Exchange Industrial Income Fund reports results for the 2nd quarter of 2007



    (TSX: EIF.UN)

    WINNIPEG, MB, Aug. 13 /CNW/ - Exchange Industrial Income Fund
(TSX V: EIF.UN) ("EIIF" or the "Fund") today reported its financial results
for the second quarter of 2007.
    Highlights of the Second Quarter of 2007

    
    -  Revenue increased 29%
    -  EBITDA increased 38%
    -  Earnings increased 50%
    -  Completed the acquisition of Hotsy Grande Prairie in May
    -  Closed a new debt facility of $65 million with a syndicate of Canadian
       banks
    

    Mike Pyle, the CEO of EIIF stated "the Fund made significant strides in
implementing our business plan in the second quarter of 2007. The completion
of our new debt syndicate will enable us to move quickly to close transactions
when required. Our operating results in the second quarter improved
significantly from the first quarter. Distributable cash per unit doubled from
that generated in the first quarter to $0.74 per unit as a result of strong
contributions from our latest investments in the manufacturing sector, as well
as improved performance in our aviation business. While we still face
increased competition in our scheduled and medevac businesses, improvements to
our fleet which will be completed in the third quarter are expected to give us
the needed capacity to effectively deal with the new competitors. We are
encouraged by our second quarter results and look forward to growing the Fund
in the balance of the year."

    Results for the Three-month Period Ended June 30, 2007.

    For the three-month period ended June 30, 2007 revenue increased by 29%
to $28.2 million versus the $21.9 million generated in the same period of
2006. Earnings increased to $2.1 million ($0.48 per unit or $0.44 fully
diluted) from $1.4 million ($0.55 per unit, or $0.46 fully diluted) in the
same period of 2006. Distributable cash per unit was $0.74 ($0.62 fully
diluted) down from $0.84 ($0.66 fully diluted) in the comparable period in
2006. There were two abnormal items that affected earnings in the period and
one of these items also affected distributable cash. The item that affected
only earnings is a one time adjustment to the future income taxes as a result
of the proposed income tax changes for income trusts receiving Royal Assent on
June 22, 2007. These tax changes result in a one time charge of $0.3 million
to earnings, which is the equivalent of $0.06 on a per unit basis (or $0.05
fully diluted). The item that affected both distributable cash and earnings is
a temporary change in our leverage level. The Water Blast transaction was
funded entirely with the proceeds from units and no debt was used in the
transaction. We would typically use a combination of debt and equity in our
capital model but the proceeds of the offering were sufficient to close the
acquisition without the need for any new debt. Our new debt facility will
enable us to close our next transaction with limited or no dilution. Had we
utilized the normal level of debt in purchasing Water Blast, and reduced the
size of our equity offering by a corresponding amount, earnings per unit would
be $0.05 higher (or $0.03 fully diluted), and distributable cash per unit
would have been approximately $0.10 higher (or $0.06 fully diluted). When
these anomalies are taken into consideration earnings per unit would be $0.59
vs. $0.55 in the prior year period (or $0.52 vs. $0.46 on a fully diluted
basis) and distributable cash per unit would be $0.84 vs. $0.84 in the prior
year period (or $0.67 vs. $0.66 on a fully diluted basis).
    "We are very pleased with results from the second quarter of 2007",
commented Adam Terwin, EIIF's CFO. "When anomalies are taken into
consideration, EIIF's earnings per unit show an increase of 7% over the second
quarter of 2006, which was also a strong quarter for the Fund. These results
are largely driven by the manufacturing segment's performance, specifically
Water Blast and Overlanders, which both had a full three months of operations
included in the period. The performances of both these entities were in line
with EIIF's expectations based on historical results. The fact that EIIF's
adjusted per unit performance improved during a period of normal performance
in our manufacturing segment and a challenging period for our aviation segment
shows the power of EIIF's business model. The purchase of companies with
proven market niches at the right price ensures that the acquisitions are
accretive to the unit holders."

    Results for the Six-month Period Ended June 30, 2007.

    For the six-month period ended June 30, 2007 revenue increased by 19% to
$50.0 million versus the $41.9 million generated in the same period of 2006.
Earnings increased to $3.1 million ($0.79 per unit or $0.74 fully diluted)
from $2.5 million ($0.97 per unit, $0.84 fully diluted) in the same period of
2006. Distributable cash per unit was $1.15 ($0.97 fully diluted) down from
$1.42 ($1.14 fully diluted) in the comparable period in 2006.
    Further information about these results can be found in disclosure
documents filed by the Fund with the securities regulatory authorities
available at www.sedar.com.

    Company Profile

    The Fund is a diversified, acquisition-oriented income trust, focused on
opportunities in the industrial products and transportation sectors which are
ideally suited for public markets except for their size. It is currently
operating in two niche business segments: aviation and specialty
manufacturing. The aviation sector consists of Perimeter Aviation Ltd. and
Keewatin Air Limited and the specialty manufacturing sector consists of Jasper
Tank Ltd., Overlanders Manufacturing LP and Water Blast Manufacturing LP and
Water Blast Grande Prairie.

    Non-GAAP measures references to "EBITDA" are to earnings before interest,
income taxes, 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. A reconciliation of these non-GAAP measures to
earnings before income tax for the three and six month periods ended June 30,
2007 and June 30, 2006 is summarized in the chart below.

    
    -------------------------------------------------------------------------
                                                  Three months ended June 30
    -------------------------------------------------------------------------
    $000's (except per unit data)                            2007       2006
    -------------------------------------------------------------------------

    Earnings before income tax                              2,562      1,765
    Depreciation & amortization                               993        860
    Interest expense                                          994        667
    -------------------------------------------------------------------------
    EBITDA                                                  4,549      3,292
    Interest on bank debt                                     516        396
    Interest on debentures                                    321        233
    Maintenance CapEx                                         474        359
    Cash taxes                                                (43)       126
    -------------------------------------------------------------------------
    Distributable cash                                      3,281      2,178

    Distributable cash per unit
      Basic                                                  0.74       0.84
      Diluted                                                0.62       0.66

    Distributions declared                                   0.36       0.30
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                    Six months ended June 30
    -------------------------------------------------------------------------
    $000's (except per unit data)                            2007       2006
    -------------------------------------------------------------------------

    Earnings before income tax                              3,157      3,041
    Depreciation & amortization                             1,930      1,610
    Interest expense                                        1,870      1,261
    -------------------------------------------------------------------------
    EBITDA                                                  6,957      5,912
    Interest on bank debt                                     854        709
    Interest on debentures                                    666        473
    Maintenance CapEx                                         845        760
    Cash taxes                                                 55        305
    -------------------------------------------------------------------------
    Distributable cash                                      4,537      3,665

    Distributable cash per unit
      Basic                                                  1.15       1.42
      Diluted                                                0.97       1.14

    Distributions declared                                   0.72       0.60
    -------------------------------------------------------------------------
    


    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 Industrial
Income Fund 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 Fund'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 Industrial Income Fund with the
securities regulatory authorities, available at www.sedar.com.

    The TSX Venture Exchange has neither approved nor disapproved the
    contents of this press release.





For further information:

For further information: Contact Mike Pyle, CEO, Exchange Industrial
Income Fund, 509 - 167 Lombard Avenue, Winnipeg, MB, R3B 0V3, Phone: (204)
982-1850, Fax: (204) 982-1855, E-mail: mpyle@eig.ca


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