EXCHANGE INCOME CORPORATION First Quarter Report
For the three months ended
March 31, 2024
CEO's Message
May 6, 2024 marks our 20th anniversary since our first acquisition of Perimeter Aviation Ltd. I think back to a comment that I had read, "Reflection requires looking back so that the view looking forward is even clearer." In my message I will look back over the past 20 years and reflect upon how far we have come as a company. Our history and the wisdom obtained over those years will provide guideposts to how we move forward as an organization. Since inception, our strategy has always been purpose built and was based on three fundamentals:
- to provide our shareholders with stable and growing cash distributions ii) maximize the share value associated with our portfolio of subsidiaries including through continued investment in those subsidiaries post acquisition, and iii) employ a disciplined acquisition strategy. We have not strayed from that purpose in the past 20 years, and I am even more convinced that our business model will lead us into the next 20 years of successes. But first let me highlight some of the key performance highlights from the first quarter:
Highlights from EIC's 2024 First Quarter Financial Performance
- Record first quarter Revenue of $602 million, an increase of $75 million or 14%.
- Adjusted EBITDA of $111 million, representing growth of $14 million over the prior period or 14% and setting another first quarter benchmark for the Corporation.
- Free Cash Flow first quarter record of $62 million compared to the prior period of $60 million.
- Net Earnings of $5 million compared to the prior period of $7 million and Net Earnings per share of $0.10 compared to the prior period of $0.16.
- Adjusted Net Earnings of $10 million compared to the prior period of $12 million and Adjusted Net Earnings per share of $0.20 compared to the prior year of $0.27.
- Increase in Free Cash flow less Maintenance Capital Expenditures of $4 million to $23 million, another first quarter record.
- Trailing Twelve Month Free Cash Flow less Maintenance Capital Expenditures Payout Ratio remained consistent with the comparative period at 58%.
- Subsequent to quarter end, completed an extension and upsize to the Corporation's credit facility to $2.2 billion, including the addition of a new Social Loan tranche of $200 million, containing consistent pricing and terms with our prior credit facility.
Revenue generated by the Aerospace & Aviation segment increased by $43 million or 13% to $369 million and Adjusted EBITDA increased by $20 million or 27% to $94 million over the comparative period. The significant drivers of the revenue and profitability increases relate to previous Growth Capital Expenditures related to additional routes, improved load factors and our previously announced medevac contracts in our Essential Air Services business line, increased flying on owned aircraft and changes in sales mix within the Aerospace business line and continued step-based improvements in our Aircraft Sales & Leasing business line as aircraft and engine leasing continues to strengthen.
Manufacturing segment revenue increased by $32 million to $233 million for the quarter and Adjusted EBITDA decreased by $5 million to $27 million. The increases in revenues were primarily driven by the acquisitions made in 2023 while the decline in segment profitability was expected and primarily due to the Environmental Access Solutions business line as the prior year comparative period was characterized by the continuation of the perfect alignment of price, demand, supply and weather coupled with the seasonal anomaly of having a number of rental mats deployed on a long, linear project in Western Canada.
We are very pleased with these results, and it sets the foundation for the remainder of the fiscal year. It demonstrated the importance of our diversified model as our Aerospace & Aviation segment posted record first quarter financial metrics and our Manufacturing segment posted strong revenue growth with an expected level of profitability due to changes in sales mix. Our business lines are complementary to one another and provide consistency whilst the world is experiencing significant macroeconomic and geopolitical uncertainty. This consistency has become a hallmark of EIC and has allowed us to provide a consistent, dependable, and increasing dividend to our shareholders. Our structure and model was developed 20 years ago and I would be remiss if I didn't reminisce about the start of EIC.
The Start of the Story
On May 6, 2004 the units of Exchange Industrial Income Fund began trading on the Toronto Venture Exchange. The initial public offering raised $8 million and through some additional financing transactions, Perimeter Aviation Ltd. was purchased for $18 million. For the 2004 fiscal year the distributions per unit (share) were 9 cents per month. The purpose of the Company was the same back in 2004 as it is today, to provide our shareholders with stable and growing cash distributions, maximize the share value associated with our portfolio of subsidiaries, and employ a disciplined acquisition strategy.
