Calgary, Alberta--(Newsfile Corp. - March 23, 2020) -  Foremost Income Fund ("Foremost" or the "Fund") announces the financial results for the year ended December 31, 2019.

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, with its focus on the oil and gas industry in Western Canada, consists of three active manufacturing and service locations across Alberta. The locations manufacture oil-treating systems, shop tanks, field tanks, agriculture equipment, oil and gas process-treating equipment, and gas separators. FME manufactures and services hydrovac and vacuum trucks and equipment; off-highway, large-wheeled and tracked vehicles; and equipment for the custom drilling, construction, water well, and mining sectors. FME focuses on custom-built vehicles for its global clientele whom it serves through two manufacturing and service locations across Alberta.

Message to Unitholders

2019 ended on a slower note than anticipated, with annual revenue only increasing marginally over 2018. New product lines and product mix changes also negatively impacted gross margin.

Foremost Mobile Equipment (FME) continues to drive Foremost's growth, with revenue increasing by 3.5% over 2018. FME produced revenue of $93.6 million, with the sales growth coming in the vacuum truck product line. Foremost vacuum trucks continued to see increased demand in the US and Canada, supported by increased production capacity and throughput in our plants through the year. The drills and parts product lines continued to contribute steadily but with lower gross margins, as the sales mix varied from previous years and two new prototype drill types were launched.

Foremost Energy Equipment (FEE) had a weak year due to soft commodity prices in the Western Canadian Energy sector, lower activity due to the oil production curtailment in Alberta, and significant competitive pressures. In 2019, FEE realized revenue of $56.5 million, approximately 5% lower than 2018. Market conditions and project execution challenges drove lower sales and lower gross margins in all FEE product lines except field tanks. Plant inefficiency due to the launch of new product lines also had an impact on gross margins and throughput in the FEE plants.

We successfully introduced two new product lines in FEE-Agriculture bins and Fuel Storage tanks-with production at the Lloydminster and Hythe locations. Robust marketing and sales across Western Canada supported the launch of these product lines and customers have reacted well to the product and service offerings.

A dealer network for Agriculture bins has been established in Alberta and Saskatchewan for the sale of agriculture bins, and we have initial commitments for the 2020 season. We anticipate sales volume in this product line to be a good contributor to the revenue and margins of the FEE segment in 2020.

The overview: key measurements

Revenue is $150.1 million, an increase of 0.2% from the 2018 revenue of $149.8 million.

Gross margin decreased to $16.0 million, down from $18.9 million in 2018.

SG&A expenses decreased to 8% of revenue or $12.7 million, down from 9% of revenue or $13.4 million in 2018.

Adjusted EBIDTA is $3.4 million, a decrease from the 2018 value of $5.9 million.

2020 outlook
Markets have seen severe instability caused by the latest headlines around the novel COVID-19 virus. Foremost continues to monitor the latest developments in assessing the impact of the outbreak as it spreads across the globe, as well as the unprecedented and abrupt hit to global economic activity. There is uncertainty about the spread of the COVID-19 virus and the impact it will have on the Fund's operations, the demand for the Fund's products, global supply chains and economic activity in general.

Kevin Johnson
President
Check out Foremost's new Agriculture product lines
http://foremost.ca/agriculture/

2019 Highlights

• Revenue decreased by $0.3 million when comparing 2019 to 2018. The FME segment recognized $3.1 million more revenue in 2019 over 2018, which was offset by the $2.8 million decrease in revenue recognized by the FEE segment. More information is in the Segmented Results of Operations section of the MD&A.
• Gross profit for 2019 was $16.0 million and 11% of revenue. More information is in the Segmented Results of Operations section of the MD&A.
• Administration costs decreased slightly to $12.7 million or 8% of revenue. The majority of spend in this category is related to personnel costs.
• Adjusted EBITDA was $3.4 million for the twelve months ended in 2019 compared to $5.9 million in 2018.
• During 2019, the Fund sold two properties: one located in Calgary and the other in Indianapolis, USA. This resulted in a gain of $1.6 million.
• The Board of Trustees reviews the stated redemption price quarterly; the stated redemption price was $6.00 at January 1, 2020. Effective March 19, 2020, the redemption price decreased to $5.95.

Trust Unit Redemptions

The Fund redeemed 466,931 Trust Units during the year ended December 31, 2019, through its normal redemption program resulting in promissory notes payable of $0.07 million and cash payments of $2.8 million.

The Trustees have determined that, as of March 23, 2020, the Fund will redeem tendered Trust Units at tangible book value of $5.95 per unit.

On behalf of the Trustees
Foremost Income Fund

Bevan May, 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.

For further Investor Relations information please contact:
Jackie Schenn, CA
Tel: (403) 295-5800 or toll free 1-800-661-9190 (Canada/US) - Fax: (403) 295-5832
E-mail: investorrelations@foremost.ca - Website: www.foremost.ca

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/53717