Exco Technologies Limited - Fourth Quarter ended September 30, 2009
Quarterly Dividend Declared
-------------------------------------------------------------------------
12 Months ended 3 Months ended
September 30 September 30
($000s, except per share amounts)
2009 2008 2009 2008
---- ---- ---- ----
Sales $143,716 $201,681 $37,694 $50,132
Net income (loss) from
continuing operations ($17,666) ($13,398) $364 ($20,753)
Net loss from discontinued
operations $- ($536) $- ($425)
Net income (loss) ($17,666) ($13,934) $364 ($21,178)
Basic and diluted earnings
(loss) per share from
continuing operations ($0.43) ($0.33) $0.01 ($0.51)
Basic and diluted (loss)
per share from
discontinued operations $0.00 ($0.01) $0.00 ($0.01)
Basic and diluted earnings
(loss) per share ($0.43) ($0.34) $0.01 ($0.52)
Common shares
outstanding 40,666,176 40,948,276 40,666,176 40,948,276
-------------------------------------------------------------------------
In the fourth quarter sales of
This improving sales environment combined with the impact of cost reductions and operating improvements implemented earlier in the year has enabled Exco to return to profitability in the quarter with net income of
Gross margin improved by 1% over last quarter to 21% and cash provided by operating activities of continuing operations improved to
During the fourth quarter the Company successfully put to rest the difficulties and distractions of the bankruptcies that took place in the third quarter and focused on operations. Shipments by Polydesign on the Honda CRV and Civic seat cover programs resumed and takeover business with Visteon
"2009 has certainly been an extraordinary year for Exco's Board, management and staff," said
(For further information and prior year comparison please refer to the Company's Fourth Quarter Interim Financial Statements in the Investor Relations section posted at www.excocorp.com. Alternatively, please refer to www.sedar.com after
Exco Technologies Limited is a global supplier of innovative technologies servicing the die-cast, extrusion and automotive industries. Through our 10 strategic locations, we employ 1,350 people and service a diverse and broad customer base.
Management will hold a conference call to discuss the fourth quarter results on
This news release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws. We use words such as "anticipate", "plan", "may", "will", "should", "expect", "believe", "estimate" and similar expressions to identify forward-looking information and statements. Such forward-looking information and statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe to be relevant and appropriate in the circumstances. Readers are cautioned not to place undue reliance on forward-looking information and statements, as there can be no assurance that the assumptions, plans, intentions or expectations upon which such statements are based will occur. Forward-looking information and statements are subject to known and unknown risks, uncertainties, assumptions and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed, implied or anticipated by such information and statements. These risks, uncertainties and assumptions are described in the Company's Management's Discussion and Analysis included in our 2008 Annual Report, in our 2008 Annual Information Form and, from time to time, in other reports and filings made by the Company with securities regulatory authorities.
While the Company believes that the expectations expressed by such forward-looking information and statements are reasonable, there can be no assurance that such expectations and assumptions will prove to be correct. In evaluating forward-looking information and statements, readers should carefully consider the various factors which could cause actual results or events to differ materially from those indicated in the forward-looking information and statements. Readers are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the Company disclaims any obligations to update publicly or otherwise revise any such factors or any of the forward-looking information or statements contained herein to reflect subsequent information, events or developments, changes in risk factors or otherwise.
