Mike Pyle - CEO Dave Patrick - Interim CFO

Trevor Johnson - National Bank Mona Nazir - Laurentian Bank Kevin Chiang - CIBC Mark Neville - Scotiabank Derek Spronck - RBC Capital Markets Tim James - TD Securities Samarth Modwal - AltaCorp Capital

Good morning. Thank you, operator.

Also with me today are Carmele Peter, EIC's President as well as Dave Patrick, our Interim CFO. Dave will review our financial results in greater detail following my introductory remarks.

Q3 was by a wide margin, the best quarter in our 11 year history as reflected in almost every financial measure. To put our Q3 results into proper perspective.

We spent new benchmarks for key metrics that were used to gauge the health and strength of our business. Most notably consolidated revenue grew 48% to $212 million.

Consolidated EBITDA grew 94% to $54 million, and most importantly free cash flow less maintenance and CapEx grew by 90% to $25 million or $1.01 per share. And as a result, our payout ratio improved from 71% last year to 46% this year.

With such stellar results and exceptional year-over-year improvements, some of our investors and regular followers maybe wondering, is our performance sustainable? Let me be clear and unequivocal, the answer is an emphatic yes.

We are very confident in our prospects and our ability to sustain our performance in the periods ahead. Our confidence is based on the ground work that we laid over a year ago; we developed and implemented a strategic plan aimed at increasing the diversification of our operations, improving our profitability and strengthening our balance sheet.

We knew that if we executed our plan effectively we will be able to increase the dividend we paid to our shareholders while at the same time lowering our payout ratio. To say that our efforts delivered positive results would be an understatement.

We increased our dividend, distributions twice in the last 12 months, most recently growing the dividend during the third quarter by 10% to $0.16 a share on a monthly basis or a $1.92 on an annualized basis. This dividend increase marked our 10th increase over the last 11 years and puts Exchange in an exclusive group of dividend paying companies.

Our ability to reduce our payout ratio, at the same time as we implemented two dividend increases is noteworthy. The fact that our payout ratio fell to 46% is even more impressive considering that we grew the number of shares by 23% over the last year and resulting in the average basic shares outstanding to increase by 12%.

The increase, I should point out was due to a series of transactions that included the acquisitions of Provincial and Ben Machine. The conversion of debentures by investors into stock as well as the $75 million bought deal financing whose proceeds were used to strengthen our balance sheet and provide quick access to capital with an opportunity that meets our well defined criteria is identified.

I mentioned earlier that increasing the diversification of our operations was a key objective of the strategic plan that we implemented a year ago. Looking at our Q3 results, more closely shows how diversified we have become.

The strength of our Q3 results was not tied to a single acquisition or to the performance of a single entity but rather was driven by a number of factors across many subsidiaries. I want to take a couple of minutes to highlight some of these factors.

Starting with Provincial Aerospace; we acquired the company at the beginning of 2015 primarily because it complemented a number of our existing businesses while providing the opportunity to enter new markets through its maritime surveillance solutions. Provincial's performance to-date has been very encouraging.

In Q3, it contributed more than $50 million in revenue and in excess of $15 million in EBITDA. Regional One was also a key contributor to our record results in Q3, growing its revenue by $7 million or 33% and its EBITDA by $4.5 million or 58% over 2014.

To say that Regional One has exceeded our expectations since we acquired it in 2013, we will be putting it mildly. Regional One strong results are particularly impressive given that it's still at the early stages of monetizing the portfolio of CRJ700 aircraft that is acquired over the last year.

I should remind everyone that the reasons we have acquired Regional One was to offset the price we paid for aviation equipment and aftermarket parts for our legacy airlines. The strategic benefits of this acquisition grew Q3 as in sales which are in U.S.

currency, help to offset the impact of the weak dollar had on our consolidated results. The reason is that the airlines within our aviations segment purchased most of their parts and components in U.S.

dollars. In effect, Regional One acts as a natural heads to our currency fluctuations.

The final area of growth that I wanted to touch on is the continued strong performance of our Legacy airlines. For new followers of exchange, this group includes Bareskin, Calm Air, Custom Helicopters and Perimeter, combined they grew their revenue by 14% or $9.8 million.

Their combined EBITDA growth of 37% or $6 million was even more impressive. It's worth noting that lower fuel cost was only one of the factors behind this EBITDA improvement.

We have invested significantly over the past several years in new infrastructure and new equipment. We have optimized flight schedules and streamlined our operations particularly at Bareskin.

In addition, we experienced the return to more normal weather conditions that resulted in higher demand for fire suppression services by Custom Helicopters. Each of these was a contributing factor not only to the strong performance of our Legacy airlines, but also to the record consolidated results in Q3.

