PRT Growing Services Ltd.
TSX : PRT

PRT Growing Services Ltd.

August 09, 2012 16:55 ET

PRT Growing Services Ltd. Reports Results for the First Half of 2012

VICTORIA, BRITISH COLUMBIA--(Marketwire - Aug. 9, 2012) - PRT Growing Services Ltd. (TSX:PRT) today released its financial results for the six- and three-months ended June 30, 2012. Forest seedlings generally take from six months to a year or more to grow, with most being grown and harvested within the calendar year. PRT's quarterly results generally reflect only a portion of the revenue that accrues over the full crop cycle, and, accordingly, the results are best considered in an annual context. Excerpts from the Company's financial report are included as part of this release.

First Half Highlights

(For the six-months ended June 30, 2012, as compared to June 30, 2011)

  • As a result of improved margins, Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) increased by $0.1 million to $3.4 million and EBITDA per share improved to 35 cents.
  • PRT's balance sheet is strong with $12.8 million in working capital including over $7.7 million in cash and no net debt.
  • Revenue decreased 2.0% to $17.9 million compared to $18.3 million due to a reduction of lower margin orders from a specialty seedling customer. For the 2012 contract year, volumes and prices in PRT's core forestry business have increased slightly.
  • Cost of production decreased by 3.7% and consequently the gross profit margin improved to 31.8% from 30.6% due to the decrease in low-margin products as well is increased efficiencies in production.

PRT reported EBITDA of $3,382,000 and total comprehensive income of $1,509,000 ($0.15 per share) for the six months ended June 30, 2012, compared with $3,347,000 and income of $1,656,000 ($0.17 per share), respectively for the first half of 2011. The slightly lower interim results primarily reflect an increased tax provision due to less available refundable tax credits.

Forestry seedling markets in western North America are continuing to benefit from strong wood product exports to China and modest improvements in the US housing market, leading to growth in our core seedling markets.

Increased margins in the period were largely offset by higher Selling General and Administration (SG&A) spending relative to the same period last year. SG&A increased due to timing of expenditures as well as increased spending on business development initiatives to enhance product and market diversification. As markets continue to recover we expect to achieve scale economies and operating leverage with increased volumes, and margin improvement with continuous improvement efforts.

Working capital and cash from operations improved in the first half, and the company had no net debt at the end of the period.

For the three months ended June 30, 2012, the Company reported EBITDA of $2,416,000 and total comprehensive income of $1,316,000 ($0.13 per share). Aggregate results were in line with management's expectations given the economic environment and the seasonal nature of PRT's business.

President and CEO, Rob Miller, observed, "The improvement in core forest seedling order volumes we experienced in 2011 has been sustained into 2012. While total market seedling demand remains significantly below historical levels, with the improvements we have made to our business over the past three years to adapt to the downturn we are able to generate improved returns on lower volumes. Our key focuses continue to be highly reliable contract delivery, superior customer service, and product innovations to meet changing customer needs. At the same time we are carefully managing capacity and costs, and emphasizing continuous improvement throughout our organization. We are also exploring expansion of our core business into new geographic regions and new product lines. These operating strategies position us well for the market conditions we expect in 2012 and beyond. Going forward, we will continue to focus on improving our operations, developing new markets, and managing our balance sheet for sustainability."

Management's discussion and analysis for PRT and the information circular are available at www.sedar.com.

About PRT Growing Services Ltd.

PRT Growing Services Ltd. (the Company) is the largest producer of container-grown forest seedlings in North America, operating 12 nursery locations that are expected to produce more than 160 million seedlings in 2012. The Company was formed on October 1, 2011 from the conversion of PRT Forest Regeneration Income Fund to a corporate structure. Shares of the Corporation are listed for trading on the Toronto Stock Exchange under the trading symbol PRT.

Conference Call and Taped Replay

The Company will host a conference call to further discuss the matters contained in this press release. The call will take place on Friday, August 10, 2012, at 11:00 AM PDT, 2:00 PM EDT. To participate in this conference call, please call 1-877-407-8035 or 201-689-8035.

Persons unable to participate in the conference call may listen to a recorded version by dialing 1-877-660-6853, account #286, conference ID# 396831. This option is available through August 17, 2012. A recorded webcast of the call may also be accessed from the Corporation's website, at www.prt.com.

The Company's next earnings conference call is expected to take place on Thursday, November 8, 2012, after the release of the Corporation's third-quarter 2012 earnings information.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations for order volumes, pricing, margins, operating costs and other expenditures; plans and opportunities for housing markets and for new market development; and other statements contained in this discussion that are not historical fact. Risks and uncertainties include, but are not limited to, agricultural risks and crop yield; future commodity prices; exchange rate risks; customer credit risks and customer insolvency; liquidity risk; the outlook for the forest industry; the impact of corporate conversion on reported earnings and taxation; and other risks identified from time to time in the Corporation's annual report and information return, prospectus, and other filing documents that are available in electronic form at www.sedar.com or by contacting the Corporation directly.

Forward-looking statements are based on current expectations, and the Corporation assumes no obligation to update such information to reflect later events or developments, except as required by law.

