Michael Pyle - Chief Executive Officer Tamara Schock - Chief Financial Officer Carmele Peter - President

Derek Spronck - RBC Capital Markets Mona Nazir - Laurentian Bank Securities Konark Gupta - Macquarie Capital Markets Chris Murray - AltaCorp Capital Kevin Chiang - CIBC World Markets Raveel Afzaal - Canaccord Genuity

Thank you, operator. Good morning, everyone.

Also with me today are Carmele Peter, our President and Tammy Schock, our CFO who will review our financial results in greater detail in a few moments. I'm excited to speak with you today.

It's an exciting day for our Company and for loyal shareholders. Not only if we delivered another strong quarter of operating performance, but this performance we've been able to increase our dividend again.

This marks the second increase in 2016 and the fourth increase in the last 24 months. The increased announced with our Q2 2016 probably Q3 2016 results raises our payment by Q1 $0.175 per month or $2.10 on an annualize basis.

This is an increase of 4.5% and brings this year's total increase to 9.4%. More remarkably it brings the total increase in the last 24 months to 25%.

This contrast inflation that is total less than 3% and very low interest rates. Our shareholders have benefited from a liable and growing dividend.

Most importantly we have been able to fund this increased dividend by growing our profitability and maintaining our payout ratio at the very low end of our target range. In fact, the third quarter payout ratio which already includes three of the four dividend increases I've discussed was a solid 54%.

Our balance sheet is strong and we are in a great position to continue to take advantage of growth opportunities, whether organic or through acquisition into the future. As I will detail a little later on we have been able to accomplish this level of performance.

In spite of less than optimal conditions in both our manufacturing and rotary wing businesses. The disciplined implementation of a diversified acquisition strategy has enabled our strong performer so not only offset the challenges in the weaker ones but to grow our bottom line and ultimately their buy our dividend.

The strength of Q3 payout ratio was echoed by the record highs established in several key metrics. More specifically EBITDA grew 11% to $60 million.

Net earnings were up 29% to $20.6 million and free cash flow less maintenance CapEx was $26.5 million up 6%. On a per share basis we are in EPS of $0.72, our best result in over a decade.

The diversity of our operations was in fact the key driver of these record results given the opportunities and challenges that each of our operating segments faced in the quarter. Our consolidated earnings were the result of strong performance in our Aerospace and Aviation segment were EBITDA decline $8 million to $57.6 million.

This was partially offset by the client of $1.8 million to $6.4 million of the manufacturing segment and a marginal increase it had office costs of $300,000. In Q3 Regional One generated strong revenue and EBITDA growth that was primarily driven by new aircraft leasing.

These leases were made possible by the continued investment in additional aircraft which began with the purchase of a fleet of CRJ700s from Lufthansa CityLine Regional airline and has continued with other purchases over the last two years. In other words our previous investments delivered a very healthy rate of return and helped fuel our growth.

I will come back to this later on. But it’s very important to understand that our growth capital expenditures made in a given period generally don't impact that period.

They're laying the foundation for growth in future periods. Based on a Regional One’s successful track record, we made strategic and opportunistic decision to acquire nine aircraft in the third quarter net of sale of one aircraft to an existing lease customer.

These acquisitions were the primary factor driving our overall $53 million of growth capital expenditures made in the quarter. Also within the Aerospace & Aviation segment Provincial made strong contributions in Q3.

In particularly it continued to benefit from the five year $150 million in service support contracts signed with the client in the Middle East in November of last year. Provincial’s diversity of operation like EICs was a key to its success in Q3.

Revenue and EBITDA contributions from the aerospace division were offset by unfavorable economic conditions in Newfoundland and Labrador. Recent austerity measures implemented by the Provincial government coupled with depressed oil and gas and mining sectors caused a drag on Provincial’s airline performance.

This impact lowered revenue and EBITDA contributions from its scheduled flight and cargo services. But as I mentioned earlier this was offset by the strong performance of its aerospace business.

Our Legacy airlines in contrast experienced strong profit gains. Their progress was largely due to previous investments made to streamline their fleet, optimize road schedules and benefit from a more coordinated procurement activities across our aviation entities.

This progress was muted somewhat by the wet weather conditions that Manitoba experience from most of the summer. These wet conditions resulted in considerably lower demand for fire suppression services primarily provided by Custom Helicopters.

Historically firefighting work generates strong EBITDA contribution seasonally in the second and third quarter. Firefighting work after a fast start in early May was virtually non-existent for the remainder of the summer.

Our Manufacturing segment faced a challenging quarter. The very low natural resource prices generally and oil and gas specifically reduced demand and lowered revenue in our Alberta operations.