First Quarter 2024 Report | -2- | Exchange Income Corporation |
I still remember the employees of Perimeter being very skeptical of EIC being the buyer, however the attitude changed dramatically with the first aircraft addition to the Perimeter fleet and with each additional purchase. The historical Perimeter business was a successful business that was built by its founder, the late Bill Wehrle. It met all our acquisition requirements as it was a niche business with strong management and a strong cash flow profile. However, like most private businesses, their growth was limited by availability of capital and the willingness to lever an already profitable company. So when EIC purchased the business I sat with the employees, opened up the EIC chequebook, gave them a blank cheque in a literal and figurative sense and asked what they needed to grow. We provided the management team with the financial capabilities to fund their growth and soon the Company expanded their fleet and added medevac capabilities. In fact, based on 2023 financial metrics, Perimeter has increased their revenues by 562% since acquisition. The growth achieved by Perimeter allowed us to identify and purchase Keewatin Air Limited. The Keewatin Air employees were aware of the capital deployed into Perimeter and were excited about the prospect of additional investments. And thus, the story of EIC began. It is also important to note that EIC's leadership in the medevac industry existed before the concept of Sustainable Loans or before the ESG acronym was readily bounded about. Our philosophy at EIC was always, do the right thing and that philosophy continues to lead us today.
Our journey has not always been smooth. There were turbulent times. In 2011, we purchased WesTower Communications in both Canada and the US and in November of that year WesTower US announced the signing of a contract with AT&T. This single $500 million contract was approximately 5 times larger than the historical per annum revenues of WesTower at acquisition. Significant efforts were required by head office and WesTower management to execute on the contract. However, we came to quickly realize that diversification, which was one of our cornerstones of our business model, became impaired and performance was lagging expectations as the business grew faster than we could collectively manage. We were able to improve the performance and recognize this lack of diversification and this enabled the divestiture of WesTower US at a significant profit. The timing was strategic as we announced the disposition in October 2014 and used the proceeds for the acquisition of Provincial Aerospace Ltd. in January 2015. This turn of events set EIC for the success that we see today and provided some valuable lessons for our management teams. The lessons included the potential pitfalls of exponential growth, the importance of cash flows, working capital management and diversification of our businesses.
We enjoyed successes for the next five years and executed on a number of transactions that were consistent with our purpose. Then the next turbulent period hit, the pandemic known as COVID-19. During that time everything changed. There was no management playbook that someone could navigate. It was making decisions on real-time basis and pivoting on the fly. But during times of stress, we would always come back to our purpose and our value of always doing the right thing. While other companies were cutting dividends and laying off employees, we pivoted throughout our various businesses. Our manufacturing companies started to produce medical equipment/supplies and we continued our increasingly important essential air services by transporting people in need and medical professionals to communities across Canada. Our medevac operations adapted and incorporated medical isolation units to transport COVID-19 patients to locations where their acute care needs would be met. In both our Manufacturing and Aerospace & Aviation segments, the crisis created by the COVID- 19 pandemic served to highlight the character we have always known exists across our organization. Our people care deeply about the communities we serve. We have always respected that spirit in our business practices and encouraged doing the right thing throughout our organization.
Fast forward to today. Our collective businesses generated $2.5 billion in per annum revenues and $556 million in Adjusted EBITDA in 2023. Our employee complement is over 8,000 strong around the world. As of December 31, 2023 we have had 17 dividend increases over the past 20 years and our average annual compounded total shareholder return since inception is approximately 19% significantly surpassing comparable indexed benchmarks. We have made $1.7 billion in Growth Capital Expenditures in addition to $1.6 billion in acquisition investments. Lastly, to date we have paid $906 million in dividends and that number is expected to approach approximately $1 billion by the year's end. All of these achievements are incredible but the thing I am most proud of is how we have not forgotten our roots of who we are and what got us here. Our Directors and executives constantly reinforce our values and the purpose of EIC to our new acquisitions, employees, and recruits. Our culture and the cultures of our subsidiaries have not changed over the years. While the numbers may have gotten bigger with more zeros behind them, the culture, the essence, and the purpose of EIC have remained the same.