Excerpts from PRT's Condensed Consolidated Interim Financial Statements (unaudited):

Condensed Consolidated Interim Statements of Financial Position (unaudited)
(in thousands of dollars)

Note As at June 30,
2012
As at December
31, 2011
Assets
Current assets
Cash and cash equivalents $ 7,716 $ 2,386
Accounts receivable 4 5,984 7,811
Inventories 5 961 1,275
Agricultural produce 7 98 84
Biological assets, current 7 251 470
Prepaid expenses and deposits 411 125
Unbilled revenue 6 2,283 2,621
Property, plant and equipment held for sale - 150
17,704 14,922
Non-current assets
Property, plant and equipment 8 34,853 34,917
Intangible assets 9 206 225
Investment in associate 305 399
Biological assets, non-current 7 205 198
35,569 35,739
$ 53,273 $ 50,661
Liabilities
Current liabilities
Accounts payable and accrued liabilities 3,100 3,115
Unearned revenue 6 1,852 980
Current portion of finance lease 11 90 86
Current portion of long-term debt 12 261 248
5,303 4,429
Non-current liabilities
Finance lease 11 166 200
Long-term debt 12 1,046 1,178
Deferred tax liabilities 13 2,587 2,229
9,102 8,036
Shareholders' Equity
Share capital 14 31,224 31,224
Retained earnings 12,469 10,950
Stock option grants 14 437 400
Accumulated other comprehensive income 41 51
44,171 42,625
$ 53,273 $ 50,661

See accompanying notes to these condensed consolidated interim financial statements.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)
(unaudited)

(in thousands of dollars, except per share amounts)

Three months ended June 30, Six months ended June 30,
Note 2012 2011 2012 2011
Revenue $ 11,026 $ 10,963 $ 17,896 $ 18,254
Expenses
Costs of production 7,444 7,876 12,209 12,677
Selling, general and administration 1,386 1,349 2,580 2,344
Amortization of property, plant and equipment 8 566 589 1,123 1,184
Amortization of intangibles 8 10 9 19 19
(Gain) Loss on foreign exchange (99) (12) (14) 51
Earnings before the following 1,719 1,152 1,979 1,979
Finance costs 36 26 68 58
Equity in loss (earnings) of investee (27) (2) (32) 5
Loss on disposal of property, plant and equipment 47 27 66 121
Profit before income taxes 1,663 1,101 1,877 1,795
Provision for income tax (expense) recovery (298) 132 (358) (152)
Profit for the period 1,365 1,233 1,519 1,643
Other comprehensive income (loss)
Exchange differences on translating foreign operations (56) 2 (10) 58
Tax (expense) recovery on other comprehensive income 7 (31) - (45)
Total other comprehensive income (loss) (49) (29) (10) 13
Total comprehensive income $ 1,316 $ 1,204 $ 1,509 $ 1,656
Basic and diluted income per share (2011: per trust unit) 15 $ 0.13 $ 0.12 $ 0.15 $ 0.17
Weighted average number of shares (2011: units) outstanding 9,757,631 9,757,484 9,757,631 9,757,484

See accompanying notes to these condensed consolidated interim financial statements.

Condensed Consolidated Interim Statements of Net Assets Attributable to Shareholders (unaudited)
(in thousands of dollars)

Share Capital Option Grants AOCI1
Translation Reserve
Retained
Earnings
Total
Balance at December 31, 2011 $ 31,224 $ 400 $ 51 $ 10,950 $ 42,625
Share based compensation expense - 37 - - 37
Profit for the period - - - 1,519 1,519
Translation of foreign operations - - (10) - (10)
Tax on other comprehensive income - - - - -
Balance at June 30, 2012 $ 31,224 $ 437 $ 41 $ 12,469 $ 44,171
1 Accumulated other comprehensive income

See accompanying notes to these condensed consolidated interim financial statements.

Condensed Consolidated Interim Statements of Cash Flows (unaudited)
(in thousands of dollars)

Six months ended June 30,
Note 2012 2011
Cash flows from operating activities
Profit for the period $ 1,519 $ 1,643
Items not affecting cash
Amortization of property, plant and equipment (excluding seedling containers) 8 1,123 1,184
Seedling container amortization included in costs of production 8 295 291
Amortization of intangibles 8 19 19
Loss on disposal of property, plant and equipment 66 121
Equity in loss (earnings) of investee (32) 5
Unrealized (gain) loss on foreign exchange (14) 51
Unrealized loss on forward contract - 4
Provision for future income taxes 358 152
Option grants 14 37 100
3,371 3,570
Net change in non-cash working capital balances 16 3,273 1,680
6,644 5,250
Cash flows from financing activities
Repayment of long-term debt (118) (78)
Repayment of finance lease (30) (54)
Issuance of shares (2011 trust units) - 6
(148) (126)
Cash flows from investing activities
Repayment of loans by investee 3 -
Government grants received for purchase of property, plant and equipment 8 8 107
Dividend from investee 123 -
Purchase of non-current biological assets (10) (8)
Purchase of property, plant and equipment (1,265) (1,734)
Cost to dispose property, plant and equipment (34) (18)
Proceeds from disposal of property, plant and equipment 9 2
(1,166) (1,651)
Increase in cash and cash equivalents 5,330 3,473
Cash and cash equivalents-beginning of period 2,386 92
Cash and cash equivalents-end of period $ 7,716 $ 3,565

See accompanying notes to these condensed consolidated interim financial statements.

Contact Information

  • PRT Growing Services Ltd.
    Tony Pollard
    VP Finance/CFO
    (866) 553-8733 ext. 229
    www.prt.com