Mar. 14, 2011 (Canada NewsWire Group) --
- Positioned for growth in 2011 due to recent acquisitions and strategic investments -
WINNIPEG, March 14 /CNW/ - Exchange Income Corporation (TSX: EIF) (the "Corporation" or "Exchange"), a diversified, acquisition-oriented company focused on the niche transportation and industrial manufacturing sectors, reported its financial results for the three- and 12-month periods ended December 31, 2010. All amounts are in Canadian currency.
"Our performance in 2010 was driven by our acquisition strategy and significant investments in growth initiatives," said Mike Pyle, President and CEO of Exchange. "During the year we added two significant contracts to our Aviation segment and laid the ground work for the completed acquisition of Bearskin on January 1, 2011 as well as the proposed acquisition of Westower in the second quarter of 2011. The new contracts for the Aviation segment required a significant amount of capital investment and management time. Those contracts, combined with the acquisition of Bearskin in Ontario, further entrench Exchange as a significant niche aviation operator in Canada and extend our geographic reach setting us up well for future growth. Overall, we are pleased with our financial performance in 2010 and believe we are well positioned to grow each of our key financial metrics with recent announcements in 2011."
2010 Financial and Operational Highlights
- Consolidated revenue increased 16% to $245 million.
- Invested a total of $44.1 million in growth capital expenditures relating primarily to the acquisition of Aviation equipment and infrastructure to service new contracts.
- EBITDA was $32.4 million, down 1% from $32.7 million for FY2009.
- Net earnings were $12.9 million, down 0.7% from $13.0 million for FY2009.
- Grew the number of common shares outstanding to 14.5 million from 10.8 million due to conversions of debentures by holders and warrants exercised.
- Successfully raised $30 million through the issuance of senior secured convertible debentures.
- Keewatin Air, a subsidiary of the Corporation's Aviation segment, was awarded a five-year contract by the Nunavut Government to perform exclusive medevac services into the Baffin Island region. The contract value is anticipated to be $50 million over five years.
- Calm Air, a subsidiary of the Corporation's Aviation segment, was awarded a three-year contract by Hydro One for the hauling of diesel and bio-diesel into northern Ontario
- Introduced the ATR 72 aircraft type into Calm Air's operating fleet of planes following license approval by Transport Canada.
"On a top-line basis, our successful acquisition history led to record revenue of $245 million. However, EBITDA, Distributable Cash and Net Earnings were all relatively flat compared to 2009. This was the result of costs associated with the new aviation contracts that were awarded in the second half of 2010. The pre-operating costs associated with the Baffin Island region medevac contract were $1.2M. Calm Air also experienced higher initial operating costs associated with its ATR 72 platform, which was added to service the Hydro One contract and further cargo opportunities. The Transport Canada approval process took a much longer time than anticipated, requiring Calm to carry staff to operate both the ATR 72 platform and the Hawker platform, which is being phased out," stated Adam Terwin, the CFO of Exchange. "On a per share basis, our results were impacted by a significant increase in the number of shares outstanding. Our strong share price performance resulted in the conversion of debentures and exercise of warrants into shares. While both have dramatically de-levered our balance sheet and increased our equity base, we have not yet put this capital to work generating additional EBITDA. We anticipate that the recently completed acquisition of Bearskin and the proposed acquisition of Westower Communications will help address this situation as they are expected to be very accretive on a per share basis."
Highlights Subsequent to Year-End
- Closed the Bearskin Airlines acquisition, which was valued at $32.5 million.
- Signed a Letter of Intent to purchase Westower Communications, a privately-owned company that designs, builds and services wireless and communications towers throughout North America. The value of the acquisition is $79 million, representing Exchange's largest acquisition to date.
- Increased its bank facility to $235 million from $106 million.
- Successfully raised $35 million through the issuance of senior secured convertible debentures
Results for the year ended December 31, 2010
Selected Financial Highlights
|All amounts in thousands except % and share data||FY 2010||FY 2009||% Change|
|Earnings per Share (fully diluted)||$0.97||$1.39||-30%|
|Dividends/Distributions declared per share||$1.56||$1.56||0%|
Consolidated revenue for 2010 was $244.7 million, up 16% from $211.3 million for FY 2009. The revenue growth was principally due to the strong performance of the Corporation's Aviation segment. It was also attributable to the addition of Calm Air, which was acquired in April 2009 and therefore the 2010 year includes three months of operations with no comparative in 2009.