In spite of our performance, Q3 was not without challenges, the manufacturing segment continued to experience soft product demand due to weak market conditions especially in the oil and gas sector. Our decision to focus on the fundamentals of our business model that is being disciplined with our acquisitions, diversified with our operations and loyal to our shareholders allowed us to overcome these challenges.

The acquisition of Ben Machine which closed in July for example, allowed us to offset the impact of low oil prices in our Alberta operations. In effect, our business model closely allowed us to generate record EBITDA results for the third quarter and made us better position to capitalize on future growth activities.

I will provide more commentary on our outlook and our ability to sustain our momentum into 2016 and beyond in my closing remarks. But right now, I would like to turn the call over to Dave, who will review our Q3 financial performance in greater detail.

Thanks Mike. Good morning everyone.

In the interest of time, I would restrict my comments to Q3 results only. I would like to point out that our results for 2015 include the contributions of Provincial, which we acquired in January, and Ben Machine products ,which we acquired this July and have no comparative in 2014.

I should also note that our results are reflective of continuing operations that's to say without the performance of WesTower U.S., which was sold in quarter four of 2014. The results for the current quarter and comparative period are presented in a consistent manner.

Turning now to our income statement, consolidated revenue for Q3 2015 was $212.8 million up 48% from $143.5 million for Q3 last year. The majority of the increase was due to the strong performance by the aviation segment, which combined accretive and organic growth.

More precisely Provincial, our largest acquisition to-date contributed $50 million, our legacy airlines grew their revenue by $9.8 million or 14% as a result of the acquisition of the Kivalliq operations of First Air as well as the strong demand for fire suppression activities provided by Custom Helicopters. Additional organic growth was delivered by Regional One, which increased its revenue by $7 million or 33%.

Regional One's growth is tied to an expanded fleet of inventory of aircraft and aftermarket parts at sales or leases to regional airline carriers around the world and the strengthening of the U.S. dollar.

On a segmented basis, the aviation segment generated revenue of $157.3 million up 74% from last year. This total represents 74% of the corporation's consolidated revenue compared to 63% last year.

Given Mike's earlier comments about our objective of becoming more diversified, I want to put the overall growth and share of revenue contributed by the aviation segment into some perspective. While it appears that our performance is heavily skewed towards the aviation segment, the reality is that our growth is not being driven by a single entity, geographic market or by passenger flight services only.

It bears repeating that the aviation segment is actually made up of multiple product lines that generate multiple revenue streams by serving multiple geographies. To be more precise, we sell aftermarket aviation equipment.

We lease aircraft. We provide fire suppression services.

We sell maritime surveillance solutions. And we provide fixed based operations services.

In other words, we are not just a passenger airline company and those revenue streams come from the regions all around the world. The manufacturing segment generated revenue of 55.4% up 5% or $2.5 million from 2014.

The growth was due to the contributions made by Ben Machine, our most recent acquisition. Ben Machine's revenue contributions more than offset the overall decline experienced by the other manufacturing segment entities.

The Alberta operations in particular were negatively impacted by low commodity prices resulting in significantly lower product demand. Consolidated EBITDA for Q3 was a record $54.1 million up 94% from 2014.

The growth was due to a combination of factors cited already. Provincial contributed $15.3 million in EBITDA in Q3, the strong performance of the Legacy airlines also drove improved performance.

The Legacy airlines grew EBITDA by 37% to $22 million due to the combined impact of lower fuel costs, previous growth investments and cost control and efficiency initiatives. Regional One also made strong EBITDA contributions in Q3 growing $4.5 million or 58% as a result of a larger portfolio of aircraft assets and a higher conversion rate on its U.S.

base results. Looking at our organic growth more broadly, same-store EBITDA that is to say without any contributions from the acquisitions completed in 2015 grew by $9 million or 32%.

This is something we are very proud of and shows the benefits of previous investments made. Turning to EBITDA performance on a segmented basis, the aviation segment increased EBITDA by 109% to $49.5 million.

Its EBITDA margins were up to 31.5% from 26.2% last year. The manufacturing segment grew it's EBITDA by 17% to $8.2 million.

Its EBITDA margins grew by 14.8% from 13.2%. As noted previously, the manufacturing segments gains were mainly due to the addition of Ben Machine.

We reported net earnings of $16 million or $0.64 per basic share for Q3. These compared to $5.2 million or $0.23 per share in the comparative period.

Excluding the after tax impact of acquisition costs and intangible asset amortization, we reported adjusted net earnings of $18.8 million or $0.76 per basic share. These compared to an adjusted net earnings of $6.1 million or $0.27 per share for Q3 2014.

This is an increase of 210% and 181% respectively. Turning now to our key financial metrics, free cash flow totaled $42.2 million up 85%; free cash flow on a per share basis was $1.70 up 65%.

