Increases dividend distributions by 4% to $0.14 per month
WINNIPEG, Nov. 12, 2012 /CNW/ - Exchange Income Corporation (TSX: EIF)
(the "Corporation" or "Exchange"), a diversified, acquisition-oriented
company focused on the transportation and industrial manufacturing
sectors, reported its financial results for the three- and nine-month
periods ended September 30, 2012. All amounts are in Canadian currency.
"We are extremely proud of our third quarter performance and the new
benchmarks we set with each of our key financial metrics," said Mr.
Mike Pyle, President and CEO of Exchange. "The growth we experienced
was largely driven by the strength of our diversification model. Even
as our Aviation segment was largely flat, our Manufacturing segment,
which was spurred by the significant contributions made by WesTower
Communications and its three-year turf contract with AT&T Mobility,
enabled us to achieve consolidated record revenue of more than $220
million and record EBITDA of more than $30 million."
Mr. Pyle added, "Given our recent momentum and the confidence we have in
sustaining our performance into 2013 and beyond, we are increasing our
dividend distribution to $0.14 per month. This increase marks the
eighth time since 2004 that we have increased dividend distributions,
and reflects our commitment to providing dependable dividends to
Q3 2012 Highlights
Consolidated revenue was $220.8 million, up 51%
EBITDA was $30.3 million, up 37%
Adjusted net income was $11.6 million, up 53%
Free Cash Flow was $24.1 million, up 25%.
Free Cash Flow less Maintenance Capex was $16.2 million, up 27%.
Exchange's Manufacturing segment generated consolidated revenue of
$147.3 million, setting a new record high
WesTower Communications, a company that designs, builds, maintains and
services wireless phone and other communications towers throughout
North America, continued the ramp up of its three-year turf contract
with AT&T Mobility, and contributed revenue and EBITDA of $124.1
million and $11.3 million, respectively.
Closed a bought-deal convertible debenture offering, raising gross
proceeds of $57.5 million.
Selected Third Quarter Financial Highlights
All amounts in thousands except % and share data
Adjusted Net Earnings2
Earnings per Share3
Adjusted Earnings per Share
"We invested nearly $11 million in growth capital expenditures in Q3
less $3.8 million in asset disposals," said Adam Terwin, Chief
Financial Officer of Exchange. "The majority of these investments were
earmarked for the Aviation segment to support our strategic decision to
rationalize Calm Air's fleet and infrastructure. The balance,
approximately $1.7 million, was allocated to WesTower in support of its
ongoing expansion. We believe that the net total of $6.9 million in
growth capital expenditures better positions us for opportunities to
grow our operations in the future."
Selected Year-to-date Financial Results
All amounts in thousands except % and share data
Adjusted Net Earnings4
Earnings per Share (basic)
Adjusted Net Earnings per Share (basic)
Review of Financial Results
Consolidated revenue for Q3 2012 was $220.8 million, up 51% from $146.0
million for the corresponding period of 2011. The revenue increase was
primarily due to the organic growth of the Manufacturing segment, and
driven largely by the contributions of WesTower Communications.
Consolidated revenue also grew as a result of the addition of Custom
Helicopters, which was acquired in February 2012, to the Company's list
of operating subsidiaries. On a year-to-date basis, revenue for FY2012
was $569.1 million, up 57% from $362.5 million for FY2011.
Exchange generates revenue from its Aviation and Manufacturing segments,
each of which is comprised of subsidiaries operating in niche markets
and generating defensible cash flows.
On a segmented basis, the Aviation segment generated revenue in Q3 2012
of $73.5 million, up 1.4% from $72.4 million for the corresponding
period of last year. The growth was due to the acquisition of Custom
Helicopters, which was completed in February 2012 and contributed $5.5
million in revenue in Q3. The Aviation segment's revenue growth was
partially off-set by a number of contributing factors, including
increased competitive pressure faced by Bearskin Airlines and the
cancellation of Keewatin Air's passenger service in September 2011. In
Q3 2012, the Aviation segment generated 33% of Exchange's consolidated
total. This compares to 49.6% of the consolidated total for Q3 2011.