NOTICE TO READER
The attached consolidated financial statements have been prepared by management of the Company. The consolidated financial statements for the twelve-month periods ended
EXCO TECHNOLOGIES LIMITED
INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited)
$(000)'s
As at As at
September 30, September 30,
2009 2008
-------------------------------------------------------------------------
ASSETS
Current
Cash $11,364 $8,141
Accounts receivable (note 4) 26,711 34,120
Inventories (note 5) 23,330 30,527
Prepaid expenses and deposits 2,589 3,013
Income taxes receivable 668 -
Mortgage receivable 600 -
Assets held for sale (note 8) 1,501 5,068
Discontinued operations - 540
-------------------------------------------------------------------------
Total current assets 66,763 81,409
-------------------------------------------------------------------------
Mortgage receivable - 600
Fixed assets (notes 3 and 9) 71,696 74,915
Goodwill (note 10) - 10,086
Future income tax assets 1,855 1,373
-------------------------------------------------------------------------
$140,314 $168,383
----------------------------
----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $- $4,634
Accounts payable and accrued liabilities 15,848 25,125
Income taxes payable - 641
Customer advance payments 4,931 944
Capital lease obligations (note 7) 125 -
-------------------------------------------------------------------------
Total current liabilities 20,904 31,344
-------------------------------------------------------------------------
Long-term capital lease obligations (note 7) 148 -
Future income tax liabilities 4,344 5,277
-------------------------------------------------------------------------
Total liabilities 25,396 36,621
Shareholders' Equity
Share capital (note 2) 35,435 35,681
Contributed surplus (note 2) 3,130 2,789
Retained earnings 89,108 109,912
Accumulated other comprehensive loss (note 2) (12,755) (16,620)
-------------------------------------------------------------------------
Total shareholders' equity 114,918 131,762
-------------------------------------------------------------------------
$140,314 $168,383
----------------------------
----------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
EXCO TECHNOLOGIES LIMITED
INTERIM CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE LOSS
(Unaudited)
$(000)'s except for earnings (loss) per share
Three Months ended Twelve Months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Sales $37,694 $50,132 $143,716 $201,681
-------------------------------------------------------------------------
Cost of sales and
operating expenses
before the following
(note 5) 29,885 39,271 115,547 158,519
Selling, general and
administrative
(notes 2 and 4) 5,114 a 7,613 25,389 b 25,690
Depreciation and
amortization (note 9) 2,226 2,252 10,131 c 9,345
Goodwill impairment
(note 10) - 23,586 10,086 23,586
Asset held for sale
write-down (note 8) - - 1,415 -
Loss (gain) on sale
of fixed assets (52) 297 (27) (2,135)
Interest expense 70 46 156 210
-------------------------------------------------------------------------
37,243 73,065 162,697 215,215
-------------------------------------------------------------------------
Income (loss) from
continuing operations
before income taxes 451 (22,933) (18,981) (13,534)
Provision (recovery) for
income taxes 87 (2,180) (1,315) (136)
-------------------------------------------------------------------------
Income (loss) from
continuing operations 364 (20,753) (17,666) (13,398)
Loss from discontinued
operations, net of tax - (425) - (536)
-------------------------------------------------------------------------
Net income (loss) for
the period $364 ($21,178) ($17,666) ($13,934)
---------------------------------------------
---------------------------------------------
Other comprehensive
income (loss)
Unrealized (loss) gain
on foreign currency
translation of self-
sustaining operations (3,902) 461 3,865 3,618
-------------------------------------------------------------------------
Comprehensive loss ($3,538) ($20,717) ($13,801) ($10,316)
---------------------------------------------
---------------------------------------------
(Loss) earnings per
common share
Basic and diluted from
continuing operations $0.01 ($0.51) ($0.43) ($0.33)
Basic and diluted from
discontinued operations - (0.01) - (0.01)
-------------------------------------------------------------------------
Basic and diluted (loss)
earnings $0.01 ($0.52) ($0.43) ($0.34)
---------------------------------------------
---------------------------------------------
a. Includes $227 foreign exchange valuation gain, $403 severance charges
and $88 bad debts
b. Includes $1,107 foreign exchange valuation loss, $2,392 severance
charges and $1,754 bad debts
c. Includes $590 impairment charge on fixed assets.
The accompanying notes are an integral part of these consolidated
financial statements.