This was driven by the higher levels of EBITDA generated. Free cash flow plus maintenance CapEx was $25 million or $1.01 per share, these compared to $13.1 million or $0.59 per share last year.

This marks the first time, we have exceeded $1 per share in a quarterly period for this key metric. We made further growth capital expenditure investments of $18.7 million during the quarter, which were largely earmarked for Provincial and Regional One.

Provincial purchased an aircraft to replace one that was previously being leased. And Regional One acquired two CRJ700 aircraft from Lufthansa CityLine.

Turning now to our balance sheet, we ended Q3 with a net cash position of $35.5 million and a net working capital of $149.1 million which represents a current ratio of 1.82:1. These compared to a net cash position of $15 million and net working capital of $95.8 million and a current ratio of 1.93:1 at year 2014.

We closed the issuance of 3 million shares at 24.85 generating 75 million of gross proceeds as well early in the quarter, we early redeemed the Series H convertible debentures with most of the debenture holders converting the principle into shares. And subsequent to the end of the period, we amended our syndicate credit facility to add another syndicate partner, the Bank of Montreal and increasing the available credit overall by $100 million.

This concludes my review of our financial results. I will now turn the call back to Mike for some closing remarks.

Thanks Dave. As you just heard, we ended Q3 more diversified, more profitable and better positioned for continued growth both organically and through acquisition than ever before.

We are very encouraged by our near-term outlook. While winter conditions will start to play a roll within the aviation segment, we expect demand for passenger and cargo services will be strong through the end of the holiday period particularly for our Legacy airlines.

We also expect that Regional One will sustain its performance in the periods ahead because of the strong track record, and very strong outlook, we made further investments in CapEx in this quarter of $12.6 million. This was largely in two CRJ700 aircraft as well as a third 700 from another party.

Regional One is taking an opportunistic approach with its inventory, it's aircraft either sold, leased, or stripped for parts depending on the customer sales opportunity, as a result, we do anticipate some variability to its performance in future periods as each sale type as varying margins and profitability. However, we have only begun to realize the return from the CRJ700 portfolio and as such we anticipate continued growth from Regional One in future periods.

Our outlook for Provincial is also very encouraging. Like our Legacy airlines, demand for its passenger service expects to be strong through the end of the year.

Its aerospace division is also seeing increased sales opportunity for its maritime surveillance solutions as well as search and rescue services given the recent geopolitical developments around the world. Although the sale cycles for these opportunities can be long and the market competitive, Provincial is well-positioned, given its track record and excellent reputation as a provide of innovative solutions.

The company is in fact partnered with consortium bidding on Government of Canada's search and rescue proposal for the north. In the manufacturing segments, our prospects in the near term will be continued to be impacted by a number of unfavorable market conditions, low energy prices in particular will continue to put pressure on our Alberta operations and soften demand for its pressure systems.

Although WesTower Canada is largely unaffected by oil price fluctuations, its prospects maybe impacted by a recent CRTC rate decision that wireless carriers [construction] [ph]. This decision may reduce for new set of demands for a south zone construction, but will increase demand for alterations upgrades and additional equipment on existing structures.

There are some bright spots in the manufacturing segment, however, Ben Machine is largely unaffected by currency and commodity price issues that is experiencing strong demand for its precision components and assemblies used in the aerospace and defense sectors. Another bright spot is stainless, which you are seeing an increase in demand for its shock and field projects based on the number of bids that is being asked to submit.

We remain very committed to grow through disciplined acquisitions. As a result of an expanded credit facility and the $75 million bought deal financing completed this summer.

We now have access to approximately $280 million in capital that we can deploy for future acquisition opportunities that meet our criteria and allow us to further diversify our operations. As was the case with the more than $294 million worth of acquisitions that we have completed in the last year, our acquisition targets will have to meet very specific criteria.

First, the price must be within our historical norms, but more importantly the targets have to operate in niche markets, generate strong cash flows and have an excellent management teams. Thank you very much for listening.

And operator, I would now like to open the call to questions.

Hey, good morning, folks.

Hi, Trevor.

Hey, guys. I was just curious about the stainless opportunity results have obviously turned in quite well.

Can you talk about maybe the CapEx opportunity and what you see in proceeds from stainless?

Well, in terms of our investment in the existing business, there really is no CapEx requirements for that. It's just normal course of operation of the business, it's a very low investment business.

But we quite frankly are looking at opportunities both in the geographic area we are already operate in by the cost of U.S. add production capacity, Trevor.

We are not at a stage where there is anything to disclose, but we are looking to grow that business probably by acquisition.

All right. And then for the -- just more big picture, I guess with the new Federal governments maybe looking to deploy a bit more capital on the First Nation space.