Uncertainty in the U.S. perhaps driven by the acrimonious U.S.

Presidential Election slowed the award of major projects at Stainless. Although customer orders interest increased radically going into the fourth quarter.

Both Overlanders and Ben Machine experienced slower than normal third quarters. Although in these businesses we expect a rebound in the fourth quarter.

West Tower by contrast experienced a modest improvement in its margins largely through a change in its product mix. While demand for new tower construction was reducing as a result of the CRTC’s decision allowing the sharing of cell phone towers among wireless telecom carriers.

Demand has grown for higher margin more intensive equipment upgrades and service work. We expect this trend to continue in the periods ahead until a new technology platform emerges to replace the current 4G.

Subsequent to the end of the third quarter we’re able to complete a U.S. $10 million acquisition that will add considerable strategic value to Regional One and expand the number of aircraft types in which it has a competitive advantage.

We acquired Team JAS as a parts and maintenance repair Service Company that has specialized in the Twin Otter platform for more than 30 years. Over time team JAS will be integrated into the operations of Regional One, the result will be an expansion into a new aircraft type building on Regional One’s expertise with Dash 8 ATR and CRJ product lines.

It will also provide an internal source of parts for provincials who operate that aircraft. The tuck-in acquisitions of CarteNav and Team JAS together with the opportunistic accretive growth capital expenditures will fuel our growth into the future.

I will expand on our outlook in more detail in my closing remarks. But now I would like to turn over the call to Tammy who will review our financial results in greater detail.

Thanks Mike. Good morning, everyone.

In the interest of time I'm going to keep my remarks focused on our third quarter results rather than year-to-date. But consolidated revenue for Q3 was $224.6 million, which is up 6% from last year.

The growth was largely driven by a strong contribution from Regional One and Provincial and also from our Legacy Airlines. As Mike mentioned, our growth was tempered by the performance of our manufacturing segment, our Alberta operations in particular continue to be impacted by low commodity prices and the aftereffects of the Fort McMurray fires.

On a segmented basis, the aerospace and aviation segment generated $178.8 million in revenue, which is up 14%. Major drivers of this include the benefit of previous capital investments made in Regional One.

The benefit of the performance based logistic contract in the Middle East Middle East and increases across all revenue streams with the exception of fire suppression in our Legacy Airlines. The Manufacturing segment had revenue of $45.9 million this was down 17% from last year and reflects the conditions in Alberta that we mentioned earlier, as well as lower volumes in the same with business.

Since 2014, we have fulfilled a number of transactions and made significant growth capital in investments that have increased existing revenue streams, introduce new revenue streams, new products and services and new geographies to our portfolio. The growth capital investments in Regional One, the acquisition of CarteNav for $17 million during the third quarter and last week’s acquisition of Team J.A.S.

our recent example of our activities. As a result of these and previous efforts, our operations continue to be well diversified.

Our two segments and their combined 13 entities operate around the world and working with a very diverse customer base. It bears repeating that the Aerospace and Aviation segment is made up of multiple product lines that generate many different revenue streams.

Consolidated EBITDA was $60 million up 11% from last year. The growth was driven by a number of factors that we have already noted, namely the strong contributions from Regional One, Provincial and our Legacy Airlines.

Despite the significant headwinds faced by our Manufacturing segment which caused a drag on our consolidated performance. Q3’s EBITDA of $60 million represents a new high for our consolidated operations for any quarter in our history.

The Aerospace and Aviation segment generated EBITDA of $57.6 million which is up 16%, EBITDA margins were 32.2% up 70 basis points from 31.5%. The Manufacturing segments EBITDA was $6.4 million which is down 22%, EBITDA margins were down 80 basis points to 14% from 14.8%.

We reported net earnings of $20.6 million or $0.72 a share. These compare to net earnings of $16 million or $0.64 per share last year.

The improvement was driven by factors that we have already stated including very strong performance in our Aerospace and Aviation segment as well as reduced acquisition cost and reduced interest cost. On a net adjusted basis, net earnings were $23.1 million or $0.81 a share for Q3 2016.

These compare to $18.8 million or $0.76 per share for the comparative period. Adjusted net earnings exclude acquisition costs and amortization taken on intangible assets.

Turning now to our other key financial metrics free cash flow was $45.9 million, which was up 9%, free cash flow on a per share basis was $1.60 which is down from $1.70 per share last year. The decline on a per share basis was due to an increase in the number of shares as a result of the conversion of our debentures primarily.

