Foremost Income Fund
TSX : FMO.UN

Foremost Income Fund

March 30, 2010 13:57 ET

Foremost Income Fund Reports Revenues and Loss for Fourth Quarter and Fiscal 2009

CALGARY, ALBERTA--(Marketwire - March 30, 2010) - Foremost Income Fund (TSX:FMO.UN) (the "Fund") announces financial results for the fourth quarter and year ended December 31, 2009.

Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income                
                 
Quarters ended December 31,     2009       2008  
Revenue $   34,944     $   57,161    
Cost of sales     28,573         44,924    
      6,371         12,237    
Selling, general and administrative     3,756         5,099    
Interest     (16 )       98    
Amortization     1,130         1,268    
Foreign exchange loss (gain)     385         (676 )  
Gain on disposal of property, plant and equipment     -         (3 )  
Unrealized gain on forward exchange contracts     -         (264 )  
      5,255         5,522    
Income from continuing operations before other expenses (income)     1,116         6,715    
Other expenses (income)                    
  Goodwill impairment     13,540         -    
(Loss) income from continuing operations     (12,424 )       6,715    
Discontinued operations     -         1,861    
Net (loss) income and comprehensive (loss) income $   (12,424 )   $   8,576    
     
(Loss) earnings per trust unit from continuing operations, basic $   (0.58 )   $   0.31    
(Loss) earnings per trust unit from continuing operations, diluted $   (0.58 )   $   0.31    
     
(Loss) earnings per trust unit, basic $   (0.58 )   $   0.40    
(Loss) earnings per trust unit, diluted $   (0.58 )   $   0.40    

Fourth quarter 2009 results reflect the further weakening of business conditions relative to 2008 and efforts to reduce costs. Fourth quarter 2009 revenue was $34.9 million versus $57.2 million last year. Gross profit declined to $6.4 million (18.2% of revenue) from $12.2 million (21.2% of revenue) for 2008. Selling, general and administrative expenses decreased $1.3 million to $3.8 million, down from $5.1 million in 2008. Income from continuing operations before goodwill impairment was $1.1 million as compared with $6.7 million last year. The goodwill impairment charge of $13.5 million was recorded during the fourth quarter resulting in a fourth quarter net loss from continuing operations of $12.4 million versus fourth quarter 2008 income from continuing operations of $6.7 million. The 2009 fourth quarter net loss was $12.4 million ($0.58 per trust unit) versus a net income of $8.6 million ($0.31 per trust unit) for 2008. Fourth quarter property, plant and equipment expenditures were $0.2 million as compared with $0.5 million last year. Fourth quarter trust unit distributions amounted to $0.10 per trust unit and totaled $2.1 million versus $0.25 per trust unit and totaled $5.4 million last year.

Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
             
Years ended December 31,     2009       2008
Revenue $   128,986     $   217,279  
Cost of sales     97,187         162,221  
      31,799         55,058  
Selling, general and administrative     17,508         22,795  
Amortization     4,559         5,008  
Interest     (18 )       357  
Foreign exchange loss (gain)     842         (870 )
Gain on disposal of property, plant and equipment     (145 )       (2,366 )
      22,746         24,924  
Income from continuing operations before other expenses (income)     9,053         30,134  
Other expenses (income)                  
  Unrealized gain on forward exchange contracts     -         (264 )
  Realized gain on forward exchange contracts     (614 )       -  
  Goodwill impairment     13,540         -  
      12,926         (264 )
(Loss) income from continuing operations     (3,873 )       30,398  
Net income from discontinued operations     -         2,442  
Net (loss) income and comprehensive (loss) income $   (3,873 )   $   32,840  
   
(Loss) earnings per trust unit from continuing operations                  
  Basic $   (0.18 )   $   1.43  
  Diluted $   (0.18 )   $   1.42  
   
(Loss) earnings per trust unit                  
  Basic $   (0.18 )   $   1.54  
  Diluted $   (0.18 )   $   1.53  

