Foremost Income Fund
TSX : FMO.UN

Foremost Income Fund

August 13, 2008 17:43 ET

Foremost Income Fund Reports Second Quarter Revenues and Earnings

CALGARY, ALBERTA--(Marketwire - Aug. 13, 2008) - Foremost Income Fund (TSX:FMO.UN) announces the financial results for the three and six months ended June 30, 2008.



(000's, except per trust
unit amounts)
for the THREE months for the SIX months
ended June 30, ended June 30,
2008 2007 2008 2007
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Revenue $ 54,910 $ 54,166 $ 106,677 $ 116,801
Cost of sales 39,430 37,983 78,352 84,421
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15,480 16,183 28,325 32,380
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Selling, general and
administrative 6,338 5,497 12,115 11,670
Interest 86 364 237 660
Amortization 1,337 1,353 2,602 2,583
Foreign exchange loss (gain) 147 461 (140) 471
Gain on disposal of property,
plant and equipment (7) - (2,332) -
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7,901 7,675 12,482 15,384
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Income before income taxes 7,579 8,508 15,843 16,996
Future income tax recovery - (19,105) - (19,368)
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Net income and comprehensive
income 7,579 27,613 15,843 36,364
Accumulated earnings,
beginning of period 81,866 58,900 80,908 58,165
Premium on repurchase of
trust units (7) - (2,026) -
Distributions to unitholders (5,308) (8,121) (10,595) (16,137)
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Accumulated earnings, end of
period $ 84,130 $ 78,392 $ 84,130 $ 78,392
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Earnings per trust unit
Basic $ 0.36 $ 1.36 $ 0.75 $ 1.81
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Diluted $ 0.35 $ 1.34 $ 0.74 $ 1.78
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Relative to 2007, YTD-2008 oil and gas related revenues reflect reduced 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. Q2-2008 oil and gas related revenues increased from Q2-2007 principally due to the timing of certain major vessel contracts. Revenues generated from waterwell, mineral and ancillary drilling equipment markets remained strong. Reflecting changes in product mix and tougher market conditions, Q2-2008 and YTD-2008 gross profit percentages remain slightly lower than those reported in 2007. Selling, general and administrative costs increased due to marketing expenses associated with certain second quarter bi-annual trade shows, increased international operating costs, higher legal costs and lower employee benefit cost recoveries traditionally received in the second quarter. Both Q2-2008 and YTD-2008 income before income taxes are lower than the same periods in 2007. Unlike 2007, the Q2-2008 and YTD-2008 net incomes are not impacted by the initial recognition of future income tax assets. YTD-2008 results include the Q1-2008 $2.3 million gain on sale of the Nisku manufacturing facility. Adjusting for this gain, Q2-2008 earnings increased relative to Q1-2008. Q2-2008 trust unit distributions were $0.25 per trust unit and all paid in cash whereas the trust unit distribution for Q2-2007 was $0.40 per trust unit and paid with cash and trust units.

Consolidated revenues for Q2-2008 were $54.9 million compared with $54.2 million for Q2-2007. Consolidated Q2-2008 gross profit was $15.5 million (28.2%) versus $16.2 million (29.9%) for Q2-2007. Q2-2008 income before income taxes was $7.6 million compared with $8.5 million in Q2-2007. Net income for Q2-2008 was $7.6 million versus $27.7 million in Q2-2007 which includes a one time $19.1 million future income tax recovery. Q2-2008 basic earnings per trust unit were $0.36 as compared to $1.36 for Q2-2007 including $0.94 per unit related to the future income tax recovery. Q2-2008 funds flow from operations was $9.0 million as compared to $10.0 million for Q2-2007. Cash flows from operating activities were $15.7 million for Q2-2008 as compared with $0.3 million for Q2-2007.

Revenues for YTD-2008 were $106.7 million as compared to $116.8 million for YTD-2007. The YTD-2008 gross profit was $28.3 million (26.6%) compared to $32.4 million (27.7%) in 2007. YTD-2008 income before income taxes was $15.8 million (14.9%) versus $17.0 million (14.6%) for YTD-2007. YTD-2008 net income was $15.8 million as compared with $36.4 million for YTD-2007 which included a $19.1 million one time future income tax recovery. YTD-2008 earnings per trust unit were $0.75 compared with $1.81 for YTD-2007 including the $0.94 per unit future income tax recovery. YTD-2008 funds flow from operations was $16.2 million versus $19.8 million for YTD-2007. YTD-2008 cash flows from operating activities were $23.5 million versus $5.5 million for YTD-2007.

As described earlier, the Fund's Q2-2008 results are indicative of the current state of its core markets and the seasonal pattern of its revenues. Revenues and earnings generated from new oilsands projects are expected to be lower for 2008 with steady growth returning in 2009. 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 significant increase in natural gas drilling activity will not occur until late fourth quarter 2008. Revenues from its waterwell, mineral and ancillary drilling equipment markets are expected to remain strong. Compared with the first two quarters, revenues are expected to increase marginally in the third and fourth quarter reflecting the seasonal nature of customer activities and resumption of field tank erection activity. The Fund continues to concentrate on the management of operating costs, manufacturing efficiencies, development of the international marketplace and exploration of additional 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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