Thank you to our shareholders, our employees, our customers and the communities we serve. Cheers for the last 20 years and looking forward to the next 20.
Mike Pyle
Chief Executive Officer
First Quarter 2024 Report | -3- | Exchange Income Corporation |
May 7, 2024
TABLE OF CONTENTS
- FINANCIAL HIGHLIGHTS AND SIGNIFICANT EVENTS ___________________________________________________ 9
- RESULTS OF OPERATIONS _______________________________________________________________________ 10
- INVESTING ACTIVITIES ___________________________________________________________________________ 14
- DIVIDENDS AND PAYOUT RATIOS__________________________________________________________________ 16
- OUTLOOK ______________________________________________________________________________________ 18
- LIQUIDITY AND CAPITAL RESOURCES______________________________________________________________ 21
- RELATED PARTY TRANSACTIONS _________________________________________________________________ 23
- CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS _______________________________________________ 23
- ACCOUNTING POLICIES __________________________________________________________________________ 23
- CONTROLS AND PROCEDURES __________________________________________________________________ 23
- RISK FACTORS_________________________________________________________________________________ 24
- NON-IFRSFINANCIAL MEASURES AND GLOSSARY__________________________________________________ 24
- QUARTERLY INFORMATION ______________________________________________________________________ 27
- FINANCIAL STATEMENTS AND NOTES_____________________________________________________________ 28
First Quarter 2024 Report | -4- | Exchange Income Corporation |
Management Discussion & Analysis
of Operating Results and Financial Position for the three months ended March 31, 2024
PREFACE
This Management's Discussion and Analysis ("MD&A") supplements the unaudited interim condensed consolidated financial statements and related notes for the three months ended March 31, 2024 ("Consolidated Financial Statements") of Exchange Income Corporation ("EIC" or "the Corporation"). All amounts are stated in thousands of Canadian dollars, except per share information and share data, unless otherwise stated.
This MD&A should be read in conjunction with the unaudited interim condensed consolidated financial statements of the Corporation for the three months ended March 31, 2024, its annual financial statements for the year ended December 31, 2023, and its annual MD&A for the year ended December 31, 2023. The unaudited interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") applicable to the preparation of the interim financial statements.
FORWARD-LOOKING STATEMENTS
This report and the documents incorporated by reference herein contain forward-looking statements. All statements other than statements of historical fact contained in this report and the documents incorporated by reference herein are forward-looking statements, including, without limitation, statements regarding the future financial position, business strategy, completed and potential acquisitions and the potential impact of such completed and/or potential acquisitions on the operations, financial condition, capital resources and business of the Corporation and/or its subsidiaries, the Corporation's policy with respect to the amount and/or frequency of dividends, budgets, litigation, projected costs and plans and objectives of or involving the Corporation or its subsidiaries or any businesses to potentially be acquired by the Corporation. Prospective investors can identify many of these statements by looking for words such as "believes", "expects", "will", "may", "intends", "projects", "anticipates", "plans", "estimates", "continues" and similar words or the negative thereof.
Forward-looking statements are necessarily based upon a number of expectations or assumptions that, while considered reasonable by management at the time the statements are made, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are cautioned to not place undue reliance on forward-looking statements which only speak as to the date they are made. Although management believes that the expectations and assumptions underlying such forward-looking statements are reasonable, there can be no assurance that such expectations or assumptions will prove to be correct. A number of factors could cause actual future results, performance, achievements, and developments of the Corporation and/or its subsidiaries to differ materially from anticipated results, performance, achievements, and developments expressed or implied by such forward-looking statements. Such factors include, but are not limited to: economic and geopolitical conditions; competition; government funding for Indigenous health care; access to capital; market trends and innovation; general uninsured loss; climate; acts of terrorism, armed conflict, labour or social unrest; pandemic; level and timing of defence spending; government funded defence and security programs; environmental, social and governance; significant contracts and customers; operational performance and growth; laws, regulations and standards; acquisition risk; concentration and diversification risk; maintenance costs; access to parts and relationships with key suppliers; casualty losses; environmental liability risks; dependence on information systems and technology; international operations risks; fluctuations in sales prices of aviation related assets; fluctuations in purchase prices of aviation related assets; warranty risk; performance guarantees; global offset risk; intellectual property risk; availability of future financing; income tax matters; commodity risk; foreign exchange; interest rates; credit facility and the trust indentures; dividends; unpredictability and volatility of prices of securities; dilution risk; credit risk; reliance on key personnel; employees and labour relations; and conflicts of interest. A further discussion of these risks is included in Section 11 - Risk Factors.