Curious, if you thought about how that might trickle down and affect your business and there might be an opportunity on the back of that?

I think the short answer to that Trevor is, if the government puts more money into those communities especially the ones that you can't drive to which is the vast majority of the places we service. It can only help us.

I think that the government is likely to put more money into nutrition north, the food mail program. And we carry most of that food up there.

And so the -- if they put more subsidies into that there is more likely to be more product that will travel. Having said that, people are only going to eat so much, I think the main benefactor of that is going to be the people in those communities as prices come down.

But, it countered our business.

Okay. And then I guess just closely tied to that just the weather I mean, it obviously who knows what's going to happen, but it does sound like there is going to be a bit more of a warmer winter this year than you have seen in years past.

Can you position yourself for this because I'm thinking that could be a potential tailwind obviously with some of the roads being less hospitable?

Yes. If you look at the winter as a whole Trevor, it's very bullish because what it does is, shortens the winter road season.

Shorter the winter road season, they have to get certain commodities up there and so they must haves go up on the road, and then nice to have largely made on -- make it, have to be flown in later in the summer things like cans, goods and long-life groceries like pop and those kinds of things. So that's positive.

In the very short-term like right now during freeze up in the far north, it's unbelievably foggy in the north because water is still warm and the temperatures are cool. So I'm glad I'm not the guy who is making all the flight decisions in terms of our schedule because it's hard to get into some of these communities.

But that's a challenge that will pass in the next week or two or three. And then, we will -- from that point on see the benefit of the warmer weather.

I will hop back in the queue. Thanks guys.

Congrats.

Thanks.

Good morning, Mona.

Good morning and congrats on the quarter.

Thank you.

Thank you.

So firstly just on the CapEx, your growth CapEx was $18.7 million in the quarter although it was down a bit sequentially. I'm just trying to get a sense going forward if $18 million is a good run rate or could we expect it to trend down slightly given the Lufthansa fleet purchases are pretty much complete and PAL Dash 8 purchase is also complete just wondering if you could go through some of the specifics on that front?

Yes, absolutely. We sort of had -- I would say three main baskets of growth CapEx over the last few years, one was updating of our fleet in our Legacy airlines and that was largely completed last year.

And so you've seen that tail-off. Then with Provincial, they are the number of least sold aircraft that we wanted to replace with old Dash 8 aircraft and we completed that process in this quarter.

And those are like the world's easiest growth investments quite frankly because the lease payments that we're not going to make the investment in the plane accretive, the returns are such that it's an easy decision to make. And then finally, where almost all the growth CapEx have been this year has been in those CRJ700s that we've been acquiring at Regional One, mostly from Lufthansa, but we've actually bought, I told the number in front, I mean two of them I think from other places in this year.

The last two from Lufthansa have already been purchased in Q4 and for the first time we've liquidated a couple of those in Q4 as well one is closed the another is about to close. So I think you'll see a material decline in Q4 in your growth CapEx, it could approach zero for this period simply because of the liquidations at Regional One.

Having said that, I don't want to give the wrong impression, we're looking for more things to buy at Regional One and I hope they find things that are as good for us is the Lufthansa transaction has been, but at this point I would suggest you that you'll see a pause in the growth CapEx in this quarter while we digest. That was a lot of aircraft with us between the third party ones and the Lufthansa ones its 15, 16, 17 aircraft over the last year and a bit.

And we disclosed it in our MD&A, we parted out I think three of them where we saw two of them and the rest are either under lease or about to be leased and so the program has been very good to us. That one is coming short to a close in terms of purchases.

Okay, thank you. And then just turning to seasonality and demand, you previously spoken about PAL being soft in January and February similar to your Legacy aviation business.

I'm just wondering does that still hold true and is there anything out that should impact the PAL on the demand side? And then secondly if you could describe the magnitude of contraction on the manufacturing?

Well, I think you've -- I think that -- let's go with the second question first on the contraction manufacturing. I think it's fairly clearly broken out, Dave you've got the number there for band, so we can talk about what the same-store revenues did and EBITDA did over the period.

Sure.

Going forward should that remain kind of where we saw it in Q2 or Q3, sorry?

Yes. I don't -- nothing is getting worse, and its starting approve, Alberta is still very flat, Mona, there is not much happening there.

Having said that, in the other places whereas particularly with stainless we're seeing an improvement, their order book is growing particularly on the profitable field jobs. And so the rest of manufacturing segment, I would describe as steady as she goes.

And then with the addition of Ben, it is growing. It gives us a more bullish impact, like I say Alberta, it's really important that we don't get too caught up in one subsidiary that at its peak is generating mid-single digits in terms of EBITDA, it's not a huge piece of a company that where in the current year we're tracking to -- I don't know the mid to high 100s in terms of EBITDA.

