PRT Growing Services Ltd. Reports Results for the First Quarter of 2012
VICTORIA, BRITISH COLUMBIA - PRT Growing Services Ltd. (PRT.TO - News) today released its financial results for the first quarter ended March 31, 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 Quarter Highlights (For the three-months ended March 31, 2012, as compared to March 31, 2011)
-- Revenue decreased 5.8% to $6.9 million compared to $7.3 million, due to
timing of revenue recognition from product mix changes under annual
growing contracts and reduction of orders from new markets. For the 2012
contract year, volumes and prices in PRT's core forestry business
increased slightly.
-- Gross profit margin decreased to 30.6% from 34.2% due to the effect of
fixed costs on the lower revenue recognized and inventory adjustments in
the quarter.
-- As a result of the lower revenue recognized, Earnings before Interest,
Taxes, Depreciation and Amortization (EBITDA) decreased to $1.0 million
from $1.5 million in the first-quarter of 2011.
-- PRT's balance sheet is strong with $11.0 million in working capital
including $4.0 million in cash and no net debt.
PRT reported operating earnings of $911,000 and total comprehensive income of $193,000 ($0.02 per share) for the quarter-ended March 31, 2012, compared with $1,495,000 and income of $452,000 ($0.05 per share), respectively for the first quarter of 2011. The lower quarterly result primarily reflects timing of revenue recognition as forest seedling volumes and prices in PRT's core traditional markets increased slightly. Forestry seedling markets in western North America are continuing to benefit from growth of wood product exports to China and stabilization of the US housing market, but the effect of this on our business will not fully offset the loss of seedling volumes in certain new markets in 2012. Earnings were also affected by higher Selling General and Administration (SG&A) spending in the period 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 nursery cost containment, and continuous improvement efforts. Working capital and cash from operations improved in the quarter, and the company had no net debt at the end of the period. President and CEO Rob Miller remarked, "We are pleased that the improvement in core forest seedling order volumes we experienced in 2011 was sustained into 2012. While 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 down turn we are able to generate improved returns on lower volumes. Our key focuses continue to be highly reliable contract delivery, 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. These strategies have positioned us well for the market conditions we expect in 2012 and beyond. While the 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 this new demand. We have remained ready to respond to any resulting increase in silviculture work, and to achieve margin improvements from the resulting increased volume and improved capacity utilization. While the future pace of the US housing market recovery is uncertain, mid-term 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, and to offset any potential negative impact from the mountain pine beetle. In addition to geographic expansion within North American 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 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 Wednesday, May 9, 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#393975. This option is available through May 16, 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 Friday, August 10, 2012, after the release of the Corporation's second-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; 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.
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PRT GROWING SERVICES LTD.
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Excerpts from PRT's Condensed Consolidated Interim Financial Statements
(unaudited):
Condensed Consolidated Interim Statements of Financial Position
(unaudited)
(in thousands of dollars)
As at As at
March 31, December 31,
Note 2012 2011
----- ------------------------------
Assets
Current assets
Cash and cash equivalents $ 3,984 $ 2,386
Accounts receivable 4 5,533 7,811
Inventories 5 1,227 1,275
Agricultural produce 7 120 84
Biological assets, current 7 401 470
Prepaid expenses and deposits 445 125
Unbilled revenue 6 5,202 2,621
Property, plant and equipment held
for sale - 150
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16,912 14,922
Non-current assets
Property, plant and equipment 8 35,078 34,917
Intangible assets 9 216 225
Investment in associate 360 399
Biological assets, non-current 7 197 198
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35,851 35,739
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$ 52,763 $ 50,661
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities 2,780 3,115
Unearned revenue 6 3,228 980
Current portion of finance lease 11 88 86
Current portion of long-term debt 12 253 248
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6,349 4,429
Non-current liabilities
Finance lease 11 183 200
Long-term debt 12 1,100 1,178
Deferred tax liabilities 13 2,297 2,229
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9,929 8,036
Shareholders' Equity
Share capital 14 31,224 31,224
Retained earnings 11,104 10,950
Stock option grants 14 416 400
Accumulated other comprehensive
income 90 51
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42,834 42,625
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$ 52,763 $ 50,661
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See accompanying notes to these condensed consolidated interim financial
statements.
