Foremost Income Fund



Foremost Income Fund

August 15, 2014 13:03 ET

Foremost Income Fund Reports Q2 2014 Results

CALGARY, ALBERTA--(Marketwired - Aug. 15, 2014) - Foremost Income Fund ("Foremost" or the "Fund") announces the financial results for the three and six months ended June 30, 2014.

OVERVIEW

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 includes activity from eight manufacturing sites throughout Alberta. Foremost manufactures off-highway large wheeled and tracked vehicles, and equipment for custom drilling, construction, water wells, and mining sectors. Foremost also maintains a focus on custom built vehicles for its clientele and is located in Calgary, Alberta.

CORPORATE - RESULTS OF OPERATIONS

Overall the Fund experienced a stronger financial quarter in Q2 2014 compared to previous quarters. Revenue is the highest is has been in the last 9 consecutive quarters and net income from operations the highest in the last 5 quarters.

The key elements from Q2 2014 are:

  • Revenue has increased $11.7 million over Q2 of 2013. This represents a 20.7% increase. Further information on the increase in revenue by segment and product lines can be found in the segmented information section of the MD&A.
  • Q2 2014 gross profit increased to 14% compared to 8% in 2013, or $4.5 million. Further information on the increase in gross profit by segment and product lines can be found in the segmented information section of the MD&A.
  • Administrative expenses decreased $1.0 million when comparing 2013 second quarter to 2014 second quarter. This decrease of 18.4% is a reflection the cost discipline strategies being exercised by the Fund. This includes a focus to reduce discretionary spending, a reduction in overhead personnel and continuous improvements in the area of supply chain management.
  • EBITDA for Q2 2014 increased to $4.1 million from a negative $1.1 million in Q2 2013. This is consistent with the increase in gross profit and reduction of SG&A.

The key elements for the year to date are:

  • Revenue decrease of 5%, year over year, due to ongoing weak demand for the shop and field tank product line, which was offset by the increasing demand for vac trucks in 2014.
  • A comparable margin of 12-13%, year over year, as the Fund's strategic initiatives and cost control measures begin to be implemented throughout the company.
  • A drop in the administrative expense of over $1.7 million due in large part to reduction of administration staff, reductions in discretionary expenses such as travel, meals, and sponsorship, and improvements in the area of supply chain management. The Fund is on track to reducing administrative expenses by $4.0 million for the 2014 calendar year.
  • Amortization expense increased as longer term projects and investments became active in the period, items such as an industry leading automated welding system, and capital investments for the successful truck manufacturing division.
  • The majority of the exchange rate loss in the current year relates to the results of hedging activities on contracts denominated in the Russian ruble. The Fund believes that the risk mitigation provided by these hedging activities continues to be consistent with our strategic goals and appropriate given ongoing European tension. During 2014 the Fund recorded an unrecognized loss of $621,000 on these forward looking contracts, nil was recorded in 2013.
  • EBITDA for 2014 increased over 2013 at $4.1 million compared to $3.4 million.
SUMMARY OF QUARTERLY INFORMATION
(000's, except per Trust Unit amount)
2014 Q1 Q2 Q3 Q4 Total
Revenue $ 46,439 $ 68,314 $ 114,753
Gross profit ($) $ 5,029 $ 9,336 $ 14,365
Gross profit (%) 11 % 14 % 13 %
Admin. expenses ($) $ 4,886 $ 4,828 $ 9,714
Admin. expenses (% of total revenue) 11 % 7 % 8 %
Exchange rate loss $ (134 ) $ (394 ) $ (528 )
EBITDA $ 9 $ 4,162 $ 4,171
Income/(Loss) from operations $ (1,140 ) $ 3,207 $ 2,067
Comprehensive income/(loss) $ (1,541 ) $ 1,950 $ 409
Trust units redeemed 21,123 66,527 87,650
Redemptions $ 151 $ 474 $ 625
Basic and diluted (loss) per trust unit $ (0.08 ) $ 0.10 $ 0.02
2013 Q1 Q2 Q3 Q4 Total
Revenue $ 64,001 $ 56,602 $ 50,232 $ 59,094 $ 229,929
Gross profit ($) $ 10,149 $ 4,770 $ 7,169 $ 7,763 $ 29,850
Gross profit (%) 16 % 8 % 14 % 13 % 13 %
Admin. expenses ($) $ 5,517 $ 5,920 $ 5,519 $ 5,171 $ 22,127
Admin. expenses (% of total revenue) 9 % 10 % 11 % 9 % 10 %
Exchange rate gain/(loss) $ (48 ) $ 225 $ 54 $ (38 ) $ 193
EBITDA $ 4,631 $ (1,150 ) $ 1,649 $ 2,592 $ 7,723
Income from operations $ 3,484 $ (2,334 ) $ 423 $ 1,325 $ 2,898
Comprehensive income/(loss) $ 2,810 $ (1,504 ) $ (2,890 ) $ 1,031 $ (553 )
Trust units redeemed 8,560 13,326 76,451 30,394 128,731
Redemptions $ 70 $ 107 $ 627 $ 229 $ 1,033
Basic and diluted gain/(loss) per trust unit $ 0.15 $ (0.08 ) $ (0.15 ) $ 0.05 $ (0.03 )
2012 Q1 Q2 Q3 Q4 Total
Revenue $ 70,822 $ 62,499 $ 64,746 $ 63,363 $ 261,430
Gross profit ($) $ 15,393 $ 13,081 $ 14,236 $ 9,389 $ 52,099
Gross profit (%) 22 % 21 % 22 % 15 % 20 %
Admin. expenses ($) $ 6,080 $ 5,977 $ 5,823 $ 6,222 $ 24,102
Admin. expenses (% of total revenue) 9 % 10 % 9 % 10 % 9 %
Exchange rate (loss)/gain $ (32 ) $ 41 $ (273 ) $ 34 $ (230 )
EBITDA $ 9,313 $ 7,104 $ 8,413 $ 3,166 $ 27,996
Income from operations $ 8,328 $ 6,096 $ 7,384 $ 2,092 $ 23,900
Comprehensive income $ 7,653 $ 5,078 $ 5,625 $ 1,371 $ 19,727
Trust units redeemed 8,486 7,709 2,500 10,090 28,785
Redemptions $ 62 $ 60 $ 19 $ 84 $ 225
Basic and diluted gain per trust unit $ 0.41 $ 0.27 $ 0.30 $ 0.07 $ 1.05

TRUST UNIT REDEMPTIONS AND DISTRIBUTIONS

For the period ending June 30, 2014 the Fund redeemed 87,650 Trust Units through its redemption program resulting in cash payments of $200,103 and notes payable of $424,589.

The Trustees have determined that, as of August 12, 2014, the Fund will redeem tendered Trust Units at $6.50 per unit.

On behalf of the Trustees Foremost Income Fund

Bevan May, 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 include statements the Fund's intention to proceed with a Unitholders' meeting and information regarding the Trustees' views of the future prospects and tax treatment of the Fund and tax treatment of the Special Redemption, the Fund's expectations regarding the future availability of cash to meet redemption requests and the Trustee's expectations for redemption prices in December 2011 and January 2012. 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.

Contact Information