Exchange Income Corporation Reports Financial Results for Fiscal 2009
- Generates record revenue and earnings; and increases combined dividends and distributions for sixth year in a row -
WINNIPEG, March 11 /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 3 and 12-month periods ended December 31, 2009. All amounts are in Canadian currency.
"We are very pleased with our performance in 2009," said Mike Pyle, President and CEO of Exchange Income Corporation. "By closely following a strategy that combines a disciplined approach to acquisitions and a commitment to growing the dividends paid to shareholders, we completed a number of significant milestones. Most notably, we added Calm Air to our list of operating subsidiaries, generated record results for revenue, net earnings and distributable cash, and increased dividends for the sixth straight year."
2009 Highlights
- Revenue increased 34% to $211 million
- EBITDA increased 57% to $32.7 million
- Net earnings increased 307% to $13 million
- Distributable cash increased 67% to $24.9 million
- Free cash flow increased 49% to $27.7 million
- Earnings per share increased 167% to $1.47
- Distributable cash per share increased 10% to $2.81
- Acquired Calm Air, the Corporation's largest acquisition to date
- Successfully raised money in the capital markets on three separate
occasions
- Completed the conversion from an income trust structure to a
publicly-traded corporation under a unit for share distribution
arrangement in July
- Increased the annual amount of distributions/dividends paid to
shareholders to $1.56, marking the sixth consecutive year of growth.
Results for the year ended December 31, 2009
Selected Financial Highlights
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YE 2009 YE 2008 % Change
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Revenue $211.3M $157.7M +34%
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EBITDA(1) $32.7M $20.8M +57%
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Net Earnings $13.0M $3.2M +307%
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Adjusted Net Earnings(2) $15.7M $8.7M +80%
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Adjusted Earnings per Share (fully diluted) $1.63 $1.47 +11%
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Dividends/Distributions declared per share $1.56 $1.51 +3%
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"Our strong financial performance, particularly in light of recessionary economic conditions for much of 2009, was remarkable," said Adam Terwin, Chief Financial Officer of Exchange Income Corporation. "That we were able to grow our free cash flows by 49% and increase our distributable cash per share by almost 10%, while investing more than $9.4 million in growth capital activities, provides further proof of the success of our diversified business model and the effectiveness of our acquisition strategy."
Consolidated revenue for 2009 was $211.3 million, up 34% from $157.7 million for FY 2008. The revenue growth was principally due to the acquisition of Calm Air, which was completed in April, 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 $153.5 million, or 73% of the consolidated total, for 2009. This compares to $84.7 million, or 54% of the consolidated total, for 2008. The Manufacturing Segment generated revenue of $57.8 million, or 27% of the consolidated total, for 2009. This compares to $73.0 million, or 46% of the consolidated total, for 2008. The year-over-year change in the percentage of revenue generated by each segment is due to higher revenue contributions resulting from the Calm Air acquisition as well as to a softening of demand for tanks and other equipment produced by the Manufacturing Segment due to weak economic conditions, most notably within the oil and gas sector.
Consolidated EBITDA for 2009 was $32.7 million, an increase of 57% when compared to 2008. Consolidated net earnings for 2009 were $13.0 million, or $1.40 per fully diluted share, up from $3.2 million, or $0.55 per fully diluted share, for 2008. Excluding a one-time charge of $2.7 million related to the conversion of the Corporation from an income trust to a corporation and a non cash-impairment charge of $0.6 million, adjusted net earnings for 2009 were $15.7 million or $1.63 per fully diluted share versus $8.7 million or $1.47 per fully diluted share, in 2008, which was adjusted for a non-cash impairment charge of $5.5 million. The year-over-year improvement in net earnings was chiefly due to the accretive acquisition of Calm Air and improved performance in the Corporation's existing Aviation segment entities.
At December 31, 2009, the Corporation had cash and cash equivalents of $4.9 million and working capital of $5.5 million. This compares to $4.0 million and $25.9 million respectively at December 31, 2008. The year-over-year decline in working capital is attributable to the treatment of the classification of certain debt instruments as current liabilities, specifically the assumption of $2.9 million in aircraft finance debt as part of the Calm acquisition and the Corporation's decision to early redeem the $9.7 million Series E debentures, which was completed in January 2010. Excluding these two items totaling $12.6 million, adjusted working capital at December 31, 2009 is $18.1 million.
Selected Key Performance Indicators
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YE 2009 YE 2008 % Change
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Free Cash Flows(3) $27.7M $18.6M +49%
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Distributable Cash(4) $24.9M $14.9M +67%
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Distributable Cash per Share (basic) $2.81 $2.56 +10%
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Dividends/Distributions Declared $14.1M $8.9M +59%
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Total Dividends/Distributions Declared
as a Percentage of Distributable Cash 56% 59% -
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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 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.
Free cash flows for 2009 totaled $27.7 million, representing an increase of 49% from $18.6 million for 2008. Distributable cash for 2009 was $24.9 million, up 67% from $14.9 generated in 2008. Distributable cash on a per share basis for 2009 was $2.81 basic and $2.40 fully diluted, representing increases of 10% and 5% respectively over 2008. The year-over-year improvement was due to the accretive acquisition of Calm Air and the improved performance in the Corporation's existing Aviation segment. Total dividends and distributions declared to shareholders in 2009 were $14.1 million, up 59% from $8.9 million distributed in 2008.