Exchange Income Corporation generates revenue from its Aviation and Manufacturing segments, each of which are comprised of subsidiaries operating in niche markets and generating defensible cash flows. On a segmented basis, the Aviation segment generated revenue of $189.3 million, or 77% of the consolidated total, for 2010. This compares to $153.5 million, or 73% of the consolidated total, for 2009. The Manufacturing segment generated revenue of $55.4 million, or 23% of the consolidated total, for 2010. This compares to $57.8 million, or 27% of the consolidated total, for 2009.
Consolidated EBITDA for 2010 was $32.4 million, a decrease of 1% when compared to $32.7 million for 2009. Consolidated net earnings for 2010 was $12.9 million, or $0.97 per fully diluted share, down from $13.0 million, or $1.39 per fully diluted share, for 2009.
At December 31, 2010, the Corporation had cash, cash equivalents and restricted cash of $29.1 million and working capital of $48.8 million. This compares to $4.9 million and $5.5 million respectively at December 31, 2009. The significant year-over-year increase in cash and working capital is attributable to several factors. Most significantly, the position at year-end 2010 was impacted positively by the $27.6 million of restricted cash held in trust by legal counsel for the acquisition of Bearskin that closed on January 1, 2011. In addition, at year-end 2009, the Company's net working capital was a temporary exception primarily due to the timing of Series E debentures redemption, which were classified as a current liability as a result of the early redemption.
Selected Key Performance Indicators
|All amounts in thousands except % and share data||YE 2010||YE 2009||% Change|
|Free Cash Flows2||$27,360||$27,706||-1%|
|Distributable Cash per Share (basic)||$1.84||$2.81||-35%|
|Dividends /Distributions Declared||$20,342||$14,060||+45%|
|Total Dividends /Distributions Declared as a Percentage of Distributable Cash||85%||56%||-|
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 flows, distributable cash, distributable cash per share and dividends/distributions declared to shareholders, to evaluate its progress and assess its ability to sustain its dividend policy. Although some of these metrics are not commonly utilized to measure the performance of public companies, they were historically used by the Corporation when it operated as an income trust, and provide a basis for comparison.
In 2010, the Corporation generated surplus distributable cash and free cash flows over dividends declared, however net earnings from operations fell short of dividends declared by $7.4 million. The net earnings shortfall, as noted previously, was due to a number of factors including an increase in number of shares outstanding as well as to a corresponding increase of the amount of total dividends paid compared to 2009. As the Corporation moves forward and available working capital funds are deployed, its balance sheet is expected to return to normal leverage levels and additional net earnings will be generated. Until then, the Corporation plans on maintaining its current dividend per share per month at $0.13.
Results for the three months ended December 31, 2010
"The majority of the costs associated with the aviation growth initiatives were incurred in the fourth quarter. These one-time costs led to lower results in the fourth quarter of 2010 compared to 2009," said Mr. Terwin. "We continue to be encouraged by the recovery in our Manufacturing segment, as the Company experienced our second consecutive quarter of EBITDA growth in this segment as the sector shows ongoing signs of recovery. While we believe these trends will continue in the short term, we expect that the investments we made in the second-half of 2010 in our Aviation segment, as well as the recently closed acquisition of Bearskin Airlines and proposed acquisition of Westower Communications will drive meaningful EBITDA and per share growth over the longer term."
Selected Financial Highlights
|All amounts in thousands except % and share data||Q4 2010||Q4 2009||% Change|
|Earnings per Share (fully diluted)||$0.22||$0.33||-33%|
|Dividends/Distributions declared per share||$0.39||$0.39||0%|
Consolidated revenue for the fourth quarter of 2010 was $67.6 million, up 17% from $58.0 million for Q4 2009. The growth was primarily due to increased passenger and cargo volumes of the Corporation's Aviation segment as well as recovery of the manufacturing sector. On a segmented basis, the Aviation segment increased revenue by 14% or $6.5 million and the Manufacturing segment grew by 24% or $3.1 million.
