Thank you, operator, and good morning everyone. Joining me this morning are Carmele Peter, EIC's President; Darryl Bergman, our CFO; and David White, our EVP of Aviation.

2019 was a great year for EIC as we generated strong financial results and invested in our future. 2019 was the seventh consecutive year of double-digit EBITDA growth for EIC.

This performance allowed us to increase our dividend for the 14 time in our history, while reducing our payout ratio. I believe that -- detailed analysis of the results to Darryl, but I would like to hit a few financial highlights for the full year and for the fourth quarter.

Revenue grew 11% to $1.34 billion. EBITDA grew 18% to $329 million.

Net earnings grew 18%, while earnings per share grew 15% to $2.58. Adjusted net earnings grew 11%, while adjusted EPS grew 7% to $3.15.

Free cash flow plus maintenance capital expenditure, payout ratio fell to 57%, while the adjusted net earnings payout ratio declined to 71%. Our fourth quarter was equally strong.

Revenue grew 15% to 363 million. EBITDA grew 28% to $89 million.

Net earnings grew 37%, while EPS grew 25% to $0.74. Adjusted net earnings grew 21%, while adjusted EPs for 11% to $0.88.

Free cash flow less maintenance capital expenditure payout ratio was essentially flat at 52%, while the adjusted net earnings payout ratio improved to 65%. I should point out that both EBITDA and earnings were affected by the implementation of IFRS 16.

IFRS 16 serves increased EBITDA while reducing earnings and adjusted earnings. It has absolutely no impact on cash flow.

The impact of IFRS 16 and the details in previous financial periods, and I will not repeat it here, other than to remind listeners of its implementation. Yes, we had a number of significant achievements in 2019 that contributed to these results and will drive growth in the future as well.

Adam and his team followed up the acquisition of Quest in late 2017 and Moncton Flight College in 2018 with the acquisitions of AWI and LV Controls in the fourth quarter 2019. AWI is the first vertical integration acquisition for Quest.

AWI is a glazier who installs Quest products in the North Eastern United States. This will provide Quest customers with a single point of contact for the purchase and installation of products.

This matches how Quest operates in Canada. Not only the acquisition of AWI simplified things for our customers, it will generate returns for Quest on installations as revenues continue to grow in this geography.

LV Controls is a dominant Western Canadian electrical systems integrator in the agricultural material handling segment with a strong margin profile. Its services include maintaining grain, uploading elevators, systems to grade grain by quality and put in appropriate silos and automatically updating credit to farmer’s accounts, while obtaining inventory positions and financial statements for the graining company.

They have great relationships with many of Canada's grain companies and a track record of profitability. Both acquisitions will strengthen our manufacturing segments and fuel growth in 2020 and beyond.

Our existing operations had a year of contract renewals and new contract wins. Not only will this fuel growth in 2020 and beyond, it provides great stability for our earnings.

While we do have some smaller customer contracts largely in the mining sector, which are negotiated on an annual basis, we do have a material aviation contract in North American aerospace and aviation segment that expires in either 2020 or 2021. A sample of the new -- renewed, new or expanded contracts includes a ramp of Canada's fixing search and rescue program where it provides in service support but due to the medical passenger transport contract, the significantly expanded Canadian Department of Fisheries Contract awarded in 2019 for late 2020 implementation, the Government of Manitoba Charter Services contract and the Maritime Surveillance Contract based at Purcell.

You will also recall that all of -- new medevac contacts were renewed in recent periods. Regional One entered into a joint venture with SkyWest, North America's largest regional carrier to lease engines for regional jets.

The joint venture subsequently announced that the initial assets of the partnership would be released on a long-term basis to a regional operator -- to U. S.

operator where Regional One will be leasing the air frames as well. This initial placement will drive returns in the second half of 2020 as the aircraft go into service and beyond.

The relationship with SkyWest is expected to provide other opportunities in the future. We also took steps to strengthen our balance sheet and provide liquidity to enable us to move quickly with an opportunity as identified.

We completed two market fundraisings, a convertible debenture offering in March, replacing a debenture which have been called by EIC and largely converted into equity and an offering of common shares in October, both were very well accepted by the market and were oversold, resulting in the underwriters fully exercising their full overallotment options. Finally, we increased the size of our syndicated facility, while reducing interest costs and improving the flexibility of the covenant package.

I will leave it to Darryl to detail these initiatives, but I'm pleased to report that in aggregate these initiatives together with our strong operating performance has served to reduce leverage, while increasing liquidity and access to capital and increasing our earnings on a per share basis. A wager of between one of EIC team members and a friend of his came to its 10 year end in November of this year, my team member believed that EIC would consistently generate an average all in return to our shareholders of at least 10%.

His friend believes that this was not achievable, given that the TSX as a whole generates only approximately 7% in average returns. When the final calculation was completed, it showed that yes, she had not only generated return of far higher than the 10% threshold, it in fact had a dividend reinvested average annual return of 21%, 3 times the average of the TSX generated over the same period.

He won his bet and it was not even close. I decided to have the calculations to redone as at December 31st in order to make them more readily comparable to the TSX as a whole or other component companies.

We calculated the dividend reinvested return to our shareholders for one year, five years, 10 years and 15 years, as well as since our inception. In all of these periods, the return exceeded 21% annually.

This is a level of shareholder return that very few can match and a level of consistency that even fewer have achieved. The absolute level of returns and their consistency speak to the success of the EIC model.

And I would like to take a moment to discuss five reasons why I believe we're able to achieve this. Firstly, we have maintained a consistent long-term strategy since our IPO in 2004.

EIC is driven by building a portfolio of strong companies, which will enable the company to provide a reliable, growing dividend to shareholder. Well, we invest significant effort in examining and refining our business model each year, we are committed to being an income story that has enabled us to increase our dividends 14 times and maintain a dividend CAGR of 5% since inception.

We are a dividend story when income is in vogue in the markets, but we are an income story when growth is what the market desires as well. But our plan to provide a growing dividend provides growth with income as is evidenced by our consistent 21% aggregate return.