Exchange's Manufacturing segment generated revenue in Q3 2012 of $147.3
million, up 100% from $73.6 million for Q3 2011. The growth was
primarily attributable to the contributions of WesTower Communications,
which increased its revenue by 117% to $124.1 million, largely due to
its three-year turf contract with AT&T Mobility. Excluding the
contributions of WesTower, Exchange's Manufacturing segment grew its
revenue by 41.6% to $23.3 million as a result of strong performance of
all the Company's pre-existing manufacturing operations. In Q3 2012,
the Manufacturing segment generated 66.7% of Exchange's consolidated
total. This compares to 50.4% of the consolidated total for Q3 2011.
Consolidated EBITDA for Q3 2012 was $30.3 million, up 37% from $22.2
million for Q3 2011. The year-over-year gain was due to the organic
growth of Exchange's pre-existing Manufacturing segment companies,
particularly WesTower, and to the addition of Custom Helicopters. On a
year-to-date basis, EBITDA for FY2012 was $68.9 million, up 27% from
$54.1 million for FY2011.
On a segmented basis, Exchange's Aviation segment generated EBITDA of
$17.3 million for Q3 2012, up 1.6% from $17.0 million for the same
period of last year. The modest increase was due to Custom Helicopter's
$3.0 million EBITDA contributions, which were offset by a number of
factors, including softer customer demand in some markets due to
competitive pressures and higher fuel costs. The Aviation segment's
EBITDA margin for Q3 2012 was stable at 23.5%.
The Manufacturing segment generated EBITDA of $15.3 million for Q3 2012,
up from $7.2 million for Q3 2011. The increase in EBITDA was due to the
growth in contributions by WesTower, which increased by 148% or $6.8
million to $11.3 million. Excluding WesTower contributions, EBITDA from
the other pre-existing Manufacturing segment companies grew 50.6% to
$3.9 million. EBITDA margin for the Manufacturing segment in Q3 2012
was 10.4%, up from 9.7% for Q3 2011. Excluding WesTower, which is a
higher sales but lower margin business, EBITDA margins for the
Manufacturing segment were 16.9%, up from 15.9% for Q3 2011.
Exchange reported net earnings for Q3 2012 of $10.0 million, or $0.49
per basic share. In the corresponding period of 2011, Exchange reported
net earnings of $7.3 million or $0.42 per basic share. Excluding
intangible asset amortization of $0.4 million expensed as a result of
IFRS and aircraft impairment write-down of $1.9 million, Exchange had
adjusted net earnings of $11.6 million or $0.57 per basic share, up 30%
from $0.44 in Q3 2011.
On a year-to-date basis, net earnings for FY2012 were $18.6 million, up
35% from $13.8 million for FY2011. Excluding acquisition costs of $0.4
million, intangible asset amortization of $1.2 million expensed as a
result of IFRS and an aircraft impairment write-down of $1.9 million,
Exchange had adjusted net earnings for FY2012 of $21.2 million, up 29%
from $16.5 million for FY2011.
At September 30, 2012, the Corporation had net working capital of $145.1
million, including net cash and cash equivalents of $10.9 million. This
compares to $67.3 million and $11.5 million, respectively, at December
31, 2011. This significant increase is the result of the working
capital required to support the growth at WesTower.
Selected Third Quarter Key Performance Indicators
All amounts in thousands except % and share data
Free Cash Flow5
Free Cash Flow per basic share
Total Maintenance Capex6
Free Cash Flow less Total Maintenance Capex7
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, the Corporation 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
Free Cash Flow for Q3 2012 totaled $24.1 million, up 25% from $19.2
million for Q3 2011. Free Cash Flow on a basic per share basis in Q3
2012 was $1.17 per share basic, up 5% from $1.11 from Q3 2011. The
growth in Free Cash Flow was chiefly due to the increased contributions
of WesTower and other Manufacturing segment companies as well as the
addition of Custom Helicopters. Free Cash Flow gains were partially
offset by a decrease by pre-existing Aviation segment companies
primarily due to competitive pressures and softer market conditions.