EXCO TECHNOLOGIES LIMITED
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
$(000)'s
Accumulated
other
compre- Total
Contri- hensive share-
Share buted Retained income holders'
capital surplus earnings (loss) equity
-------------------------------------------------------------------------
Balance,
October 1,
2008 $35,681 $2,789 $109,912 ($16,620) $131,762
Net loss for
the quarter - - (2,425) - (2,425)
Dividends - - (712) - (712)
Stock option
expense - 67 - - 67
Repurchase of
share capital (239) - (290) - (529)
Unrealized gains
on translation
of self-sustaining
operations - - - 12,187 12,187
-------------------------------------------------------------------------
Balance,
December 31,
2008 35,442 2,856 106,485 (4,433) 140,350
Net loss for
the quarter - - (14,607) - (14,607)
Dividends - - (712) - (712)
Stock option
expense - 102 - - 102
Unrealized losses
on translation
of self-sustaining
operations - - - (113) (113)
-------------------------------------------------------------------------
Balance,
March 31, 2009 $35,442 $2,958 $91,166 ($4,546) $125,020
Net loss for
the quarter - - (998) - (998)
Dividends - - (711) - (711)
Stock option
expense - 88 - - 88
Repurchase of
share capital (7) (2) (9)
Unrealized losses
on translation
of self-sustaining
operations - - - (4,307) (4,307)
-------------------------------------------------------------------------
Balance,
June 30, 2009 $35,435 $3,046 $89,455 ($8,853) $119,083
Net income for
the quarter - - 364 - 364
Dividends - - (711) - (711)
Stock option
expense - 84 - - 84
Repurchase of
share capital - - -
Unrealized losses
on translation
of self-sustaining
operations - - - (3,902) (3,902)
-------------------------------------------------------------------------
Balance,
September 30,
2009 $35,435 $3,130 $89,108 ($12,755) $114,918
------------------------------------------------------
------------------------------------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
EXCO TECHNOLOGIES LIMITED
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
$(000)'s
3 Months ended 12 Months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net (loss) income from
continuing operations $364 ($20,753) ($17,666) ($13,398)
Add (deduct) items not
involving a current
outlay of cash
Goodwill impairment
(note 10) - 23,586 10,086 23,586
Assets held for sale
write-down (note 8) - - 1,415 -
Depreciation and
amortization (note 9) 2,226 2,252 10,131 9,345
Stock-based compensation
expense (note 2) 124 73 393 402
Future income taxes (764) (2,120) (1,415) (2,186)
Loss (gain) on sale
of fixed assets (52) 297 (27) (2,135)
Loss (gain) on financial
instrument valuation
(note 4) (227) 488 1,107 376
-------------------------------------------------------------------------
1,671 3,823 4,024 15,990
-------------------------------------------------------------------------
Net change in non-cash
working capital
balances related to
continuing operations 1,774 (3,129) 11,365 (3,699)
-------------------------------------------------------------------------
Cash provided by
operating activities of
continuing operations 3,445 694 15,389 12,291
-------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase (decrease) in
bank indebtedness 1,572 1,638 (4,809) 2,760
Increase (decrease) in
long-term debt - - - (85)
Repayment of capital
lease obligations (35) - (134) -
Dividends paid (note 2) (711) (717) (2,846) (2,772)
Repurchase of share
capital (note 2) - (105) (538) (1,843)
-------------------------------------------------------------------------
Cash provided by
(used in) financing
activities of
continuing operations 826 816 (8,327) (1,940)
-------------------------------------------------------------------------
INVESTING ACTIVITIES:
Investment in fixed
assets (1,534) (2,875) (8,020) (11,238)
Proceeds on sale of
fixed assets 165 25 3,841 3,087
-------------------------------------------------------------------------
Cash used in investing
activities of
continuing operations (1,369) (2,850) (4,179) (8,151)
-------------------------------------------------------------------------
CASH FLOWS FROM
DISCONTINUED OPERATIONS:
Net cash provided by
discontinued operations - 341 - 80
-------------------------------------------------------------------------
Net cash provided by
discontinued operations - 341 - 80
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash (400) 115 340 184
-------------------------------------------------------------------------
Net increase in cash
during the period 2,502 (884) 3,223 2,464
Cash, beginning of period 8,862 9,025 8,141 5,677
-------------------------------------------------------------------------
Cash, end of period $11,364 $8,141 $11,364 $8,141
---------------------------------------------
---------------------------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
$(000)'s except per share amounts
1. ACCOUNTING POLICIES
Basis of presentation
These unaudited interim consolidated financial statements of Exco
Technologies Limited (the "Company") have been prepared in accordance
with Canadian generally accepted accounting principles ("GAAP"), except
that certain disclosures required for annual financial statements have
not been included. Accordingly, the unaudited interim consolidated
financial statements should be read in conjunction with the Company's
annual consolidated financial statements included in the 2008 Annual
Report. The unaudited interim consolidated financial statements have been
prepared on a basis that is consistent with the accounting policies set
out in the Company's 2008 annual consolidated financial statements,
except for the changes described below.
Accounting policy changes
Effective October 1, 2008, the Company has adopted the new Canadian
Institute of Chartered Accountants ("CICA") accounting sections: 3064
(Goodwill and Intangible Assets), 3031 (Inventories) and 1400 (General
Standards of Financial Statement Presentation).
Section 3064 (Goodwill and Intangible Assets) provides guidance on the
recognition of intangible assets in accordance with the definition of an
asset and the criteria for asset recognition, clarifying the application
of the concept of matching revenues and expenses and whether these assets
are separately acquired or are developed internally. Adoption of this new
section has no material impact on the Company's unaudited interim
consolidated financial statements.