The information contained or incorporated by reference in this report identifies additional factors that could affect the operating results and performance of the Corporation and its subsidiaries. Assumptions about the performance of the businesses of the Corporation and its subsidiaries are considered in setting the business plan for the Corporation and its subsidiaries and in setting financial targets. Should one or more of the risks materialize or the assumptions prove incorrect, actual results, performance, or achievements of the Corporation and its subsidiaries may vary materially from those described in forward-looking statements.
The forward-looking statements contained herein or contained in a document incorporated by reference herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included or incorporated by reference in this report are made as of the date of this report or such other date specified in such statement. Except as required by law, the Corporation disclaims any obligation to update any forward-looking information, estimates or opinions, future events or results, or otherwise.
First Quarter 2024 Report | -5- | Exchange Income Corporation |
Management Discussion & Analysis
of Operating Results and Financial Position for the three months ended March 31, 2024
EXCHANGE INCOME CORPORATION
The Corporation is a diversified, acquisition-oriented corporation focused on opportunities in aerospace, aviation, and manufacturing. The business plan of the Corporation is to invest in profitable, well-established companies with strong cash flows operating in niche markets. The objectives of the Corporation are:
- to provide shareholders with stable and growing dividends;
- to maximize shareholder value through ongoing active monitoring of and investment in its operating subsidiaries; and
- to continue to acquire additional businesses or interests therein to expand and diversify the Corporation's investments.
Segment Summary
The Corporation's operating segments are strategic business units that offer different products and services. The Corporation has two operating segments: Aerospace & Aviation and Manufacturing.
All consolidated revenue percentages noted below have been calculated by adjusting revenues for acquisitions that were completed in fiscal 2023 to reflect a full year contribution. Acquisitions completed in the current year are not included.
Aerospace & Aviation Segment
The Aerospace & Aviation segment is comprised of three lines of business: Essential Air Services, Aerospace, and Aircraft Sales & Leasing.
Essential Air Services includes both fixed wing and rotary wing operations. Under various brand names across Canada, our subsidiaries provide essential services to Canada's northern and remote communities, including medevac, passenger, charter, freight services, and auxiliary services. The majority of the communities we serve are not accessible year-round by ground transportation, meaning our airlines provide a vital link into these communities. Our operations span across Canada, and more specifically include operations in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Ontario, and Quebec. The Corporation also operates two flight schools, training pilots both for our own airlines and for airlines around the world.
Essential Air Services accounted for approximately 32% of the Corporation's consolidated revenues in fiscal 2023. Items impacting margins within this business are fuel prices, load factors, weather, and, in the current operating environment, the ability to source a full complement of pilots and aircraft mechanics. Labour costs in these areas have increased well above the rate of inflation and in certain circumstances cannot be immediately flowed through to the customer.
Essential Air Services includes the operations of Calm Air International LP, CANLink Aviation Inc. (MFC Training), Carson Air Ltd, Custom Helicopters Ltd., Keewatin Air LP, PAL Airlines Ltd., and Perimeter Aviation LP (including its operating division, Bearskin Airlines).
Aerospace includes our vertically integrated aerospace offerings that provide customized and integrated special mission aircraft solutions primarily to governments across the globe. These services encompass mission systems design and integration, aircraft modifications, intelligence, surveillance, reconnaissance operations ("ISR"), software development, logistics and in-service support. Most of these services are provided pursuant to long term government contracts. In addition, our subsidiaries deliver training solutions across an array of aviation platforms and have in-depth experience in training pilots and sensor operators on both manned and unmanned aircraft for governmental agencies.
Aerospace accounted for approximately 14% of the Corporation's consolidated revenues in fiscal 2023. Training solutions typically generate lower margins as there are low capital requirements outside of working capital, whereas ISR flying operations typically have higher margins as the upfront investment in the owned assets to perform the ISR flying operations is reflected as an expense through depreciation.