Our shareholders know exactly who we are and what we are trying to achieve. Secondly, we maintain our long term focus.

One of the great challenges of being a publicly traded company is the market’s focus on quarter to quarter results. We pride ourselves on looking towards the horizon and focus on generating long-term sustainable success rather than simply maximizing our profit in the next quarter.

Two quick examples of this strategy in action would be the Force Multiplier program, which required us to invest significant amounts of capital years before revenues and profits could be proven out. The design, construction and certification took over two years to complete, but we are now realizing the benefit of the project.

A second example is the slow measured ramp up of Quest Dallas facility. A choice was made to ramp its production slowly in order to make sure that the quality of the product match that from our first plant.

This choice met losses would be incurred during the ramp up, but it's a long-term reputation of the company is preserved and in fact enhanced. Third, we believe in our balanced approach to growth, utilizing both acquisition and organic investment.

Many people saw EIC or many people view EIC as simply an acquisition company, but that is not correct. Since our inception, we've invested approximately three quarters of $1 billion in our platform acquisitions, while at the same time, investing over $1 billion in tuck-in acquisition and growth capital into those platforms.

We maintain the same expected return threshold for both acquisition and growth capital opportunities, which enables us to grow our subsidiaries and maximize the returns we generate. EIC needs to make sure that we have the capital available to fund the opportunities uncovered by our subsidiaries, and any new acquisition opportunities we have coming.

The high standard of returns on all investments ensures that growth is accretive on a per share basis, and not just growth for the sake of growth. The all time high EPS and adjusted EPS evidence this fact.

Fourth and perhaps most importantly, culture. We buy strong companies with proven market niches and established management teams.

Our culture allows these companies to be led by these management teams who understand the business better than a new owner to possibly understand it. We don't buy brokered companies.

EIC provides oversight and the capital necessary to implement their business plan, but we do not take over day to day management. As a result, our management teams remain motivated and entrepreneurial.

We've been able to keep the management teams in place in our subsidiaries for years, maintaining that knowledge and expertise enables EIC to pursue its diversification strategy that would be absolutely impossible without these talented people. The final driver of our success is social responsibility.

There's recently been a significant increase in focus on environmental and social responsibility by the capital markets. EIC has always believed that these matters were fundamental to long-term sustainability of the company, which is why since our inception has been a significant part of what we do and who we are.

From funding economic and the economic development in the first nations communities we serve, to providing employment opportunities through programs like Life in Flights, to providing life changing experiences to First Nations children through our barmer and jet programs, or improving our environment by building greener plants like Quest zero-waste facility in Dallas, investing in our environment, investing in the communities we serve, investing in the people who are our customers, our courage in future employees, may not have immediate results but consistent with our corporate strategy of a focus on long-term growth, we have a commitment to social and environmental responsibility, not just today but yesterday, today and tomorrow. We know it works not only from our financial results, from the quality of people we attract, the companies we are able to buy and the support of our customers.

I would now like to turn the call over to Darryl to discuss our 2019 results. Darryl?

Thank you, Mike and good morning everyone. Before I present the results, I would like to take a minute to speak to some financial highlights from 2019.

2019 has been a year where we saw many all time quarterly highs, including in the third quarter where adjusted net earnings reached a quarterly high of $1.03, which was the first time in the company's history that adjusted net earnings exceeded $1 per share in a quarter. To wrap up the year, EIC reached a new milestone with regards to annual adjusted net earnings per share.

We're at broke through $3 threshold, reaching $3.15 per share. 2019 also a year where we demonstrate our ability to maintain a strong balance sheet, with modest leverage and good liquidity to allow us to be ready when opportunities arise, the outcome of transactions in 2019 lends well to our ability to access capital going forward and at levels which is the best that company has experienced.

In Q4, we entered into a new credit facility that improved our access to available capital by $500 million, inclusive of the accordion feature, while at the same time providing lower interest on borrowed and un-borrowed amounts, increasing allowable leverage from three and a quarter times two four times, minimizing security requirements, providing much more flexible covenants and brought new members into our syndicate of lenders that can support growth. Syndication of the facility was materially oversubscribed.

The improvement to our credit facility, as we have stated before, does not in any way change our approach to our balance sheet strategy, which is a supporting principle of our business model. We take and we'll continued to take a disciplined approach to our aggregate leverage, which includes both secured debt and convertible debentures, and is adjusted for full year impact of acquisitions, keeping it between 2.5 times and 3.5 times, which we have kept consistent since inception.

One of the key tenants of utilizing convertible debentures is managing maturities and retiring these debentures at the first appropriate time. That's said, we decided to exercise the right to call the seven years 6% convertible debentures, which were due on March 31, 2021 and we're in the money.

The result of this decision was $24.7 million principle amount of debentures that were converted into 780,112 shares at a price of $31.70 per share, with a very small amount of remaining outstanding debentures redeemed. When the debentures were initially issued in February 2014, shares were trading around $21.70.

As an overall result, the effect on dilution of equity was approximately 358,000 shares less than if we had decided to elect to issue equity in 2014. We replaced the aforementioned convertible debenture issuance with a new one.

The new debentures featured a lower interest rate of 5% and 3.25%, and a higher strike price of $49, the offering was oversubscribed and the underwriters exercised their overallotment, which brought the gross proceeds to $86.25 million. The proceeds of the offering were used to pay down long-term debt.

Looking at the combined impact of the two convertible debenture transactions, it resulted in a conversion to common share equity with lower dilution and paid down secure debt, which improved both our liquidity and leverage. In the fourth quarter in concert with two accretive acquisitions, we chose to complete an offering of common shares.

The capital raise further reduced leverage and received strong support from the market. The offering was materially oversubscribed and the underwriters exercised their full allotment option.

The gross proceeds of the offering at $37.65 per share was $80.5 million. Before I move on, I should point out that even with the new shares issued as part of the common share offering ended and the debentures converted earlier in the year that all of our per share measurements improved.

