Mike Pyle - Chief Executive Officer, Director Tammy Schock - Chief Financial Officer

Trevor Johnson - National Bank Mona Nazir - Laurentian Bank Derek Spronck - RBC Chris Murray - AltaCorp Konark Gupta - Macquarie Steven Hansen - Raymond James Mark Neville - Scotiabank Tim James - TD Securities Kevin Chiang - CIBC Raveel Afzaal - Canaccord Genuity

Good morning everybody. Thank you operator.

Also with me today are Carmele Peter, EIC's President and Tammy Schock, our CFO who will review our financial results in greater detail. We ended 2015 on an extremely high note, setting new benchmarks for our key financial and operating metrics.

I am very pleased that we have been able to sustain this momentum into 2016. We have started the year off with our best first quarter results ever in our 12-year history.

Most notably, consolidated revenue grew 25% to $218 million. Consolidated EBITDA increased 43% to $44 million.

Earnings per share up, climbed over 900% from $0.04 to $0.36. Free cash flow less maintenance CapEx grew by 84% to $17 million or $0.61 a share, up from $0.40 per share in the previous year.

Our payout ratio declined from 109% to 79% and the trailing 12 payout ratio declined to a stellar 59%. I want to take the time to put these record results in perspective for everyone, particularly for our recent followers to our company.

Historically, the first quarter has always been the weakest quarter, given the impact of seasonality factors have on our operations. Yes, sea has always had significant exposure to aviation in the North and as a result the first quarter is always more financially challenging period as the system of winter roads provides a cost-effective alternative to air travel for several weeks in February and March.

Typically, the seasonality has resulted in payout ratios well in excess of 100% for the first quarter. In fact, the five year average payout ratio for the first quarter was 194%.

Over the last two years, we have been able to enhance diversification of our operations in particular with the varied revenue streams at Regional and Provincial and elsewhere and profitability enhancements to reduce this ratio to 109% in 2015 and now to 79% in 2016. With the addition of these two companies, EIC did business in over 60 countries around the globe in the first quarter.

We have become less exposed to the impact of weather through our efforts to be more diversified. Being more diversified has also meant that we are now less exposed to the rapidly changing commodity prices or the rising and falling of the U.S.

Dollar. This stability has also enabled us to focus on organic growth and profitability enhancements.

Excluding Ben Machine, who were added to EIC in the summer of last year and therefore have no comparative results, EBITDA rose by 36% in the first quarter. This improvement was the result of efforts made by our existing subsidiaries to grow their business and enhance their profitability.

It also demonstrates the return on growth investments that have been made in previous years. Plain and simple, diversification works.

It has made us more profitable. It helped us strengthen our balance sheet and most importantly it's allowed us to consistently increase our dividend distributions to our shareholders over time.

As a result of Q1's record performance and our outlook for the periods ahead, our Board of Directors yesterday approved a 5% dividend increase, effective for the dividend payment coming out in June. This means that we will be distributing $2.01 per share on a go forward annualized basis.

This increase is our third in the last 18 months and is growing dividends by 20%. It also is the 11th increase in the past 12 years.

It certainly cements our place in the top group of dividend paying companies on the TSX. One might be tempted to assume that given the strength of our overall results that all of EIC subsidiaries performed at their peak in the first quarter.

But this was not case. Manufacturing in general and our Alberta Operations in particular had a difficult environment with weaker than typical demand.

These were cyclical as opposed to competitive challenges and we are confident that they will rebounded in future quarters. Aviation was the driver of Q1s performance.

Legacy continued to generate solid results, while Provincial and Regional One provided strong growth. Provincial, which we acquired in January of 2015, was a key contributor.

The company, which in itself is diversified, generated strong revenue, EBITDA and cash flow in the first quarter, despite facing unfavorable condition in its principal airline market. The decline of nickel, oil and gas prices in particular have impacted several major projects in Newfoundland and Labrador resulting in more demand for Provincial's passenger and cargo handling service.

Through its aerospace unit, Provincial was able however to offset these soft market conditions for its airline division, securing a five-year in-service support contract with a client in the Middle East. The contract, which was signed in November of last year, is valued at in excess of $150 million over the five-year period.

You may notice a theme developing here, but quite simply diversification works. Another key driver of our Q1 results was Regional One, our subsidiary focused on the sale and lease of aftermarket aircraft parts and engines.

The company continued its progress in monetizing its expanded portfolio of assets, principally but not exclusively the fleet of a dozen CRJ700s acquired over the last 18 months. We originally acquired Regional to generate a strong standalone return and offset costs we incur for aviation parts at our legacy airlines.

In addition to its operating performance, R1 played a significant role in our strategy to internally hedge currency fluctuations. The extreme weakness of the Canadian Dollar part way through the quarter put inflationary pressures on the cost of our airplane parts and overhauls which are generally priced in U.S.

Dollars. But R1 generates its profits in U.S.

Dollars effectively offsetting this challenge. While Regional One has multiple recurring revenue streams, including part sales, aircraft and engine leasing, in Q1 R1 benefited from the sale of operating aircraft.

I raise this because the sale of operating aircraft are not consistent from period-to-period and as such performance may be somewhat variable from quarter-to-quarter depending on the number of aircraft it sells. I would point out that the variance from this factor was not huge in the first quarter, simply a couple of million dollars, but rather I point it out so that the people understand that there are certain quarters when we may have exceptional performance when we sell more than the expected number of aircraft.