I think we're sitting at in the neighborhood of 145, 143, I think for the year-to-date. So the relative amount that comes from Alberta is actually quite small and I don't want to have too much emphasis on the small piece of the business.

As it relates to Provincial, their seasonality would be the same as this year. The airlines are slower in the winter because there is an alternative if we go in the roads and there is less activity.

The only thing that would change that would be the aerospace segment doesn't have the same regular seasonality, it depends on projects, at this point there has been nothing material that's changed in that but we've disclosed a number of times that we continue to work on projects around the world, should we be successful in the future that has the opportunity to improve that seasonality because its highly unlikely the aerospace would be seasonal in a new contract opportunity. Having said that at this point that's hypothetical until we get one.

Okay. Thank you.

And just lastly from me here is, despite doing three acquisitions this year, I think seem to be progressing very well, no significant integration theme with over $250 million in capital, just wondering if you could speak about the acquisition landscape timing on which we could see something, are you looking at targets now and the magnitude of such?

Well, obviously, I can't say it when an acquisition is coming because if it was announceable, we would announce it. I can't tell you there I nothing that's eminent.

We've done a lot of stuff in the last 12 months for divestiture of our U.S. cell tower business to the acquisition of Provincial, the purchase of Ben and equity offering the purchase in Kivalliq and then the redoing of our credit facility.

And I think your characterization that there is no big hard food from the digestion of those transactions is accurate. We're very pleased with everything that's been accomplished in this period and quite frankly some of the stuff exceeded our expectation.

The Legacy airlines improvement and Regional One in particular have exceeded our expectations. And so its -- I think it's unlikely you see us in outside anything before the end of the year.

But having said that we need to be opportunistic and that's why we raised the capital so we can move quickly. Adam and his team are looking at a number of opportunities across our business from the stainless market area to aerospace to a couple of opportunities in aviation.

So we're cautiously optimistic, but there is nothing that you're going to get a press release on tomorrow.

And Mona just keep in mind too that we're constantly looking for opportunities to Regional One, whether it would be another kind of Lufthansa type deal and so that could be another opportunity to use some of those cash flows that we've got available to us. Again, there is nothing to announce, but there is something we push Regional One to try to find.

Okay. Thank you.

Good morning, Kevin.

Hey, good morning thanks for taking my question. First off, I think your comments around how replacement or your growth CapEx is going to trend over the near term.

I think should be well received. But -- if I had to dovetail that with Regional One, is this the maximum capital intensity that this division is going to see i.e., it sounds like, if I'm right, sounds like the growth capital should decline here over time, and you'll start monetizing the CRJs presumably driving higher cash flow and earnings.

Is that the right way to think about the capital intensity of Regional One or does it have to cycle through and you have to recapitalize it again a year or two years from now?

I wouldn't view this as recapitalize, you're right in terms of the position we're at today Kevin, I think that's an accurate description, but it's opportunistic. So if Air France was getting rid of some airplane that we thought that we could sell, we had an opportunity we would move on that because of the margins we can make.

And I think the way you need to look at those big transactions region -- like I say we've done one in Regional One though, Lufthansa transaction, it's more of an acquisition than it is a CapEx. When you're buying $70 million worth of an aircraft, if we had bought it in a Shell Corporation, we would have called it an acquisition.

And so those tend to be opportunistic and when they come they come and whether we'll have one in the next year, I have no idea. We prove it with the Lufthansa transaction that the cash flows warrant the further investment, right now we're at the end of that program and you'll see capital coming back as we liquidate the portfolio or quite frankly we have over half of them under lease.

So we'll be holding them for a while and generating positive returns. But what we don't put out specific numbers we fully anticipate Regional One's contribution to the company growing materially next year as we see the benefit of the aircraft we've purchased this year.

That's helpful. And maybe more of a philosophical question, I know you have a good dividend payout ratio, and you've key metrics you look at in terms of when you raise the dividend.

But when I listen to the tone of this call and obviously previous calls, it sounds like a lot of opportunities to continue to grow the business whether it's investing in Regional One or acquisitions. I'm just wondering when you look at it philosophically does it make sense to grow the dividend 10x in 11 years or whatever the trend is today, given this pipeline of growth regardless of where your payout ratio is?

Yes. I think Kevin we have something -- it's interesting you asked that, we have a strategic planning with our Board every year and that's a discussion we have every year.

But I'm confident that we're going to stick with the policy we have and the reason that is Kevin is the company's we buy, we aren't buying companies with growth being the number one criteria. Free cash flow improving market niches is our criteria, so we have that.

We think the best valuation of that cash flow is to pay it to our shareholders on a sustainable growing basis. If we weren't going to not pay the money out the -- perhaps growth will rank higher in our criteria of acquisition -- criteria rather than free cash flow.

