PRT reports quarterly net loss of $798,000

PRT Forest Regeneration Income Fund has announced improved results for its third quarter ended September 30, 2010.

The Fund reported a net loss for the nine months ending September 30, 2010 of $617,000 compared to a net loss of $1,317,000 for the comparable period in 2009 per unit. The loss for the period was reduced due to improved operating margins and lower amortization charges, but this effect was partially offset by higher exit activity charges to complete previously announced nursery closures.

PRT's business is highly seasonal, with the third quarter typically being the lowest revenue period. As such, for the three months ended September 30, 2010, the Fund reported a net loss of $798,000 and nominal Cash Available for Distribution of ($9,000). Quarterly results were in line with management's expectations given consideration for the current industry downturn and the seasonal nature of PRT's business.

While traditional forestry seedling contract volumes declined slightly, there has been an overall improvement in total annual seedling volumes to 130 million aided by other products; however this increase was not sufficient to offset the effects of smaller seedlings and lower prices. Despite competitive market conditions, however, management estimates that market share overall was relatively stable. Production expenditures have been scaled to address the current market trends and gross margins improved from 31.9% in 2009 to 38.3% in 2010 for the same period. Selling, general and administration costs also declined by 7.1% over the period due to continued cost containment efforts as a response to the industry downturn.

Commenting on the first nine months, President and CEO, Rob Miller, said, "While new home construction in the US is recovering slowly from its lowest levels in more than 50 years, we are seeing additional reasons for optimism about the forest industry's recovery over time. Lumber markets in China are opening up, alternate uses are being found for mountain pine beetle affected trees, prices for dimensional lumber have improved, and there are comparatively healthy Canadian new home construction levels. While industry analysts vary in their outlook for US housing, there is consensus around a gradual steady improvement over the coming years."

He added, "At PRT we have adapted our business for the downturn and have continued to generate 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 and will continue 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 over time.

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

PRT is the largest producer of container grown forest seedlings in North America, currently operating 12 nursery locations expected to produce approximately 130 million seedlings in 2010.

Source: PRT Forest Regeneration Income Fund