I should also point out that our corporation's aerospace operations took advantage of more than $26 million in growth CapEx investment that we made to grow its portfolio. The most six significant investment was the two CRJ 900 aircraft, which increased the new aircraft platform for our customers and thereby opened significant opportunities for future growth.

Ben Machine, which we acquired in July of 2015, helped to mitigate some of the challenges faced by manufacturing segment entities. Acquiring Ben Machine allowed us to expand our manufacturing segment into new geographical and product markets and effectively reducing our exposure to the volatility of oil prices, particularly for our Alberta Operations.

As our consolidated results show, we have never been better positioned to withstand economic challenges and embrace new opportunities. Our success is due to our business model.

It works. It's why we devoted considerable effort on our key fundamentals being diversified, being disciplined and delivering dependable dividend.

It's also why we ended Q1 with a strong balance sheet and are well positioned for growth. I will provide more commentary on our outlook and prospects for growth through 2016 and beyond in my closing remarks.

I would now like to turn the call over to Tammy, who will review our Q1 financial performance in detail.

Thanks Mike. Good morning everyone.

Before I begin, I would like to point out that we have retained our two segment reporting structure in Q1 2016. This is because we have not changed our internal management reporting structure and as our business changes and grows, we will be considering making changes to how internally manage our businesses and at that time we will reconsider our reportable segments for external reporting purposes.

Financial reporting standards require that our segment disclosures are consistent with how we manage our businesses. Although we do have two reportable segment as we discussed before and as Mike mentioned today, there are number of diverse business lines within our segments.

I will also point out that our Q1 2016 results include the addition of Ben Machine, which we acquired in July 2015 and therefore the results of Ben Machine are not included in the comparative figures. Turning to our income statement.

Consolidated revenue for Q1 was $218 million which is up 25% from last year. The growth was largely driven by the strong contributions from Regional One and Provincial and to a lesser extent the addition of Ben Machine to our portfolio.

Our growth was tempered by the performance of the manufacturing segment, particularly our Alberta Operations which were impacted by continued low levels of oil prices. Other subsidiaries within our manufacturing segment performed relatively consistently with Q1 2015.

On a segmented basis, the aviation segment generated $174 million in revenue, which was up 30% from Q1 2015. The manufacturing segment had revenue of $44.4 million and this was up 10% from last year largely due to the addition of Ben Machine.

Revenue from our legacy airlines was largely flat in Q1. The aviation segment's growth came largely from the sale of aftermarket parts, engines and aircraft through Regional One and from the sale of maritime solutions in Provincial.

The fact that our revenue growth was largely organic bears repeating. We are pleased with the performance of Ben Machine, but the majority of our growth was driven by companies that were already in our portfolio at this time last year.

Consolidated EBITDA was $44.3 million, up 43% from last year. The growth was due to a number of factors.

As we have previously noted, it was driven by Regional One, Provincial and Ben Machine. Our legacy airlines, which continued to benefit from previous efforts to streamline operations and profitability, also performed well and contributed to our EBITDA growth.

On a segmented basis, the aviation segment generated EBITDA of $43.6 million which is up 40%. Its EBITDA margins were 25.1% which is up from 23.4% last year.

The manufacturing segment generated EBITDA of $4.5 million which is up 62%. Its EBITDA margins were 10.2% which is up from 6.9% last year.

We reported net earnings of $9.9 million or $0.36 a share and this compares to net earnings of $934,000 or $0.04 a share last year. The improvement was driven by factors already cited, including the strong performance of our aerospace businesses.

Also contributing to this was the lower interest expenses stemming from the redemption of two series of convertible debentures in 2015. On an adjusted basis, net earnings were $12 million or $0.43 a share for Q1 2016 and that compares to $3.7 million or $0.16 a share for the comparative period.

Turning to other key financial metrics. Free cash flow was $34.9 million which is up 46% and on a per share basis that was $1.26, up 21%.

Free cash flow less maintenance CapEx was $16.8 million or $0.61 a share and this compares to $9.1 million or $0.40 on per share basis last year. The resulting payout ratio for Q1 2016 was 79% and as Mike noted that was a substantial improvement from 109% in Q1 2015.

On our balance sheet, we ended Q1 with a net cash position of $29.4 million and net working capital of $160 million which represents the current ratio of 1.95:1. This compares to net cash position of $15.5 million and net working capital of $135 million last year and a current ratio of 1.74:1 at the end of 2015.

Our total capitalization and leverage ratios continued to be strong. Our senior debt leverage ratio was approximately 1.8 at the end of Q1 2016 and our leverage ratio, including the convertible debentures, was 2.9.

We continue to have significant financial capacity through our credit facilities and we are well within our credit facility covenants. This financial strength and flexibility leaves us very well positioned to achieve our business objectives.

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

Thank you Tammy. As you have heard, we ended Q1 more diversified, more profitable and with a stronger balance sheet than ever before.

We believe we are well positioned to sustain this momentum through 2016 and beyond. It's largely the reason we increased our dividend by 5% effective with the dividend payment in June.

Looking ahead, our outlook for organic growth remains positive, particularly within our aviation segment. More specifically, we anticipate that Regional One will sustain its performance given the growth capital investments we have made to expand its portfolio of assets, especially with the introduction of the CRJ900 platform to its portfolio mix.

It's important to note that we have consistently invested in Regional One since its acquisition and this has enabled us to continue to grow this on a profitable basis. Custom Helicopters is expected to see higher demand for its fire suppression services given the relatively dry spring we have experienced in Manitoba so far.