Fiscal 2009 consolidated annual revenue was $129.0 million, down 40.6% from the $217.3 million reported for 2008. Consolidated income from continuing operations before other expenses (income) was $9.1 million for 2009 down from the $30.1 million in 2008. The decline in revenues and lower gross profit percentages were partially offset by a $5.3 million decrease in selling, general and administrative expenses. The Fund recorded a $13.5 million goodwill impairment charge at the end of the fourth quarter. As a result the Fund reported a net loss of $3.9 million for fiscal 2009 as compared with net income of $32.8 million for 2008. Basic (loss) earnings per trust unit were $(0.18) for 2009 versus $1.54 for 2008. Fiscal 2009 quarterly trust unit distributions were $0.10 per trust unit versus $0.25 per trust unit in 2008. Trust unit distributions declared and paid in 2009 amounted to $0.40 per trust unit, or $8.6 million in aggregate, as compared with $1.00 per trust unit, or $21.3 million in aggregate, for 2008. Reflecting lower net income, funds flow from operations amounted to $14.4 million in 2009 versus $33.1 million in 2008. Year-over-year changes in net income adjusted for non- cash items and non-cash working capital resulted in a $30.8 million increase in cash flow from operating activities. Cash flow from operating activities amounted to $45.2 million for 2009 as compared with $33.1 million in 2008.

Consolidated Balance Sheets
         
As at December 31,   2009   2008
Assets        
Current assets        
  Cash $ 37,035 $ 497
  Accounts receivable   19,444   42,118
  Inventories   34,563   56,448
  Prepaid expenses   353   1,186
    91,395   100,249
Property, plant and equipment   49,555   53,687
Future income taxes   19,485   19,485
Goodwill and intangibles   1,431   15,176
  $ 161,866 $ 188,597
 
Liabilities and Unitholders' Equity        
Current liabilities        
  Accounts payable and accrued liabilities $ 13,871 $ 22,484
  Deferred revenue   6,467   12,449
    20,338   34,933
Unitholders' equity        
  Unitholders' capital   62,115   62,115
  Contributed surplus   1,428   1,127
  Accumulated earnings   77,985   90,422
    141,528   153,664
  $ 161,866 $ 188,597

The Fund currently expects the uncertain business conditions to continue throughout 2010. Reduced demand and prices for oil and gas products, changing government regulations, uncertain business credit conditions, fragile investor confidence and predominantly weak worldwide economic conditions are expected to limit revenues and earnings. The Fund will continue to aggressively search for and pursue domestic and international revenue opportunities, update existing products, evaluate new products, maintain tight control over operational expenditures and manpower levels, undertake capital expenditures necessary to maintain required productive capacity and determine trust unit distributions using quarterly business performance. The Fund believes it is in a strong position to address a sudden improvement in business conditions or accretive acquisition.

The Fund is an unincorporated open-ended mutual fund trust conducting its business through Foremost Universal LP ("Universal") and Foremost Industries LP ("Foremost"). The Fund derives its operational income from both Universal and Foremost. Universal's overall business is focused on the oil and gas industry and currently consists of: Universal Industries, a manufacturer of oil treating systems, shop and field storage tanks; Maloney Industries ("Maloney"), a manufacturer of medium- to large-scale oil and gas process treating equipment; Stettler Universal Limited Partnership ("Stettler"), a gas separator manufacturer; Corlac Industries ("Corlac") and Peace Land Fabricating and Supply Ltd. ("Peace Land") both shop tank manufacturers. Foremost is comprised of the business unit of Foremost Industries, a manufacturer of custom equipment used for the oil and gas, construction, waterwell and mining industries.

On behalf of the Trustees Foremost Income Fund

James T. Grenon, Trustee

FORWARD-LOOKING STATEMENT

Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this news release, such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this news release. These forward-looking statements involve a number of risks and uncertainties, including: the impact of general economic conditions, industry conditions, changes in laws and regulations, increased competition, fluctuations in commodity prices and foreign exchange, and interest rates and stock market volatility.

Note: A complete financial breakdown can be found on www.sedar.com on or before March 31, 2010.

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