PRT Growing Services Ltd. Reports Improved Results for 2011
VICTORIA, BRITISH COLUMBIA-- PRT Growing Services Ltd. (TSX: PRT.TO - News) today released its financial results for the fourth quarter and full year of 2011.
Year's Highlights (For the year ended December 31, 2011, as reported under IFRS)
-- Revenue increased 27.8% to $33.3 million compared with 2010.
-- Gross profit increased to 31.9% and $10.6 million from 28.2% and $7.3
million in 2010, due to higher volumes and increased production
efficiencies.
-- EBITDA increased to $5.8 million in 2011 from $2.8 million in 2010.
-- PRT increased cash from operating activities before working capital
changes by $3.1 million.
-- Earnings improved $0.31 per share to $0.25 per share.
-- PRT's balance sheet is strong with $10.7 million in working capital
including $2.4 million in cash.
-- Completed a tax deferred conversion to a publicly traded corporation
from an income trust on October 1, 2011.
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. PRT reported operating earnings of $5,419,000 and total comprehensive income of $2,409,000 ($0.25 per share) for the year ended December 31, 2011, compared with $2,198,000 and a loss of $573,000 ($0.06 per share), respectively for 2010. The improved performance reflects a 41% increase in seedling order volume over 2010, mainly attributable to improving forest seedling markets. Forestry markets benefited from growth in Chinese lumber exports and stabilization of the US housing market. However, lower average pricing, particularly for new seedling products, partially moderated revenue growth in 2011. Operating margins improved by 7.9 percentage points due to improved scale economies with increased volumes, nursery cost containment, and continuous improvement efforts. In addition, margins benefited from operating leverage, as certain elements of operating costs remain fixed despite volume increases. For the three months ended December 31, 2011, PRT reported operating earnings of $2,190,000, total comprehensive income of $1,611,000 ($0.16 per share) and EBITDA of $2,452,000. Aggregate results were in line with management's expectations given the seasonal nature of PRT's business. President and CEO Rob Miller remarked, "We are pleased with our 2011 results, and with the improvements that are starting to show in our business. Over the past three years we have implemented several strategies to adapt to the forest industry and economic downtown, and our results for the year demonstrate that they are working. Over this period we focused on highly reliable contract delivery, customer service, and product innovations to meet changing customer needs. At the same time we kept our house in order by carefully managing capacity and costs, and emphasizing continuous improvement throughout our organization. This positioned us well for the improving markets we experienced in 2011. "While US housing market remains challenged, certain customers have made significant headway in developing new markets in Asia, and this has brought an increase in harvesting activity to meet their needs. We have remained ready to respond to the resulting increase in silviculture work, and to achieve margin improvements from the increased volume and improved capacity utilization. "While the future pace of the US housing market recovery is uncertain, midterm recovery prospects remain promising, and this will have further positive long-term effects on our business. Despite this prospect, we continue to believe it is prudent to diversify our business further to generate additional growth and stability. In addition to geographic expansion within forest seedling markets, we are actively investigating other opportunities to expand our product line by growing plants for other industries. These present unique opportunities to expand and diversify our markets while levering off our core expertise in seedling propagation. Going forward, we will continue to focus on improving our key operational capabilities, managing our balance sheet, and developing new markets." Adoption of International Financial Reporting Standards (IFRS) PRT has commenced reporting under IFRS in 2011. Subject to certain transitional elections disclosed in the financial statements, PRT has consistently applied the same accounting policies under IFRS in its opening IFRS balance sheet at January 1, 2010 and throughout all periods presented, as if these accounting policies under IFRS had always been in effect. 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) was formed on October 1, 2011 from the conversion of PRT Forest Regeneration Income Fund to a corporate structure. The Company is the largest producer of container-grown forest seedlings in North America, with 13 nursery locations that produced more than 180 million seedlings in 2011. 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 Thursday, March 22, 2011, at 11:00 am PDT, 2:00 pm EDT. To participate in this conference call, please call 1-877-407-8031 or 201-689-8031. Persons unable to participate in the conference call may listen to a recorded version by dialing 1-877-660-6853, account #286, conference ID#389368. This option is available through March 29, 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, May 10, 2012, after the release of the Corporation's first-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, operating costs and other expenditures; the outlook for energy prices; plans and opportunities for capital spending; 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 reporting earnings and taxation; the impact of changes in financial reporting to IFRS; and other risks identified from time to time in the Fund'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 the Fund's annual financial report:
Consolidated Statements of Financial Position
(in thousands of dollars)
As at As at As at
December 31, December 31, January 1,
Note 2011 2010 2010
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Assets
Current assets
Cash and cash equivalents 5 $ 2,386 $ 92 $ -
Accounts receivable 6 7,811 6,147 11,237
Inventories 7 1,275 1,079 1,054
Agricultural produce 9 84 73 104
Biological assets, current 9 470 511 274
Prepaid expenses and
deposits 125 218 224
Unbilled revenue 8 2,621 2,094 2,405
Property, plant and
equipment held for sale 11 150 - 775
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14,922 10,214 16,073
Non-current assets
Property, plant and
equipment 10 34,917 36,127 37,765