The prospects for Provincial are also encouraging given the number of opportunities around the world for its maritime surveillance as well as its search and rescue services. Demand for its scheduled airline and cargo services are expected to be somewhat softer, however, given the weakness of the mining and oil and gas sectors in the recent austerity measures introduced by the government of Newfoundland and Labrador, but as I mentioned earlier, Provincial is a small microcosm of EIC and its diversified onto itself and in aggregate we expect it to grow.

Within the manufacturing segment, we anticipate continued strong performance from Ben, which we believe will offset the drag on performance that low commodity prices will continue to have on Alberta Operations for the foreseeable future. Over the longer term, we remain very committed to growth via disciplined acquisitions.

With access to approximately $200 million in deployable funds and our strong balance sheet position, we are very well positioned to capitalize on acquisition opportunities that meet our very specific purchase criteria and support our goal of continued diversifications and increase dividend payouts. Thank you very much for listening and I would now like to open the call to questions.

Operator?

Hi. Morning, folks.

Good morning, Trevor.

Just to start off with Regional One. I know that the economics and the market environment has been such that you have been benefiting more from leasing of late.

With the couple planes sold in the quarter, have you seen a shift in terms of that business' dynamics and is it maybe moving back towards more of a sale model on the overhauls? Or can you still see a nice appetite for the leasing front as well?

It's actually both, Trevor. We take look at each aircraft and see what it is best suited for, the length of the life span of the engines, whether it needs to be overhauled and that's where you get into that whole kind of matrix and pointing each aircraft into it.

The general economics for the plane itself was that there was low fuel price, there is demand for the aircraft. If there is demand for the aircraft, whether that's through leasing or through sale of aircraft, it depends on the individual customer.

So there is really been no movement away from leasing and in fact I can tell you that we have all of the CRJ700s now deployed, whether that means our lease, sold or being disassembled for parts. And we see no change to that demand environment in the near or even the medium term.

As well, Trevor, the two CRJ900s that we recently acquired, they are on lease as well.

Great. Yes.

That was my next question is in terms of where you saw those two going? So in terms of the CapEx, I know the IRR profile for Regional One has just been tremendous.

Are you still seeing those same type of IRR or at least similar type of economics on dollars that you are deploying into that business?

Yes. That's a question I really wanted to get because sometimes we get feedback that we continue to invest and if you look at our returns as a company, they are growing, our earnings are up nine-fold this quarter.

EBITDA is up almost 50%. It's because we are investing in our existing operations and generating exemplary returns.

If I can put $20 million into a business I know and generate 15% plus returns on capital, rather than having to go buy a new business and the risks inherent with buying a new business, we are going to invest in our self before we invest in others. That not being said, that we not looking for acquisition opportunities, we clearly are.

But we are excited about when we get a chance to buy, like the CRJ900 at a rate of return that's more than acceptable, we are to continue to do that. And that's why having a balance sheet that we do is so important.

So Hank, our CEO says Mike, we have got an opportunity, we can say right to chat.

Yes. Provincial, any update on the contract for the marine surveillance for Canada's North.

It's government. So you have to take this with a rich grain of salt that so richly requires.

But both of the main bidders have been working with the government and testing whether we meet the standards and the process is moving along. The government has indicated that it may come to a head later this year.

I am not sure that I want to predict that it will happen exactly then but we are seeing significant progress and the change of government had remarkably little effect on this procurement initiative. All three parties acknowledge the need for these new aircrafts.

So we are pleased with how it's going along and we remain confident in our chances.

I think we said before that we wouldn't expect a decision before the end of the year and I think that's still where we are at now. Although we are pleased with what we have seen to-date.

Good morning and congratulations.

Thanks, Mona. It was a good quarter.

Yes. So just a couple of questions for me.

Firstly, I was wondering if there were any major one-time items in the quarter that had a positive impact? You did mention the CRJ sale on the Regional One side.

Can you quantify what kind of impact that would be from a revenue perspective? And are the margin there in line with historical Regional One?

Just trying to get a sense of, if it was a material contribution.

I will give you sort of a roundabout answer to your question because I don't really want to disclose what we are making on a given aircraft. The key thing in the first quarter was we sold more than one which doesn't happen every quarter.

And so we probably experienced extra EBITDA in the range of a couple million dollars from these stronger aircraft sales than a typical quarter would have. I am not going to give you a sales number because then you know what I am selling my airplanes for.

And so I am not prepared to do that. But I mean in the grand scheme of things, it's a couple of million dollars on $44 million of EBITDA.

It's not a big number, but we wanted to be fulsome in our disclosure and let people know that look that business is always going to be lumpy in that we have got core part sales which are really reliable quarter-to-quarter. We have got leases that are reliable quarter-to-quarter and quite frankly, are fueling most of the growth as we put the new aircraft we buy on to lease and generate significant returns.

But occasionally, we will sell more than one aircraft and that will give us a little bump in that quarter. But it's not a huge number.

Okay. That helped.

Just secondly, you touched on it in your prepared remarks and a keyword that kept coming up was diversification, but sustainability was another word that came up when I was just reading through the material. I just wanted some clarification on the sustainability that you are seeing.

Is it sustainability of organic growth? Sustainability of margin?

Sustainability of dividend? Or all of the above?

And any comment on that would be great.

