Foremost Income Fund
TSX : FMO.UN

Foremost Income Fund

May 14, 2008 12:54 ET

Foremost Income Fund Reports First Quarter Revenues and Earnings

CALGARY, ALBERTA--(Marketwire - May 14, 2008) - Foremost Income Fund (TSX:FMO.UN) announces the financial results for the three months ended March 31, 2008.



(000's, except for per trust unit amounts)
for the THREE months
ended March 31,
2008 2007
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Revenue $ 51,767 $ 62,635
Cost of sales 38,922 46,438
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12,845 16,197
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Selling, general and administrative 5,781 6,173
Interest 151 296
Amortization 1,265 1,230
Foreign exchange loss (gain) (287) 10
Gain on disposal of property, plant and equipment (2,329) -
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4,581 7,709
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Income before income taxes 8,264 8,488
Future income tax recovery - (263)
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Net income and comprehensive income 8,264 8,751
Accumulated earnings, beginning of period 80,908 58,165
Premium on repurchase of trust units (2,019) -
Distributions to unitholders (5,287) (8,016)
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Accumulated earnings, end of period $ 81,866 $ 58,900
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Earnings per trust unit
Basic $ 0.39 $ 0.44
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Diluted $ 0.39 $ 0.43
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Q1-2008 results reflect market conditions anticipated in the 2007 Annual Report's "Outlook for 2008". Relative to Q1-2007, oil and gas related revenues decreased due to the slowing of oilsands activity caused by uncertainty regarding the Government of Alberta's Royalty Review ("Royalty Review") and the continued weakness in North American natural gas drilling activity. Revenue increases from continued strength in the waterwell, mineral and ancillary drilling equipment markets partially offset this decrease. Selling, general and administrative costs decreased as a result of cost reductions. During Q1-2008, the Nisku manufacturing facility was sold for $3.9 million generating a gain of $2.3 million.

Consolidated revenues for Q1-2008 were $51.8 million compared to $62.6 million in Q1-2007. The gross profit for Q1-2008 was $12.8 million (24.8%) compared to $16.2 million (25.9%) for Q1-2007. Q1-2008 income before income taxes was $8.3 million compared with $8.5 million in Q1-2007. Net income for Q1-2008 was $8.3 million compared to $8.8 million in Q1-2007. Both the Q1-2008 income before income taxes and net income figures include the $2.3 million gain from the sale of the Nisku manufacturing facility. Q1-2008 basic earnings per trust unit were $0.39 compared to $0.44 for Q1-2007. Q1-2008 funds flow from operations was $7.3 million compared with $9.8 million for Q1-2007.

During Q1-2008 and effective for the March 31, 2008 distribution, the Trustees of the Fund indefinitely suspended the Distribution Reinvestment Plan ("DRIP") and reduced the Fund's quarterly trust unit distribution from $0.40 per unit to $0.25 per unit. Pursuant to its Normal Course Issuer Bid ("NCIB"), the Fund used $3.0 million to repurchase and cancel 351,700 trust units in January 2008.

As described earlier, the Fund's Q1-2008 results are indicative of the current state of its core markets. Revenues and earnings generated from new oilsands projects are now expected to be lower throughout 2008 as a result of the impact of the Royalty Review. Revenues and earnings generated from North American natural gas drilling are currently expected to be similar to last year. The Fund continues to believe that any increase in natural gas drilling activity will occur during the fourth quarter of 2008. Consequently, the Fund is concentrating on the management of operating costs, the balancing of manufacturing amongst its facilities to maximize efficiencies and the development of internal revenue opportunities. Potential acquisition opportunities continue to be evaluated.

The Fund is an unincorporated open end 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 contains the business units of: Universal Industries, a manufacturer of oil treating systems, shop and field storage tanks; Maloney Industries, a manufacturer of medium- to large-scale oil and gas process treating equipment;
Stettler Universal Limited Partnership, a gas separator manufacturer; Wilco Industries; Corlac Industries; Peace Land Fabricating and Supply Ltd. and De-In Industries Ltd., all shop tank manufacturers. Foremost is comprised of the business units of Foremost Industries, a manufacturer of custom equipment used for the oil and gas, construction, water-well and mining industries; and Mobile Drilling Company, Inc., a U.S. based business which manufactures and sells rigs and parts for the geotechnical industry.

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.

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