Intangible assets 12 225 264 429
Investment in associate 13 399 282 333
Biological assets, non-
current 9 198 169 95
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35,739 36,842 38,622
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$ 50,661 $ 47,056 $ 54,695
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Liabilities
Current liabilities
Operating line 14 $ - $ - $ 3,566
Accounts payable and
accrued liabilities 3,115 2,407 1,801
Provisions 15 - 139 591
Unearned revenue 8 980 1,051 754
Current portion of finance
lease 16 86 91 65
Current portion of long-
term debt 17 248 198 1,698
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4,429 3,886 8,475
Non-current liabilities
Finance lease 16 200 281 320
Long-term debt 17 1,178 880 3,456
Deferred tax liabilities 18 2,229 1,956 1,996
Unit option grants 20 - 243 155
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8,036 7,246 14,402
Net assets attributable to
unitholders 19, 20 - 39,810 40,293
Shareholders' Equity
Share capital 20 31,224 - -
Retained earnings 10,950 - -
Stock option grants 20 400 - -
Accumulated other
comprehensive income 51 - -
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42,625 - -
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$ 50,661 $ 47,056 $ 54,695
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See accompanying notes to these consolidated financial statements.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands of dollars, except per share amounts)
Years ended December 31,
Note 2011 2010
-------------------------------
Revenue 21 $ 33,304 $ 26,066
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Expenses
Costs of production 22 22,685 18,721
Selling, general and administration 23 5,332 4,984
Amortization of property, plant and equipment 10 2,376 2,488
Amortization of intangibles 12 39 165
Loss (gain) on foreign exchange (131) 163
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Earnings before the following 3,003 (455)
Finance costs 121 302
Equity in earnings of investee 13 (117) (89)
Loss on disposal of property, plant and
equipment 264 105
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Profit (loss) before income taxes 2,735 (773)
Recovery of (provision for) income tax
expense 18 (282) 105
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Profit (loss) for the year 2,453 (668)
Other comprehensive income (loss)
Exchange differences on translating foreign
operations (59) 158
Tax recovery (provision) on other
comprehensive income 18 15 (63)
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Total other comprehensive income (loss) (44) 95
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Total comprehensive income (loss) $ 2,409 $ (573)
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Basic and diluted income (loss) per share
(2010 per trust unit) 25 $ 0.25 $ (0.06)
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Weighted average number of shares outstanding 9,757,631 9,754,512
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See accompanying notes to these consolidated financial statements.
Consolidated Statements of Changes in Equity and Net Assets Attributable to
Unitholders
(in thousands of dollars)
Retained
AOCI(1) Earnings
Unit Share Option Translation (Cumulative
Capital Capital Grants Reserve Deficit) Total
-----------------------------------------------------------
Balance at
January 1, 2010 $ 96,303 $ - $ 155 $ - $ (56,010) $40,448
Units issued
under ESOP 90 - - - - 90
Share based
compensation
expense - - 88 - - 88
Loss for the
year - - - - (668) (668)
Translation of
foreign
operations - - - 158 - 158
Tax on other
comprehensive
income - - - (63) - (63)
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Balance at
December 31,
2010 $ 96,393 $ - $ 243 $ 95 $ (56,678) $40,053
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Balance at
January 1, 2011 $ 96,393 $ - $ 243 $ 95 $ (56,678) $40,053
Units issued
under ESOP 6 - - - - 6
Effect of
corporate
conversion (96,399) 31,224 - - 65,175 -
Share based
compensation
expense - - 157 - - 157
Profit for the
year - - - - 2,453 2,453
Translation of
foreign
operations - - - (59) - (59)
Tax on other
comprehensive
income - - - 15 - 15
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Balance at
December 31,
2011 $ - $31,224 $ 400 $ 51 $ 10,950 $42,625
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(1) Accumulated Other Comprehensive Income
Consolidated Statements of Cash Flows
(in thousands of dollars)
Year ended
December 31,
Note 2011 2010
-------------------------
Cash flows from operating activities
Profit (loss) for the year $ 2,453 $ (668)
Items not affecting cash
Amortization of property, plant and equipment
(excluding seedling containers) 10 2,376 2,488
Seedling container amortization included in costs
of production 10 560 665
Amortization of intangibles 12 39 165
Loss on disposal of property, plant and equipment 264 105
Equity in earnings of investee 13 (117) (89)
Unrealized loss (gain) on foreign exchange (90) 202
Unrealized gain on interest rate swaps - (63)
Provision for future income taxes 18 282 (104)
Option grants 20 157 88
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5,924 2,789
Net change in non-cash working capital balances 26 (1,708) 1,247
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4,216 4,036
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Cash flows from financing activities
Proceeds of long-term debt 17 500 -
Repayment of long-term debt 17 (179) (4,209)
Repayment of finance lease 16 (85) (13)
Decrease in operating line - (3,566)
Issuance of trust units 20 6 90
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242 (7,698)
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Cash flows from investing activities
Repayment of loans by investee - 20
Government grants received for purchase of
property, plant and equipment 10 144 438
Dividend from investee - 120
Purchase of non-current biological assets (30) (77)
Purchase of property, plant and equipment 10 (2,257) (2,146)
Cost to dispose of property, plant and equipment (43) (103)
Proceeds from disposal of property, plant and
equipment 22 5,502
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(2,164) 3,754
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Increase in cash and cash equivalents 2,294 92
Cash and cash equivalents-beginning of year 92 -
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Cash and cash equivalents-end of year $ 2,386 $ 92
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