I think it's sustainability of all of the above but with kind of an aspect. The first quarter is generally a slower quarter.

So to generate a bigger percentage increase is possible in Q1. If you take Q3 where we remain, I don't have the number in front of me, $50 million something, it will be very hard to generate the percentage increase in Q3 that we have generated in Q1.

But do I expect to continue to grow in those quarters? Absolutely we do.

The businesses we are in are sustainable. Our airlines, we have proven we have been in those for over a decade and challenges come and go, but we have consistently generated free cash flow that are reliable.

Our manufacturing consistently augments that. We are going through a tough time in Alberta, but it's actually interesting because each of the other time throughout, the oilfield has gone through a tough time, our Alberta also come out stronger because we can continue to invest in the slow period.

We don't accept the market. We don't cease to carry inventory.

So when the market recovers and it will, whether it's three months from now, nine months from now or 24 months from now, we will be in a position to take advantage of it. And our aerospace quite frankly we love that business.

With what's happening in our maritime surveillance businesses where we have added contracts, we are in discussions in various parts of the globe. And then Regional One, as we talked about a lot on this call, it's expanded its reach around the world.

I don't have the number right in front of me but I think they did something like 55.

Over 58 countries they sold or had sales around the world.

In the first quarter. So that kind of geographic diversity and customer diversity is what makes us sustainable.

Okay. And just lastly before I get back in queue, just turning to the dividend.

Third increase in 18 months, up 20%, but you remain focused on growth via acquisition. Is there any read through that you are increasing the dividend especially given the frequency and the magnitude of increases that maybe there is a slowdown in the M&A or the environment has cooled or you are not seeing potentially as large of a transaction?

Just wondering if there was any correlation to the dividend increase versus acquisition outlook?

Absolutely not. We are deploying capital at a fairly high rate internally.

There is a correlation between the dividend and what earnings we do. And that correlations with our payout ratio.

We have been able to increase it three times and still be in that 60% range. We have been consistent since we started in 12 years ago and we are comfortable in the 70% range and we are uncomfortable when it gets to 80%.

Now we are in the 60%, we are going to look at raising our dividend. We are trying to do it in bite-size pieces so that the market can say, okay, there is one.

If they continue to perform, maybe there is another one coming. And so if you want to predict our dividend in the future, the best predictor of that is where you think your payout ratio is going to be.

If we need money for an acquisition, we will tap the capital markets. We will use our credit line depending on the size of it.

But we are not getting pay it out just because we have got nowhere to put it. We have got lots of organic opportunities to invest.

Good morning. Thanks for taking my question.

Good morning, Derek.

I had the opportunity to attend a luncheon with the new federal transport minister, Marc Garneau. Mr.

Garneau clearly indicated that improving access to northern communities was a key mandate. Do you any more color on what that could potentially mean and how EIF may be able to leverage this?

It's one of those promises that's very hard to fulfill. And I in no way doubt the sincerity of the government that they want to invest in First Nations, but when you are talking about communities of 500 to 3,000 people that are hundreds of miles away from road infrastructure, the likelihood of there being any other way to get there other than airlines is very remote.

What we would hope is that they want to invest in improving the airport infrastructure. Some of these things that 3,000 foot runways and they are gravel and they are rough and it's hard on the aircraft.

They could improve the quality of the service we can give them by investing in the airports. We have heard nothing that says they are prepared to do that.

I think it's more likely that the government will end up providing greater funding to the First Nations. And hopefully that funding will enable them to engage in economic development whether that be tourism, fishing, those kinds of things which will increase the wealth of those communities and that's going to be nothing but good for us.

Okay. That's great color.

Just moving back to the financials, was $28 million in growth CapEx this quarter primarily due to the two CRJ900s? And going forward, are there any other types of aircraft that you are looking at for Regional One?

That's a hard question. I have got a backup drill to answer to the question.

For us to do well in an aircraft, we have to have enough knowledge of that aircraft to be able to engage in the arbitrage between parting an aircraft out, leasing it or selling the whole thing. And so we have to build that knowledge.

And the movement from a 700 to a 900 was fairly easy because there is a tremendous commonality of parts. And so we are very comfortable at our ability to enter into that.

We dipped our toe into Embraer aircraft occasionally. That's something we would like to add expertise of, because it's not something we do a lot of business in.

But we are looking for opportunities and it may well be buying a company that has expertise in an aircraft, even if it's in overhaul or it's in straight leasing or straight parts. But we need to have the internal expertise to be able to engage in the entire arbitrage process to be able to generate the profits that we do in that business.

So the short answer is, we are looking at a bunch of stuff. The longer, somewhat more accurate answer, would be that we need to do continued work to build the expertise internally to be able to do that.

Yes. It makes sense.

On the $28 million though, was that primarily the CRJs?

Yes.

Yes. Okay.

It wasn't exclusively that. We did buy other aircraft but the single biggest investment in that substantially was the two CRJ900.

Okay. That's great.

I will leave it there for now. Thanks Mike.

Thanks.

Thanks. Good morning.

Guys, just you have talked a little bit about the sustainability runs, but just thinking about the margins and some of the internal things, I guess a couple of things. One, how much did the mild winter weather impact the legacy airlines this Q1?

And I am thinking about even longer term, is that the kind of run rate that we should be thinking about? And then two, you talked a little bit about in past calls about how some of the work that Provincial can do for you.

Typically, Q1 is a fairly heavy maintenance quarter. Is there also some margin benefit that we are seeing out of some cross-selling, if you will, between the different groups?

