RE: RE: Earnings after the bell.. Yet again the numbers look good, slow and steady, this company has done nothing but continue to come through when it counts, lots of talk about organic growth which is very positive, look for another acquisition in 2013 which should take it yet again to another level. Whoever said buy and hold is dead never met EIF.
Exchange Income Corporation Reports Financial Results for Fiscal 2012
Exchange Income Corporation Reports Financial Results for Fiscal 2012
- Generates $800.6 million in revenue and EBITDA of $94.5 million -
- Record results driven by strength of diversification model -
WINNIPEG, Feb. 27, 2013 /CNW/ - Exchange Income Corporation (TSX: EIF) (the "Corporation"), a diversified, acquisition-oriented company focused on niche aviation and specialty manufacturing sectors, reported its financial results for the three- and twelve-month periods ended December 31, 2012. All amounts are in Canadian currency.
"Exchange enjoyed significant success in 2012," said CEO Mike Pyle. "We set new records for each of our key financial metrics with revenue surpassing the $800 million mark and net income exceeding $25 million for the first time. These strong financial results led us to increase our dividend distributions to shareholders for the eighth time since 2004.
"While the acquisition of Custom Helicopters contributed to our success, our growth was overwhelmingly organic and driven largely by our Manufacturing segment, particularly WesTower Communications, which enjoyed strong demand for its products and services across North America as telecom carriers continue to upgrade their infrastructure. The strong performance of our Manufacturing segment provided further evidence that our diversification model works effectively since some of our Aviation segment subsidiaries were adversely impacted by economic and sector pressures throughout the year."
2012 Financial and Operational Highlights
Consolidated revenue increased 57% to $800.6 million.
EBITDA was $94.5 million, up 26% from $74.8 million for FY2011
Net earnings were $25.4 million, up 22% from $20.7 million for FY2011.
Acquired Custom Helicopters, a provider of helicopter-based aviation services in Manitoba and Nunavut, for $28.4 million
Increased dividend distributions by 4% to $0.14 per month
Raised an aggregate total of $115 million through share offering and debenture financings aimed at strengthening the Company's balance sheet and supporting its acquisition strategy
Made a net total of $36.3 million in growth capital investments.
Results for the year ended December 31, 2012
Selected Financial Highlights All amounts in thousands except % and share data FY 2012 FY 2011 % Change
Revenue $800,573 $510,303 +57%
EBITDA1 $94,498 $74,839 +26%
Net Earnings $25,351 $20,745 +22%
Adjusted Net Earnings2 $29,330 $23,770 +23%
Earnings per Share3 $1.26 $1.24 +2%
Adjusted Earnings per Share $1.46 $1.42 +3%
Dividends declared $32,717 $27,100 +21%
Consolidated revenue for 2012 was $800.6 million, up 57% from $510.3 million for FY 2011. The revenue increase was primarily due to the organic growth of the Manufacturing segment, and driven largely by the contributions of WesTower Communications, a manufacturer, constructor and servicer of cell phone towers. Consolidated revenue also grew as a result of the addition of Custom Helicopters, which was acquired in February 2012.
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 of $280.4 million, or 35% of the consolidated total, for 2012. This compares to $274.3 million, or 54% of the consolidated total for 2011. The year-over-year revenue growth was largely due to the acquisition of Custom Helicopters, which contributed $14.9 million in revenue. The Aviation segment's revenue growth was partially off-set by a number of contributing factors, including increased competitive pressure faced by Bearskin Airlines in eastern Canada markets and the cancellation of Keewatin Air's passenger service, which was initiated in September 2011.
The Manufacturing segment generated revenue of $520.2 million in 2012, up 120% from $236 million for 2011. The growth was primarily attributable to the contributions of WesTower Communications, largely due to its three-year turf contract with AT&T Wireless Mobility. Excluding WesTower, the Company's Manufacturing segment companies increased revenue by $23.3 million or 34%, mostly as a result of gains made by Stainless and Overlanders. In 2012, the Manufacturing Segment generated 65% of the Company's consolidated total. This compares to 46% of the consolidated total for 2011.
Consolidated EBITDA for 2012 was $94.5 million, an increase of 26% when compared to $74.8 million for 2011. The year-over-year gain was due to the organic growth of the Manufacturing segment, particularly as a result of the strong performance of WesTower.
On a segmented basis, the Aviation segment generated EBITDA of $52.1 million for 2012, down 9% from $57.2 million for 2011. The decline was due to a number of factors, including higher fuel costs, softer customer demand in some markets due to competitive pressures, and increased short-term operating costs stemming from a fleet restructuring initiative for Calm Air. The acquisition of Custom Helicopters, which contributed $6.4 million in EBIDTA, partially offset some of the declines of the Aviation segment. The Aviation segment's EBITDA margin for 2012 was 18.6% down from 20.8% for 2011.
The Manufacturing segment generated EBITDA of $51.0 million, up 104% from $24.9 million for 2011. The increase in EBITDA was due to the growth in contributions by WesTower, which increased by 156%. WesTower's growth was mostly due to the continued ramp up of its turf contract with AT&T Wireless Mobility and included gains from its customer activities in other markets throughout North America.