Free Cash Flow less Maintenance Capex was $16.2 million, or $0.79 per
basic share, in Q3 2012. This compares to $12.7 million, or $0.74 per
basic share, for Q3 2011. The growth in Maintenance Capex was chiefly
due to the timing of Aviation segment engine over-hauls and heavy
checks, activities that fluctuate from period to period.
"As historically has been the case, we expect seasonality factors to
impact our performance in the coming months," said Mr. Pyle. "The
start of winter conditions will have a drag on the performance of our
Aviation segment as the build-out of winter roads in the northern
communities we service will reduce demand for transportation services.
WesTower may also be impacted by the onset of winter conditions, which
may limit the installation of cell towers in some markets, especially
Mr. Pyle added, "Over the long term, we are very bullish on the
sustainability of our business model and our prospects. Having a
diversified portfolio of operating companies enables us to better
absorb the fluctuations of various economic cycles and still take
advantage of organic growth opportunities. And with access to more than
$185 million in available capital as well as a strong balance sheet, we
are poised to apply our disciplined strategy take advantage of
acquisition opportunities as they emerge."
The Corporation's complete financial statements and management's
discussion and analysis for the three and nine months ended September
30, 2012 can be found at www.exchangeincomecorp.ca or at www.sedar.com.
Increase to monthly dividend distributions
Exchange also announced that its Board of Directors has voted to
increase the Corporation's monthly dividend payout rate by four percent
from $0.135 per share per month to $0.14. The increase will take
effect with the dividend distribution for the month ended November 30,
2012, and payable December 14, 2012 to shareholders of record at the
close of business on November 30, 2012.
Conference Call Notice
The Corporation will hold a conference call to discuss its 2012 third
quarter financial results on November 13, at 9:30 a.m. ET. Mike Pyle,
President and CEO, 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 Tuesday, November 20, 2012 at midnight. To access the archived
conference call, please dial 1-855-859-2056 or 416-849-0833 and enter
the reservation code 47797492.
A live audio webcast of the Q3 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, and Custom Helicopters, 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).
The statements contained in today's press 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 the 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, 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 the Corporation with the securities regulatory authorities,
available on SEDAR.
1 EBITDA is defined as earnings before interest, income taxes,
depreciation, amortization, other non-cash expenses, such as unrealized
foreign exchange gains or losses and asset impairment, and any unusual
non-operating one-time items, such as acquisition costs. 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 Q3 2012 adjusted net earnings excludes pre-tax intangible amortization
of $391,000 (Q3 2011 - $408,000) and an aircraft impairment write-down
of $1.9 million (Q3 2011 - nil).
3 Exchange had 20.4 million common shares outstanding at September 30,
2012, up from 17.2 million at September 30, 2011. The growth is due to
an increase in the conversion of debentures, the exercise of warrants
by investors, and the issuance of shares in support of acquisition
4 Year to date adjusted net earnings excludes pre-tax acquisition costs
of $392,000 ($1.8 million - FY2011), pre-tax intangible amortization of
$1.2 million ($1.4 million - FY2011) and an asset impairment write-down
of $1.9 million (nil - FY2011).
5Free Cash Flow is a financial metric used by Management to assess the
Corporation's performance and assess its ability to sustain its
dividend policy. Free cash Flow for the period is equal to the cash
flow from operating activities as defined by Canadian GAAP, adjusted
for changes in non-cash working capital and any unusual non-operating
one-time items. It is not a recognized measure under Canadian GAAP.
6 Maintenance Capex is not a GAAP measure. Capital expenditures are
characterized as either maintenance or growth capital expenditures.
Maintenance capital expenditures are those required to maintain the
operations of the Company at its current level and includes principal
payments made on finance leases.
7 Free Cash Flow less Maintenance Capex is not a GAAP measure. It
approximates the metric Distributable Cash that the Corporation
reported prior to the adoption of IFRS.
SOURCE: Exchange Income Corporation
For further information:
President & CEO
Exchange Income Corporation
Phone: (204) 982-1850 Phone:
The Equicom Group Inc.
(416) 815-0700 Ext. 243