This demonstrates the accretive nature of the use of these funds. Finally, it is worth highlighting another principle that guides our strategy.

In Q3, we increased the dividend for the 14th time in company history, solidifying one of the best track records of dividend growth on the TSX. Even with this increase in the dividend, we continued to improve on our payout ratios.

Overall, we are very pleased with the outcome of 2019. As I’ve noted on previous calls, our 2019 financial results include the impacts of IFRS 16.

Compatibility to results from prior periods with respect to EBITDA, net earnings and adjusted net earnings are impacted. Now turning to our financial results.

I will initially focus my discussion on our annual results and then I'll continue with a shorter discussion on our 2019 Q4 results. Consolidated fiscal 2019 was another great year for EIC.

We generated revenue of $1.3 billion, which is up $138 million or 11% over last year. Aerospace segment revenues increased $91 million and manufacturing segment revenues increased $47 million.

Aerospace and aviation segment revenue was up 10% to $975 million. The revenue from the legacy airlines and provincial increased by $60 million, aerospace revenue increased with the deployment of the Force Multiplier aircraft and greater in service support revenues as overseas maritime surveillance flying hours increased.

The segment also benefited from new revenues coming from long-term contract to provide general transportation support to the judicial system in Manitoba. The Regional One revenue increased in 2019 compared to the prior year by $31 million.

Sales and service revenue increased by 12%, which can be attributed to investments made in working capital in prior years. Lease revenue increased by 8% year-over-year despite a customer bankruptcy at the end of the third quarter of 2019.

The increase is a result of higher utilization of aircraft and an increase in the number of assets in the portfolio on lease. Notably, the assets related to the joint venture with SkyWest are currently being phased in and did not contribute in a material way in 2019.

The deployment of these assets will be phased in throughout 2020. Turning now to our manufacturing segment.

Revenue grew by $47 million over the prior period, benefiting from the commencement of production of the Quest Dallas plant and continued increases in custom manufacturing and high levels of defense spending. The revenue for the segment was $367 million.

Moving to EBITDA. Consolidated EBITDA was $329 million, up 18% or $51 million for the year compared to the prior period.

This includes the $6 million one-time bad-debt write-off at Regional One because of an airline customer bankruptcy, which decreased EBITDA during this period and the adoption of IFRS 16, which increased EBITDA compared to the prior year. Despite the write-off, EBITDA performance on year was strong and EIC was still able to meet guidance provided.

This is a further testament EIC's diversified investment strategy working as intended. EBITDA in the Aerospace and Aviation segment in 2019 was $299 million, an increase of $51 million compared to the prior year.

EBITDA generated by the legacy airlines and provincial increased by $48 million. The increase in EBITDA for the legacy airlines and provincial was driven largely by the same underlying conditions as noted with the increased revenue previously discussed.

Again, our EBITDA grew despite industry related challenges. Industry-wide labor shortages resulted in continued higher overtime, contractor and training costs.

The implementation of the EIC Life in Flight program will help mitigate the impact moving forward, but it's acknowledged that it will require time to take full effect. EIC has now also begun to implement similar strategies to address maintenance labor challenges.

EBITDA from Regional One increased by $4 million over the prior year, excluding the impact of the one-time $6 million bad debt write-off, EBITDA increased by $10 million over the prior year. In manufacturing segment, EBITDA was $56 million, an increase of $4 million compared to the prior year.

EBITDA at Quest was lower than the prior as a result of costs incurred with the ramp-up at the Quest new Dallas facility where management continues to proceed in a responsible manner, balancing production with important quality requirements and risk management. The balance of the manufacturing segment collectively experienced growth in EBITDA, driven by increased revenues and operational efficiencies.

Growth capital expenditures made in the current and previous periods enabled the segment to respond to increased demand from customers, resulting an increased EBITDA. Turning to earnings, net earnings was $84 million, an increase of $13 million.

The adoption of IFRS 16 in 2019 negatively impacted net earnings compared to the 2018 year. Net earnings per share increased by 15% in comparison to the prior period to $2.58.

It should be noted that during the year, the weighted average number of shares increased by 3%, partially offsetting the increase on a per share basis and net earnings, adjusted net earnings and free cash flow. We had adjusted net earnings of $102 million for the 2019 year, representing an increase of $10 million, or 11% compared to the prior year.

Once again, EIC reached a new milestone with regards to adjusted net earnings per share, seeing it increase to above $3. For 2019, adjusted net earnings per share increased to $3.15 compared to $2.94 last year.

In 2019, free cash flow improved by 10% over last year to 246 million or $7.58 per share. The main reason for this increase is the increase in EBITDA and the decrease in current tax expense, partly offset by increased interest cost and principal payments on rate of use lease up liabilities.

Free cash flow was impacted by the onetime bad debt write off as previously noted. Free cash flow less maintenance capital expenditures per share increased 7% to $3.89 per share from $3.64 per share in the prior year.

Growth in adjusted net earnings drove the improvement in adjusted net earnings payout ratio over the year to 71% from 74%. The stronger free cash flow less maintenance capital expenditures compared to the prior year led to an improvement in the free cash flow less maintenance capital expenditures payout ratio to 57% from 60%.

In 2019, the corporation announced its intention to reduce the adjusted net earnings and free cash flow less maintenance capital expenditures payout ratios 60% and 50% respectively over the three year period. The improvement in both payout ratios this year shows positive progress towards the corporation meeting these goals and it shows that reaching these targets does not preclude dividend increases when results warrant.

Turning to working capital. During 2019, the corporation invested $45 million in working capital across several entities to support our organic growth, resulting from various contract awards, the ramp up of Quest Dallas plant and increased operations.

During the fourth quarter, the corporation was also affected by a slow payment of receivables from a significant government customer as a result of a cyber security breach. Expectations are for this receivable to be collected in the first quarter of 2020.

Our leverage ratios remain within our target range and within our covenant with lenders. In addition, now with the new credit agreement under our belt, we have access to approximately $580 million of available capital and another $300 million in addition to that in an accordion feature, should we choose to exercise it.