And so we think that we have an expertise in acquiring and growing that type of business and ultimately the market will value that all CEOs think their stock is undervalued. I think the capitalization rate in our dividend when you look at it relative to our stock prices is too high and as the market understands how strong our company is, how strong the balance sheet is, how strong our payout ratio is and the fact that they could rely on not only this level of dividend but a growing dividend in the future.

I think as that cap rate comes down the decision to pay dividends look stronger and stronger.

Okay. That's helpful color.

And just lastly from me more of a housekeeping question, just about Canadian WesTower, it sounds like there is a bit of a mix issue here, it sounds like your revenues are off on some lower margin. So just trying to get a sense of what the margins are trending now in WesTower given this mixed impact?

And then just quickly on Ben Machines, it looks like EBITDA was $2 million, how should I be thinking about that on an annualized basis if you can remind me what some of those numbers are?

I think you would see that quarters at the low of what we would expect on a quarterly basis for Ben. Like I say we're one quarter into it.

So I think the disclosure, we gave purchased and is still accurate, having said that, there is strong demand in Ben's rather anticipate growing that business. Remind me your first question.

Just WesTower, yes.

Yes. What happened with, the changes in the CRTC rules, where the carriers have to effectively allow their competitors to hang equipment on their existing towers, its' reduced the demand for new towers which reduces the big dollar sales for us the biggest sale is a brand new tower.

It's been replaced with doing work on existing towers whether it's hanging equipment or reinforcing the towers. And so what you've seen is a decline in the top line offset somewhat by an increase in the margin amount.

So at this point, the results look a lot like they have in the past. We're early in this and there are some people who think its really just a pause in tower construction because there still isn't enough capacity, but its really hard particularly with the telcos to get visibility beyond three or six months.

So when we report Q4, I'll give you guys an update on what we see for 2016 on that but in the near-term what we've seen is a decline in the bigger picture more higher value jobs offset by more labor intensive higher margin work.

And Kevin with the changes in technology that the telcos have, if you were to see how LTE and 4G is kind of more the common space now and that conversion for the most part has taken place throughout most of Canada already. And so it's more of the maintaining that side of it.

But if you were to see as a telcos all of a sudden in North America start to move to a 5G or the next generation, then again, that the CRTC side of it probably would go out the door and have less impact and they would be just a matter of time and as you see those national carrier start to roll those programs out across North America then you're going to see the positive impact as well because that means they're going to have to make modifications to the existing towers which no, its not erecting a brand new tower but its significant work for WesTower.

That's great color. Thank you very much.

Hi, good morning guys. Just going back to the growth capital, for Q3, $12.5 million at Regional One that was for 3 CRJs?

Well, there is two that's in essence including growth CapEx, Regional One does buy additional aircraft but that would be falling in more of the maintenance CapEx side of it just and so therefore we categorize the two of the three as being growth CapEx.

Just -- CapEx because they're such a big lease portfolio there, unlike our other companies where every CapEx we look at that CapEx and break it into maintenance or growth. We take everything up to our depreciation levels as a maintenance CapEx because we got to maintain that lease portfolio and then if we're increasing it beyond that then that's a growth CapEx.

So net-net our growth CapEx in that company was like $12 million I think and that's made up of two CRJs.

Okay -- sorry go ahead.

I was just going to add, there are times too where Regional One will purchase and flipping aircraft and so there is scenarios that can happen like that as well so.

Okay. But there is also two more coming in for Q4, correct?

Correct. We've already closed on both of those.

And we've also closed on the sale of one and the sale of another is eminent.

Okay. And the sale of those two, if you just may be help us or help me think about how that impact Q4, I mean how much are these sold for, how do we think about sort of add the impact it has in Q4 and how significant that could be?

I think the way you look at it is, our margins are fairly consistent on what we kick out in sales and I mean massive aircraft, big aircraft sales in terms of percentages would be somewhat lower than it would be on the landing gear or part simply because of the size of the transaction. But I think the way you look at it is just its $15 million revenue and at a reasonable margin and then when you look at capital investment in assets the purchase of two of them.

Great, okay. That helps.

And just on seasonality, you touched on it earlier, but typically on the sort of going back in comments I think you made earlier this year, but Legacy if I'm not mistaken there is typically margin sort of drop in Q4, but may be I'm mistaken but I thought that sort of the guidance for the remainder of the year was that sort of these levels or sustainable, am I right in thinking that?

Yes. I mean typically, the sales in aviation are higher in Q4, not higher than Q3, but higher than our average and the margins are lower.

And the reason for that is, when you're going into the North at Christmas time there is a lot of freight that goes. And the balance between passengers and freight, freight goes one way passengers go two ways.

