Foremost Income Fund Reports Q1 Results

CALGARY, ALBERTA--(Marketwire - May 14, 2012) - Foremost Income Fund ("Foremost" or the "Fund") announces the financial results for the 3 months ended March 31, 2012.

ANNUAL FINANCIAL RESULTS:

The key elements from 2012 are:

• Revenues have increased 25.6% as a result of improvement in the domestic heavy oil markets and increased activity in the oil sands development. Consolidated revenues were $70.8 million versus $56.4 million for 2011.
  
  
• Revenues generated outside of Canada have increased to 23.4% from 9.8% of total revenues.
  
  
• Operating activities generated a gross profit percentage of 21.7% as compared with 18.3% in 2011; the higher margins are a result of increased operational efficiency. Gross profits were $15.4 million as compared with $10.3 million for 2011.
  
  
• Administrative expenses increased to 8.6% of revenue versus 8.2% of revenue in 2011 due to increased business activities and additional employee count. Administrative expenses were $6.1 million in 2012 and $4.6 million for 2011. The increase in the gross dollar value is a result of increased revenue levels, the addition of the vacuum and hydrovac product lines and the Bonnyville business unit.
  
  
• Fluctuations in the exchange rates between the Canadian dollar and the U.S. dollar resulted in a $31,647 exchange loss compared to a $13,432 loss in 2011.
  
  
• Income from operations increased 88.8% to $8.9 million versus $4.7 million for 2011.
  
  
• Comprehensive income was $7.7 million compared to a $4.7 million in 2011. 2012 comprehensive income includes a $0.6 million gain on sale of property and equipment and charge for deferred tax assets of $1.2 million
  

QUARTERLY FINANCIAL RESULTS:

SUMMARY OF QUARTERLY INFORMATION (unaudited)

(000's, except per trust unit amounts)

2012	Q1		Q2		Q3		Q4		Total
Revenue	$	70,821							$	70,821
Income from operations	$	8,952							$	8,952
Comprehensive Income	$	7,654							$	7,654
Net income
Per trust unit, basic & diluted	$	0.41							$	0.41
2011		Q1		Q2		Q3		Q4		Total
Revenue	$	56,398	$	65,856	$	65,631	$	71,496	$	259,381
Income from operations	$	4,742	$	7,535	$	8,616	$	10,001	$	30,894
Comprehensive Income	$	4,717	$	7,445	$	8,741	$	9,268	$	30,171
Net income (loss)
Per trust unit, basic and diluted	$	0.23	$	0.35	$	0.42	$	0.45	$	1.45

FINANCIAL POSITION:

• Quarterly Trust Unit distributions remain suspended during the quarter compared with a $2.1 million distribution in 2011.
  
  
• The Fund redeemed 8,486 Trust Units during the quarter resulting in cash payments of $0.1 million.
  
  
• Basic and diluted earnings per Trust Unit were $0.41 per trust unit as compared with $0.23 per trust unit in 2011.
  
  
• During the quarter the Fund acquired the current and long term debt facilities of Steelhead Welding Ltd., pursuant to a separate agreement the Fund also acquired and subsequently leased back the operating assets of Steelhead Welding Ltd. The Fund has advanced a total of $1.2 million in connection with its agreements with Steelhead Welding Ltd.
  
  
• Quarter to date cash flow generated from operations for 2012, calculated as comprehensive income adjusted for items not involving cash such as amortization, gains on disposals of property, plant and equipment, trust units based compensation and changes in non-cash working capital totaled $12.5 million versus $5.0 million in 2011.
  
  
• Non-cash working capital accounts consist of trade and other receivables, loan receivable, inventories, prepaid expenses, trade and other payables, warranty provisions, and deferred revenue. The increase in net income, strong collections and customer deposits outpaced increased inventory and prepaid levels as well as cash used for payables and warranty provisions.
  
  
• Cash has increased $11.7 million since December 31, 2011. This increase was the result of $12.5 million of funds generated from operations, $0.8 million of net capital expenditures, and $6,000 of Trust Unit redemptions. Working capital, defined as current assets less current liabilities decreased $8.3 million to $75.2 million due to strong earnings, strong collections and customer deposits outpacing billings.
  
  
• Property, plant and equipment at March 31, 2012 amounted to $55.9 million. The $0.1 million increase relative to 2011 reflects $1.1 million in acquisitions, and $1.0 million decrease from amortization and disposals.
  
  
• Short-term indebtedness decreased to nil at March 31, 2012, compared with $3.5 million at December 31, 2011.
  
  
• Unitholders' equity increased from $156.7 million at December 31, 2011 to $164.3 million at March 31, 2012. The increase relates primarily to strong earnings and minimal Trust Unit redemptions.
  

Special Redemption and Trust Unit Redemptions:

The Fund has redeemed 8,486 Trust Units through its normal redemption program resulting in cash payments of $0.1 million. The Trustees have determined that, as of May 14, 2012 the Fund will increase the redemption price for tendered Trust Units from $7.25 to $7.75 per Unit.

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;
  
  
• Universal Bonnyville, shop tank manufacturer
  
  
• Maloney Industries, a manufacturer of medium- to large-scale oil and gas process treating equipment;
  
  
• Stettler Universal Limited Partnership, a gas separator and hydrovac 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 include statements the Fund's intention to proceed with a Unitholders' meeting and information regarding the Trustees' views of the future prospects and tax treatment of the Fund and tax treatment of the Special Redemption, the Fund's expectations regarding the future availability of cash to meet redemption requests and the Trustee's expectations for redemption prices in December 2011 and January 2012. 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.