Now, turning to Q4 2019 results. Consolidated Q4 was another good quarter for EIC.

We generated revenue of $363 million, which is up $48 million or 15% over the comparative period. Of the increase, $19 million was generated in our aerospace and aviation segment and $29 million was in our manufacturing segment.

The primary explanations for financial results and changes in the quarter were largely consistent with drivers for the year-to-date. Where there are notable differences, I will provide some further commentary.

Aerospace and aviation segment revenue was up 8% to $253 million for the quarter. The revenue from legacy airlines and provincial increased by $21 million over the comparative three month periods.

For Regional One revenue decreased slightly in the fourth quarter 2019 compared to the prior period by $3 million due to higher than average sales of aircraft and engines in the comparative period. Notably, sales of parts are a consistent portion of sales and service revenues, and it increased by 17% from the comparative period, helping to offset the lower engine and aircraft sales.

Lease revenues at Regional One, were down marginally by 2%. The lease revenues in the fourth quarter of 2019 were impacted by the bankruptcy of a customer in the previous quarter.

This resulted in some larger assets not being leased. Now turning to our manufacturing segment.

Revenue grew by $29 million for the fourth quarter versus the comparative period. The total revenue for the segment was $111 million.

Moving to EBITDA. Consolidated EBITDA was up $19 million or 28% to $89 million for the fourth quarter of 2019 versus the comparative period.

EBITDA in the Aerospace and Aviation segment, in the fourth quarter of 2019 was $81 million, an increase of $18 million compared to the prior period. EBITDA generated by the legacy airlines and provincial increased by $16 million.

EBITDA from Regional One was up slightly in the fourth quarter of 2019 versus the prior period by $1 million. The manufacturing segment’s EBITDA was $14 million, an increase of $3 million in the fourth quarter of 2019 versus the prior period.

Turning to earnings. Net earnings in the period was also strong coming in at $25 million, which is an increase of $7 million compared to the prior period.

Net earnings per share increased by 25% to $0.74. We had adjusted net earnings of $30 million in the fourth quarter of 2019, representing an increase of $5 million or 21% compared to the prior period.

Adjusted net earnings per share increased to $0.88 compared to $0.79 in Q4 of last year. It should also be noted that in the period, the weighted average number of shares increased by 8%, partially offsetting the increases on a per share basis in net earnings, adjusted net earnings and free cash flow.

During the fourth quarter of 2019, free cash flow improved by 15% over the prior period to $696 million or $2.02 per share. The main reason for this increase is the $19 million or 28% increase in EBITDA in the quarter, partially offset by the principal payments on right of use lease liabilities.

Free cash flow plus maintenance capital expenders improved by 9%. On a per share basis, it is up slightly to $1.09 per share from $1.08 per share in Q4 2018 as maintenance capital expenditures were higher in the fourth quarter as a result of timing of certain aircraft upgrades.

Maintenance capital expenditures were up 22% in the fourth quarter, but were in line with expectations for the full year. The higher investment in the fourth quarter simply offsets lower levels earlier in the year.

On a quarterly comparative, our adjusted net earnings payout ratio improved to 65% from 69% in the prior period. The free cash flow less maintenance capital expenditures payout ratio was pretty much flat period-over-period at 52% compared to 51%.

Subsequent to year-end, we applied and received approval from the TSX with regards to the renewal of our normal course issuer bid for common shares. Before I pass the call back to Mike, I would like to make a couple of concluding comments.

First, a general comment, as I come to the end of my first year with EIC, I would like to share how impressed I am with the depth of talent I have met throughout the organization. You just need to turn to what is being achieved over the course of just this year, not to mention prior years.

It would be very difficult for any organization to achieve what EIC has achieved without some pretty talented people from within. EIC's depth can be attributed to efforts around recognition of internal individual development opportunities and succession planning.

Equally, as noted within our investment strategy, one of our key parameters in assessing of potential acquisition is strengthened management. This has definitely been a success in adding adding great value, both in talent and depth.

My final comment would be with regards to guidance that Mike will further elaborate on in his subsequent comments. We provide guidance on an annual basis.

That said, there are certain conditions throughout any given year that may vary result from quarter-to-quarter, things like seasonality in our aviation segment where winter roads provided temporary alternative means to our airlines and effective passenger volumes and cargo, timing of aircraft and engine overhauls, timing of investments in purchased inventory at our one and slower lease revenues in certain periods as utilization of aircraft by customers is generally higher in busier summer months. That concludes my review of our financial results and comments.

I will now turn the call back to Mike to wrap up. Mike?

Thanks Darryl. We're excited about 2020.

Investments made in previous periods will begin to generate new profits, while our acquisition pipeline is robust and we examine opportunities for organic growth. We closed two acquisitions in late 2019 and as such, some of the opportunities we are examining are nearing the final stage of the process.

The capital market in the U. S.

remains very liquid and as a result, purchase multiples are higher than we think are sustainable in the long-term and are higher than we are prepared to pay. Our pipeline is strong however and we remain a preferred buyer for companies with paternalistic ownership who have reservations of the purchase and resale model of private equity.

We currently have opportunities in both of our operating segments, but the larger portion of the transactions under consideration, are in our manufacturing segment. The investments we've made in previous years will bear fruits in 2020.

The Quest factory in Dallas with increase production and begin to contribute to the bottom line. The ramp up of production will climb throughout the year.

AWI has performed as expected since its acquisition in Q4 and will also grow Quest results in 2020. Investments in Provincial with supervision will also kick in 2020.

The aircraft for the fixed wing search and rescue support contract will begin to be delivered in 2020 and continue for the next two years. The revenue for that contract will continue to grow as the aircraft go into service and need to be maintained.

Although, revenue has already begun as we are required to have the infrastructure in place for the first deliveries. The new expanded Fisheries contract goes into effect in the third quarter and will contribute late in the year.