And so I guess people are bringing gifts and things for Christmas celebrations. We have a disproportion amount going north with only revenue going one way it's a lower margin.

So in Q4 that way and Q4 also has disproportionate good weather, bad weather days, when its foggy we can't fly where we've had two days, it looks like where we couldn't go anywhere because its all fogged in. That will go away.

It is normal. But weather we have 20 days this year and 10 last year and 10 last year and five this year, it bounces around a little bit that's why also our margins can be compressed a little bit in Q4.

Having said that Q4 typically looks a lot like Q2 depending on weather may be somewhat slightly less than that but they're in the same sort of range.

Sure. All right.

Thank you very much.

Good morning, Derek.

Good morning. I understand that your aviation segment is relatively diversified amongst the different subsidiaries.

Regional One is providing some synergies there on the part side, are there any additional synergies you could drive out of your aviation segment in particular with the purchase of PAL?

Absolutely. We're going through a process internally that we call it our return on capital process.

And what we're trying to do is take a look at what we do, and see if there is ways to combine and take advantage. I'll give you a couple of examples.

First one being heavy overhauls on our large aircraft, historically, Perimeter and Calm who operate ATRs and Dash 8s have outsourced those to third parties. PAL with its aerospace division and its operating of Dash 8's internally does that.

We've ramped up the department at PAL and we now do all of that internally with two big real benefits to our company. One is, because we're doing it for our self, it's cheaper and we save money.

But frankly that's the secondary benefit. Now we control when we overhaul the aircraft, we don't have to get a slot in an MRO, and so we work together as a team and we actually quite frankly have shared aircraft.

Perimeter had a slow period had to play at overhaul at the same time as Provincial was super busy, Provincial used the aircraft and vice versa. So it's taken step back and forth, so heavy overhauls, big synergy.

We communized our -- our purchasing of things like engine overhauls which we outsourced. We put that together down into a single-bit driven down pricing and improved service conditions where Calm were combining back office things like our charter capabilities, our accounting capabilities.

Front line things where we service the brand names who manage -- remain a ton of this entity, we're combining as many of the back office things as we can to not only reduce costs but to improve the timeliness, the quality of the information to our managers so they can do a better job.

That's great color. Thanks Mike.

Anyways to quantify the potential opportunity from that in 2016, it's a difficult question but --

It's really hard to answer. I mean, I think if you look at the kind of margins we're generating in the current year, I think you will see continued marginal improvement.

I will caution that the leap we've made this year is a result of big, big investments we've made over past years, so it's not going to continue at that rate of growth. But you will see continued improvement particularly I point out as we realize the efficiencies of the far north Kivalliq transaction.

We added a lot of revenue and we've had to move maintenance spaces and move people and build accommodations for them to stay. So I think you'll see material improvement in comps performance which will flow through the aviation segment combined with smaller incremental growth in the other businesses.

That's great. And in terms of acquisitions, is there an opportunity in the aviation sector to make an acquisition to vertically integrate your current subsidiaries and even if there were an opportunity, is that something that you would even consider?

There were something that we couldn't do now like we did it with Regional One where we bought a part supplier. Provincial served as a vertical integration in terms of overall.

So if there was an opportunity -- an engine opportunity or something like that sure we would. It has to fit our criteria and it has be about the right size, I don't think you'll see us buy something really small just service ourselves and probably built it ourselves as supposed to buy it in that world.

But if it was big enough that it has a standalone cash flow stream and then could augment our internal capabilities, we would love to do that.

Keep in mind too that we -- its beyond just Regional One and then we have some of that vertical already fixed base operations is an area were in essence that does a lot of the fuel supplying for a lot of our existing airlines. So there are other areas that we already have beside just Regional One that do support the [sched] [ph] in cargo and charter type opportunities and as Mike said, we're always looking to further expand that, but it does reach more than just the parts and aircraft supplies that Regional One brings.

Good morning, Tim.

Good morning. Thank you.

First question regarding Regional One, the outlook highlights the fact that the business hasn't yet really demonstrated the volatility that you might expect over the long-term, there is also some commentary suggesting that the monetization of the CRJ700 portfolio will provide growth through the remainder of this year and into 2016. Should we interpret the combination of these two statements as meaning that any downward -- sort of potential downwards volatility won't really kick in until part way through 2016?

Are there other revenue drivers within Regional One unrelated to the CRJ700 that are significant enough and volatile enough that despite rising revenue and earnings from the CRJ700s, there could still be some of this volatility in the next couple of quarters on Regional One revenue and EBITDA?

I think the commentary on Regional One volatility is more of a general comment. Because has Dave mentioned earlier, we'll occasionally buy and sell aircraft within the same quarter and so you can get blips upwards in terms of a big transaction in a given period.