Free cash flow, less maintenance CapEx was $26.5 million or $0.93 a share, and these compared to $25 million or $1.01 on a per share basis last year. Our free cash flow totals excluded the growth capital investment of $53.3 million that were principally made for the expansion of Regional One portfolio of aircraft.

Our payout ratio for Q3, 2016 was 54% which compares to 46% in Q3 last year. The increase was tied to the recent growth in our dividend rate and the growth in the number of shares.

Our Q3 payout ratio was below our historical range that we use to determine the sustainability of our dividend and that we use to make the decisions to increase our dividends. Given the strong payout ratio and our positive outlook, our Board of Directors approved the decision to increase our dividend distribution to $17.5 per share on a monthly basis.

On our balance sheet we ended Q3 with a net cash position of $16 million and net working capital of $150.8 million which represents a current ratio of 1.9 to 1. This compares to a net cash position of $15.5 million and net working capital of $135.3 million and current ratio 1.74 to 1 at end of 2015.

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

Thanks Tammy. I want to take this opportunity to speak with you about the value of diversity and how we grow as a company.

I've already spoken in detail to diverse nature of our existing operations, but of equal importance is the power of diversity and how we grow. I spoke at a recent quarters about how the low interest rates and high liquidity in the United States has resulted in purchase prices for companies being unrealistically and unsustainably high and beyond what we are prepared to pay.

While the situation in Canada is similar it is not nearly to the same extent in the United States. As a result we are selective in what we are purchasing and deals tend to be smaller and more strategic in nature.

Does this mean however that our growth is limited in this period of high acquisition pricing. The answer is it unqualified known.

In addition to making acquisitions we have the capability to invest money in our existing operations and generate rates of return that are equal if not better than what we have generated in past acquisitions. Regional One is a prime example.

We purchased Regional One of an EBITDA of approximately US$16 million and by the end of 2016 in less than four years we have more than triple that amount by the continuing to invest in that company. And this brings me to an issue that I think is very important for issues to understand.

How do I see calculate what a growth capital expenditures are. On a qualitative basis it's a very simple formula.

If expenditure is made in order to create a new source of EBITDA then it is a growth capital expenditure for us if it is made to preserve the earning power of an existing asset or replace an existing asset that it's a maintenance capital expenditure. In all of our subsidiaries except for Regional One the split between maintenance growth is done by the nature of the investment being made.

For example an engine overhaul creates no new revenue stream and is therefore a maintenance capital expenditure. Contrarily new aircraft purchase to facilitate perimeters expansion into Northwestern Ontario will create new revenues and therefore would be classified as growth.

Regional One is different however because of the size of our portfolio of least our aircraft. Each month these aircraft are flown and generate niche revenue.

But the assets are slowly used up as their flow by the lessee. And their ability to generate revenue in the future declines.

We need to replace this decline in earnings power with new assets. In order to maintain our cash flow over time.

According way we classify all asset expenditures even if they generate new revenue as maintenance capital until they exceed the depreciation incurred in the period. Some may see this is overly conservative.

We however do it is appropriate. Any investment in excess of this amount will therefore increase our ability to generate revenue and is therefore classed as a growth expenditure.

It is very important to note the purchases of aircraft or aircraft parts where they will be sold those parts are shown as inventory and are not included in capital expenditure calculation. One final note on the methodology.

Well these plane reaches the end of its useful life as an operating aircraft it is generally torn down and sold as parts. When this occurs it is treated as a negative CapEx as it is no longer available to generate lease revenue.

The value is transferred to inventory a relieved from the balance sheet is cost of sales. Sales a whole aircraft are also treated as negative growth CapEx.

Our investments in growth CapEx in Regional One have generated exceptional returns. Equal and in many cases superior to what we can achieve in acquisitions at our target price purchase multiples.

We have average returns in excess of 15% on an unlevered basis after accounting for maintenance reinvestment requirements but before tax. You can see why we're so excited about the possibilities whether they be of additional aircraft Regional One, new contracts at Provincial such as the contract in the UAE to maintain aircraft from last year or the recently bid government of Canada Fixed Wing Search and Rescue contract or the geographic expansion of our legacy operations.

There are terms we generate and able us to grow even if periods where we do not uncover acquisition opportunities that meet our stringent criteria as are available at a accretive price. We look to invest in any of these growth activities that meet our return requirements and risk profile as they enable us to grow our dividend on the sustainable basis year-over-year.

These investments generally have very little impact in the current period rather they provide growth in profitability in future periods. Investments in 2015 fueled 2016 and beyond and current investments will help us grow our returns into 2017 and thereafter.

There are some that are conserved when these growth expenditures exceed the cash generated from operations to fund them. This is quite simply a concern that we do not share.