Aerospace includes the operations of Crew Training International, Inc. and PAL Aerospace Ltd.
Aircraft Sales & Leasing includes aftermarket aircraft, engine and parts sales and aircraft and engine leasing along with aircraft management services. Our subsidiaries specialize in regional and commuter aircraft, and seek to monetize their portfolio over the full life cycle of the asset. Our subsidiaries are not typical finance lessors; rather, assets are leased for shorter durations to consume the available green time on those assets. Once the green time has been consumed, the assets can then either be overhauled and leased out again, or torn down into piece parts and sold to airlines around the world to generate further cash flows. Revenue streams include
First Quarter 2024 Report | -6- | Exchange Income Corporation |
Management Discussion & Analysis
of Operating Results and Financial Position for the three months ended March 31, 2024
selling whole aircraft, engines and components of those assets, leasing of aircraft and engines and fee income earned through the provision of services for third parties such as asset management or consignment sales. Our expertise in understanding the value of each component of an aircraft and the anticipated demand for those components, including the next major shop visits and next major overhaul event for each platform we specialize in, provides a competitive advantage on what to buy and what to pay.
Aircraft Sales & Leasing accounted for approximately 12% of the Corporation's consolidated revenues in fiscal 2023. The most significant item impacting margins in this line of business is sales mix. Leasing contributes very high margins and therefore variability in leasing revenue has the largest impact on margin. Within this business line, parts revenue is the most predictable and stable from both sales and margin perspectives; whereas the sale of aircraft and engines varies on a period to period basis, both in volume and in price, but are generally higher dollar and lower margin transactions.
Aircraft Sales & Leasing includes the operations of EIC Aircraft Leasing Limited and Regional One, Inc.
Manufacturing Segment
The Manufacturing segment is comprised of three lines of business: Environmental Access Solutions, Multi-Storey Window Solutions and Precision Manufacturing & Engineering.
Environmental Access Solutions is the largest provider of temporary access solutions in Canada, providing a turnkey service which includes planning, consultation, delivery and installation, logistical support, and removal and washing solutions. Our access solutions and related services provide temporary ground protection that allow customers to access job sites or use heavy machinery and equipment on wet, loose, or otherwise unstable or environmentally sensitive ground. Access mats and bridges provide access to remote areas in a much more environmentally friendly manner than the construction of temporary gravel roads and installation of culverts and water-diversion devices, which are difficult to remove and remediate and can cause cross-contamination of soil. As the largest operator in this industry, we provide a one-stop solution for our clients with a vertically integrated platform including in-house mat manufacturing capabilities, a sizable fleet of trucks and equipment, and a portable, patented closed-loop mat washing system.
Environmental Access Solutions accounted for approximately 8% of the Corporation's consolidated revenues in fiscal 2023. Rentals generate higher margins than other lines of business within Environmental Access Solutions. Rental activity is influenced by several factors, such as the supply of mats in the marketplace, the availability and pricing of timber used in mat production, and weather conditions, including the amount of precipitation and temperature. In addition to rentals, the sale of mats and the overall sales mix in a given period can also have a significant impact on margins. These mat sale transactions are generally higher dollar value and lower margin transactions when compared to rental revenue.
Environmental Access Solutions includes the operations of Northern Mat and Bridge LP.
Multi-Storey Window Solutions includes the design, manufacture and installation of the exteriors of residential and mixed-use high rises which integrate residential, retail, and office spaces. Our subsidiaries manufacture an advanced unitized window wall system, curtain wall, and railing solutions. This provides solutions for the entire façade, including the windows, operable elements and opaque areas that surround the exterior envelope of a building. Our vertically integrated offering within the Multi-Storey Window Solutions includes installation services in both Canada and in the United States. In the United States, we have the capability to install both our internally manufactured window solutions and those manufactured by others.
Multi-Storey Window Solutions accounted for approximately 19% of the Corporation's consolidated revenues in fiscal 2023. The most significant items impacting margins within this line of business are the cost of raw materials and product mix. Since our subsidiaries both manufacture and install exteriors of high-rise buildings, the margins realized in a particular period can vary based on the type of work performed. Installation, particularly on jobs completed with non-Quest/BVGlazing product, generate lower margins than for supply and install projects.