Excluding WesTower's contributions, EBITDA from other Manufacturing segment companies grew 44% as a result of the success of Stainless and the strong performance of the Alberta market for most of 2012. EBITDA margin for the Manufacturing segment in 2012 was 9.8%, down from 10.6% for 2011. The percentage decline was due to the impact of the higher proportion of revenues contributed by WesTower, which is a higher sales but lower margin business, to Exchange's operations in 2012. Excluding WesTower, EBITDA margins for the Manufacturing segment were 17.8% for 2012.
Exchange reported net earnings for 2012 of $25.4 million or $1.26 per basic share ($1.25 per fully diluted share). The net earnings total was impacted by an increase in corporate taxes of $6.5 million and an increase in interest payments of $1.2 million. In 2011, Exchange reported net earnings of $20.7 million or $1.24 per basic share ($1.21 per fully diluted share). Net earnings per share in 2012 were impacted by a growth in the number of shares outstanding of 18.6% to 20,636,593. The growth was due to an increase in the conversion of debentures by investors, the issuance of shares to support acquisition activities and a share offering financing that generated gross proceeds of $57.5 million.
Excluding net intangible amortization, aircraft impairment and acquisition costs totaling $3.8 million expensed as a result of IFRS, Exchange had adjusted net income of $29.3 million or $1.46 per basic share ($1.43 per share fully diluted).
As at December 31, 2012, Exchange had a net cash position of $4.2 million and net working capital of $156.6 million, which represents a current ratio of 1.90 to 1. These compare to a net cash position of $11.5 million, net working capital of $67.3 million and a current ratio of 1.80 to 1 for 2011.
Selected Key Performance Indicators All amounts in thousands except % and share data YE 2012 YE 2011 % Change
Free Cash Flow4 $76,776 $64,109 +20%
Free Cash Flow per share $3.83 $3.82 +0%
Total Maintenance Capex $30,771 $29,640 +4%
Free Cash Flow less Maintenance Capex $46,005 $34,469 +33%
Free Cash Flow less Maintenance Capex per share $2.30 $2.05 +12%
Dividends/Distributions Declared $32,717 $27,100 +33%
Free Cash Flow less Maintenance Capex Payout Ratio 71% 78%
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 2012 totaled $76.8 million, up 20% from $64.1 million for 2011. Free Cash Flow on a per share basis in 2012 was $3.83 ($3.02 per share fully diluted). This compares to $3.82 per basic share for 2011 ($3.18 per share fully diluted). The growth in Free Cash Flow was largely due to organic growth of the Manufacturing segment, particularly WesTower, and to the acquisition of Custom Helicopters. Per share results were impacted by the increase in number of shares.
Free Cash Flow less Maintenance Capex was $46.0 million for 2012, up from $34.5 million for 2011. On a per basic share basis, this represents $2.30 ($2.05 fully diluted) and compares to $2.05 ($1.82 fully diluted) for 2011. Maintenance Capex grew primarily as a result of the addition of Customer Helicopters.
Results for the three months ended December 31, 2012
"Our fourth quarter results, which generated a new revenue record of $231.4 million, capped our most successful year ever," said Adam Terwin, Chief Financial Officer of Exchange Income Corporation. "Our growth was mostly organic and driven by our Manufacturing segment, validating the strength of our diversification model. As strong as our $6.7 million net income was for the period, it was impacted by acquisition costs of nearly $1 million and an increase in corporate taxes of $1.9 million."
Selected Financial Highlights All amounts in thousands except % and share data Q4 2012 Q4 2011 % Change
Revenue $231,447 $147,780 +57%
EBITDA $25,642 $20,734 +24%
Net Earnings $6,710 $6,914 -3%
Adjusted Net Earnings $8,090 $7,253 +12%
Earnings per Share $0.32 $0.40 -20%
Adjusted Earnings per Share $0.39 $0.42 -7%
Dividends/Distributions declared $8,555 $7,120 +20%
Consolidated revenue for the fourth quarter of 2012 was $231.4 million, up 57% from $147.8 million for Q4 2011. The revenue increase was primarily due to the organic growth of the Manufacturing segment, driven largely by the contributions of WesTower.
On a segmented basis, the Aviation segment generated revenue in Q4 of $68.8 million, which was flat over the corresponding period of 2011. Revenue was impacted by seasonality factors, particularly for Custom Helicopters, and competitive pressures faced in certain Bearskin Airlines markets in eastern Canada. In Q4 2012, the Aviation segment generated 30% of Exchange's consolidated revenue total. This compares to 47% for Q4 2011.
In Q4 2012, Exchange's Manufacturing segment generated revenue totaling $162.7 million, up 106% from $79 million for Q4 2011. The growth was primarily due to the contributions of WesTower, which increased its revenue by 137% largely as a result of the continued ramp up of its three-year turf contract with AT&T Wireless Mobility. Excluding the contributions of WesTower, the Manufacturing segment grew its revenue by 11% largely as a result of the strong performance of Stainless. In Q4 2012, the Manufacturing segment generated 70% of Exchange's consolidated revenue total. This compares to 53% for Q4 2011.