We are fully prepared to utilize our debt or equity capital to fund these opportunities as they are accretive on a per share basis without increasing our overall leverage. We would not refuse a suitable acquisition opportunity because the purchase price exceeded the period free cash flows.

Nor would we pass up a suitable growth capital investment opportunity for this same reason. The proof of this strategy is in our results.

We have been able to increase our dividend by 25% in two years, while maintaining a low payout ratio and the same low leverage rate ratio. Diversity of operations and diversity in operations to grow, it approaches to growth, work just as well.

Regional One’s strong prospects were also behind our decision to acquire Team JAS the acquisition small by our usual standards of US$10 million. But we expect that it will deliver a significant strategic value in the long-run, it broaden Regional One’s experience into the Twin Otter platform and provides the opportunity to expand the offerings within Regional One's business model.

Just as important the acquisition of Team JAS will enable us to streamline the procurement of parts for Provincial which features Twin Otters amongst its fleet of aircraft. Our strong results in Q3 and the latest dividend increase maybe [indiscernible] can we maintain this rate of growth.

We believe the answer is in unqualified yes. The outlook is encouraging and we were particularly bullish about sustaining our momentum into 2017and beyond.

Before I open up the call to questions, I want to reiterate our commitment to growth via acquisitions as well. Our last three acquisitions namely Ben Machine, CarteNav and Team JAS should reflect this, even though the transactions were relatively small in size representing a combined total value of approximately $70 million.

The size of these indications is more an indication of the trend towards upward acquisition multiples for target companies that represents a shift in our strategy. Our goal is not to make big deals for the sake of making deals.

Even as multiples climb we're not prepared to pay any price being disciplined has led to our success. We're not prepared to change what has worked for us over the past dozen years.

Unless acquisitions satisfy all of our criteria including price, we will walk away. In fact we're prepared to keep our powder dry or invested in internal growth opportunities.

As always we remain focused on extending our track record of providing our shareholders with a dependable and growing income stream through steady, disciplined and consistent execution of our strategy. I want to thank you very much for listening.

And we would now like to open the call to questions. Operator?

Good afternoon, thanks.

Good morning, Derek.

Good morning. When we look at the 2017, I think I know the answer to this, but just getting your view.

Can we assume that the current organic growth rates in you subsidiaries plus some operational improvements and then on top of that the growth kicker based around the anticipated returns around the growth CapEx you spent in R1. Is that a good way to kind of frame 2017?

That’s exactly the way I would look at the business. I would take a look at our organic growth rate in some of the businesses which we would expect to improve in manufacturing as the economy strengthens into 2017.

We've delivered consistent growth that exceeds the inflation rate in the Legacy Airlines both through the organic growth and the number of passengers we service, enhancements in our efficiencies and now growth into Northwestern Ontario. And then at Regional One, we've been pretty forthcoming on what kind of returns we expect that we've been able to generate in the past of those expenditures.

As I said in my comments, don't turn into free cash flow the second we buy an aircraft, we have to do something with it first. We have to find the customer and lease it out.

So that takes a quarter or two, but if you apply a drag and then put in the expected levels of return that we've generated in the past. I think that gives you a reasonably accurate picture of what we would expect.

Okay. It makes sense.

In the CRJ900 I mean [indiscernible] in the airlines, I mean it's a very marketable good aircraft. Are you finding purchase prices higher than you anticipate or are you finding good deals and/or I guess the opportunity to place them into leases?

What is that market like?

The 900 market is interesting simply because the plane still in production. You can still go buy a brand, new CRJ900 from Bombardier.

So that supports the number of people flying the aircraft. It's right on the edge of entering into a Regional One type investment because the [indiscernible] operating aircraft requires us to lease it for slightly longer period, but with the 700.

But because those planes are so interchangeable with our customer base, our ability to leverage our knowledge of the 700 into the 900 makes it an exciting growth opportunity for us and it's earlier in its life cycle the 100s, 200s and 700s that we've already played in quite significantly in the past. So 900 is clearly a part of our future growth.

It's just entering into the stage of its lifespan where we will participate, but our initial experience with the plane has been very, very good.

And Derek, [indiscernible] about the 900s is that they have the same engine as the 700 and parts probably look 80% interchangeable.

That’s great. And just one more quickly here, a couple little tidbits I saw in the MD&A, one is that, in Provincial you invested in demonstrator aircraft.

Is that just for future sales purposes or is that tied to a specific potential bid?

It's not tied to specific bid, but it's really for two reasons. One of the things that we've experienced in the last 24 months since we've owned it working with the Provincial team is that occasionally things come up in the world that you don't have a lead time on whether it be when the Ebola crisis broke out and people need the maritime surveillance aircraft in two days not two months or two years.