The Force Multiplier has completed several missions and discussions with several countries about longer term deployments are occurring. Investigations developing a second aircraft are also underway.

LV Controls performed as expected since its acquisition and will also contribute to our growth in 2020. As a result of these factors and other factors, I'm pleased to tell you that we expect EBIT growth of 10% to 15% in 2020.

This will mark the eighth consecutive year of double digit growth. Maintenance capital expenditure are expected to grow at roughly the same pace as the low end of our EBITDA guidance, this is unchanged from previous information.

I should point out however that the seasonality of maintenance capital expenditures will be different than in 2019. We have more heavy aircraft overhauls in 2020, which will be completed as the first half of the year and as such, a much higher proportion of the annual investment will be incurred in the first half of the year.

We tried to complete this work in the slower winter period in order to maximize our capacity in the busy summer period. This contrast with 2019 when the significant part of our capital program was engine overhauls, which can be completed at anytime during the year as they can be completed without taking the aircraft out of service for more than a day or two.

Given that maintenance capital expenditures are front end loaded while growth will ramp through the year, we expect payout ratios will rise in the first two quarters before declining in the second half of the year. Before moving onto questions, I'd like to make a quick comment about the corona virus.

EIC is fortunate that we have little exposure to this pandemic. Our exposure is currently limited to MFC where we train pilots for Chinese airlines.

These pilots arrive regularly and stay for approximately one year. Should the flow of pilots be interrupted, it wouldn't reduce revenue at MFC.

But unless the [Technical Difficulty] go on for a prolonged period where current classes of pilots graduated and no new pilots have replaced them, the impact will not be material. To-date, there has been no impact.

Finally, before moving on to questions, I want to thank all customers, employees, shareholders and all stakeholders for their ongoing support. We’d now like to open the call to questions.

Operator?

So my first question just has to do with the manufacturing segment and the kind of the root of the lower margin. Is it primarily all due to Quest?

And can you just speak about how the ramp-up is progressing, some of the growing pains or why a decision to do a slower ramp? And then I just have a follow-up, is that now that we're into the end of February, how things are sitting now?

Those fit together pretty well. Quest builds windows for projects, we don't build inventory.

And so to a certain extent, every project we do is a custom project. And so we want to make sure when we started rolling the production into our Dallas facility that we made sure that the product matched what came out of Toronto and because of delay with our windows delays the whole project.

And so we slowly ramped where we did a higher level of testing in Dallas of each production unit until we were confident that it matched the products from Toronto. It actually goes a step further than that and then we had to build up, we call it tribal knowledge of our workforce, because they haven't built certain types of windows and so each time they do it, it's a complete start from zero.

We've seen a material increase in the throughput of production. It continues to grow and we anticipate by later in the year that throughput on a per employee basis should be close to matching that in Toronto.

As a result, you'll see profitability begin to rise through this year and you'll see the full impact of it in the second half of the year. As for so far this year, Quest is performing as expected in the first six weeks of the year.

And I know that there is an ongoing pilot shortage, which is further pressurized by new fatigue regulations. But aside from that, I'm just wondering if you could speak about what other areas you are seeing any labor shortages?

And how things are trending for 2020, do you expect similar pressures?

I'm going to let Dave White, our EVP of Aviation, take that one.

You are on target as we monitor the pilot challenges over the last couple of years. We've seen increases in other areas inclusive of the maintenance area with aircraft maintenance engineers.

So we're working on a project. We've actually already got some people into the pipeline for similar approach to bring trained and gain experience engineers through an apprenticeship program that takes about four years for licensing to put people into our airlines.

This program, which little different than the pilots, allows us to focus the experience in the airlines as apprentices at the same time that they're doing their training. And so that's an initiative that we brought on this year.

As well we used the initiatives that we're lucky to have with nine different independent companies to be able to attract the pipeline from various sources. So we've got a good reputation out to what our company has been able to hire maintenance people and the different companies reach out to their networks to also bring in more applicants.

So we continue to monitor. There are some pressures in there.

But we've taken those proactive steps, as well as not putting ourselves in a box and saying that's the only solution, we always have to find multiple solutions to the pipeline.

Mona, just one thing I’d add is we built our Life in Flight program. We built it with a platform that we could leverage so that we easily could address a shortfall that we knew existed on for instance, the aircraft mechanics.

So having that platform readily available to address other needs is also very useful for us and that's what we're going to use going forward. Not only for that but other shortages that we see in the industry.

And just lastly for me, Mike, you touched on seasonality of CapEx in your prepared remarks. I'm just wondering if you could speak about the upcoming year and what kind of ebbs and flows or variants are you expecting quarter-to –quarter.

And just for my confirmation, is it that the annual CapEx shouldn't be too much different than 2019, it’s just the quarterly split?

Well, we anticipate that as the business grows the CapEx with it. So I'd anticipate maintenance CapEx growth of high single digits to around 10%.

But the more material changes, the fact that in first quarter and early second quarter, we have a number of heavy aircraft overalls where we take aircraft out of service for weeks at a time while they're effectively torn down to their frames and rebuilt. We don't want to do that during the summer and fall seasons where we're very busy.

So that get moved forward in the year. And I think you'll see a material increase, particularly in Q1 but also in Q2 versus last year.

And then in the back half of the year, you'll see a decline. We had $40 million in maintenance CapEx in Q4 of this year.

I don't have Q1 in front of me, but it was materially less than that and that's not typical for us. It's 2019 that was actually kind of atypical in terms of the breakdown of maintenance CapEx.

2020 will return to a sort of more normal cycle where its front end loaded and then reduces as the year goes on.

I'll start on with Quest. Is it possible to quantify the margin impact and ramp up costs for Quest on your manufacturing division’s 2019 EBITDA?

I'm not sure I want to get that granular with it Raveel. What I can tell you is that we incurred actual losses in Quest Dallas for the first three quarters of the year before effectively breaking EBIT in the fourth quarter.

But the impact is largely on Toronto where we effectively put so much stress on our production capacity there to keep up. We've made promises to customers and you have to deliver on time.

