Foremost Income Fund
TSX : FMO.UN

Foremost Income Fund

August 14, 2006 18:01 ET

Foremost Income Fund Reports Record Second Quarter Revenues and Earnings

CALGARY, ALBERTA--(CCNMatthews - Aug. 14, 2006) - Foremost Income Fund (TSX:FMO.UN) announces the financial results for the six months ended June 30, 2006.



(000's except per Trust for the THREE for the SIX
Unit amounts) months ended months ended
June 30, June 30,
2006 2005 2006 2005
------------------------------------------------------------------------
Revenue $ 68,037 $ 46,131 $ 131,294 $ 88,090
Cost of sales 48,997 35,267 95,660 68,658
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19,040 10,864 35,634 19,432
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Selling, general and
administrative 6,406 3,340 11,702 6,615
Interest 93 419 314 726
Amortization 905 706 1,689 1,265
Foreign exchange gain (95) (7) (162) (58)
Loss (gain) on disposal of
property, plant and equipment 19 - - (29)
-----------------------------------------
7,328 4,458 13,543 8,519
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Income before income taxes 11,712 6,406 22,091 10,913
Future income tax recovery (84) - (84) -
-----------------------------------------
Net income $ 11,796 $ 6,406 $ 22,175 $ 10,913
-----------------------------------------
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Earnings per Trust Unit
Basic $ 0.61 $ 0.34 $ 1.16 $ 0.58
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Diluted $ 0.60 $ 0.33 $ 1.13 $ 0.56
-----------------------------------------


DISTRIBUTABLE INCOME (Unaudited)
(000's for stated values, for the THREE for the SIX
except per Trust Unit amounts) months ended months ended
June 30, June 30,
2006 2005 2006 2005
------------------------------------------------------------------------
Net income $ 11,796 $ 6,406 $ 22,175 $ 10,913
Amortization 905 706 1,689 1,265
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12,701 7,112 23,864 12,178
Less: sustaining capital
expenditures 600 350 1,200 700
-----------------------------------------
Distributable income $ 12,101 $ 6,762 $ 22,664 $ 11,478
-----------------------------------------
Trust Unit distributions
declared $ 7,715 $ 2,806 $ 12,522 $ 5,138
-----------------------------------------
Trust Unit distributions
declared per Trust Unit $ 0.63 $ 0.36 $ 1.18 $ 0.61
-----------------------------------------
-----------------------------------------


Distributable income is not a defined term under Canadian generally accepted accounting principles. This amount is determined as net income for the period with amortization, which is a non-cash expense, added back. An estimate of normalized sustaining capital expenditures is then deducted.

Management believes that distributable income is a useful supplemental measure of performance as it is used by other income funds. It indicates the amount of income the business has generated during that period to support cash distributions to unitholders. However, distributable income should not be construed as an alternative to using net earnings as a measure of profitability or the statement of cash flows. Furthermore, the Fund's method of calculating distributable income may not be comparable to similarly titled amounts reported by other issuers.

For the Fund, the level of distributions is set periodically with no direct relationship to the distributable income during the period.

The Fund's growth strategy again produced record quarterly and six month financial results.

Revenues for Q2-2006 were $68.0 million, an increase of $21.9 million or 47.5% from $46.1 million for Q2-2005. The gross margin was $19.0 million (27.9%) compared to $10.8 million (23.5%), and net income was $11.8 million compared to $6.4 million, an increase of 84.4% . Earnings per unit increased to $0.61 from $0.33, with funds flow from operations amounting to $12.8 million compared to $7.1 million. Distributable income was $12.1 million or $0.63 per unit compared to $6.8 million and $0.36 per unit.

Revenues for YTD-2006 were $131.3 million as compared to $88.1 million for YTD-2005, an increase of $43.2 million or 49.0% over the same period. The gross margin was $35.6 million (27.1%) compared to $19.4 million (22.0%) and YTD-2006 net income increased 103% over the YTD-2005, from $10.9 million to $22.2 million. Earnings per unit increased to $1.16 per unit from $0.58 per unit, with funds flow from operations for YTD-2006 doubling to $24.2 million from the YTD-2005 $12.1 million. Distributable income increased to $22.7 million or $1.18 per unit versus $11.5 million or $0.61 per unit for the six month periods.

All business units have grown significantly and have orders into 2007, with some units backlogged to the end of 2007. Nearing completion, Universal Industries and Peace Land will have increased their productive capacities through the addition of 40,000 and 30,000 ft2, respectively, of manufacturing space. Construction continues on Foremost Industries' 30,000 ft2 addition to its existing 65,000 ft2 facility. This additional space, intended to increase production and improve efficiencies of its coiled tubing rig production line, is now expected to be completed by Q4-2006.

The Fund continues to experience unprecedented demand for its product lines. This demand will be reflected in the forthcoming reporting periods through strong margins and net income. As well, the Maloney operations are expected to contribute meaningful financial results beginning in the third quarter of this year. Given the continued strength of the oil and gas economy, the steady growth of the Universal business unit, the improved margins generated by Foremost Industries, the completion of the facility expansions and the accretive growth from acquisitions made over the last several months, we expect our strong performance to continue over the second half of 2006.

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 Oil and Gas Equipment, 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, a U.S. based business which manufactures and sells rigs and parts for the geotechnical industry.

On behalf of the Trustees Foremost Income Fund

(Signed: J.T. Grenon)

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 earnings 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 earnings 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. The Fund is not undertaking to update any forward-looking statements."


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