And so we want to be able to have an aircraft that's available and flexible to jump into those opportunities, but more importantly in jumping into those opportunities we want to show our long-term capabilities to these potential customers. So it's really a door opener, but one that will generate revenues while it's in that position.

We may well in fact and if we're successful I think you'll see us put that into a short-term opportunity which may become a long-term opportunity we may sell plane operated for someone else and then build another one. The point is we want to have one available for our potential customers, so we can react faster than the marketplace.

It’s a gap that fills in for those customers that don't need a full time surveillance aircraft, but only certain times or portions of the year are able to access - would be able to access this only when the need requires.

Okay. Thanks so much for answering my questions.

Good morning and congratulations on another great quarter.

Thanks Mona. Good morning.

Just looking at the growth CapEx side. Last quarter you stated that you are looking to build up the CRJ900 fleet and you had a commitment in place to purchase 11 aircraft with addition of 9 aircraft I mean safe to assume that this is nearing completion or completed and that it should come down the growth CapEx moving forward.

I'm not sure that I would tie those directly the comment on how many were committed to we have a number of individual transactions, but at this point I can't tell you we've made commitments into the future for any specific number, but we were made active in that marketplace. And so we go out and place 900 under a medium-term lease with the kind of returns that we expect to generate.

If we can buy them at the right price will buy us more, will buy some 700s or ATR's or Dash 8 that portfolio I mean it's really important to take back - step back and look at what Regional One has done. It's gone from $16 million to north of $50 million in the same currency there's no Canadian exchange rates and that's U.S.

dollars in three years. And at the same time kicked out of free cash flow in line after we maintain those assets to make it sustainable.

So from our point of view. We find it bullish we find it exciting.

Whenever we get an opportunity to buy those in our prices. We will buy them whether I will be able to find it up opportunities to spend $30 million again in quarter $40 million in a quarter.

That's not every quarter occurrence. That was a really busy quarter, but an exciting quarter for us.

And the aircraft that were purchased in Q3 at Regional One it was a variety of aircraft there was - it wasn't a single type.

Okay. That's helpful.

And just secondly turning to the reduced fire suppression work. I believe prior deviant this from historic patterns could positively or negatively impact EBITDA by about $2 million I'm just wondering if this is accurate or similar for this quarter.

That would be on the low-end to be honest. The impact on our rotary business alone would have been close to $3 million and there's also an impact in our fixed wing business because we do a lot of evacuation work.

So the aggregate impact is somewhere in the midst three to $4 million from and the quotation marks normal because as much as this is a much lower than normal season. We will also have years where there's fires everywhere and we deploy every aircraft, every helicopter we have a very high pricing.

So often about median kind of year and I would suggest last year was a median kind of year. You would see some were between $3 and $4 million shortfall in this year's operations.

And just turning to the federal government announcement there's been some changes within the aviation sector including an increase in foreign ownership kept to 49% from 25% the change may give way to some new market entrants including Canada Jetliner and inner jet. Just wondering if you could talk about the implications of this change on your business if any.

On a big picture basis the increase in U.S. potential U.S.

or other world investment is good for us. With relative modest 30 million shares outstanding under the old rules we had to stay under 25% internationally owned or about 7 million shares.

So we did not focus a tremendous amount of time selling our stock outside of the borders of Canada. With the new 49% it gives us a lot more room to sell the foreign investors without creating a problem with the Canadian Transport Agency.

So for us I think it's bullish on that end. In terms of the increased competition ultra-low cost carriers are going to flying [indiscernible].

So they're not really an impact on us. That's a very, very difficult business model and the people want to take a swing at it more power to them, but I think it's a difficult place to be and it really has no direct impact on our operations.

Good morning and congrats on a good quarter. My first question is on Mike on Regional One.

Can you please update us on the portfolio of aircraft that you have right now especially on the leasing aside because that tends to be very good margins I guess. So what kind of aircraft and how many if you can tell are currently in leasing right now and how many do you expect to be plotted out and held-for-sale.

Okay. For competitive reasons Konark I'm not going to give you a precise breakdown of what we bought.

I can tell you that the majority of the dollars vested are in the newer CRJs, maybe 700s or 900s and those aircraft that we purchased this year are generally all being held for lease. We have plotted out an aircraft but not a lot.

The demand for the aircraft is short to medium term leases as high and so we're putting them there and that's where I really wanted to make it clear in my comments today that when we buy one of those planes the benefit comes in future quarters but we are maintaining its ability to earn income by subtracting off of our free cash flow and amount equal to our depreciation and that's because we need to maintain the earning power of those aircraft. And so as we build up that lease portfolio that's what’s going to generate the increases in dividends in 2017 and beyond.