The Corporation expects that some of the performance indicators used when it operated as an income trust, such as distributable cash or distributable cash per share, may change as it continues its evolution as a publicly-traded corporation.
Results for the three months ended December 31, 2009
Selected Financial Highlights
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Q4 2009 Q4 2008 % Change
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Revenue $58.0M $40.8M +42%
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EBITDA(1) $9.0M $5.6M +61%
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Net Earnings $3.7M ($3.0M) -
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Adjusted Net Earnings(2) $4.1 $2.6 +61%
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Adjusted Earnings per Share (fully
diluted)(2) $0.36 $0.42 -14%
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Dividends/Distributions declared per share $0.39 $0.385 +1%
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Consolidated revenue for the fourth quarter of 2009 was $58.0 million, up 42% from $40.8 million in Q4 2008. Consolidated EBITDA for the fourth quarter of 2009 was $9.0 million, up 61% from $5.6 million in Q4 2008. Consolidated net earnings for Q4 2009 was $3.7 million compared to a loss of $3.0 million in Q4 2008. The revenue, EBITDA, and net earnings growth was principally due to the acquisition of Calm Air, which was completed in April, 2009. The growth in net earnings also relates to the $5.7 million non-cash impairment incurred in Q4 of 2008 related to the operations of Jasper Tank.
Selected Key Performance Indicators
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Q4 2009 Q4 2008 % Change
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Free Cash Flows(3) $7.2M $5.7M +26%
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Distributable Cash(4) $6.5M $4.0M +62%
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Distributable Cash per Share (basic) $0.62 $0.68 -9%
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Distributions/Dividends Declared $4.2M $2.3M +80%
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Total Distributions Declared as a
Percentage of Distributable Cash 63% 57% -
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The Corporation generated free cash flows of $7.2 million for Q4 2009, up 26% from $5.7 million for Q4 2008. Distributable cash was $6.5 million for Q4 2009, representing an increase of 62% from $4.0 million in Q4 2008.
Distributable cash on a per share basis for Q4 2009 was $0.62 basic and $0.51 fully diluted, representing declines of 9% and 16% respectively from Q4 2008. The year-over-year decline was principally due to an increase in capital expenditures of $6.5 million from $1.3 million in Q4 2008. Total dividends declared to shareholders in Q4 2009 were $4.2 million, up 80% from $2.3 million for Q4 2008.
Distributable cash per share and adjusted net earnings per share declined in the fourth quarter principally because of a material reduction in leverage of EIC's balance sheet. Since the end of the second quarter of 2009 the Corporation raised $7.9 million by issuance of shares and warrants, realized $7.3 million on the exercise of warrants, and sold $30.0 million of convertible debentures. The proceeds of these items funded the conversion from a trust to a corporation, with the balance used to reduce debt. Accordingly, the Corporation's secured debt has reduced in both absolute terms and relative to EBITDA versus 2008, in spite of the acquisition of Calm Air. As at December 31, 2009, the Corporation had secured net debt of $23.5 million or 0.7 times EBITDA, versus $38.9 million or 1.9 times EBITDA in 2008. EIC has not changed its strategy on leverage over this period and still intends to target net secured debt levels between 1.75 and 2.25 times EBITDA. EIC has simply temporarily utilized the proceeds of these equity and convertible debenture offerings to pay down debt until a suitable acquisition target is identified. As such, the reduction in debt is dilutive until the funds are redeployed to generate additional EBITDA and thus distributable cash for EIC.
Outlook
"Consistent with our recent performance, our focus throughout 2010 will be to identify companies that match our acquisition criteria," said Mr. Pyle. "In particular, we will look for companies that will complement our existing operations, have strong, established management teams, and will be immediately accretive on an EBITDA and free cash flow basis. Over the longer term, we expect to add to our Operating Segments, which will enable us to further diversify our revenue streams, sustain our growth and ability to increase our dividend payments."
Exchange Income Corporation's complete financial statements and management's discussion and analysis for the three and twelve months ended December 31, 2009 can be found at www.exchangeincomecorp.ca or at www.sedar.com.
Conference Call Notice
The Corporation will hold a conference call Friday, March 12 at 10:00 a.m. ET to review its financial results for the Fourth Quarter and Fiscal Year ended December 31, 2009. 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 Friday, March 19, 2010 at midnight. To access the archived conference call, please dial 1-800-642-1687 or 416-849-0833 and enter the reservation code 61189327.
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.
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(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) Adjusted net income is not a recognized measure under Canadian GAAP.
It excludes a non-recurring restructuring charge of $2.7 million in
2009 relating to the conversion of the Corporation from an income
trust to a public company. It excludes impairment write-downs of $0.6
million in 2009 and $5.7 million in 2008. The Corporation believes
that adjusted net income and adjusted earnings per share are more
representative of its performance as the non-recurring charges are
not related to its business activities.
(3) 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.
(4) 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.
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 and Calm Air International 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.
For further information: Mike Pyle, President and CEO, Exchange Income Corporation, (204) 982-1850, [email protected]; Joe Racanelli, Investor Relations, The Equicom Group Inc., (416) 815-0700 or 1-800-385-5451 ext. 243, [email protected]
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