Those are two good questions, Chris. Let's deal with the second one first.

We have internalized all of our overhaul capabilities and we have been flowing that through Provincial and we get two key benefits of that. One is pure cost.

Provincial has done on our more cost-effective basis than the third parties and it's also given us flexibility. And flexibility on when we do it turns into higher margins in the airlines because if they have an opportunity, we postpone an overhaul for two weeks or move it up so that we are doing it at the best time for our operators.

So we have experienced significant savings as a result of that. On a correlated basis, because we are doing it all in one place, we have done things like putting on an RFP for our engine overhaul work for the big engines that we don't do internally.

And that RFP has significantly reduced the price that individual companies were paying for their overhauls on a one or two or three off basis. Can you refresh me what your first one was?

Margins and were they sustainable. The weather in Q1 quite frankly it didn't do anything to really help us in Q1.

It will help us later on in the year. What happened was, because of the mild winter, the winter roads had a shorter season.

So they were open less long, so less material, things, construction materials, food that sits on the shelf for a long time, like cans of soup or cans of Pepsi got into the communities. So as those are used in the communities, they will have to be replaced through the air which will ultimately create demand for us over the summer and into the fall.

But in the quarter itself, the impact was negligible. I think the other indirect effect will be on the fire season.

The fact that the snow has melted sooner and the forests are dryer, we are already experiencing challenges in the eastern part of Manitoba and we have all seen the horrible disaster in Alberta. And while that's has absolutely no impact on our business, it shows how quickly things like that can happen.

And when that does happen, it does tend to drive demand for our services, whether it be to evacuate people or to fight the fire.

And Chris, one further comment, the overhaul capability that we have internalized, because it is not necessary a to-do, it's added a potential revenue stream to Regional One that wasn't there before. Because in the past, an aircraft that was reaching the end of its green time and significant overhaul would have been parted out by Regional One.

We now have the potential of sending that to Provincial to get overhauled and now there is an additional aircraft that can either form a part of Regional One's leasing cool or be sold off as an operating aircraft.

And we do that with kind of some labor, we have put couple of those planes in the back. We call them project planes.

So when we have got a gap between scheduled overhaul work, whether it be ours or for third parties, we are going to pay those people anyway, so we might as well have something for them to do. So they work on those project planes and it's a means of recovering some cost.

Okay. Great.

Interesting. Just turning to balance sheet for a second.

You have got the Series J debentures still out, but you have got a call available to you at the end of May. The Series J are kind of unusual in that they also have a secured component to them in terms of the balance sheet.

Any thoughts about bringing that in, freeing up that security and maybe doing something different, just even on the interest arbitrage?

Yes. We are always looking at those securities to get the best return on money.

One of the things that's always been really an important aspect is maintaining the stability of our balance sheet by not having too much renewal risk. And so we try to deal with these things in advance when it's appropriate to do.

And we did that where you saw last year, where we cleaned up two series of convertible debentures and we continue to look at opportunities in the future. We want to make sure that as each of these debentures come due, none of them are a significant enough amount of money that we couldn't just write a check out of our bank lines.

So it's a long-winded answer to say, yes, we look at all those things. No decisions have obviously been made or we would have told you about them.

But that's something we look at.

Okay. Thanks guys.

Thanks. Good morning, Mike and congrats on a good quarter once again.

Good morning. Thank you.

Mike, just a couple of questions here. Just following up on Trevor's question on Regional One, can you remind us after selling the CRJ700s in the quarter, how many are basically on lease and are being stripped out or available for sale?

And what are your prospects on the CRJ900s? Would you like to opportunistically acquire more of those and put them on a similar kind of business model?

Thanks. Yes.

I will do it again. I will deal with your second question first.

The CRJ900 is newer and so it's still largely in service with Tier 1 carriers. So this is our first toe dipping in and they are relatively expensive for us.

So I would love to buy more of them. I suspect it will take a couple of years for us to meaningfully increase our fleet of those simply because they are still on lease with the Tier 1 carriers.

The Lufthansa update, we really have deployed all of them. As of today's date, we have parted out, I believe, three of them.

We sold a couple of them and the rest would be on lease. Remember that we have bought more than just the ones from Lufthansa.

We bought a couple others. So I think we have something in the neighborhood of, I don't have the numbers in front of me, I think we have got seven or eight of them on medium-term lease.

We don't do long-term leases but some ranging from a year to a couple years.

Okay. That's fair.

And have you seen or noticed any change in dynamics because of the recent blip, I would say, in the fuel price or the oil price because the Regional jets are typically not as fuel efficient as other aircraft are? So have you seen any kind of impact of that fuel price?

Does that make your customers nervous about operating them on short-term basis?

That's a really good question. The fuel prices, they have kind of been all over the place this quarter.

We have seen really low prices that bumped up and falling back down. But the key thing to look at that is, you have to look at a much longer term curve of pricing.

And the price of jet fuel now is still materially lower than it's been for the last few years. And so if oil bumps up to $50 or $60 a barrel, then it's still relatively cheap and the dynamic of the efficiency of those engines continued at that kind of oil pricing.

You need to see oil going back into perhaps not $100, but closer to that before the efficiency argument on the engines has a dramatic impact. So I would suggest, at least in the medium term, that the demand for these aircraft is solid and that's what we are seeing in our demand.

Okay. Thanks.

