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Foremost Income Fund Reports Q3 2017 Results and Reviews Unit Redemption Monthly Limit for November 2017

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Foremost Income Fund Reports Q3 2017 Results and Reviews Unit Redemption Monthly Limit for November 2017

Foremost Income Fund Reports Q3 2017 Results and Reviews Unit Redemption Monthly Limit for November 2017

CALGARY, ALBERTA--(Marketwired - Nov 7, 2017) - Foremost Income Fund ("Foremost" or the "Fund") announces the financial results for the three and nine months ended September 30, 2017.

Overview

The Fund is an unincorporated open end mutual fund trust conducting its business through two operating segments, Foremost Energy Equipment ("FEE") and Foremost Mobile Equipment ("FME"). FEE's overall business is focused on the oil and gas industry and includes activity from four manufacturing sites throughout Alberta. FME manufactures off‐highway large wheeled and tracked vehicles, hydrovac and vacuum trucks, equipment for custom drilling, construction, water wells, and mining sectors. FME has three manufacturing facilities located in Alberta.

Message to Unitholders

Dear Unitholders,

The third quarter of 2017 was disappointing from an earnings perspective but in context still resulted in a steady revenue performance. Moderately lower revenues in high margin product lines impacted the bottom line negatively. Administrative and fixed costs remain well in control, and discretionary spending is being closely monitored.

Despite continued headwinds in some of Foremost's markets revenue was relatively stable. Q3 revenue came in at $32.3 million, an increase of 7.9% year over year, but a decrease of 5.1% over the previous quarter. Gross profit was 8% ‐ lower than the average run rate in 2017 of about 11.5% ‐ because of the product mix and an adjustment in foreign exchange losses. EBIDTA was negative $0.4 million; 2017 YTD EBIDTA stands at $0.6 million.

Sales of vacuum trucks, mining tools, DRs, and shop tanks remain strong. Sales of energy equipment product lines saw some strength in Q3 but margins remain depressed in this very competitive market. Foremost's vacuum truck product line hit a landmark by achieving a monthly production run rate of 15 trucks. This was made possible by diligent supply chain work, a realignment of the shop processes for smoother workflow, and better supply management of chassis.

Foremost continues to rationalize its business operations to align with market signals. The Calgary South facility is being prepared for sale; a major auction of materials and equipment related to the legacy compression business is being planned for November 2017. After the auction the building will be listed for sale.

As we progress through 2017 a few things are becoming clearer about Foremost's business. The Western Canadian Market is strengthening, albeit slowly, the worldwide mining sector is getting back on its feet, and the US and Canadian market for vac trucks remains quite strong. This provides a good base for Foremost to start planning for 2018 to grow revenues and strengthen the bottom line.

Kevin Johnson, President

Quarter‐to‐Date Q3 2017 Highlights

  • Revenue increased by $2.4 million, or 7.9%, when comparing the third quarter of 2017 over the same quarter in 2016. More information can be found in the Segmented Results of Operations section of the MD&A.
  • Gross profit as a percentage of revenue dropped slightly from 9% in Q3 2016 to 8% in Q3 2017. Included in gross profit is an inventory allowance recovery of $0.1 million for the third quarter of 2017 compared with an expense of $0.2 million in 2016.
  • Administration costs decreased $0.1 million, from $3.0 million in the third quarter of 2016 to $2.9 million in the third quarter of 2017. This value has levelled off and has remained at a consistent 9% of revenue in 2017.
  • During the three months ended September 30, 2017 and 2016, the Fund recognized a $0.1 million foreign exchange loss, which is consistent with the same period end in 2016.
SUMMARY OF QUARTERLY INFORMATION
(000's, except per Trust Unit amount)
2017 Q1 Q2 Q3 Q4 Total
Revenue $ 31,010 $ 34,067 32,320 $ 97,397
Gross profit ($) $ 3,345 $ 4,110 2,665 $ 10,120
Gross profit (%) 11 % 12 % 8 % 10 %
Admin. expenses ($) $ 2,866 $ 3,049 2,944 $ 8,859
Admin. expenses (% of total revenue) 9 % 9 % 9 % 9 %
Exchange rate loss $ 199 $ 337 132 $ 668
EBITDA $ 284 $ 723 (416 ) $ 591
(Loss) income from operations $ (501
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