Exchange Income Corporation announces 2009 second quarter results



    
    /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
    DISSEMINATION IN THE UNITED STATES/
    

    WINNIPEG, Aug. 14 /CNW/ - Exchange Income Corporation (TSX: EIF) (the
"Corporation" or "Exchange"), (formerly Exchange Industrial Income Fund (TSX:
EIF.UN) (the "Fund)) a diversified, acquisition-oriented corporation, focused
on opportunities in the industrial products and transportation sectors, today
reported its financial results for the three and six-month periods ended June
30, 2009.

    
    Highlights for the Quarter Ended June 30, 2009

    -   Revenue increased 36.0% to $55.9 million from $41.0 million in
        Q2 2008
    -   EBITDA(1) increased 50.0% to $8.5 million from $5.7 million in
        Q2 2008
    -   Distributable cash increased to $6.7 million, or $0.69 per unit
        (fully diluted) from $4.4 million or $0.67 per unit (fully diluted)
        in Q2 2008; basic distributable cash per unit was $0.67 per unit,
        consistent with Q2 2008
    -   Distributions declared increased 4% to $0.39 per unit for the
        quarter, representing a payout ratio of 51% basic or 57% fully
        diluted.
    -   Net earnings totalled $4.0 million, or $0.44 per unit (fully
        diluted), compared to net earnings of $3.1 million, or $0.50 per unit
        (fully diluted) in Q2 2008
    -   Completed the acquisition Calm Air International Inc. ("Calm Air"),
        essentially doubling the size of Exchange's aviation segment
    -   Announced the intent to convert to a corporation through the
        acquisition of HMY Airways Inc., and completed the conversion
        subsequent to the end of the quarter.
    -   Completed two separate equity offerings, raising a combined total of
        $35 million
    -   Market capitalization of the Corporation exceeded $100 million for
        the first time
    

    "The second quarter of 2009, which marked Exchange's fifth year
anniversary, was a transformational quarter. The first milestone was the
acquisition of Calm Air, which doubled the size of our aviation business. Calm
Air compliments Exchange's existing northern aviation companies and we were
excited to acquire it at an attractive price. Expanding the size of our
recession resistant aviation business at an accretive multiple enables
Exchange to further its goal of providing reliable and growing distributions
to investors" commented Mike Pyle, President and CEO of Exchange. "The second
milestone was the announcement that we would convert back to a corporation
through the acquisition of HMY Airways. When the government announced in
October 2006 that income trusts would be subject to taxation in 2011 the
market's appetite for this type of instrument diminished significantly, thus
making it more difficult and costly to raise capital. Exchange's low payout
ratio combined with the acquisition of HMY, enabled the Fund to make this
conversion to a corporation while maintaining the same monthly disbursements
that it was paying as an income trust, resulting in a significant benefit to
the unitholder who will now be taxed at a dividend tax rate. The third
milestone for Exchange is that in June 2009 its market capitalization reached
$100 million for the first time."
    Adam Terwin, Exchange's CFO commented, "our aviation segment continued to
prove its resilience in the current economic landscape during the second
quarter, as our existing airlines had significant improvements in sales and
EBITDA over Q2 2008. As well, Calm Air, our newest acquisition made a
significant contribution to the strong performance of our aviation division.
The excellent results from our aviation companies combined with cost cutting
measures taken by our manufacturers led to another quarter of good financial
performance. In fact, Q2 marked the seventh consecutive quarter that our fully
diluted distributable cash per unit increased over the comparative prior year
quarter, as it increased 3% to $0.69. Our payout ratio for the second quarter
was 51% or 57% fully diluted, and our balance sheet remains strong with $25.4
million in working capital including $9.6 million in cash and equivalents."

    Results for the Three Months ended June 30, 2009

    Exchange Industrial Income Fund's revenue for the three months ended June
30, 2009 increased 36% or $14.9 million to $55.8 million when compared to the
same period in 2008. The main driver of the increase in revenues for the
period is the addition of Calm Air that was acquired at the beginning of the
second quarter and added to the Aviation segment. Revenues for the Aviation
segment increased 92% to $41.5 million compared to the same period in 2008 and
revenues for the Manufacturing segment decreased 26% to $14.3 million compared
to the same period in 2008.
    EBITDA(1) for the three months ended June 30, 2009 increased 50% or $2.8
million to $8.5 million compared to the same period in 2008. Consistent with
revenue, the main driver of the increase in EBITDA(1) was the acquisition of
Calm Air. The EBITDA(1) for the Aviation segment increased 91% to $8.0 million
compared to the same period in 2008 and EBITDA(1) for the Manufacturing
segment decreased 23% to $1.7 million compared to Q2 2008.