I think it's evidenced by the fact that when we bought those two years ago, we suggested that we were going to part out a significant portion of them and quite frankly we haven't been able to because the demand for the aircraft is too high.

Right. And just moving onto the manufacturing side.

I understand, obviously Ben Machine is doing very good, given its exposure to A&D market. However, Stainless, Alberta Operations and other businesses basically, they are not obviously as robust at this time.

So what could be one or two things that you might see changes in over the next, call it, six or 12 months? Like, would you expect WesTower, for example, to slowdown in terms of declines in revenue and stabilize at some point?

Or would it be Stainless or Overlanders or something else?

I think you will see Stainless has been is fairly stable to begin with and we don't see any declines there. Overlanders, as well is a fairly stable business.

Give or take, very small amounts, it's very predictable. WesTower is in a period where there is less new technology being installed.

We are nearing the end of 4G LTE and waiting for the next. So again we see that business as being fairly stable at a level lower than it was a couple years ago but I don't see a continued decline in the business.

And quite frankly, Alberta has kind of plateaued. I hesitate to hang my hat on it, because it's a short period.

But we have seen relative stability in the last couple of months in that business. Again relative stability in numbers have not troubled us.

But having said that, what they do is an essential service in the production of oil and in agriculture. It will come back and so will be patient.

We will continue to have the inventory in place, look after our customers and our market share will undoubtedly grow as Alberta comes out of its doldrums.

Yes. Good morning guys.

Mike, I just wanted to follow-up on the opportunity for internal investment. Do you guys have a budget for the balance of the year as these opportunities have been involving?

Can you just give us a sense for the magnitude of capital that you expect to deploy internally for the balance of the year?

That's a great question. It might be the hardest question I have had today to answer.

Because we make our money in Regional One based on how we buy not on how we sell. We know what to buy, when we can buy at a price that's going to generate returns we have.

So by the very nature, it's opportunistic. We don't anticipate four quarters to look like Q1 in terms of the amount of money invested.

But I anticipate making meaningful investments throughout the balance of the year. In terms of the non-aerospace business, outside of Provincial and Regional One, growth capital investment is very small.

We completed a lot of work in the airline business. We bought the Kivalliq operations of First Air a year ago and we continue to digest that.

But the capital required to do that is all in the business. And so we will see continued improvement in that performance as we digest it.

But the only place I see material money going into, would be in the aerospace side. And I wish I could give you a hard number, $20 million is a big number for a quarter, but it could be that again.

Or it could be smaller than that. I don't see it being much over that in a given quarter, unless we have a Lufthansa like opportunity and I will be very excited to tell you about it if we find one.

Sure. That's helped on both.

And then just on, clearly year appetite the aerospace side has been improving of late, you described it in your earlier remarks. But your thinking about the acquisition pipeline outside of the internal opportunities, are you hunting in that landscape?

You described your need to get additional capabilities on other platforms as an example. Can you buy those capabilities?

Just give us some sort of sense of where you are looking in the pipeline from a sector or geographic perspective?

Geographically, we are entirely agnostic. We are actually looking at stuff around the world right now.

To be clear, if it's outside of North America, it's going to need a certain amount of scale to make it worth the effort of adding it to our portfolio. But geographic diversity strengthens our dividend paying capability.

In terms of sector, we are looking for anything that augments the two existing areas we are in. So maritime surveillance, maybe we will have a company like Ben that helps us make parts, maybe we will have MRO capabilities that help us adapt aircraft and put them into a surveillance configuration.

We are looking at means of the expanding SFI's production capability. We been factory landlocked for a number of years and we are looking for opportunities in that business.

And people have heard me say this for a long time and we haven't been able to find it yet, but we would still like to find one more leg of business at the right multiples. That's one of those things that either are glass half-full or glass half-empty thing.

We haven't found anything that fits and we still have been able to grow the business dramatically. Move our dividend.

But the other side of that is, we haven't chased deals for the sake of doing them and we won't change that. We will look and when we find it, we will do it.

But I think in terms of sectors where we are going, there will be less in pure aviation, there aren't as many opportunities there. Having said that, when the right deal comes, we will jump.

Things that are tangential to our existing aerospace business we like and the ability to grow SFI is something we like.

Okay. That's helpful.

And then just a last one, if I may, because I am thinking about, as you describe what you are doing and is there any appetite to prune. There are some of the smaller businesses dating back 10, 15 years now.

They were quite small when you acquired them. They have grown to a certain degree.

But have you ever thought of pruning just to simplify the business platform at all as you lump, you have added on some larger lump sized acquisition here in recent years?

It's an interesting question. The short answer is, no.

Our business is built upon being able to pay dividends. And so we know these businesses and they generate cash flows that we like.

So if someone were to come to us and say hey, I will pay you, we are doing a strategic rollup of the whatever business and we really want your such and such business, I am agnostic. The are not children.

They are just businesses. Having said that, you are going to pay me more than we think they are worth.

I don't want to sell it to report a capital date on paper, send some money down to Ottawa in taxes or to Washington to pay our tax bill. And then I will have to take the money out and we will have to go out and find a new company to replace that cash flow stream.

So barring a situation where someone thinks something is worth more than what we think it's worth or barring a situation where we don't think we can manage it, I don't think you are going to see much in the way of sells.

Hi. Thanks.

Good morning. Maybe just a couple of housekeeping questions.

Starting with Regional One, how many planes do you actually sell in a quarter?

I am not really sure I want to disclose that. It was two or three.