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PRT GROWING SERVICES LTD.
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Condensed Consolidated Interim Statements of Operations and Comprehensive
Income (Loss) (unaudited)
(in thousands of dollars, except per
share amounts)
Three months ended March 31,
Note 2012 2011
------------------------------------
Revenue $ 6,870 $ 7,291
Expenses
Costs of production 4,765 4,801
Selling, general and administration 1,194 995
Amortization of property, plant and
equipment 8 557 595
Amortization of intangibles 8 9 10
Loss on foreign exchange 85 63
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Earnings before the following 260 827
Finance costs 32 32
Equity in loss (earnings) of investee (5) 7
Loss on disposal of property, plant
and equipment 19 94
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Profit before income taxes 214 694
Provision for income tax expense (60) (284)
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Profit for the period 154 410
Other comprehensive income (loss)
Exchange differences on translating
foreign operations 46 56
Tax provision on other comprehensive
income (7) (14)
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Total other comprehensive income 39 42
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Total comprehensive income $ 193 $ 452
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Basic and diluted income per share
(2011 per trust unit) 15 $ 0.02 $ 0.05
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Weighted average number of shares
(2011 units) outstanding 9,757,631 9,757,336
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See accompanying notes to these condensed consolidated interim financial
statements.
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PRT GROWING SERVICES LTD.
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Condensed Consolidated Interim Statements of Net Assets Attributable to
Shareholders (unaudited)
AOCI(1)
Share Option Translation Retained
Capital Grants Reserve Earnings Total
-----------------------------------------------------
Balance at December
31, 2011 $ 31,224 $ 400 $ 51 $ 10,950 $ 42,625
Share based
compensation
expense - 16 - - 16
Profit for the
period - - - 154 154
Translation of
foreign operations - - 46 - 46
Tax on other
comprehensive
income - - (7) - (7)
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Balance at March 31,
2012 $ 31,224 $ 416 $ 90 $ 11,104 $ 42,834
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(1) Accumulated Other Comprehensive Income
See accompanying notes to these condensed consolidated interim financial
statements.
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PRT GROWING SERVICES LTD.
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Condensed Consolidated Interim Statements of Cash Flows (unaudited)
(in thousands of dollars)
Three months ended March 31,
Note 2012 2011
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Cash flows from operating activities
Profit for the period $ 154 $ 410
Items not affecting cash
Amortization of property, plant and
equipment (excluding seedling
containers) 8 557 595
Seedling container amortization
included in costs of production 8 154 145
Amortization of intangibles 8 9 10
Loss on disposal of property, plant
and equipment 19 94
Equity in loss (earnings) of investee (5) 7
Unrealized loss on foreign exchange 39 7
Provision for future income taxes 60 284
Option grants 14 16 14
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1,003 1,566
Net change in non-cash working capital
balances 1,370 521
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2,373 2,087
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Cash flows from financing activities
Repayment of long-term debt (55) (52)
Repayment of finance lease (15) (34)
Decrease in operating line - -
Issuance of shares (2011 trust units) - 6
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(70) (80)
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Cash flows from investing activities
Repayment of loans by investee 3 -
Government grants received for
purchase of property, plant and
equipment 8 8 7
Dividend from investee 41 -
Purchase of non-current biological
assets - (4)
Purchase of property, plant and
equipment (759) (824)
Cost to dispose of property, plant and
equipment (3) -
Proceeds from disposal of property,
plant and equipment 5 1
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(705) (820)
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Increase in cash and cash equivalents 1,598 1,187
Cash and cash equivalents-beginning of
period 2,386 92
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Cash and cash equivalents-end of
period $ 3,984 $ 1,279
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See accompanying notes to these condensed consolidated interim financial
statements.
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