And so if we take something out of there plotted out, that’s going to be a negative CapEx it's going to reduce our earning power. So we've got to go find some new planes to buy to replace them.

When we pull the ballpark it'll generate earnings in that period. But when you sell a plane off by parts it's a period gain not an ongoing revenue business.

So we always have part sales but we’re continually refreshing that inventory. On the lease side we want to build that portfolio because that's the most reliable earnings stream we have.

Okay.

With an acquisition of Team JAS that gives us kind of a new segment for us to particularly on Regional One the Twin Otter.

Okay, so that was my actually next question. That Team JAS does it come with any aircraft and what kind of synergies do you expect with Regional one like given they have a presence in Florida?

The location really doesn't matter us. We fly a reasonable number of Twin Otters in Provincial and they have in the past bought things from Team JAS but it wasn't their primary supplier.

They will become their primary supplier which will be very much like Regional One has supported the ATR and Dash 8 platforms and our Legacy Airlines. So we expect that to improve efficiency there.

But I think the most important part of this isn’t vertical integration play. It's the expertise in another platform and the fact that Team JAS is authorized to manufacture certain aircraft parts.

And so while right now they're doing that only in the Twin Otter portfolio. There's no reason we can expand that into the Dash 8 platform in particular and so we're excited about that opportunity.

And there are no aircraft in that company.

I see. Okay and that's great.

And the island comment in your MD&A was pretty interesting because you already have a leasing business there. So are you basically looking for opportunities to expand the Region one in island or is that going to be a different subsidiary?

No. It will be part of Regional One.

I don’t have the precise number on my fingertips. But I think it's considerably over half the world leasing aircraft leasing businesses are housed in Ireland.

And so it makes sense for us to be there from an operating point of view. We’ll take our business model and transplant that there's going to be a lot of banks and other people looking to offload aircraft at the end of leases or if a particular customer has trouble, so we want to be right in geographic proximity and quite frankly the other reason to be there is tax rates which are third of what we're paying in Florida right now.

Quite frankly Florida may well be the most expensive tax jurisdiction we could have picked up on the lease portfolio. Especially when for competitive reasons it's also not the best place to be.

So we’re committed to our Regional One team they're going to manage in new subsidiary, we're going to move in that business into Ireland to take advantage of the competitive situation and a very material savings in cash taxes.

Okay. And finally, Mike on airlines, the fuel price seems to be getting into headwind more for 2017 because it was depressed this year.

So there could be some margin pressure on the airline business, but is there any way you can mitigate that margin pressure from fuel costs by passing on the fuel inflation to your customers or is there any other way you can offset that?

You hit the nail on the head. When the fuel prices fell in most of our places there's a lot of our contracts that have flowed through, so they automatically adjust.

A lot of our business [indiscernible] in particular the price of fuel were different too because we pass it on to the customer, so if it goes up they pay it, if it goes down they reap the savings. But in the markets where it wasn't a direct pass through, automatically we passed on a portion of that savings to our customers and we haven't taken material price increases for years in some of these communities.

So quite frankly if our fuel prices increase appreciably we will pass that on to our customers just like what we had fuel price reductions we pass those on to our customers. And I don't mean to suggest that’s 100% clearly we've benefited.

But we shared it with our customer and we've established that our pricing is off of the current fuel pricing, so the fuel pricing rises, so well our ticket prices. Clearly I love for jet fuel to stay where it is exactly right now although Alberta operations tracked me down and say they won’t agree with that's so much.

We're on both sides of the equation that’s not something I'm going to lose a lot of sleep over.

Thanks guys. Good morning.

Just maybe going to some your comments about deployment of capital and thinking about growth versus acquisitions. Is it fair to think that you always historically thought about kind of a four to five times EBITDA multiple maybe a bit higher in terms of external acquisitions, but is it fair to think that kind of approach also goes into making decisions around internal uses of capital for growth.

I mean you did reference sort of a 15% hurdle rate, but any color on how we should think about that and maybe even the investment this quarter?

I think that's really the point I was trying to make is I think there's disconnect and with certain people where I met have certainly done a good enough job of explaining how. The internal growth is really mimicking the effect of an acquisition, if we went out bought a company, taking there for an example the last time the deal we did, real life example.

We had a dozen aircraft in it. We bought them as assets because that's the way they were being sold, but we could just as easily have put those in a shell and bought a shell with all that stuff in and that would have been an acquisition.

