- Revenue grows 50% to $219.6 million; EBITDA increases 25% to $17.6
WINNIPEG, May 14, 2013 /CNW/ - Exchange Income Corporation (TSX: EIF)
("Corporation" or "Exchange"), a diversified, acquisition-oriented
company focused on the transportation and industrial manufacturing
sectors, reported its financial results for the three-month period
ended March 31, 2013. All amounts are in Canadian currency.
"We grew revenue by 50% to $220 million and increased EBITDA by 25% to
$17.6 million despite the negative impact that seasonality factors had
on the performance of our Aviation and Manufacturing segments alike,"
said Mike Pyle, President and CEO of Exchange Income Corporation. "Our
strong Q1 results provide further evidence of the effectiveness and
success of our diversification model. With the accretive growth
contributions from our Regional One acquisition expected to begin in
Q2, we are well positioned to sustain our momentum throughout 2013 even
if economic conditions remain volatile."
Q1 2013 Highlights
Consolidated revenue increased 50% to $219.6 million.
EBITDA increased 25% to $17.6 million.
Adjusted net income was $2.7 million (69% increase) or $0.13 per share
Free cash flow increased 20% to $13.4 million.
Raised $65 million through a debenture financing aimed at strengthening
the Corporation's balance sheet and supporting its acquisition.
Announced the acquisition of Regional One Inc., a privately-owned US
company that is a leading provider of aircraft and engine aftermarket
parts to regional airline operators around the world. Subsequent to
the end of the quarter, the total purchase price was confirmed at US
$74.2 million subject to an earn-out that could result in additional
payments of up to US $9.3 million. This is the Corporation's largest
acquisition to date.
Q1 2013 Results
Selected Financial Highlights
All amounts in thousands except % and share data
Adjusted Net Earnings2
Earnings per Share3
Adjusted Earnings per Share
Consolidated revenue for Q1 2013 was $219.6 million, up 50% from $146.7
million for Q1 2012. The revenue increase was chiefly due to the
organic growth of the manufacturing segment, and driven largely by the
contributions of WesTower Communications, a manufacturer and servicer
of cell phone towers, which generated revenue of $135.1 million.
Exchange generates revenue from its Aviation and Manufacturing segments,
each of which is comprised of subsidiaries operating in niche markets
and generating defensible cash flow. On a segmented basis, the Aviation
segment generated revenue in Q1 2013 of $62.8 million. This compares
to $65.8 million for Q1 2012. The Aviation segment's year-over-year
revenue decline of $3.0 million was due to a number of contributing
factors. These included adverse weather conditions that impacted
flight schedules, increased competitive pressures faced by Bearskin in
eastern Canada markets, and as previously discussed, the loss of a
charter service customer by Calm Air at the end of Q1 2012. The decline
in the mining sector has negatively impacted the volume of charter
services for both fixed and rotary wing aircraft, and also scheduled
service volumes for Calm Air.
The Manufacturing segment generated revenue in Q1 2013 of $156.8
million, up 94% from $80.9 million for Q1 2012. The growth was largely
due to the contributions of WesTower, which generated revenue of $135.1
Consolidated EBITDA for Q1 2013 was $17.6 million, up 25% from $14.1
million generated in Q1 2012. The growth was principally due to the
contributions of WesTower, which continued the build-out of its turf
contract with AT&T Wireless Mobility.
On a segmented basis, Exchange's Aviation segment generated EBITDA of
$7.1 million, down 17% from $8.6 million for Q1 2012. EBITDA margins
for the Aviation segment in Q1, which traditionally is the
Corporation's weakest due to seasonality factors, were impacted by a
number of developments. The largest impact on the lower EBITDA in the
first quarter were the revenue drivers discussed above. Cost reductions
helped to offset some of these revenue decreases, however the cost
reductions did not fully offset the revenue decreases. Calm Air's fleet
rationalization plan has started to contribute to lower expenses and
the Corporation expects to realize further benefits of the fleet
rationalization plan as the year progresses. EBITDA margin for the
Aviation segment in Q1 2013 was 11.3%, down from 13.0% for Q1 2012.