But they weren't all big aircraft. There is other things we sell.

So I have got to be careful about competitively sensitive information. But I would tell you that it's more than normal.

And I think I already stated that it probably brought in a couple of million dollars in EBITDA more than I would typically expect.

Okay. So you are still around the 12, 13 planes in that business, I guess with the addition of the new?

No. We have a lot of other aircraft in the business.

You are talking about just the CRJs. We have got engines we lease out.

We have Dash 8s in the portfolio. We have ERJs in the portfolio.

I think we still have a couple of ATRs in the portfolio. So there is more than just the CRJs.

They are getting focused because they are much more expensive planes to buy. I think we purchased those I think something like $7 million a piece, around the $6 million or $7 million yes.

And whereas some of these planes we are buying for $1 million or $2 million a piece.

Okay. So in terms of the CRJs, was that was sold in the quarter?

We sold one of those, yes.

Okay. That helps.

Thank you.

Thank you. Good morning.

Just want to return to the growth CapEx. Mike, you mentioned, if you back out the Regional One and the aircraft acquisition which I realize is volatile and difficult to provide much guidance on, is it impossible just to wrap some goal post around the growth CapEx in the remaining part of the aviation business?

I think you mentioned it was relatively small, but does that mean $5 million a quarter, $10 million a quarter? Just trying to get a bit of a sense for that.

It would be materially less from that. It would be $1 million or $2 million and maybe not even that.

It would be when we really upgrade a facility or something or perhaps trade in an aircraft and upgrade it. But it's a very small number.

Yes. We are running in the $2.5 million a quarter type range.

Okay. Thank you.

And then it looks like everything is going extremely well here. Are there any businesses where you feel changes need to be made, strategic, cost structure?

And it obviously other than just the industry weakness that's coming from the resource sector, is there anything that concerns you at this point? Or are you really firing on all cylinders here with all the business units?

We are happy with where we are but I think when you are happy there is a risk you are complacent. And our job is to help our guys drive the synergies in their businesses and between their airlines.

So we are spending a lot of time right now on the legacy businesses. See where one business and consolidation of services can drive costs without changing the market of the company.

So as an example, we put together a group called Charter Connections, where we have taken the charter stuff out of all of our legacy airlines and combined it because quite often one airline would get call for an airplane they don't have. Say we have a NC charter for Calm Air, well Calm Air has no NC aircraft.

We have put all of them together, put together a dedicated team and we are actually harvesting the opportunities at a higher return rate because we have access to the entire fleet of aircraft. We talked earlier about the synergies of the overhaul business.

We are putting together our parts purchasing to generate savings and costs.

Training. We have also consolidated our training needs to again use our buying power to reduce cost.

Another thing that, apart from the legacy that we do is, I call it nurturing growth opportunities in all of our NCs which we do on an ongoing basis.

And so I think, are there any big landmines? None that we see at this point.

There is always competition in places and there is little ups an downs in the business. But we see continued improvement in our airline business from the efficiencies we are working on.

And now we have clearly made a big jump in that area last year in 2015. The subsequent step, the fruit is a little higher up the tree.

So it won't be at the same rate of improvement but we will continue to see growth in that. And one of the things that our business model does and I really want to talk with synergies and they are very important, but we enable companies to grow.

When you look at Regional One and I am just using it as a proxy. We can do Perimeter just as easily.

But we bought Regional One and they had all the expertise they have today. But we bought it off of $16 million, $17 million, $18 million EBITDA number with a five-ish multiple.

They made almost that in a quarter. And what have we changed.

We have given the ability for them to monetize opportunities. We let them take advantage of what they do well.

Perimeter is another great example. We bought it and it was our first acquisition.

It's kind of the poster child for our business. We bought it in 2004.

It was making $4 million in EBITDA. It's now making materially over $20 million and generating strong cash on cash returns.

And what have we done with it? We have given its access to a balance sheet, so that the people there can implement ideas they always have.

It's us facilitating growth. We are like the steroids to our subsidiary's performance.

Okay. That's great.

Thank you very much.

Hi. Thanks for taking my question.

Maybe I will just follow-up on that point. You have had Ben Machine for a couple of quarters now.

Over the past couple of months here, are there opportunities you see to further nurture the growth there? Either expanding the product line or geographic distribution or further tuck-in acquisitions?

Is there something within Ben Machine that you see in terms of growth opportunities?

Yes. Actually all of those, Kevin.

The relative weakness of the Canadian Dollar makes us competitive in the U.S.. Finding smaller other companies that we could tuck product lines in is also an acquisition front we are looking at.

The only cautionary for Ben is the nature of the customers of those are tend to be slightly longer purchase cycles. So if we build a part, as an example, for the Joint Strike Fighter, the F-35, they don't change the production of that on a one-month's notice kind of thing.

So we are working on a number of initiatives and we have significant confidence in growing that business over the medium-term. How fast you are able to land programs from other suppliers, it's questionable what you can do in the very short-term.

Okay. That's helpful.

And I know synergies aren't a big driver as to why make these acquisitions, but you have obviously highlighted a few in your aerospace segment. But within manufacturing, especially with Ben Machine now in the fold, you do have a U.S.

stainless operation. I know the fabrication of the materials are totally different but are there potential synergies, especially as you grow manufacturing here?

Are there potential steel supply side synergies or cost synergies you see?

The synergies actually, between the manufacturing companies per se, there really isn't very much. But from Ben to the aerospace businesses, we believe there is material opportunities there.