Consolidated EBITDA for the fourth quarter of 2012 was $25.6 million, up 24% from $20.7 million for the corresponding period of 2011. The year-over-year improvement was due to the organic growth of the Company's Manufacturing segment, particularly as a result of the strong performance of WesTower.
On a segmented basis, Exchange's Aviation segment generated EBITDA of $12.0 million for Q4 2012, down 12% from $13.7 million for the same period of last year. The decline was due to a number of factors, including higher fuel costs, softer customer demand in some markets due to competitive pressures, poor weather and short-term costs related to a fleet restructuring initiative for Calm Air. These costs were partially offset by the contributions of Custom Helicopter totaling $0.5 million. Custom's performance in Q4 was impacted by the start of winter conditions. The Aviation segment's EBITDA margin for Q4 2012 was 17.5%, down from 20.0% for Q4 2011.
The Manufacturing segment generated EBITDA of $15.7 million for Q4 2012, up 80% from $8.7 million for Q4 2011. The increase in EBITDA was due to the growth in contributions by WesTower, which increased by 121%. EBITDA margin for the Manufacturing segment in Q4 2012 was 9.6%, down from 11.0% for Q4 2011. Excluding WesTower, which is a higher sales but lower margin business, EBITDA margins for the Manufacturing segment were 14.2%.
Exchange reported net earnings for Q4 2012 of $6.7 million, or $0.32 per basic share. In the corresponding period of 2011, Exchange reported net earnings of $6.9 million or $0.40 per basic share. The year-over-year decline was largely due to higher taxes incurred, which grew by $1.9 million. Per share results were also impacted by an increase in the number of shares issued as a result of financing activities and the conversion of debentures by investors.
Excluding acquisition costs totaling $1.0 million, intangible asset amortization of $0.3 million expensed as a result of IFRS and $0.1 million in impairment charges, Exchange had adjusted net earnings of $8.1 million or $0.39 per basic share in Q4 2012. In the corresponding period of 2011, Exchange had adjusted net earnings of $7.3 million or $0.42 per basic share.
Selected Key Performance Indicators All amounts in thousands except % and share data Q4 2012 Q4 2011 % Change
Free Cash Flow $20,729 $17,470 +19%
Free Cash Flow per share $1.00 $1.00 +0%
Total Maintenance Capex $7,297 $7,625 -4%
Free Cash Flow less Maintenance Capex $13,432 $9,845 +36%
Free Cash Flow less Maintenance Capex per share $0.65 $0.57 +14%
Dividends/Distributions Declared $8,555 $7,120 +20%
Free Cash Flow less Maintenance Capex Payout Ratio 64% 71%
Free Cash Flow for Q4 2012 totaled $20.7 million, up 19% from $17.5 million for Q4 2011. Free Cash Flow on a per share basis in Q4 2012 was $1.00 ($0.76 per share fully diluted). This compares to $1.00 ($0.83 fully diluted) for the corresponding period of 2011. The growth in Free Cash Flow was due to the strong organic EBITDA growth in the Corporation's Manufacturing segment, particularly WesTower, as well as to the contributions of Custom Helicopters. Free Cash Flow gains were partially offset by a decrease experienced by the Aviation segment due to competitive pressures and softer market conditions.
Free Cash Flow less Maintenance Capex was $13.4 million or $0.65 on a per share basis ($0.57 fully diluted) for Q4 2012. This compares to $9.8 million or $0.57 a per share basis ($0.50 fully diluted) for Q4 2011. The decline in Maintenance Capex was due to the timing of Aviation segment engine over-hauls and heavy checks, activities that fluctuate from period to period.
Outlook
"While we expect our performance to be relatively stable in the short term, seasonality factors may have an impact on our operations," said Mr. Pyle. "Our first quarter results, which traditionally have been our weakest, will be affected by winter conditions that may impact flight schedules and demand for our Aviation segment services as well as the installation of cell towers for WesTower in certain northern markets."
Mr Pyle continued, "Over the longer term, we are very confident in our prospects for growth. From an organic growth perspective, the pipeline of demand for WesTower's products and services remains very strong. In addition, we have implemented a series of programs in our Aviation segment designed to introduce new efficiencies and enable it to better respond to market conditions. From an accretive growth perspective, we have access to almost $170 million in available capital to apply our disciplined acquisition strategy and take advantage of opportunities as they emerge."
Exchange Income Corporation's complete financial statements and management's discussion and analysis for the three and twelve months ended December 31, 2012 can be found at www.exchangeincomecorp.ca or at www.sedar.com.
Conference Call notice
Exchange will hold a conference call to discuss its fourth quarter and year-end financial results for fiscal year 2012 on Thursday February 28, 2012 at 10:00 am 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 Thursday, March 7, 2013 at midnight. To access the archived conference call, please dial 1-855-859-2056 and enter the encore code 10099939.
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, 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