Consistent with results of previous years, the Corporation expects that
EBITDA for its Aviation segment will improve throughout 2013 as
seasonality factors affecting Q1 performance subside. The completion
of the fleet restructuring initiative for Calm Air, anticipated to be
finalized in the third quarter of 2013, is also expected to result in
The Manufacturing segment generated EBITDA of $12.6 million for Q1 2013,
up 77% from $7.1 million for Q1 2012. The growth was primarily
attributable to WesTower, which generated EBITDA of $8.7 million, as a
result of the on-going delivery of its service contract with AT&T
Wireless Mobility. Included in WesTower's EBITDA are consulting
charges of $1.3 million. Exchange has directed considerable internal
and external resources to manage the growth at WesTower and to position
it for further opportunities. This consulting focus is expected to
continue for the remainder of the year. Exchange's other manufacturing
subsidiaries contributed EBITDA of $3.9 million, which represented a
decline of $0.5 million over Q1 2012. The decline was due to weaker
market conditions for Stainless and Alberta operations. EBITDA margin
for the Manufacturing segment in Q1 2013 was 8.0%, down from 8.8% for
the same period in 2012. The decline in EBITDA margins was the result
of product mix as the lower margin WesTower business contributed a
higher proportion of revenue in 2013.
Exchange reported net earnings for Q1 2013 of $1.6 million or $0.08 per
share basic. In Q1 2012, the Corporation reported net earnings of $0.9
million or $0.05 per share basic. Consistent with the discussion
above, the increase in net earnings of $0.7 million, or 74%, was driven
by the higher contributions from WesTower.
Net earnings per share in Q1 2013 were impacted by an increase of 13% in
the average number of shares outstanding on a year over year basis. The
growth was due to an increase in the conversion of debentures by
investors and issuance of shares to support acquisition and financing
Excluding net intangible amortization and acquisition costs totaling
$1.1 million expensed as a result of IFRS, Exchange had adjusted net
income of $2.7 million or $0.13 per share. These compare to $1.6
million and $0.09 per share, respectively, for the corresponding period
As at March 31, 2013, the Corporation had a net cash position of $2.8
million and net working capital of $162.8 million, which represents a
current ratio of 1.92 to 1. These compare to a net cash position of
$4.2 million and net working capital of $156.6 million, or a current
ratio of 1.90 to 1, at December 31, 2012.
Selected Key Performance Indicators
All amounts in thousands except % and share data
Free Cash Flow4
Free Cash Flow per share
Total Maintenance Capex
Free Cash Flow less Maintenance Capex
Free Cash Flow less Maintenance Capex per share
Free Cash Flow less Maintenance Capex Payout Ratio
Given its operations and commitment to stable dividend payments to
shareholders, Exchange currently uses a number of key performance
indicators, most notably Free Cash Flow, to evaluate its progress and
assess its ability to sustain its dividend policy. With the adoption of
IFRS, Exchange is no longer utilizing Distributable Cash, a metric used
as a performance indicator from the time when the Corporation operated
as an income trust. Exchange will use Free Cash Flow and Free Cash Flow
less Maintenance Capex as performance indicators. Under IFRS, the
calculation of Distributable Cash and Free Cash Flow less Maintenance
Capex are very similar and presenting both would be a duplication of
the same metric. Free Cash Flow less Maintenance Capex has been chosen
over the Distributable Cash because this metric can tie directly into
Exchange's consolidated financial statements.
Free Cash Flow for Q1 2013 totaled $13.4 million, up 20% for Q1 2012.
Free Cash Flow on a per share basis in Q1 2013 was $0.65. This compares
to $0.61 per basic share for Q1 2012. The growth in Free Cash Flow was
principally due to the contributions of WesTower. Free Cash Flow gains
were offset by a decrease within pre-existing Aviation segment
companies due primarily to seasonality and competitive factors already
Free Cash Flow less Maintenance Capex was $5.5 million, or $0.26 per
share, for Q1 2013. This compares to $3.9 million, or $0.21 per share,
for Q1 2012. Maintenance Capex grew by 9% over the prior year primarily
in the aviation segment on aircraft maintenance events and rotable
"We are very encouraged by our recent acquisition of Regional One, which
is our largest to date," said Mr. Pyle. "Not only does it allow us to
further diversify our revenue streams and cash flow through its sale of
aircraft parts and equipment to regional carriers around the world,
Regional One will also help to offset the rising costs of a major
expense category of our Aviation segment. These two factors, combined
with operational efficiencies and the fleet restructuring we are
implementing, should result in improved performance of our Aviation
segment in the periods ahead."