So for us we're buying something that's going to increase our ability to be profitable. We're looking for that same threshold return and I mentioned it before, but to make sure understand, what I’m saying is we're looking for a 15% unlevered.

So we don't want to play around with debt to generate the returns, it's unlevered whether it's debt or equity, 15% return after maintenance reinvestment. And that's where you get a little bit of a difference between the pure multiple of like you are paying 5.5 times EBITDA.

If there is very little maintenance reinvestment in the 5.5 that will be considerably over 15%, but if you have a big maintenance reinvestment 5.5 might be too high. And so what we are really buying is the residual cash flow stream and so that's why we're looking for a return after we've maintained the assets.

So just like in the Regional One, after we pay the maintenance CapEx to keep the planes in the air or replaced up. We want to 15% cash on cash return pretax.

Okay. All right.

So I guess I’ll leave there. Just really quickly just thinking tax rate for 2017, I mean we've talked previously about more mixed income in the U.S.

your tax rate would be coming up. The Ireland transaction, any thoughts around where kind of effective tax rates are probably look like as that revenue started flowing in?

I am going to let Tammy take the percentages here, but the one thing I just want to make sure we explain that we're going over to Ireland for the business opportunities, the tax benefits are the icing on the cake, but it will take a part of next year to get this done and it's not something that instantaneously happens, but maybe Tammy talk about what it looks like when we are finished. We're fully implemented there?

Yes, so that there I guess I would look at it in two ways there. We should see an immediate cash tax savings once that that business is up and running based on that the earning that we would be generating right now on the lease portfolio there is - as Mike mentioned earlier that that the tax rate differential is pretty significant up over 37% down to about 12.5%.

So you can sort out that that would have a pretty significant impact on our tax expense. The second thing that I would say is that if you look at the growth capital expenditure that we've been doing over the last little while.

That is causing our lease revenue to grow quite significantly from one-year to the next. And as we see that continuing that the relative benefit of that would also grow at that leased revenue stream get bigger and bigger.

It's important to understand that we have no intention at this point time of moving our parts business. That is where it's really the lease business that we want to move because that's where the rest of the world market is in Ireland.

So we should be that...

And it also - there is also an opportunity for a pretty good to lend our expertise on managing that lease portfolios to other players that are purely financing and they don't have the whole picture expertise that there business opportunity that should come along with that.

Okay that’s good. And then finally just think about team Jazz one of the things that happen with Regional One certainly as you started with Bombardier on the smaller aircraft in the older aircraft.

That you've expanded your relationship into the larger aircraft. Any opportunities to maybe work with Viking in terms of different parts of their portfolio.

In terms of adding additional aircraft frames that they're not supporting.

It's exactly what we look to there is significant customer add their supplier. There are both sides with them depending on what we're doing and so we would look to strength in that relationship.

Okay. Any interest in sub-manufacturing for them or turning part of the aerospace business into a supply chain for them.

Absolutely.

Okay. Thanks.

Hey, thanks for taking my question and thanks for the color in your prepared remarks. Maybe if I just turn back to them.

Maybe a question I would have on how you look at Regional One is instead of breaking it up as was growth Cap Ex or maintenance CapEx. Is there a total size of the business you think this can be so you've gone from you know a remarkably from $16 million of EBITDA to $50 million of EBITDA in a very short period of time.

It’s like a 100 million EBITDA is that's the case you obviously need to investor certain amount of capital to get there is there size of Regional One. We should be thinking about when you think longer-term planning within Exchange.

We are such a small piece of the market that we're in Kevin. Whether it goes from $50 to $100 or $50 to $200 at this point it depends what other platforms we have in terms of additional aircraft type.

I think the key thing is for us is balance of the portfolio. We want to make sure we don't have too much exposure to any one given aircraft.

We want to make sure that we can always part them out and get our money back and part of the reason. We are so active right now is it's a great time in the marketplace for us because Bombardier is the manufacturer of these would typically be very, very active in the resale of used aircraft.

Bombardier is focused on preserving cash and is really particularly interested in the used market. So the opportunities right now are probably better than they would be in a typical part of the business cycle.

And so we want to take advantage of that again subject to making sure we're getting the returns we want and if you take the total amount of capital deployed. And the total return we're generating.

That business would be I could I don't know it's a privilege of his you would use to describe it, but I mean if it's growing at a remarkable clip. But the free cash flow and the profits and I understand when we talked about free cash flow, Kevin in that business and subtracting depreciation from free cash flow.

We're making in a maintenance CapEx. So what we're really talking about is distributing profit.

Right, right. I'm just trying to figure out if you've gone from 16 to 50 and I appreciate the difficulty in trying to goal post this because it is a fluid market.