Section 3031 (Inventories) which has replaced Section 3030, establishes
new standards for the measurement and disclosure of inventories. It
requires inventories to be measured at the lower of cost and net
realizable value, provides guidance on the determination of cost and
requires the reversal of prior write downs when the net realizable value
of impaired inventory subsequently recovers. Adoption of this new section
has no material impact on the Company's unaudited interim consolidated
financial statements.
Section 1400 (General Standards of Financial Statement Presentation) was
amended to include requirements to assess and disclose an entity's
ability to continue as a going concern. Adoption of the amendment of this
section did not have an impact on the Company's unaudited interim
consolidated financial statements.
Credit risk and the fair value of financial assets and financial
liabilities (EIC 173) - On January 20, 2009, the Emerging Issues
Committee (EIC) issued the above abstract which provides further guidance
on the determination of the fair value of financial assets and financial
liabilities under Section 3855. EIC 173 concluded that when determining
the fair value of financial assets and financial liabilities, the entity
should consider its own credit risk as well as the credit risk of the
counterparty. This abstract should be applied retrospectively, without
restatement of prior periods, to all financial assets and liabilities
measured at fair value in interim and annual financial statements for
periods ending on or after January 20, 2009. Adoption of this abstract
has no material impact on the Company's unaudited interim consolidated
financial statements.
Future accounting policy changes
In February 2008, the Canadian Accounting Standards Board (ACSB)
confirmed that International Financial Reporting Standards (IFRS) will
replace current Canadian GAAP for publicly accountable companies. The
official change-over date is for interim and annual financial statements
for fiscal years beginning on or after January 1, 2011. IFRS will be
required for the Company's interim and annual consolidated financial
statements for the fiscal year beginning on October 1, 2011. The Company
is currently formulating and developing an implementation plan to comply
with the new standards and its future reporting requirements.
In January, 2009, the CICA issued Section 1582 (Business Combinations),
which replaced former guidance on business combinations (Section 1581).
This standard establishes principles and requirements of the acquisition
method for business combinations and related disclosures. In addition,
the CICA issued Section 1601 (Consolidated Financial Statements)
(replaced Section 1600), and Section 1602 (Non-Controlling Interests).
Section 1602 provides guidance for the treatment of non-controlling
interests subsequent to a business combination. These new standards are
effective for the Company's annual reporting period on October 1, 2011.
The Company is currently assessing the impact and does not anticipate the
adoption of this new section will have a material impact on its
consolidated financial statements.
In June 2009, the CICA issued amendments to CICA Handbook Section 3862
(Financial Instruments - Disclosures) and 1506 (Accounting Changes).
Section 3862 amendments include enhanced disclosures related to the fair
value of financial instruments and the liquidity risk associated with
financial instruments. The amendments will be effective for annual
financial statements for fiscal years ending after September 30, 2009.
The Company is currently evaluating the impact of the amended section on
its consolidated financial statements. Section 1506 was amended to
exclude from its scope changes in accounting policies upon the complete
replacement of an entity's primary basis of accounting. The amendments
are effective for annual and interim financial statements relating to
fiscal years beginning on or after July 1, 2009. The adoption of IFRS is
not expected to qualify as an accounting change under CICA 1506.
2. SHARE CAPITAL
Authorized
The Company's authorized share capital consists of an unlimited number of
common shares, an unlimited number of non-voting preference shares
issuable in one or more series and 275 special shares.
Issued
The Company has not issued any non-voting preference shares or special
shares. Changes to the issued common shares are shown in the following
table:
Common Shares
-------------------------------------------------------------------------
Issued and outstanding at September 30, 2008 40,948,276 $35,681
Purchased and cancelled pursuant to
normal course issuer bid (274,100) (239)
-------------------------------------------------------------------------
Issued and outstanding at December 31, 2008 40,674,176 35,442
-------------------------------------------------------------------------
Issued and outstanding at March 31, 2009 40,674,176 35,442
Purchased and cancelled pursuant to
normal course issuer bid (8,000) (7)
-------------------------------------------------------------------------
Issued and outstanding at June 30, 2009 40,666,176 35,435
-------------------------------------------------------------------------
Issued and outstanding at September 30, 2009 40,666,176 $35,435
------------------------
------------------------
Currency translation adjustment
All of the Company's foreign operations are self-sustaining. Gains and
losses arising from the translation of the Company's net investment in
its foreign subsidiaries are included in accumulated other comprehensive
loss in shareholders' equity. The appropriate amount of exchange gain or
loss included in accumulated other comprehensive loss is reflected in
earnings when there is a sale or partial sale of the Company's investment
in these operations or upon a complete or substantially complete
liquidation of the investment.
