Foremost Income Fund



Foremost Income Fund

November 09, 2012 13:05 ET

Foremost Income Fund Reports Q3 Results and Increase in Redemption Price

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2012) - Foremost Income Fund ("Foremost" or the "Fund") announces the financial results for the three and nine months ended September 30, 2012.

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;
  • Universal Bonnyville, Corlac Industries and Peace Land Fabricating and Supply Ltd., all shop tank manufacturers
  • Maloney Industries, a manufacturer of medium- to large-scale oil and gas process treating equipment;
  • Stettler Universal Limited Partnership, a gas separator and hydrovac truck manufacturer and
  • Brahma, a sub-200 horsepower compressor manufacturer.

Foremost includes the operations of Foremost Industries, a manufacturer of custom equipment used for the oil and gas, construction, water-well and mining industries.

FINANCIAL RESULTS
Condensed Consolidated Interim Statements of Comprehensive Income
Unaudited
Three months ended Nine months ended
(000's), except per Trust Unit September 30, September 30,
amounts 2012 2011 2012 2011
Revenue $ 64,746 $ 65,632 $ 198,067 $ 187,885
Cost of sales 50,510 51,141 155,357 149,528
Gross profit 14,236 14,491 42,710 38,357
Administrative expenses 5,825 4,753 17,880 14,900
Depreciation and amortization 1,027 1,220 3,022 3,217
Other income (2 ) (98 ) (632 ) (653 )
Income from operating activities 7,386 8,616 22,440 20,893
Interest (income) expense 3 (92 ) 16 (53 )
Foreign exchange (gain) loss 273 (34 ) 264 43
Net finance (income) expense 276 (126 ) 280 (10 )
Income before income tax 7,110 8,742 22,160 20,903
Income tax expense 1,485 3,804
Net income and comprehensive income for the period $ 5,625 $ 8,742 $ 18,356 $ 20,903
Basic and diluted earnings per Trust Unit $ 0.30 $ 0.42 $ 0.98 $ 1.00

The key elements from Q3 2012 are:

  • Q3 revenues have decreased slightly by 1.3%. Q3 consolidated revenues were $64.7 million versus $65.6 million for 2011.

  • Q3 revenues generated outside of Canada have increased to 20.5% compared with 13.0% in 2011 of total revenues.

  • Q3 operating activities generated a gross profit percentage of 22.0% as compared with 22.1% in 2011. Gross profits were $14.2 million as compared with $14.5 million for 2011.

  • Q3 administrative expenses increased to 9.0% of revenue versus 7.2% of revenue in 2011 due to increased business activities and additional employee count. Administrative expenses were $5.8 million in 2012 and $4.7 million for 2011.

  • Fluctuations in the exchange rates between the Canadian dollar and the U.S. dollar, along with a U.S. cash balance of $8.4, resulted in a $273,000 exchange loss in Q3 compared to a $34,000 gain in 2011.

  • Q3 income from operations decreased 14.3% to $7.4 million versus $8.6 million for 2011.

  • Q3 comprehensive income was $5.6 million compared to $8.7 million in 2011. 2012 comprehensive income includes a charge to deferred tax assets of $1.4 million.

  • Quarterly Trust Unit distributions remain suspended during the quarter, consistent with 2011. The Fund's intention is to utilize an annual distribution process as per prior years.

  • The Fund redeemed 2,500 Trust Units during the quarter resulting in payments of $19,747. 16,000 Trust Unit options were exercised in the quarter at $8.75 for a cash value of $140,000.

  • Q3 basic and diluted earnings per Trust Unit were $0.30 per Trust Unit as compared with $0.42 per Trust Unit in 2011.

The key financial elements for the year to date are:

  • Year to date revenue has increased 5.4% as a result of improved domestic heavy oil markets and increased activity in oil sands development. Year to date consolidated revenues were $198.0 million versus $187.9 million in 2011.

  • Year to date revenues generated outside of Canada have increased to 18.0% from 12.9% of total revenues.

  • Year to date gross margin percentage is 21.6% as compared with 20.4% in 2011. Year to date gross profits were $42.7 million as compared with $38.3 million for 2011.

  • Year to date administrative expenses increased to 9.0% of revenue versus 7.9% of revenue in 2011. Administrative expenses were $17.8 million in 2012 and $14.9 million for 2011.

  • Fluctuations in the exchange rates between the Canadian dollar against the U.S. dollar resulted in a year to date loss of $264,000 compared to a loss of $43,000 in 2011.

  • Year to date income from operations increased 7.4% to $22.4 million versus $20.9 million for 2011.

  • Year to date comprehensive and net income was $18.3 million compared to $20.9 million in 2011. 2012 year to date comprehensive and net income includes a $3.8 million utilization of deferred tax assets.

  • Year to date basic and diluted earnings per Trust Unit were $0.98 per Trust Unit as compared with $1.00 per Trust Unit in 2011.

  • During the first quarter the Fund acquired the current and long-term debt facilities of Steelhead Welding Ltd., pursuant to a separate agreement the Fund also acquired and subsequently leased back the operating assets of Steelhead Welding Ltd. To date the Fund has advanced a total of $3.0 million in connection with its agreements with Steelhead Welding Ltd.

  • Cash has increased $4.5 million since December 31, 2011. This increase was the result of $9.8 million of funds generated from operations, less net capital expenditures of $5.3 million, less $137,000 of Trust Unit redemptions and $140,000 received upon exercise of options. Working capital, defined as current assets less current liabilities, increased $19.1 million to $86.0 million due to strong earnings, strong collections and customer deposits outpacing billings.

  • Property, plant and equipment at September 30, 2012 amounted to $58.4 million. The $2.7 million increase relative to 2011 reflects $5.7 million in acquisitions and $3.0 million decrease from amortization and disposals.

  • Short-term indebtedness decreased to nil at September 30, 2012 compared with $3.5 million at December 31, 2011.

  • Unitholders' equity increased from $156.7 million at December 31, 2011 to $175.0 million at June 30, 2012. The increase relates primarily to strong earnings and minimal Trust Unit redemptions.

TRUST UNIT REDEMPTIONS:

For the nine month period ending September 30, 2012 the Fund redeemed 18,695 Trust Units through its normal redemption program resulting in payments of $140,926. The Trustees have determined that, as of November 8, 2012 the Fund will increase the redemption price for tendered Trust Units from $8.26 to $8.40.

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.

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