I think if I was going to goal post it, I think a small quarter has us by $5 million worth of assets in a big quarter might be like this. I don't anticipate many 10 plane acquisitions because it was a unique as Tammy mentioned, there was a complete blend of different types of aircraft in that.

So there's some of that much more expensive 900s, some of them much less expensive 200s as well as some turbo propped stuff. And so I mean there is a finite amount of the CRJ market that we're prepared to own, we're just not that close to yet and we're starting to dabble in the ERJ market.

And Kevin the other aspect of Regional One, it’s important to note, is that we are also growing other aspect of the business not just about acquiring aircraft in parts. We’re also expanding our fee based income through third-party asset management and lease management.

So there is growth in various different ways to Regional One which you should keep in mind.

That’s very helpful. And then maybe actually just you lead me to my second point one of the comments you made there Mike was, it sounds like the opportunities are quite good.

Maybe a little more robust than you would have expected at this part of the cycle. You raise the dividend again four times in two years which is obviously very, very good.

But do you think looking at dividends as part of an earnings payout ratio maybe a little bit income grew - given what looks to be a very robust growth environment for you. It seems like there's a lot of other cash flow opportunities that generate arguably much higher return given some of these opportunities.

Does it not make more sense just apply would all into these opportunities generate 15% to 20% cash on a cash return versus looking at earning payout ratio…

I think the key thing is our shareholders are largely income based and we've been consistent like the policies we've gone from one things our shareholders can understand is we're not going to increase dividends when we can't make it sustainable and we were down in the 50% to 60% range. We can afford to increase our dividends and that's the purpose of why we buy this as to payout it as a dividend.

We don't expect this isn't like the old income trust stories where I want some of the capitalized the income stream were said quite the opposite. What we're saying is we can buy assets at a price that will enable us to grow our dividend to you way faster than inflation and that's going to create capital appreciation and ultimately that's going to be reflecting our price and I think you see that now that's begun when we bump over $40 and our yield drops down below five in spite of this growth it's because the market ultimately is going to value that stream appropriately and our ability to generate income appropriately.

And as a result that reduces my cost of capital which makes me more effective in the business.

That’s helpful.

The best use of my cash flow is to complete my promise to my customer to my shareholder which is to put it in there.

We've been a dividend paying company from beginning, we do it responsibly to we are, we don’t apologize for that.

Good morning, guys. So a couple of questions for me.

First of all is it possible for you guys to quantify what the EBITDA growth was from the legacy business versus the other two businesses within the aviation division as you have in previous quarters? So just looking at your overall business, the aviation division, you are in the process of realizing synergies between the three subdivisions.

I’m wondering how far along are you realizing the synergy you mentioned in the MD&A and what sort of gross margin impact are you already seeing as a result of these initiatives and where you think that gross margin impact can go in the future?

Which initiatives are you talking?

I am talking about things like consolidating buying functions for the businesses and selling the Regional One selling parts to the other businesses?

We are probably halfway through that process. The simpler stuff to do with McDonnell, we've consolidated accounting, we're in the process of consolidating parts purchasing, we've already moved all our overhauls internally.

So we've moved charters together. There's still opportunities in training.

There's still opportunities in interlining like backing each other up with aircraft to prevent outsourcing and those kinds of things. So we're probably more than 50% of the way there, but there's still opportunities for us to work together more closely.

I would suggest to you that the aggregate improvement in the Legacy’s this quarter was pretty modest and that was largely because of what I talked about the rotary wing.

When you include the rotary wing it's pretty modest in that 10% range.

There was an abnormal year for that so you're taking $3 million worth of EBITDA out of that.

And that’s all-in quarter.

Yes, that’s all in the third quarter. And that's not something that continues into the fourth quarter because there's never really material force fighting in the fourth quarter.

Yes. So if you normalize that how are you looking at somewhere in the 10% to 15% growth in EBITDA.

Got it. Perfect.

Thank you. And then maybe my second question if you have that or we can discuss that offline?

In terms of a percentage on that, I really don’t have one in terms of I can just tell you that we are sort of half way through that process.

Okay, perfect. And then just moving to the EBITDA growth for the Legacy versus the other two in the quarter?

That was into 2015.

Again you’ve got to exclude the one-time change for the firefighting business.

Okay. That’s all for me.

Thank you.

I really like to thank everyone for participating in today's call. It’s an exciting period for us with the growth we've been able to achieve, the dividend we've been able to pass on to our shareholders, and it's been a great opportunity for us to be able to share our strategies with you.

We look forward to update you on our progress in future quarters. Thank you very much and have an awesome day.