Foremost Income Fund
TSX : FMO.UN

Foremost Income Fund

November 14, 2005 16:41 ET

Foremost Industries 2005 Q3 Earnings Release

CALGARY, ALBERTA--(CCNMatthews - Nov. 14, 2005) - Foremost Industries Income Fund (TSX:FMO.UN) (the "Fund"), of Calgary, AB today announces the financial results for the three and nine months ended Sept. 30, 2005 with comparative figures for the preceding period as follows:



(000's, except per trust unit amounts)

for the THREE months for the NINE months
ended Sept. 30, ended Sept. 30,
2005 2004 2005 2004
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Revenue $ 51,816 $ 40,138 $ 139,906 $ 105,352
Cost of sales 40,296 30,555 108,954 79,536
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11,520 9,583 30,952 25,816
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Selling, general
and administrative 3,484 3,391 10,099 8,555
Interest 242 222 968 392
Amortization 748 632 2,013 1,559
Foreign exchange loss 233 192 175 142
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4,707 4,437 13,255 10,648
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Income from operations 6,813 5,146 17,697 15,168
Gain (loss) on disposal of
property, plant and equipment - (16) 29 (13)
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Net income 6,813 5,130 17,726 15,155
Change in Unitholders' equity (437) (1,909) (5,536) (5,530)
Unitholders' equity,
beginning of period 55,529 43,570 49,715 37,166
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Unitholders' equity,
end of period $ 61,905 $ 46,791 $ 61,905 $ 46,791
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Earnings per trust unit
Basic $ 0.36 $ 0.27 $ 0.95 $ 0.81
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Diluted $ 0.35 $ 0.26 $ 0.92 $ 0.79
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DISTRIBUTABLE CASH (Unaudited)
(000's for stated values, except per trust unit amounts)

for the THREE months for the NINE months
ended Sept. 30, ended Sept. 30,
2005 2004 2005 2004
------------------------------------------------------------------------
Net income $ 6,813 $ 5,130 $ 17,726 $ 15,155
Amortization 748 632 2,013 1,559
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7,561 5,762 19,739 16,714
Less: sustaining capital
expenditures 350 350 1,050 850
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Distributable cash $ 7,211 $ 5,412 $ 18,689 $ 15,864
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Cash distributions paid $ 2,837 $ 2,332 $ 7,975 $ 6,048
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Distributable cash flow
per trust unit $ 0.38 $ 0.29 $ 0.99 $ 0.84
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Distributable cash 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 cash is a useful supplemental measure of performance as it is used by other income funds. It provides investors with an indication of the amount of cash the business has generated during that period which could be available for distribution to unitholders. Investors are cautioned, however, that distributable cash should not be construed as an alternative to using net earnings as a measure of profitability or the statement of cash flows. Further, the Fund's method of calculating distributable cash may not be comparable to similarly titled amounts reported by other issuers.

In the case of the Fund, the level of distributions is set periodically with no direct relationship to the distributable cash during the period.

The Fund has just completed the most successful quarterly results in its history.

Revenues for the quarter exceeded $51.8 million, an increase of $11.7 million or 29.2% from the prior year's $40.1 million. Gross margin for the quarter ended was $11.5 million (22.3%) compared to $9.6 million (23.9%) last year. Net income for the quarter was $6.8 million compared to $5.1 million last year, an increase of 33.3%. Earnings per unit for the quarter increased to $0.36 from $0.27 last year. Cash flows from operations amounted to $7.6 million compared to $5.8 million last year. Distributable cash amounted to $7.2 million or $0.38 per unit, in comparison to $5.4 million and $0.29 per unit for the 2004 third quarter.

From a year-to-date perspective, revenues have increased to $139.9 million from $105.4 million last year, representing a 32.7% improvement. Year-to-date gross margin was $30.9 million (22.1%) compared to $25.8 million (24.5%) last year. Net income increased to $17.7 million from $15.2 million last year, a 17.0% increase. Earnings per unit for the year-to-date improved to $0.95 from $0.81 per unit last year. Cash flows from operations for the first nine months amounted to $19.7 million compared to $16.7 million last year. Distributable cash was $18.7 million or $0.99 per trust unit, an increase from $15.9 million or $0.84 per trust unit last year.

All business units are experiencing sizeable growth from the previous year and have backlogs until the spring of 2006 with certain units backlogged through to spring of 2007. As mentioned in previous reports, Universal Industries is attempting to meet customer demand by adding approximately 40,000 square feet of manufacturing space with completion expected by mid-2006. Further to this, Foremost Industries will be adding approximately 30,000 square feet of manufacturing space, to its existing 65,000 square feet of manufacturing space, to improve capacity and production efficiencies of its coiled tubing rig product line. The additional space, expected to be completed by July 2006, will also significantly reduce the outsourcing of sandblasting and painting.

The fourth quarter is expected to provide further improvements in revenues and earnings. In addition to the continuing revenue increase from all business units and an expected improvement in margins from the Foremost operation, the mid-third quarter acquisitions of Peace Land and De-In will provide for a full quarter of financial results. These strategic acquisitions provide Universal with significant manufacturing capacity in the key oil and gas producing areas of NW Alberta, NE British Columbia and the NWT. Traditionally, the last quarter of the year generates the greatest revenue, usually due to customer and project deadlines requiring completion before year end. We anticipate the overall margins will be improved, or at least maintained, and overheads should be similar to prior quarters after taking into account overheads from the new acquisitions. As mentioned, backlogs remain strong with little likelihood of a slowdown.

The Fund is an unincorporated open end mutual fund trust conducting its business through Foremost Universal Limited Partnership ("Universal") and Foremost Industries Limited Partnership ("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 ("Universal Industries"), a manufacturer of oil treating systems, shop and field storage tanks; Stettler Oil and Gas Equipment, a gas separator manufacturer; Wilco Industries; Corlac Industries ("Corlac"); Peace Land Fabricating and Supply Ltd. ("Peace Land") and De-In Industries Ltd. ("De-In") all shop tank manufacturers. Universal purchased the assets and business operations of Corlac on July 1, 2004 and the shares and business operations of Peace Land and De-In during the third quarter of 2005.

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 Industries Income Fund



(signed: James T. Grenon)

James T. Grenon, Trustee


Forward Looking Statement

"Certain statements in this press 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 press release, such statements use words such as "estimate", "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 press 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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