PRT reports net earnings of $181K

PRT Forest Regeneration Income Fund (the "Fund") has announced results for its second quarter ended June 30, 2010.

For the six month period ending June 30, 2010, the Fund reported net earnings of $181,000 ($0.02 per unit) and Cash Available for Distribution of $1,690,000 ($0.17 per unit).

The Fund's business is highly seasonal, with the second quarter typically being the highest revenue period. As such, Cash Available for Distribution realized in the first half of the year is expected to be used in the second half of the year to fund operations and capital maintenance programs.

Net earnings increased by $0.01 per unit reflecting improved operating margins over the prior year despite lower overall revenues. The increased margins reflect the benefit of cost containment and productivity improvement programs as well as capacity management initiatives.

The Fund also confirmed that during the first six months of 2010 the insurance settlement reached in 2009 was fully received, and the majority of the proceeds were used to completely repay its Canadian bank term loans.

For the three months ended June 30, 2010, the Fund reported net earnings of $892,000 ($0.09 per unit) and Cash Available for Distribution of $1,596,000 ($0.16 per unit). Aggregate results were in line with management's expectations given consideration for the current economic environment and the seasonal nature of PRT's business.

Revenues in the six month period decreased by $2.2 million or 13%, mainly caused by a trend to smaller seedling sizes and lower prices for some products.

While traditional forestry seedling contract volumes declined slightly there has been an overall improvement in total annual seedling volumes from 124 million to 130 million, aided by other products; however this increase was not sufficient to offset the effects of smaller seedlings and lower prices.

Of note, however, is that despite competitive market conditions, management estimates that market share remained relatively stable. Production expenditures were scaled to the lower sizes and gross margins improved from 35.7% in 2009 to 39.8% in 2010 for the same period. Selling, general and administration costs were 6.8 % lower than the first six months of 2009 due to continued cost containment efforts as a response to the economic downturn.

Commenting on the first six months, President and CEO, Rob Miller, said, "While the forest industry has been sharply impacted by the collapse of US housing markets in 2009, we are seeing more reasons for optimism about the industry's recovery over time. Markets in China are opening up, alternate uses are being found for mountain pine beetle affected trees, prices for dimensional lumber have improved, and a gradual recovery in the fragile US housing market is being seen. Industry analysts adapt their forecasts frequently, but there is a consensus around a gradual steady improvement over the coming years in US house construction."

He added "At PRT we have adapted our business for the downturn and generated positive cash flow from operations on significantly lower volumes. Revenue has declined, but margins have significantly improved, illustrating the effects of our operating strategies in our core business. Furthermore, we have continued to invest in new growth strategies that we believe will enable us to adapt to new realities in the forest products industry, and to diversify our business.

We will continue to focus on providing exceptional customer service, maximizing cash flow, on keeping our balance sheet in good shape, and in doing so we believe we are well positioned to benefit from the future recovery in forest seedling markets."

Source: PRT Forest Regeneration Income Fund