So that meant we were running projects through on overtime and in less than the most efficient manner and so that reduced margins, particularly in Q4 in Toronto. You'll see that slowly recovering Q1 and by Q2 I expect to see Toronto back to is more normal margin profile and then continued growth in Dallas through the end of the year.

Raveel, the other thing to consider is we also are investing today to make sure that we have the infrastructure for the kind of large order book that exists. So as production grows, we'll see the absorption grow as well, which will help with margins.

Just one follow-up on that, what portion of Dallas product are you guys testing now, was to say, in Q3 '19 and how that compares with the Toronto facility? Just so we see how that ramp-up is coming along.

It depends on the product itself, so it's not a precise number. But the Toronto number would be at the low single digits less than 5% of product is physically tested.

Whereas in Dallas through Q3, it was 100%, we're now down to about 25% and really intend to ramp that down here shortly again toward single digits. So we're making great progress on that.

And really I'm nervous when I talk to with this that it comes across as apologetic, because it really shouldn't be it's not. What we want to do is we have a standard in the marketplace that's given us our $300 million and $400 million order book.

We want to maintain that standard, ramping the facility -- the profit in the next 10 minutes, is it material to the value we create with that business. It's no different than with Force Multiplier where we took the time to have it certified so that all governments around the world can use it and now we're seeing a great demand.

And quite frankly, we're excited about that as it mean building another one. But it's the investment in making sure you do it right.

And so it's the hard part of being public where people want to know how you did in the last 10 minutes and then extrapolate it. And we're fortunate to have a group of analysts to look at our longer term prospects.

But for us, we want to make sure people know that we're taking the time to do it right.

And speaking about Force Multiplier, congratulations it's been getting a lot of media attention for its work in Mozambique. Can you directionally speak to the split between Provincial's airline and aerospace division?

I know you guys don't provide it, but any directional help on that would be helpful. And how you expect that to change based on these visible growth drivers for this vertical?

When we bought it several years ago, the segments were very close to equal between aviation and the aerospace. But in the intervening period, we had two major things that have grown the aviation space.

So our Air Borealis partnership with the Inuit in Labrador increased the size of that business and then the acquisition of Moncton Flight College, which we locked in with our aviation as opposed to our aerospace have it today that about two thirds of it would be in airlines and about one-third would be in aerospace. But as we move forward, the growth goes the other way with the contracts we've talked a lot.

So you'll see the percentage of aerospace grow. And while aviation will continue to grow, we don't anticipate at least in 2020 it will keep pace with aerospace.

And just one more from me. I mean your payout ratio remains below your long-term target of 50% to 80% despite these recent dividend increases.

Does the board have a medium term target that we should be thinking about with respect to additional dividend increases as we look out to 2020 and 2021?

Yes, we're definitely well within our comfort zone in terms of dividend payout ratio. We set a three year target to get 50% on a free cash flow basis and 60% on an adjusted net earnings basis.

And so we've made significant progress towards that and we will over the next couple of years get the rest of the way. But it's important that people understand, this isn't an either or with dividend increases.

You've seen this year that not only did we issue stock, so some people go that's dilutive. Well, no, the use of proceeds was such that we created more earnings and it's actually accretive.

So even with that and an increase in the number of monthly dividend, we've been able to pay down that payout ratio. And I think over the next two years, you'll see us do both but working towards that goal of 50% and 60% respectively.

Just want to follow up on earlier CapEx question, I mean you understand the maintenance CapEx going up and the timing of there. But you just read through the MD&A, it does sort of sound like growth CapEx expectations for 2020 should be that they would be lower year over year.

And firstly, have I got that correct? And secondly, if you are able to win a couple of these contracts that are out for bid, the one you've mentioned in Europe and also the one from medevac.

What does that mean for CapEx this year or is that more of a 2021 CapEx event?

First of all, if I've led people to believe that maintenance CapEx will go down, that's incorrect [Multiple Speakers] CapEx expected to go up by 10%. But what we should go down is maintenance CapEx in the second half of the year relative to this year, because of the timing and the shift to the first half of the year.

As it relates to those major contracts, most of them, the possible exception that would be the Manitoba medevac contract, which is kind of governments held in a bands, so I suspect that's going to go active again very shortly and that could go into effect before the end of the year, which would result in some growth investment for that. But the other major opportunities on the aerospace side are that would be next year and even later than that investment.

Growth CapEx this year, the only real major initiatives we have is the finishing off of additional aircraft for the fisheries contract, and we're going to buy couple extra aircraft for our aviation business. Its growth rate consistently exceeds what we expected to and to do a good job of looking after our customers we need to add some more aircraft.

So we will buy two or three more aircraft in the aviation segment.

So just so I'm clear, I mean maintenance CapEx goes up I heard that. But just sort of total CapEx, what should we expect for 2020 absent having to make additional investments for new contract…

So if there’s no new initiatives that we don't have today, growth CapEx will decline.

And just secondly for me just talking about the M&A pipeline. You mentioned that on the manufacturing side is where you're seeing more opportunities right now.

I'm just wondering if you can maybe talk about your -- I guess are there opportunities there that are fits with existing manufacturing operations that you have, or are you looking at new potential verticals here that you might look to invest in?

It's a bit of both. We definitely have a couple of vertical integration opportunities with existing businesses.

We find those exciting, because once we understand the segment and the management teams in there identify something that they think makes their business stronger, our team puts that to the top of the list that we do have a couple of those opportunities. And we also are looking at a couple of -- I'm not sure I'd go quite as far as new vertical, but that would have different customers or slightly different characteristics, but they would all be in that niche specialty manufacturing segment where we could explained to you guys when we buy it, what the secret sauce is and why we think this is a great opportunity.

So nothing grossly different, but there are a couple that are producing slightly different products than we have today, again, who knows whether we'll land any of those. And then on the aviation side, the stuff we're looking at is all directly related to what we do.

