Foremost Income Fund

Foremost Income Fund

August 11, 2005 17:17 ET

Foremost Industries Income Fund Earnings Release

CALGARY, ALBERTA--(CCNMatthews - Aug. 11, 2005) - Foremost Industries Income Fund (the "Fund"), of Calgary, AB today announces the financial results for the three and six months ended June 30, 2005 with comparative figures for the preceding period as follows:

(000's, except per trust unit amounts)

for the THREE months for the SIX months
ended June 30, ended June 30,
2005 2004 2005 2004
Revenue $ 46,131 $ 34,491 $ 88,090 $ 65,214
Cost of sales 35,267 24,834 68,658 48,981
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10,864 9,657 19,432 16,233
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Selling, general and
administrative 3,340 2,927 6,615 5,164
Interest expense 419 75 726 170
Amortization 706 534 1,265 927
Foreign exchange gain (7) (70) (58) (50)
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4,458 3,466 8,548 6,211
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Income from operations 6,406 6,191 10,884 10,022
Gain on disposal of property,
plant and equipment - 18 29 3
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Net income $ 6,406 $ 6,209 $ 10,913 $ 10,025
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Earnings per trust unit
Basic $ 0.34 $ 0.33 $ 0.58 $ 0.54
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Diluted $ 0.33 $ 0.32 $ 0.56 $ 0.52
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Number of trust units 18,705,390 18,582,390 18,705,390 18,582,390
(post three-for-one
unit split)

Distributable cash
(000's for stated values, except per trust unit amounts and trust units

Net income $ 6,406 $ 6,209 $ 10,913 $ 10,025
Amortization 706 534 1,265 927
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7,112 6,743 12,178 10,952
Less: sustaining capital
expenditures 350 250 700 500
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Distributable cash $ 6,762 $ 6,493 $ 11,478 $ 10,452
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Cash distributions paid $ 2,806 $ 1,858 $ 5,138 $ 3,716
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Distributable cash flow per
trust unit $ 0.36 $ 0.35 $ 0.61 $ 0.56
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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 continues to grow its revenue base and earnings. Revenues for the quarter were $46.1 million compared to $34.5 million for the same period last year. Despite certain one-time production costs associated with the Foremost operation (further described below) net income before cash distributions amounted to $6.4 million compared to $6.2 million last year. Earnings per unit for the quarter increased to $0.34 from $0.33. Cash flows from operations amounted to $7.1 million compared to $6.7 million last year. Distributable cash amounted to $6.8 million or $0.36 per unit, in comparison to $6.5 million and $0.35 per unit for the 2004 second quarter.

On a year-to-date basis, revenues have increased to $88.1 million from $65.2 million while net income increased to $10.9 million from $10.0 million. Earnings per unit increased to $0.58 from $0.54 per unit. Cash flows from operations for the first six months amounted to $12.1 million compared to $10.9 million last year. Distributable cash was $11.5 million, an increase from $10.5 million last year.

All business units are experiencing sizable growth from the previous year. Certain business units are backlogged until the fall of 2006 with the likelihood that within the next couple of months this will be stretched to the spring of 2007. To help meet demand, Universal Industries is adding approximately 40,000 square feet of manufacturing space with completion expected by December 2005. In addition, Foremost is currently examining expanding its Calgary location.

The forecast for the remainder of the year looks extremely promising. Traditionally, the second half of the year is stronger than the first. The increased order backlogs may allow for more efficient planning and increased productivity for the remainder of the year.

The results for the second half of the year should be further strengthened with the addition of De-In Industries and Peace Land Fabricating and Supply. These operations were acquired by the Fund within the last few weeks and are expected to increase annualized revenues and net income by $25 to $30 million and $4 million respectively. They will begin to contribute revenue activity for a significant portion of the third quarter.

The Fund is an unincorporated open end mutual fund trust conducting its business through Foremost Industries Limited Partnership ("Foremost") and Foremost Universal Limited Partnership ("Universal"). The Fund derives its operational income from both Foremost and Universal. Foremost is comprised of the business units of Foremost Industries, a manufacturer of custom equipment used for the oil and gas, construction and waterwell industries; and Mobile Drilling, a U.S. based business which manufactures and sells parts for the geotechnical industry. 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, a shop tank manufacturer; and Corlac Industries ("Corlac"), a shop and field tank manufacturer. Universal purchased the assets and business operations of Corlac on July 1, 2004.

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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