Multi-Storey Window Solutions includes the operations of BVGlazing Systems Ltd., and Quest Window Systems Inc.
Precision Manufacturing & Engineering provides engineering and precision manufacturing services throughout North America in a wide variety of industries. These services include: wireless and wireline construction and maintenance services; the manufacture of precision parts and components for a variety of industries; the manufacture of portable hydronic climate control equipment; the manufacture of specialized stainless steel tanks, vessels, and processing equipment; electrical and control systems integration focused on the agricultural material handling segment; and the manufacture of specialized heavy-duty pressure washing and steam systems, commercial water recycling systems, and custom tanks.
First Quarter 2024 Report | -7- | Exchange Income Corporation |
Management Discussion & Analysis
of Operating Results and Financial Position for the three months ended March 31, 2024
Precision Manufacturing & Engineering accounted for approximately 15% of the Corporation's consolidated revenues in fiscal 2023. Margins in this line of business are typically stable. While there may be margin pressure in times of rapid escalation of prices of raw materials, generally our subsidiaries have the ability to pass on these costs to customers over time due to the specialty nature of the products that are being provided.
Precision Manufacturing & Engineering includes the operations of Ben Machine Products Company Incorporated, DryAir Manufacturing Corp., Hansen Industries Ltd., LV Control Mfg. Ltd., Overlanders Manufacturing LP, Stainless Fabrication, Inc., Water Blast Manufacturing LP, and WesTower Communications Ltd.
Management of the Corporation continuously monitors and provides support to the operating subsidiaries. The operating subsidiaries of the Corporation, however, operate autonomously and maintain their individual business identities.
First Quarter 2024 Report | -8- | Exchange Income Corporation |
Management Discussion & Analysis
of Operating Results and Financial Position for the three months ended March 31, 2024
1. FINANCIAL HIGHLIGHTS AND SIGNIFICANT EVENTS
The financial highlights for the Corporation for the periods indicated are as follows:
FINANCIAL PERFORMANCE | per share | per share | per share | per share | ||||||||
2024 | basic | diluted | 2023 | basic | diluted | |||||||
For the three months ended March 31 | ||||||||||||
Revenue | $ | 601,769 | $ | 526,844 | ||||||||
Adjusted EBITDA(1) | 111,051 | 97,117 | ||||||||||
Net Earnings | 4,528 | $ | 0.10 | $ | 0.09 | 6,861 | $ | 0.16 | $ | 0.16 | ||
Adjusted Net Earnings(1) | 9,574 | 0.20 | 0.20 | 11,540 | 0.27 | 0.27 | ||||||
Free Cash Flow(1) | 61,931 | 1.31 | 1.19 | 59,708 | 1.40 | 1.26 | ||||||
Free Cash Flow less Maintenance Capital Expenditures(1) | 22,593 | 0.48 | 0.47 | 18,923 | 0.44 | 0.44 | ||||||
Dividends declared | 31,171 | 0.66 | 26,805 | 0.63 | ||||||||
For the Trailing Twelve months as at March 31 | ||||||||||||
Adjusted Net Earnings payout ratio(1) | 84% | 75% | ||||||||||
Free Cash Flow less Maintenance Capital Expenditures payout ratio(1) | 58% | 58% | ||||||||||
FINANCIAL POSITION | March 31, 2024 | December 31, 2023 | ||||||||||
Working capital | $ | 521,333 | $ | 540,720 | ||||||||
Capital assets | 1,602,299 | 1,571,067 | ||||||||||
Total assets | 4,049,397 | 4,079,807 | ||||||||||
Long-term debt | 1,464,463 | 1,422,642 | ||||||||||
Equity | 1,242,195 | 1,245,473 | ||||||||||
SHARE INFORMATION | March 31, 2024 | December 31, 2023 | ||||||||||
Common shares outstanding | 47,281,753 | 47,136,625 | ||||||||||
March 31, 2024 | March 31, 2023 | |||||||||||
Weighted average shares outstanding during the period - basic | 47,206,228 | 42,529,459 |
Note 1) As defined in Section 12 - Non-IFRS Financial Measures and Glossary.
