Foremost Income Fund

Foremost Income Fund

March 30, 2011 18:21 ET

Foremost Income Fund Reports Fourth Quarter Revenues and Earnings and December 31, 2010 Consolidated Results

CALGARY, ALBERTA--(Marketwire - March 30, 2011) - Foremost Income Fund announces the financial results for the three and twelve months ended December 31, 2010.



CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
AND ACCUMULATED EARNINGS

(000's, except per trust For the THREE months For the TWELVE months
unit amounts) ended December 31, ended December 31,
(Unaudited) 2010 2009 2010 2009
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Revenue $ 46,939 $ 34,944 $ 171,323 $ 128,986
Cost of sales 41,390 28,573 137,494 97,187
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5,549 6,371 33,829 31,799
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Selling, general and
administrative 3,705 3,756 16,752 17,508
Interest income 74 (16) 16 (18)
Amortization 908 1,130 4,000 4,559
Foreign exchange loss 289 385 363 842
Gain on disposal of
equipment (20) - (30) (145)
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4,956 5,255 21,101 22,746
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Net income (loss) before
other expenses 593 1,116 12,728 9,053
Other Expenses
Realized gain on forward
exchange contracts - - - (614)
Goodwill impairment - 13,540 - 13,540
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Net income (loss) before
income tax 593 (12,424) 12,728 (3,873)
Future income tax
recovery (366) - (366) -
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Net income (loss) and
comprehensive income 959 (12,424) 13,094 (3,873)
(loss)
Accumulated earnings,
beginning of period 83,694 92,550 77,985 90,422
Future income tax
adjustment (18,518) - (18,518) -
Distributions to
unitholders (2,143) (2,141) (8,569) (8,564)
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Accumulated earnings, end
of period $ 63,992 $ 77,985 $ 63,992 $ 77,985
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Earnings per trust unit
Basic $ 0.04 $ (0.58) $ 0.61 $ (0.18)
Diluted $ 0.04 $ (0.58) $ 0.61 $ (0.18)
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CONSOLIDATED BALANCE SHEETS
(000's) (Unaudited)

As at: December 31, December 31,
2010 2009
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Assets
Current assets
Cash $ 21,766 $ 37,035
Accounts receivable 37,686 19,444
Inventories 41,275 34,563
Prepaid expenses 749 353
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101,476 91,395
Property, plant and equipment 46,863 49,555
Future income taxes 1,700 19,485
Goodwill 3,154 -
Intangibles and other assets 1,628 1,431
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$ 154,821 $ 161,866
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Liabilities and Unitholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 16,395 $ 13,871
Deferred revenue 10,747 6,467
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27,142 20,338
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Unitholders' equity
Unitholders' capital 62,195 62,115
Contributed surplus 1,492 1,428
Accumulated earnings 63,992 77,985
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127,679 141,528
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$ 154,821 $ 161,866
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For the three months ended December 31, 2010

Fourth quarter 2010 results reflect the strengthening of business conditions relative to 2009 and continued efforts to control costs. Fourth quarter revenue was $46.9 million versus $35.0 million last year. Gross profit declined to $5.5 million (11.8% of revenue) from $6.4 million (18.2% of revenue) for 2009. Selling, general and administrative expenses in 2010 were equivalent to 2009. Income before other expenses was $0.6 million as compared with $1.1 million last year. Net income before tax was $0.6 million compared to a loss of $12.4 million in 2009. The loss in 2009 is a result of the non-cash goodwill impairment recorded in the fourth quarter. The 2010 fourth quarter net income was $1.0 million ($0.04 per trust unit) versus a net loss of $12.4 million for 2009. Fourth quarter property, plant and equipment expenditures were $0.7 million as compared with $0.2 million last year. Fourth quarter trust unit distributions paid in cash amounted to $0.10 per trust unit and totaled $2.1 million in both 2010 and 2009. A special non-cash distribution of $0.37 per unit was recorded at year-end. The special distribution allocates the balance of taxable income from the Fund to the unitholders.

