CALGARY, ALBERTA--(Marketwire - June 15, 2011) - Foremost Income Fund announces the financial results for the three months ended March 31, 2011.
Condensed Consolidated Interim Statements of
Comprehensive Income
Unaudited
Three months ended
March 31,
(000's), except per Trust Unit amounts 2011 2010
----------------------------------------------------------------------------
Revenue $ 56,398 $ 42,884
Cost of sales 46,080 34,500
----------------------------------------------------------------------------
Gross margin 10,318 8,384
Administrative expenses 4,632 4,059
Depreciation and amortization 937 1,000
----------------------------------------------------------------------------
Income from operations 4,749 3,325
Other expenses and (income)
Interest expense (income) 12 (20)
Foreign exchange loss 13 157
Other expense (income) 7 (1)
----------------------------------------------------------------------------
Income before tax 4,717 3,189
Deferred income tax reduction - -
----------------------------------------------------------------------------
Net income and comprehensive income $ 4,717 $ 3,189
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic and diluted earnings per Trust Unit $ 0.23 $ 0.15
The March 31, 2011 financial statements are the Fund's first condensed consolidated interim financial statements prepared in accordance with IFRSs and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. The effects of the business conditions and operational responses by the Fund are found by comparing the 2011 and 2010 adjusted statements of income. The cumulative results of the steps undertaken by the Fund are found by comparing the March 31, 2011 and December 31, 2010 statements of financial position. The key elements are:
-- Revenues increased 31.5% as a result of improvement in the domestic
heavy oil markets and increased activity in the oil sands development.
Consolidated revenues were $56.4 million versus $42.9 million for 2010.
-- Revenues generated outside of Canada decreased from 14.3% to 9.8% of
total revenues.
-- Competitive pressures generated a gross margin percentage of 18.3% as
compared with 19.6% in 2010. 2011 gross profits were $10.3 million as
compared with $8.4 million for 2010.
-- Selling, general and administrative expenses increased 14.9%. 2011
figures include $0.6 million related to Brahma and Air and Gas G.P.
which did not exist in 2010. Selling, general and administrative
expenses were $4.6 million in 2011 and $4.0 million for 2010.
-- Minor fluctuations in the exchange rates between the Canadian dollar
against the U.S. dollar resulted in a $13,000 exchange loss compared to
a $157,000 loss in 2010.
-- Income from operations increased 42.8% to $4.7 million versus $3.3
million for 2010.
-- Comprehensive and net income was $4.7 million compared to a $3.2 million
in 2010.
-- Trust unit distributions, were $0.10 per trust unit or $2.1 million in
2011 and 2010. The 2011 and 2010 trust unit distributions were paid from
cash reserves and cash generated by operating activities.
-- Basic and diluted earnings per Trust Unit were $0.23 per trust unit as
compared with $0.15 per trust unit in 2010.
-- Cash flow from operations for 2011, calculated as comprehensive and net
income (loss) adjusted for items not involving cash such as
amortization, gains on disposals of property, plant and equipment, trust
units based compensation and changes in working non-cash working capital
totaled $5.0 million versus a depletion of $1.0 million for 2010.
Condensed Consolidated Interim
Statement of Financial Position
Unaudited
March 31 December 31 January 1
2011 2010 2010
(000's) (Note 12) (Note 12)
----------------------------------------------------------------------------
Assets
Current assets
Cash $ 21,248 $ 21,766 $ 37,035
Accounts receivable 43,005 37,686 19,444
Inventories 51,583 41,275 34,563
Prepaid expenses 1,338 749 353
----------------------------------------------------------------------------
117,174 101,476 91,395
Property, plant and equipment 44,318 44,813 47,298
Deferred tax assets 29,644 29,644 19,485
Goodwill 3,154 3,154 -
Intangibles and other assets 1,572 1,628 1,431
----------------------------------------------------------------------------
$ 195,862 $ 180,715 $ 159,609
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and Unitholders' Equity
Current liabilities
Accounts payable and accrued
liabilities $ 26,251 $ 15,560 $ 12,811
Warranty provisions 907 835 1,060
Deferred revenue 15,425 10,747 6,467
Trust unit options 178 188 225
----------------------------------------------------------------------------
42,761 27,330 20,563
----------------------------------------------------------------------------
Unitholders' equity
Unitholders' capital 60,888 62,195 62,115
Accumulated earnings 92,213 91,190 76,931
----------------------------------------------------------------------------
153,101 153,385 139,046
----------------------------------------------------------------------------
$ 195,862 $ 180,715 $ 159,609
----------------------------------------------------------------------------
----------------------------------------------------------------------------
-- Cash decreased $0.5 million to $21.2 million at March 31, 2011. This
decrease was generated from a combination of greater funds flow from
operations, $0.7 million of net capital expenditures and, $2.8 million
of Trust Unit redemptions and $2.1 million of distributions to Trust
Unit holders.