I think in terms of volatility, I don't expect to see any material downward pressure. I think its what you don't see is 15% growth this quarter, 15% growth the next, 15% growth the quarter after that, you may see 30% growth and then 2% growth and then 25% growth -- because we're doing fairly large transactions within there, its hard to make it kind of a straight line.

But your second comment about, are there other revenue drivers? Absolutely, this is a great business before we owned those 12 aircrafts.

And so the core business is what's driving most of the returns at this point, the upside to those returns is monetizing that new portfolio.

And Tim, I'd point to you again and keep in mind as Mike referenced that we have in the MD&A where we have a bit of a disclosure that tries to frame where those other aircrafts are. So besides the ones that we talk about selling in quarter four, there are those other ones that are being leased and that leasing term is not long-term in the sense of multi-years but it could extend to into 2017 and again, it depends on the opportunities presented to Regional One for those aircrafts.

So you may not see all of those immediately come through and all of a sudden get unloaded in 2016. In reality its probably you're going to see more of them unloaded beyond that.

Okay, great. Thank you.

Is it possible to give us a general sense of how much of the $9.8 million revenue increase in the Legacy airlines on a year-over-year basis comes from the new Kivalliq revenue versus the normal fire suppression activity in the quarter that those are the two primary reason cited for the increase?

Yes. The majority of it -- over half of it would come from the new opportunity with Kivalliq in the far north, a significant minority of it would be the fire suppression stuff.

For competitive reasons, I really don't want to get into precise numbers on what Custom is doing. But I can tell you that more than half of it comes from the Calm's expansion in Kivalliq as significant portion, but less than half would come from Custom's return too.

And I want to emphasize that it's only a return to almost normal weather there were still no fire suppression for us in Ontario, which is almost unheard of. We had a time in Saskatchewan this year, but when you look at this year it's a no-way an anomaly the level of fire suppression and I would suggest you that it's actually lower than the long-term average of what we would typically do.

Okay, great. Thank you.

And then one just kind of a housekeeping question here, looking at the depreciation and amortization in the third quarter, should we consider the normalized run rate in the quarter as the reported value but excluding the -- here is the total $1.9 million in amortization of intangible assets from purchase price allocations, in other words no part of that $1.9 million represents a recurring amortization?

Yes. That's how I mean it takes a period of time till we amortize those intangible assets.

But that's nothing that ever needs to be replaced and that's why when we calculate our adjusted net earnings we always exclude that amortization. The amortization is probably higher than what we would have anticipated going into the quarter simply because we thought we were part of more of the CRJ aircraft when we initially bought them.

But the lease activity has been so strong, we've chosen to lease some and when you put them into the lease portfolio they depreciate, when you put them into the parts inventory they're into the fixed price. So there has been probably a growth in that relative to our decision to lease those assets out -- over the medium term.

Okay, great. Thank you very much.

Good morning.

Good morning, guys. This is Samarth on behalf of Chris here.

Just wanted to circle back on your comments on dividends that you made earlier, you highlighted that the company remains focused on growing the dividend. Just wanted to get your thoughts on how you are thinking about the payout ratio with it being added slow as at 46% and would you expect the Board to be reviewing the dividend shortly?

Yes. I understand.

Make sure when you look at that 46% that's a number we are static about that. Let's say exception, I think one quarter back in 2006 or something that's the best it's ever been.

And I really want to point out one thing with that, actually two things. One, seasonally the third quarter is always the best quarter, so you need to look at kind of an annualized run rate as opposed to just the Q3 run rate.

But beyond that, every year up until this year, we had a tax shelter that made it such that we weren't paying current taxes. We are now paying current taxes; I don't have the exact number in front of me, but in the range of 20% current taxes, our financial statements.

We are looking at a 46% payout ratio that's after paying those taxes, so in the event we will have a decline, our ability to pay goes down by less than $1 for every $1, there is a decline in EBITDA. So the relative percentage of 45% payout ratio now was really good, is even better than a 5% -- 45% payout ratio was a year ago.

So the numbers are even stronger than what they looked like at face value. In terms of when the Board is going to look at it, I can tell you we look at it every quarter.

The run rates are currently in the 16% range currently. And we will look at that again next quarter and at the appropriate time, we will move the dividend.

I think it's the Board's opinion that we've gone twice in the last 12 months and increased it by 15%. And so we will pace ourselves.

But the company is clearly in a position towards the low end of our ratio. And we will be in a position to raise our dividend sooner or rather than later.

Perfect. Thank you.

That's great color on dividends.

Thank you, operator. Given that there is no further questions I would like to thank everyone for participating in today's call.

And we look forward to updating on our progress at the end of fourth quarter and to bring to close the best year in the company's history. Thanks for your support.