Mr. Pyle added, "We are also very optimistic about our growth prospects
over the longer term. The introduction of new technology and
capabilities within the wireless industry show no signs of slowing
down, providing strong organic growth opportunities for WesTower.
Equally important, we have more than $229 million of available capital
to deploy for targeted acquisitions that will help drive accretive
The Corporation's complete financial statements and management's
discussion and analysis for the three months ended March 31, 2013 will
be made available at www.exchangeincomecorp.ca or at www.sedar.com after the Corporation's Annual General Meeting, which is scheduled for
10:30 AM CST at the Calm Air Hangar facility, located at 50 Morberg
Conference Call Notice
Exchange will hold a conference call to discuss its 2013 first quarter
financial results on Wednesday, May 15 at 10:00 am ET. Mike Pyle,
President and Chief Executive Officer, and Adam Terwin, Chief Financial
Officer, will co-chair the call.
All interested parties can join the conference call by dialing
1-888-231-8191 or 647-427-7450. Please dial in 15 minutes prior to the
call to secure a line. The conference call will be archived for replay
until Wednesday, May 22, 2013 at midnight. To access the archived
conference call, please dial 1-855-859-2056 and enter the encore code
56680952. A live audio webcast of the conference call will be available
at www.ExchangeIncomeCorp.ca and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to
ensure adequate time for any software download that may be required to
join the webcast. An archived replay of the webcast will be available
for 365 days.
About Exchange Income Corporation
Exchange Income Corporation is a diversified acquisition-oriented
company, focused on opportunities in the industrial products and
transportation sectors which are ideally suited for public markets
except for their size. The strategy of the Corporation is to invest in
profitable, well-established companies with strong cash flows operating
in niche markets in Canada and/or the United States.
The Corporation is currently operating in two niche business segments:
aviation and specialty manufacturing. The aviation segment consists of
the operations by Perimeter Aviation, Keewatin Air, Calm Air
International, Bearskin Lake Air Service, Custom Helicopters and
Regional One, and the specialty manufacturing segment consists of the
operations by Jasper Tank, Overlanders Manufacturing, Water Blast
Manufacturing, Stainless Fabrication and WesTower Communications. For
more information on the Corporation, please visit www.ExchangeIncomeCorp.ca. Additional information relating to the Corporation, including all
public filings, is available on SEDAR (www.sedar.com).
Caution concerning forward-looking statements
The statements contained in this news release that are forward-looking
are based on current expectations and are subject to a number of
uncertainties and risks, and actual results may differ materially.
These uncertainties and risks include, but are not limited to, the
dependence of Exchange Income Corporation on the operations and assets
currently owned by it, the degree to which its subsidiaries are
leveraged, the fact that cash distributions are not guaranteed and will
fluctuate with the Corporation's financial performance, dilution,
restrictions on potential future growth, the risk of shareholder
liability, competitive pressures (including price competition), changes
in market activity, the cyclicality of the industries, seasonality of
the businesses, poor weather conditions, and foreign currency
fluctuations, legal proceedings, commodity prices and raw material
exposure, dependence on key personnel, and environmental, health and
safety and other regulatory requirements. Further information about
these and other risks and uncertainties can be found in the disclosure
documents filed by Exchange Income Corporation with the securities
regulatory authorities, available at www.sedar.com.
1 EBITDA is defined as earnings before interest, income taxes,
depreciation and amortization. EBITDA is not a defined performance
measure under Canadian generally accepted accounting principles (GAAP).
It is used by Management to assess the performance of the Corporation
and its Operating Segments.
2 Adjusted net earnings exclude intangible amortization charges and
acquisition costs less applicable taxes.
3 Exchange had 20,731,600 shares outstanding at March 31, 2013. The
average amount of shares outstanding for Q1 2013 was 13% higher than Q1
2012. The growth is due to an increase in the conversion of debentures,
and the issuance of shares in support of and financing acquisition
4 Free cash flows is a financial metric used by Management to assess the
Corporation's performance and assess its ability to sustain its
SOURCE: Exchange Income Corporation
For further information:
President and CEO
Exchange Income Corporation
The Equicom Group Inc.
(416) 815-0700 or 1-800-385-5451 ext. 243