They build the kind of parts that can be used in that. And Ben is a big supplier to some of the people that are suppliers to Provincial for the maritime surveillance business.

So joint projects together with our suppliers and our customers are possible. Those are at their very infancy of those discussions.

But there are opportunities between Ben and those companies. The other, whether it's Overlanders, the Alberta Ops and WesTower, there really isn't much.

Overlanders does make parts for Alberta. That's actually why we bought it originally, was as a supplier to Jasper Tank.

Over time, it's become more of a standalone enterprise. But there is some synergies with Ben and the aerospace business.

That's helpful. And maybe I will end it off, just following up on Mona's question earlier.

You have obviously raised the dividend three times in 18 months and as you highlighted you focus on a payout ratio as the driver of that. But given the things like the capital intensity in your business and increasing a little bit of share just to reflect a lot of the growth opportunities you have highlighted, the ability to invest in your business and generate 20% plus returns, is there a thought of maybe lowering that payout ratio to unlock more capital to pursue some of these growth investments, whether it's aircraft in Regional or signing new contracts in PAL?

Have you and the Board thought of adjusting the payout ratio you look at? Or is that pretty much set in stone as you see it today?

Have we thought about it? For sure we have.

Are we about to change it right now? We are not and quite simply the reason for that is, we buy companies which have a certain cash flow attribute.

And if we are going to buy them for growth sake, we are going to buy a different kind of company. And if you take the cost of our dividend increase, Tammy, may throw into you in two seconds here, so get ready.

But we are talking about a 5% increase in our dividend, which amounts to something like $0.09 cents per share. So you are talking a couple of million dollars.

I will have to check my math and see whether I am telling the truth on the exact cost of it. But saving that $2 million is really not going to fund very much.

What we want to do is reward our customers as we grow our business. And the other thing that's important to look at is what's our dividend payout relative to our adjusted profits.

People debate at what our CapEx is and I think our disclosure is very fulsome. But if you take a look, even at our new level, we are distributing less than our adjusted earnings and probably less than our pure accounting earnings.

So when you look at our business, I don't think we are aggressively increasing our dividend at all. What we are doing is aggressively growing, creating the opportunity to pay the money out.

All of the analysts on this call are going to do their pro formas and when they do their pro formas, nobody is going to get a number that's higher than a six as the first number in the payout ratio. And with that, it's very sustainable.

And bear in mind, one of the thing that's super important to understand is, we are now fully taxable. In the old days, where we had a 70% payout ratio, there was no taxes to buffer a decline.

But now with the taxes we are paying, I think our tax rate is 30%.

30%.

30%. So if we had a dollar decline, the first $0.30 is what we don't pay the government.

And so we are very secure in our ability to maintain and quite frankly to continue to grow that dividend. So our business model is based on paying our profits to our shareholders.

If we couldn't access capital, if there were some other reason to not pay it out, we will revisit it. I think being set in stone is dangerous but I think being predictable is important.

And we want be predictable. If we increase our profitability, we are going to pay it to our shareholders.

That's what good shareholders expect. That's why they invest in us and that's who we are.

Yes. Good morning guys.

You have listed a lot of margin improvement initiatives in the aviation division. I am wondering if it's possible to quantify how far along you are with these initiatives?

And if there is an EBITDA margin target for the aviation division that you are targeting?

No. There isn't a target, because that's all product mix driven.

It's impossible for me to give you that. I think you will continue to see slow but consistent improvement in the margins in that business, particularly over the next 18 months or so as we finalize the acquisition of Calm Air that we right size that business.

And then some of the cost efficient things bear fruit. The easy ones are done.

The harder ones are underway. But there is ample opportunity in those to continue to improve our budgets and I am not prepared to put forward a public number on that other than to say, we expect margins to continue to grow albeit at a smaller rate of growth than they have in the last year.

Got it. I have one more question on Regional One.

Right now, it appears that it's performing really well. The demand for its services is really high because of the low oil prices.

But when we look at its performance even historically when oil prices were high, it still preformed really well. So does it change its product mix when oil prices are high, so it continues to deliver strong returns?

Well, the bottom line is, we don't necessarily change our product mix, we change what we do with the assets. And so if there strong demand for a plane as an operator and it's better than tearing it apart and getting a short-term profitable, where the demand for an aircraft to decline, there is still going to be the need for spare parts for the fleet so they will remain in business.

The thing with aircraft is, is that they don't go in and out of service overnight. They move from bigger carriers to smaller carriers over time.

And as the price goes down, different people are prepared to operate them. And so we would deal with the change in demand for a whole aircraft by parting them out and selling them out as pieces and supporting the other aircraft that are still flying.

And that's why Regional One is such an unique business. Because of their internal expertise, we can generate different revenue streams with the same asset and then tie the revenue stream to what's going on in the market at that time.

It's really an intellectual property business. What they know about the value of the core underlying assets that make up the plane, the engines, the landing gear, the avionics, what those are worth.

And if you know what those are worth, you can then figure out what the best way to dispose of them is, whether it's through a lease, a purchase or a sale.

Got it. Thank you.

That's all for me.

I would like to thank everyone for participating in today's call. I look forward to updating you on our progress in coming periods and I would remind you that our Annual General Meeting takes place later this morning at Winnipeg and for those of you in other cities, we are now live streaming that on the Internet.

The information for how to access that is on our website. Thank you for dialing in and have a great day.