For the year ended December 31, 2010



-- Revenues increased 32.8% as a result of improvement in the domestic
heavy oil markets and increased activity in the oil sands development.
Consolidated revenues were $171.3 million versus $129 million for 2009.
-- Revenues generated outside of Canada decreased from 22.4% to 17.5% of
total revenues.
-- Competitive pressures generated a gross margin percentage of 19.7% as
compared with 24.7% in 2009. 2010 gross profits were $33.8 million as
compared with $31.8 million for 2009.
-- Selling, general and administrative expenses decreased 4.3%, reflecting
continued declines in variable expenses such as commissions and
performance bonuses, reductions in discretionary programs and personnel
and includes $0.4 million of fees relating to the acquisition of Brahma
and Air and Gas G.P. Ltd. Selling, general and administrative expenses
were $16.8 million in 2010 and $17.5 million for 2009.
-- Strengthening of the Canadian dollar against the U.S. dollar resulted in
a $0.4 million exchange loss compared to a $0.8 million loss in 2009.
-- During the year the Fund disposed of one property in the Grand Prairie
region for proceeds of $0.3 million.
-- In July, the Fund acquired 100% of the voting shares of Brahma and Air &
Gas G.P. Ltd. (Brahma) for $3.3 million. The Fund's 2010 financials
include the six months of results of Brahma.
-- Income before other expenses (income) increased 39.5% to $12.7 million
versus $9.1 million for 2009.
-- Net income including a $0.4 million recovery of future income taxes was
$13.1 million compared to a $3.9 million loss in 2009. The 2009 results
include a goodwill impairment of $13.5 million and a realized gain on
forward exchange of $0.6 million.
-- Trust unit distributions were $0.77 per trust unit or $16.5 million in
2010 as compared with $0.40 per trust unit or $8.6 million for 2009.
2010 distributions were made up of $8.6 million paid in cash and $7.9
million relating to a year-end special distribution. The year-end
special distribution was paid in accordance with the Deed of Trust that
allows the Fund to distribute all taxable income to the unitholders. The
special distribution was paid in the form of additional trust units;
there was an immediate reconsolidation of the number of trust units
outstanding. After the consolidation, each unitholder holds the same
number of trust units as held before the distribution of additional
trust units. The 2010 and 2009 trust unit distributions were paid from
cash reserves and cash generated by operating activities during each
year, $1.0 million and $45.2 million respectively.
-- Earnings per trust unit from operations plus the realized gain on
forward exchange contracts but before goodwill impairment was $0.61 per
trust unit as compared with $0.45 per trust unit in 2009.
-- 2010 basic earnings per trust unit is $0.61 per trust unit versus a loss
of $0.18 per trust unit for 2009.
-- Funds flow from operations for 2010, calculated as net income (loss)
adjusted for items not involving cash such as amortization, gains on
disposals of property, plant and equipment, trust units based
compensation and goodwill impairment totaled $16.8 million versus $14.4
million for 2009. The increase is a direct result of the higher income
generated from operations.
-- Cash decreased $15.3 million to $21.8 million at December 31, 2010 and
comprises 21.4% of current assets. This decrease was generated from a
combination of funds flow from operations and significant increase in
non-cash working capital accounts. At December 31, 2009 cash on hand
amounted to $37.0 million and was 22.9% of current assets.
-- Non-cash working capital accounts consist of accounts receivable,
inventories, prepaid expenses, accounts payables, accrued liabilities,
and deferred revenue. All of these account balances at December 31, 2010
increased relative to December 31, 2009, reflecting the impact of
increased business activity.
-- Working capital, defined as current assets less current liabilities
increased $3.3 million to $74.3 million as at December 31, 2010.
-- Property, plant and equipment at December 31, 2010 amounted to $46.9
million. The decrease relative to 2009 reflects a $4.0 million decrease
from amortization plus a $1.0 million capital expenditure increase.
-- No short-term or long-term bank indebtedness existed at December 31,
2010 or 2009.
-- Unitholders' equity decreased from $141.5 million at December 31, 2009
to $129.5 million at December 31, 2010. The decrease relates primarily
to the impact of an $18.5 million adjustment to future income tax
assets.


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;
-- Corlac Industries, Peace Land Fabricating and Supply Ltd. and De-In
Industries Ltd., all shop tank manufacturers;
-- Brahma a sub-200 horsepower compressor manufacturer.
-- Foremost is comprised of the business unit of Foremost Industries, a
manufacturer of custom equipment used for the oil and gas, construction,
water-well 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.


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