    
    -------------------------------------------------------------------------
    Distributable
     Cash Table

    ($000's except  Three Months   Three Months    Six Months     Six Months
     per unit          Ended          Ended          Ended          Ended
     data)         June 30, 2009  June 30, 2008  June 30, 2009  June 30, 2008
    -------------------------------------------------------------------------
    Revenue:
      Aviation          $41,525        $21,668        $61,658        $39,435
      Manufacturing      14,327         19,327         31,390         35,980
    -------------------------------------------------------------------------
                        $55,852        $40,995        $93,048        $75,415

    Expenses:
      Direct
       Operating        $35,297        $27,580        $60,280        $50,634
      General &
       Administrative    12,077          7,758         20,204         15,293
    -------------------------------------------------------------------------
                        $47,374        $35,338        $80,484        $65,927

    EBITDA               $8,478         $5,657        $12,564         $9,488
    Less:
      Interest on
       bank debt            861            734          1,232          1,525
      Interest on
       debentures           196              0            431              0
      Interest on
       convertible
       debentures           364            289            653            577
      Maintenance
       capital
       expenditures         477            208            794            560
      Cash taxes            (93)            14             66             79
    -------------------------------------------------------------------------
    Distributable Cash   $6,673         $4,412         $9,388         $6,747

    Distributable Cash
     per unit
      Basic               $0.76          $0.76          $1.28          $1.16
      Diluted             $0.69          $0.67          $1.16          $1.05

    Distributions
     declared per unit    $0.39         $0.375          $0.78          $0.75

    Payout Ratio
       Basic                51%            49%            61%            65%
       Diluted              57%            56%            67%            71%
    -------------------------------------------------------------------------
    

    The Fund generated Distributable Cash of $6.7 million in the second
quarter of 2009 reflecting an increase of 51% over the $4.4 million generated
in the same period in 2008. On a per unit basis, distributable cash was $0.69
fully diluted, a 3% increase over the $0.67 generated in the same period in
2008.
    Net earnings for the second quarter of 2009 increased 30.3% to $4.0
million, or $0.44 per unit (fully diluted) compared to $3.1 million or $0.50
per unit (fully diluted) in the second quarter a year ago. The decrease in the
earnings per unit resulted from an increase in depreciation and amortization
expense of $0.08 per unit compared to the prior year, accounting for more than
the full $0.06 decrease in earnings per unit. The higher depreciation level
reflects the high level of capital assets at Calm Air combined with
amortization of intangible assets related to purchase price accounting for the
Calm Air acquisition.

    Results for the Six Months ended June 30, 2009

    For the six months ended June 30, 2009, revenue for the Fund totaled
$93.0 million, EBITDA(1) totaled $12.6 million, and net earnings totaled $5.4
million, or $0.72 per unit (fully diluted), compared to revenue of $75.4
million, EBITDA(1) of $9.5 million, and net earnings of $4.5 million, or $0.75
per unit (fully diluted) for the same period in 2008. Distributable cash per
fully diluted unit of $1.16 in the first six months of 2009 represents a 10.5%
increase compared to $1.05 for the same period in 2008. With distributions
declared per unit of $0.78 and $0.75 for six months ended June 30, 2009 and
2008 respectively, this implies a payout ratio (fully diluted) of 67% and 71%
respectively.

    Liquidity & Capital Resources

    As at June 30, 2009, the Fund had working capital of $25.4 million,
including cash and cash equivalents of $9.6 million, compared to working
capital of $25.9 million, including cash and cash equivalents of $4.0 million
as at December 31, 2008. Long-term debt was $59.3 million as at June 30, 2009,
compared to $40.9 million as at December 31, 2008.

    
    (1) Non-GAAP measures references to "EBITDA" are to earnings before
        interest, income taxes, foreign exchange gains or losses,
        depreciation, and amortization and to "distributable cash" which is a
        performance measure used to summarize the funds available to
        unitholders of an income fund. Management believes that, in addition
        to net income or loss, EBITDA and distributable cash are useful
        supplemental measures in evaluating its performance. Specifically,
        management believes that EBITDA is the appropriate measure from which
        to make adjustments to determine the Fund's distributable cash.
        EBITDA and distributable cash are not measures recognized by Canadian
        generally accepted accounting principles ("GAAP") and do not have a
        standardized meaning prescribed by GAAP. Management cautions
        investors that EBITDA and distributable cash should not replace net
        income or loss as an indicator of performance, or cash flows from
        operating, investing, and financing activities as a measure of the
        Fund's liquidity and cash flows. The Fund's method of calculating
        EBITDA and cash distributions may differ from the methods used by
        other issuers.


    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 unitholder
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.

    
    The Toronto Stock Exchange has neither approved nor disapproved the
    contents of this press release.
    

    About Exchange

    Exchange is a diversified, acquisition-oriented corporation, 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 Perimeter
Aviation Ltd., Keewatin Air Limited, and Calm Air International Inc. and the
specialty manufacturing segment consists of Jasper Tank Ltd., Overlanders
Manufacturing LP, Water Blast Manufacturing LP, and Stainless Fabrication,
Inc.





For further information:

For further information: Mike Pyle, President and CEO, Exchange Income
Corporation, (204) 982-1850, mpyle@eig.ca; Alice Dunning, Investor Relations,
The Equicom Group Inc., (416) 815-0700 or 1-800-385-5451 ext. 255,
adunning@equicomgroup.com


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