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The headline numbers at Exchange Income Corp. were impressive in the second quarter, with revenue and two of the company's earnings measures easily exceeding expectations. Bay Street applauded, with analysts reiterating their buy recommendations and raising their target prices to imply, on average, a 45-per-cent return on the company's shares.

Such things do not end a battle with short-sellers, however, and the company's fight with bare-knuckled Marc Cohodes will continue. Mr. Cohodes, presented with the numbers, chooses to focus on other elements of the company's results, particularly its continued burning of cash and a new disclosure that its aircraft-parts subsidiary is allowing its CEO to invest alongside it for personal profit.

Investor reaction is complex, but the price action on Thursday does not suggest the market sided with the company. After opening at nearly $35 a share, up from Wednesday's close, the stock lost as much as 14 per cent during the day's trading. It closed at $30.33, down more than 8 per cent from Wednesday.

Here is what the company, a Winnipeg acquirer of industrial businesses, highlighted: Revenue up 20 per cent, year over year; a gain in EBITDA, or earnings before interest, taxes, depreciation and amortization, of 23 per cent; and a 34 per cent increase in earnings per share.

The company's preferred cash metric, free cash flow less maintenance capital expenditures, declined 14 per cent year-over-year, because the company said it accelerated aircraft repairs for its aviation business to take full advantage of warm-weather months. That put its payout ratio – as it calculates it – at 75 per cent, up from 54 per cent in 2016's second quarter.

It is Exchange Income's calculations of its cash performance, however, that are at the heart of Mr. Cohodes's critique. (And, I must say, it is a critique that I made three years ago, and have maintained, so I am not a neutral observer.)

Exchange Income says that a significant amount of its capital expenditures represent "growth capex," versus "maintenance capex," and therefore should be excluded from measures of its operating cash performance. "Since growth capex will generate future returns similar to an acquisition, these investments are not included in our payout ratio," CEO Mike Pyle said on Thursday in the company's investor call. "We have used this approach since going public in 2004, and the proof is in the pudding."

However, when you take operating cash flow, as measured under International Financial Reporting Standards, and subtract the full amount of capital expenditures as reported in the company's cash-flow statement, Exchange Income has not historically generated enough cash to pay its dividend.

In the second quarter, Exchange Income reported $36.9-million in operating cash flow, including changes in working capital. It had $61.8-million in capital expenditures, net of the sale of certain property, plant and equipment. The difference yields negative free cash flow, if you accept this definition, of nearly $25-million in the quarter. (Purchases of other assets shave another $3-million, leading to Mr. Cohodes' allegation that free cash flow was negative $28.5-million.)

"I think I put a brick upside their heads," Mr. Cohodes said in an interview on Thursday. "Free cash flow has a real definition, and these people are making up a number."

Of course, investors and analysts are well aware of this element of the Exchange Income story, and have chosen to ignore it. The stock has doubled from the 2014 lows, when the issue first captured attention, and the company has consistently raised its dividend.

However, Mr. Cohodes has opened a multifront attack. For one, he has alleged there are safety issues with the company's planes, and he is distributing the anonymous comments he's receiving from former employees of the company's aviation businesses. (This likely ensured the presence of David White, the company's vice-president of aviation operations, safety and integration, on the company's conference call on Thursday.)

Mr. Cohodes also delighted in a new disclosure in Exchange Income's financial statements of a related-party transaction in which the company has entered a deal with the CEO of Regional One, its aircraft parts and leasing operation, in which it's allowing the CEO to personally invest alongside Regional One in "certain aircraft assets."

The CEO's company, CRJ Capital Corp., invested $7.29-million so far in 2017 and has already received returns of $2.35-million, Exchange Income says in its securities filings. In return, Exchange Income says, "the CEO of Regional One has extended his noncompete agreement with the Corporation."

The disclosure plays into Mr. Cohodes's narrative, previously outlined, that the Regional One CEO had established multiple side businesses and that the company gets most of its sales from aircraft parts, and has even called it a "chop shop" unworthy of a rich valuation.

Mr. Cohodes shows no signs of going away, and Exchange Income hasn't yielded from its long-term narrative. The battle rages on.