It may be exactly the same, it'd be a geographical expansion, or it could be vertical integration to help us control costs. But there's nothing new and Air Canada doesn't have to worry about us buying an A320 to fly to Las Vegas.

We'll stick to what we know.

I had a quick question for you. Yesterday, the government of Manitoba started talking about perhaps moving some of the Northern airports to some of our local indigenous lands.

And I was wondering with all your operations with permanent and calm, does that create challenges or opportunities for you? Because I know you have a lot of facilities on those sites.

I'm thinking also about operational things like fuel facilities and fuel storage. Any thoughts around that that could see some changes in your business over the next year or two?

I got to the forth right on this that we weren't particularly involved in that initiative, so we're still learning exactly what it means. But quite frankly, if it gives the first nations control over the airports in their area, that's probably a good thing.

They've got boots on the ground and they can see what's going on in their individual communities. It's going to require the build-off of a significant top management infrastructure for them to be able to manage those.

And so I suspect this will take a little bit of time. In terms of our business, if we can provide guidance and help, we'll be glad to do so.

But I don't think it's going to have much of an impact, because those airports are overseen by transport Canada. Dave, maybe if you've got a comment or two on that?

At the end of the day, it is early stages. We just saw the announcement about the transfer.

But at the end day, the airports are regulated entity and there's minimum standards that have to be maintained at the airport regardless of who's in control or owns those. So as far as our carrier is going into in there, we always look after our responsibilities.

We have the same expectations for the airports to be maintained to those responsibilities and which company, or organization or corporate does, they still have to meet the standards set by Transport Canada to ensure safe operations for the public.

So that was a whole bunch of we're not sure yet, but we don’t think it has a big impact on us.

No, it's fine. It's just that you're worried about your assets on the ground and stuff like that, and who's going to have to pay to maintain those kinds of things.

I just the other question for you…

I don’t think that profile is going to change that we're paying for it now, and we'll have to pay for it in the future. I think the bigger discussion will be who's going to pay to maintain the airports, because they're typically right now owned by the province, maintained by the province.

But the MOU implies that it's going to be tripartite between the first nations, the province and the feds and so we'll see.

And Mike, just to add one thing that, we do have assets there but they are very limited in comparison to what we would have at the major centers like Winnipeg, or Thompson or St. John's.

So while we have some assets materially when you compare it to where we operate, it is a great deal of assets there and we will manage it but we have to...

They’d largely be freight hangers and fuel farms we would have on the course.

And then, Mike, just thinking about payout ratio and dividend growth over the next couple of years. I mean, as you kind of alluded to, you're kind of at the bottom end of your range right now.

Sure, you're going to -- you've got some timing on maintenance CapEx, I'll take that your payout ratio is up a little bit but then you come back in. How do we think about your dividend evolution over the next couple of years?

Because as you've already alluded to a lot of your growth is already pre-baked, you've already gotten a lot of the -- I guess, pretty confidence in the fact that that growth is going to be evident in 2020 and likely 2021 just given the nature of the contracts. Is it something that you want to get these programs into a more mature stage and get some more proving on them before you start wanting to move, because if I look at it, I mean you’re going to end up in the 40s pretty, pretty soon, just on a kind of a runway basis without changing anything?

I think I am going to bring you to the board meeting to help me with these discussions with my board. But the key thing is, is that we want to maintain and show that we’re continuing to grow because sustainability is first, growth is second.

But there's one of our investors that regularly says that I'd rather cut off my arm than cut the dividend and well, that's probably not true, it's reasonably close. So the key thing for us is that we want to be able to move it reliably and regularly, and I don't think we need to not grow the dividend to reduce the payout ratio.

If you look where we've come over the last three or four years, we've cut our payout ratios from the 70s to the 50s. And for us to drive it the rest of the way while maintaining modest dividend growth I think is entirely achievable.

We'll want to see us deliver on what we think we're going to do in Q1 and then we’ll take a peak. Our board discusses payout ratio every quarter.

I'm not suggesting that we're making a payout change after two one. I'm saying that we look at it every quarter.

And if we deliver on our plan, we will do everything to maintain that 5% dividend CAGR we've had for 15 years. We're proud of the fact that we're the only ones on the TSX that have that.

So there's no thought as you grow to start changing the range and ratcheting it back down. I mean historically when you're trust, you're like 70 to 80 and now it's sort of 50 to 60, so you can get lot if you -- it's not something to think about, like 40 to 50 is the right band?

I think we've talked about getting to 50, I think that's the right stuff and we will keep you informed if we change it beyond that. But for now the goal of 50 on a cash flow basis and 60 on the earnings basis are where we're working towards.

So let me just dig in a little bit more on the Quest. So you mentioned the taxes broke even in Q4.

Just wanted to understand to be sure, the breakeven level is going to sustain in the first half of this year and then you will see profits in second half? Or is that -- do you see your profit ramp-up throughout the year every quarter?

Are you negotiating on behalf of Joe down in my Dallas plant? No, we expect them to make money in Q1 but the amount we make will grow as number of windows process per day goes up, that's really what drives it I mean.

And the other thing that I don't want to get lost in the wash is something Carmel mentioned a couple of minutes ago is the kind of shift in size that we have for what Quest was, to what it is, to what it's going to be quite frankly, we've invested in infrastructure, head office and people and systems. And so we need to put out more windows to absorb those kind of head office costs, for lack of a better term.

So you'll see that get absorbed. Where the bigger improvement will come is when we let Toronto run at more normal rates of capacity as opposed to taking every window other than we possibly can and you'll see that subside over the first half of the year.

So I guess what I'm saying is you'll see improvement in each quarter, it won't take till the back half of the year but it'll be more evident as we get later in the year.

And then what do you think about from like, just for the Texas plant. I mean when you anticipate in terms of timing, the steady state margin to be reached.

Will that be something like next year or it could be year after?

No, I think towards the end of this year or the beginning of next year we should be there. Now I caution the word about steady state, because quite frankly I'm more aggressive than that.

We built 330,000 square feet. So we kind of talked to our Quest guys about two things.