-- Non-cash working capital accounts consist of accounts receivable,
inventories, prepaid expenses, accounts payables, accrued liabilities,
and deferred revenue. All of these account balances at March 31, 2011
increased relative to December 31, 2010, reflecting the impact of
increased business activity.
-- Working capital, defined as current assets less current liabilities
increased $0.3 million to $74.4 million as at March 31, 2011.
-- Property, plant and equipment at March 31, 2011 amounted to $44.3
million. The $0.5 million decrease relative to 2010 reflects a $0.9
million decrease from amortization, $0.4 million in disposals, plus $0.8
million in capital expenditures.
-- No short-term or long-term bank indebtedness existed at March 31, 2011
or December 31, 2010.
-- Unitholders' equity decreased from $153.4 million at December 31, 2010
to $153.1 million at March 31, 2011. The decrease relates primarily to
the Trust Unit redemptions and distributions outpacing comprehensive and
net income for the quarter.
AQUISTION OF ASSETS:
The Fund is pleased to announce that effective June 6th 2011, through its subsidiary Foremost Universal LP, it has acquired the tank production facility, equipment and select inventory located near Bonnyville, Alberta from Altus Energy Services Partnership. This synergistic group of assets including the 65,000 square foot facility, located north of Bonnyville will boost Foremost Universals' production capacity and grant access to new labor markets. The facility is strategically located and will help to ensure timely and cost effective deliveries to our customers. Foremosts' management team will operate the business with an attention to outstanding product quality, customer service and employee retention. Acquisition costs, to be financed by the Fund's current cash position, will be in the range of approximately $7.8 million in cash, subject to closing adjustments.
TRUST UNIT REDEMPTIONS:
For the period ending March 31, 2011 the Fund redeemed 450,167 Trust Units at $6.40 per unit, of which $2.8 million were paid in cash and $0.1 million being paid in the subsequent month. On transition to IFRS the Fund conducted asset impairment testing by cash generating unit. The Fund determined that its De-In manufacturing facility's carrying value was greater than the fair value. The inactivity at De-In is a direct result of the Fund consolidating its manufacturing operations in the region to the newer and more efficient facility the at its Peaceland location. The Fund has recorded an asset impairment charge of $2.3 million, charged to accumulated earnings ($0.10 per trust unit) on January 1, 2010. Due to this charge and the effect on tangible book value the Trustees have determined that the Fund will continue to redeem tendered Trust Units at tangible book value + 10% or $6.40 per unit.
TRUST UNIT DISTRIBUTIONS:
The Fund has recently concluded an acquisition to expand its business and is continuing to evaluate other strategic expenditures. In addition, the June 6, 2011 Federal Budget introduced a tax change that may require the Fund to fundamentally change its capital structure. Efforts are underway to more fully understand the proposed tax changes; the accounting, legal and investment communities are providing feedback to the Department of Finance, hoping to have the provisions, which in many cases are difficult to understand or apply, at least clarified and hopefully amended. It should be noted that these proposed changes in rules do not relate to the Fund's decision to delist from the Toronto Stock Exchange in December of 2010.
As a result of these proposed tax changes, and to conserve the Fund's financial flexibility, the Trustees have determined it is prudent to forego its June 30, 2011 and possibly the September 30, 2011 distribution. A more definitive course of action will likely be decided before the end of the 2011 fiscal year. To the extent a distribution is not paid, the cash will continue to strengthen the balance sheet and is taken into account in determining future redemption prices.
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;
-- Corlac Industries; Peace Land Fabricating and Supply Ltd. and De-In
Industries Ltd., all shop tank manufacturers and
-- Brahma a sub-200 horsepower compressor manufacturer.
-- Foremost is comprised of the business unit of Foremost Industries, a
manufacturer of custom equipment used for the oil and gas, construction,
water-well and mining industries.
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.
Contact Information:
Doug Rae, CA
(403) 295-5800 or Toll Free 1-800-661-9190
(403) 295-5832 (FAX)
investorrelations@foremost.ca
www.foremost.ca