Consolidated EBITDA for the fourth quarter of 2010 was $8.1 million, down 10% from $9.0 million for the corresponding period of 2009. The decline was attributable to a number of factors including start-up costs of $1.2 million in preparation of delivery of medevac services for the new contract in the Baffin Island region of Nunavut. EBITDA for Q4 2010 was also impacted by the increase in fuel costs when compared to the same period of 2009. The decline was offset partially by an increase in EBITDA of the Manufacturing segment by 62% or $0.8 million.
Consolidated net earnings for Q4 2010 were $3.3 million or $0.22 per share fully diluted. This compares to $3.7 million or $0.33 per share fully diluted for Q4 2009. The declines were due to an increase in expenditures to support the launch of medevac services to Baffin Island region of Nunavut as well as to a growth in the number of shares.
Selected Key Performance Indicators
|All amounts in thousands except % and share data||Q4 2010||Q4 2009||% Change|
|Free Cash Flows2||$7,146||$7,236||-1%|
|Distributable Cash per Share (basic)||$0.40||$0.62||-35%|
|Total Distributions Declared as a Percentage of Distributable Cash||98%||64%||-|
The Corporation generated free cash flows of $7.2 million for Q4 2010 as it did in Q4 2009. Distributable cash was $5.7 million for Q4 2010, representing a decrease of 12% from $6.5 million for Q4 2009. The decrease can be mainly attributed to the net change in EBITDA and cash interest costs. The decrease in EBITDA for the period was offset by a decrease in cash interest costs of $0.3 million.
Distributable Cash on a per share basis for Q4 2010 was $0.40 basic and $0.38 fully diluted, representing declines of 35% and 25% respectively from Q4 2009. The year-over-year decline was principally due to the impact of higher amounts of shares outstanding as a result of new shares issued for warrants exercised and debentures conversions that took place throughout 2010. As a result of the increased number of outstanding shares, total dividends declared to shareholders grew 35% to $5.6 million from $4.2 million for Q4 2009.
"Since the start of 2011, we have completed a series of milestones to bring our company to the next level of growth and size," added Mr. Pyle. "Of note, we have closed the acquisition of Bearskin, completed all of the start-up activities and investments related for our new fuel haulage and medevac contracts, and have increased our bank facility by $129 million to support future acquisition efforts. More recently, we have announced the acquisition of Westower Communications, which will further spread our operations throughout North America and allow us to tap into a growing sector of the manufacturing industry. Combined, these latest developments should effectively position us for a breakout year in 2011."
Exchange Income Corporation's complete financial statements and management's discussion and analysis for the three and twelve months ended December 31, 2010 can be found at www.exchangeincomecorp.ca or at www.sedar.com.
Conference Call Notice
The Corporation will hold a conference call on March 14 at 4:00 p.m. ET to review its financial results for the Fourth Quarter and Fiscal Year ended December 31, 2010. The call will be hosted by Mike Pyle, President and Chief Executive Officer, and Adam Terwin, Chief Financial Officer.
All interested parties can join the call by dialing 1-888-231-8191. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Monday, March 21, 2011 at midnight. To access the archived conference call, please dial 1-800-642-1687 or 416-849-0833 and enter the reservation code 49612966.
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.
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.
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 Perimeter Aviation LP, Keewatin Air LP, Calm Air International LP, and Bearskin Lake Air Service LP and the specialty manufacturing segment consists of Jasper Tank Ltd., Overlanders Manufacturing LP, Water Blast Manufacturing LP, and Stainless Fabrication, Inc. For more information on Exchange Income Corporation, please visit www.exchangeincomecorp.ca.
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 Free cash flows is a financial metric used by Management to assess the Corporation's performance and assess its ability to sustain its dividend policy.
3 Distributable cash is not a recognized measure under Canadian GAAP. It is a measure used to determine the funds available for distribution to unit holders of an income trust.
|Mike Pyle |
President and CEO
Exchange Income Corporation
(416) 815-0700 or 1-800-385-5451 ext. 243