When does Dallas become Toronto, because Toronto operating out of 200,000 square feet but where I don't -- we didn't build 330,000 to build 200,000 square feet were the product. So I expect further ramp-ups.

We may add pieces of equipment in the future and that's probably 2021 by the time we get to that. And then quite frankly, the Toronto plant is in two buildings in there which are both leased, which the leases expire in three years.

The next phase of this is to put Toronto into one building and do that. So that's three years from now.

So steady state we’ll refer for a short period of time, but as long as the market demand is where we’ve seen it so far, we anticipate further growth.

And then you mentioned Toronto lease expiring in three years. And so I mean is there any kind of evaluation to kind of move the plant before three years or you want to wait until the lease expires on that?

By the time something, the size of building we need Konark is probably going to have to be built never say never. So it's likely that it's at the expiry of those leases.

And then how we would dovetail production is a whole bunch of work that isn't finished yet about how we will do this, because what we don't want to do is take a plant out of production and put the stress on Dallas that we put on Toronto while Dallas is ramped up. So we'll keep you guys informed in future quarters as to how that plan is coming.

And it’s in its baby steps phases right now. The most important thing to us is getting our Dallas plant cooking.

Some of you have had the opportunity to see it and it's a very impressive place. And I'm pretty confident on what we can kick out of that place.

And then on the Regional One, so can you remind us where are you on SkyWest deal at this point? I mean like how many aircraft and engines are waiting to be placed and then any similar opportunities like SkyWest that's cooking right now?

So when we did the joint venture with SkyWest, there was 14 engines that were placed in a joint venture. All of those are under contract to be leased together with 10 of our airframes that Regional One has on its own.

We announced shortly after the formation of the joint venture that everything that we have were being released to U. S.

operator and that they were going to be on lease or going into lease in phases, starting in Q4 of 2019 and then continuing on for the first half of the year. So that for the second half of 2020, they should be on lease, that's still as per plan.

I believe we had four of our airframes going into lease in Q4 of 2019. The balance will be this year.

With respect to additional opportunities with SkyWest yes. Yes, we're looking to transfer additional assets into that joint venture for lease into the same program that the current assets are going on lease for.

And in relation to similar opportunities like a SkyWest joint venture. Yes, we have arrangements whereby we have jointly invested in assets where Regional One uses its management capabilities to leverage their knowhow.

And in fact, under those arrangements we have over $100 million of assets under management.

And then lastly on the legacy airlines, so any contract renegotiations that could happen over time that you are looking at and any new breeding opportunities? You mentioned obviously one over the medivac site, but anything else beyond those?

This is the most fun answer. No, there's nothing I have to renegotiate.

We have small little things here and there with a specific in mind or things like that. But in terms of our big picture contracts, no, they're all in place for the foreseeable future.

We're excited about the opportunity with the Manitoba provincial government, but so are some of our competitors. So we'll work hard to win that when the opportunity's there.

But outside of that, there really isn't a lot going on in the legacy other than looking after our customers and doing a good job.

And on the fuel surcharge, Mike, any sense on the recent volatility in fuel price being down, any adjustments that you need to make or you have made already?

We think our fuel prices are largely in line. When they'd bumped up a few weeks ago, several weeks ago, we were getting close to the point where we wanted we considered putting on a fuel surcharge.

But again we -- because of the nature of who we're serving in our first nations, we want to make sure that we need to put the fuel surcharge on before we do and so patience paid off the fuel, the surcharge is about right for now. If your prices change, we'll adapt in the future but for now, we're in the right spot.

Just back to Quests to confirm the reference in the report to relatively flat EBITDA there relative to the prior period, which I assume means Q4 of '18. Is that reference includes any contribution that would have come into quarter from AWI?

I realized that was probably relatively material, but was it at least sort of possible…

Yes, in aggregate including AWI was about flat. On its own, it was down.

And that's again, because of the factors I've mentioned before, a rough breakeven in Dallas combined with lower margins in Toronto, because of how fast we were running it and the extra infrastructure build to facilitate Dallas. So that was offset somewhat by the profits in AWI.

And then turning to Regional One, the reference to investing $6.6 million in inventory through the year, I just want to confirm that’s a net number? Or another way of thinking about that is that inventory went up by $6.6 million the balance, the year-end balance relative to the end of 2018.

Is that correct?

That's exactly the way you look at it. Inventory at R One is, moves every day.

We're constantly selling stuff. We're buying pools of inventory and we're parting out some of our own planes.

So it goes in and out. So we talked about those things.

Our investment there is really three things; it’s been net investments in inventory after the costs of sales go through, how we've replaced it; it's maintenance capital, which maintains the aircraft in the lease fleet; and then, it’s any amount invested in excess of maintenance to grow the leased fleet. So those are the three numbers.

When you look at the inventory, it was relatively flat at $6 million. The sale of one engine or one airframe could spin that.

So they bounce around like that forever.

And then my final question more of a big picture question is as exchange continues to grow. Are there any of the smaller businesses that you would contemplate selling as maybe their size doesn't justify the ownership?

And I'm not asking for specific names of businesses. I'm just wondering if your ideal and optimal average investment size is changing at all.

In terms of new investment, Tim, you couldn't be more right. I mean, we aren't buying things that make $3 million or $4 million anymore unless we're folding them into our business and we already have.

We still do tuck-in things. But in terms of standalone businesses, we do have some that we wouldn't buy today, but we understand those businesses pretty well and we've got great management teams in place.

So there's no pressing requirement to make any changes. Quite frankly, I view it as all of our stuff, while they're not quite children, they might be stepchildren and we have to be quite a good buy offer to sell them.

And the smaller ones are the same. We know them.

There's no great need to sell them. Quite frankly, part of our secret sauce is vendors knowing that we buy the whole.

And I hold that reputation pretty close to me. We would sell a business if the offer is right, but the offer would have to be right.

Thank you everybody for joining us today. We're excited about what's coming off in 2020.

I look forward to talking to you in May. Have a great day.