SIGNIFICANT EVENTS
Normal Course Issuer Bid ("NCIB")
On March 14, 2024, the Corporation renewed its NCIB for common shares and certain series of convertible debentures. Under the renewed NCIB for common shares, purchases can be made during the period commencing on March 19, 2024, and ending on March 18, 2025. The Corporation can purchase a maximum of 4,414,853 shares and daily purchases will be limited to 22,369 shares, other than block purchase exemptions. The Corporation renewed its NCIB because it believes that from time to time, the market price of the common shares may not fully reflect the value of the common shares. The Corporation believes that in such circumstances, the purchase of common shares represents an accretive use of capital.
Under the NCIB for certain series of convertible debentures, purchases can be made during the period commencing on March 19, 2024, and ending on March 18, 2025. The Corporation can purchase a maximum of $7,970 principal amount of 7 year 5.35% convertible unsecured subordinated debentures of EIC (June 2018), $8,607 principal amount of 7 year 5.75% convertible unsecured subordinated debentures of EIC (March 2019), $14,373 principal amount of 7 year 5.25% convertible unsecured subordinated debentures of EIC (July 2021), and $11,500 principal amount of 7 year 5.25% convertible unsecured subordinated debentures of EIC (December 2021), with daily purchases of principal amount, other than block purchase exceptions, limited to $646, $711, $1,212, and $1,628, respectively. The Corporation sought the NCIB for debentures to permit repurchase and cancellation of these securities during times of market instability where management believes the market price does not reflect the value of the debentures.
SUBSEQUENT EVENTS
Credit Facility Upsize and Extension
On May 6, 2024, the Corporation amended its credit facility. The enhanced credit facility increased to approximately $2.2 billion from approximately $2.0 billion, extended its term to May 6, 2028, and was completed with no change in pricing. This includes $1.846 billion
First Quarter 2024 Report | -9- | Exchange Income Corporation |
Management Discussion & Analysis
of Operating Results and Financial Position for the three months ended March 31, 2024
allocated to the Corporation's Canadian head office and US $260 million allocated to EIIF Management USA, Inc. The amount allocated to the Corporation's Canadian head office includes a new $200 million social loan tranche, which will be used to fund the purchase of new King Air aircraft at Carson Air for the long-term medevac contract with the Province of British Columbia. The $200 million Social Loan permits the Corporation to draw on that portion of the facility as the new aircraft are delivered and modified for medical purposes. As part of the transaction, ISS Corporate provided an independent Second Party Opinion that concluded the loan is in alignment with the Social Loan Principles as issued by the Loan Market Association. The increased size of the facility provides the Corporation capacity to continue to execute on its core strategy of pursuing accretive growth through investment in its operating subsidiaries and through acquisition.
2. RESULTS OF OPERATIONS
The following section analyzes the financial results of the Corporation for the three months ended March 31, 2024, and the comparative 2023 period.
Three Months Ended March 31, 2024 | |||||||
Aerospace & | |||||||
Aviation | Manufacturing | Head Office (2) | Consolidated | ||||
Revenue | $ | 368,514 | $ | 233,255 | $ | - $ | 601,769 |
Expenses (1) | 274,476 | 206,204 | 10,038 | 490,718 | |||
Adjusted EBITDA | 94,038 | 27,051 | (10,038) | 111,051 | |||
Depreciation of capital assets | 55,314 | ||||||
Amortization of intangible assets | 5,578 | ||||||
Finance costs - interest | 29,815 | ||||||
Depreciation of right of use assets | 9,682 | ||||||
Interest expense on right of use lease liabilities | 1,984 | ||||||
Acquisition costs | 1,305 | ||||||
Earnings before income taxes | 7,373 | ||||||
Current income tax expense | 7,834 | ||||||
Deferred income tax recovery | (4,989) | ||||||
Net Earnings | $ | 4,528 | |||||
Net Earnings per share (basic) | $ | 0.10 | |||||
Adjusted Net Earnings | $ | 9,574 | |||||
Adjusted Net Earnings per share (basic) | $ | 0.20 |
First Quarter 2024 Report | -10- | Exchange Income Corporation |
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Exchange Income Corporation published this content on 07 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 May 2024 21:20:30 UTC.
