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This article was published 14/5/2013 (1379 days ago), so information in it may no longer be current.
AT Exchange Income Corp. -- the company poised to become the province's next billion-dollar-per-year business -- the story is all about diversification.
It held its annual meeting on Tuesday in the main hangar of its largest airline, Calm Air, which is across the parking lot from a brand-new 60,000-square-foot, $10-million heavy-maintenance hangar the EIC will commission this summer.
It will become the maintenance headquarters for the company's fleet of 100 planes that fly for its four airlines -- Calm Air, Perimeter Aviation, Keewatin Air and Bearskin Airlines.
The meeting highlighted EIC's latest and largest acquisition, Regional One Inc., a Miami, Fla., company that sells after-market parts to regional carriers and leases planes and engines that are near their life limits.
But EIC's first-quarter results, released Tuesday, were dominated by dramatic growth in WesTower Communications, a company that builds wireless phone and other communications towers throughout North America and is in the middle of a massive contract to build and upgrade towers for AT&T throughout the U.S.
WesTower is part of EIC's manufacturing division, which includes three oil industry service companies in Western Canada and a stainless-steel tank manufacturing company in Springfield, Mo.
"Diversification matters," said company CEO Mike Pyle.
What an understatement.
In 2012, 65 per cent of EIC's revenue came from its manufacturing operations, which grew 120 per cent. Aviation, which had previously been EIC's largest group, produced only two per cent growth.
With revenue up 50 per cent in the first quarter of this year to $219.6 million, again it was the manufacturing group, led by WesTower, that produced the strongest results with revenues up 94 per cent to $156.8 million.
Aviation revenue, on the other hand, was down 4.6 per cent in the first quarter to $62.8 million because of adverse weather conditions, increased competition faced by Bearskin and the loss of a charter-service customer of Calm Air's at the end of first quarter last year.
But it's the new aircraft parts business, Regional One, that's causing the latest excitement for the company.
Acquired in February for $74 million (with an additional payout of $9.3 million possible if the company achieves certain targets), it will immediately add to the bottom line.
"We are super excited about Regional One," Pyle said. "It dovetails nicely with our regional airline business. With our new overhaul facility, it will give us new access to parts and vertically integrates our overhaul business with a cheaper source of parts for our operating airlines."
The Regional One acquisition met the company's disciplines-acquisition strategy -- the right value, niche market and strong management with plans for growth.
Regional One wasn't necessarily looking to be acquired by a company such as EIC, but according to its CEO Hank Gibson, it is an excellent fit.
"We did not seek out a Canadian partner that happened to be operating aircraft near the largest manufacturer in the main line we deal with -- Bombardier -- but that's what we got," he said.
Gibson will soon realize Montreal is a long way from Winnipeg, but the point is Regional One has made a great business out of being the reliable supplier of many legacy Bombardier planes including the Dash-8 and the twin turbo-prop ATR, both flown by EIC's airlines.
But the combination is not just about today's operations. Gibson said Regional One is looking to start expanding its after-market parts lines into Bombardier's larger Regional Jet lines that are being replaced by newer models.
"From a purely economic perspective, the relationship with EIC will give us access to the additional capital that will allow us to get into the next generation of regional jets and turbo-props," he said.
Meanwhile, EIC remains on the lookout for its next deal to enhance its diversification play with about $200 million in bank facility available to pull the trigger on the next deal as quickly as is necessary.