Unrealized translation adjustments which arise on the translation to
Canadian dollars of assets and liabilities of the Company's self-
sustaining foreign operations resulted in an unrealized currency
translation loss of $3,902 during the three months ended September 30,
2009 (three months ended September 30, 2008 - the unrealized translation
gain was $461). For the twelve months ended September 30, 2009 the
unrealized gain was $3,865 (twelve months ended September 30, 2008 - the
unrealized gain was $3,618). Year-to-date unrealized gain of $3,865 is
primarily attributable to the strengthening of the U.S. dollar against
the Canadian dollar as measured at September 30, 2009 and September 30,
2008.
Cash dividend
During the three months ended September 30, 2009, the Company paid cash
dividends as outlined in the table below. The dividend rate per quarter
was increased from $0.015 to $0.0175 per common share since the second
quarter of fiscal 2008.
2009 2008
-------------------------------------------------------------------------
December 31 $712 $618
March 31 712 719
June 30 711 718
September 30 711 717
-------------------------------------------------------------------------
Total dividends paid $2,846 $2,772
------------------------
------------------------
Stock option plan
The Company has a stock option plan under which common shares may be
acquired by employees and officers of the Company. Non-executive
directors are not eligible to participate in the stock option plan. The
following is a continuity schedule of options outstanding (number of
options in the table below is expressed in whole numbers and has not been
rounded to the nearest thousand):
2009 2008
-------------------------------------------------------------------------
Options outstanding Options outstanding
--------------------- ---------------------
Weighted Weighted
Number average Number average
of exercise Options of exercise Options
options price exercisable options price exercisable
-------------------------------------------------------------------------
Opening
balance 2,265,414 $4.36 1,793,196 2,410,849 $4.50 1,817,387
Granted 87,049 $1.52 - 73,777 $3.79 -
Vested - - 157,629 - - 183,021
Expired (348,034) $3.50 (348,034) (179,212) $5.42 (179,212)
-------------------------------------------------------------------------
Balance,
December
31 2,004,429 $4.39 1,602,791 2,305,414 $4.41 1,821,196
Granted 30,000 $1.03 - - - -
Vested - - 2,000 - - 6,000
Expired (40,000) 3.88 (40,000) - - -
Cancelled - - - (30,000) 6.85 (24,000)
-------------------------------------------------------------------------
Balance,
March 31 1,994,429 $4.35 1,564,791 2,275,414 $4.38 1,803,196
Expired (65,000) $4.78 (65,000) - - -
-------------------------------------------------------------------------
Balance,
June 30 1,929,429 $4.33 1,499,791 2,275,414 $4.38 1,803,196
Expired - - - (10,000) $7.60 (10,000)
-------------------------------------------------------------------------
Balance,
September
30 1,929,429 $4.33 1,499,791 2,265,414 $4.36 1,793,196
---------------------------------------------------------------
---------------------------------------------------------------
Employee stock purchase plan
The Company has an employee stock purchase plan (ESPP). The ESPP allows
employees to purchase shares annually through payroll deductions at a
predetermined price. During fiscal 2009, payroll deductions will be made
supporting the purchase of a maximum of 401,150 at $1.29 per share. The
purchase and payroll deductions with respect to these shares will be
completed in the first quarter of fiscal 2010. Employees must decide
annually whether or not they wish to purchase their common shares. During
the twelve months ended September 30, 2009 no shares (2008 - nil) were
issued under the terms of the ESPP. Effective December 31, 2009, the ESPP
will be terminated. Options previously granted and outstanding will
continue to be outstanding and exercisable in accordance with the terms
of the plan.
Stock-based compensation
Stock-based compensation resulting from applying the Black-Scholes
option-pricing model to the Company's Stock Option Plan and the ESPP was
$84 for the three months ended September 30, 2009 (three months ended
September 30, 2008 - $96) and for the twelve months ended September 30,
2009 was $341 (twelve months ended September 30, 2008 - $425). All stock-
based compensation has been recorded in selling, general and
administrative expenses. The weighted average assumptions measuring the
fair value of stock options and the weighted average fair value of
options granted in the twelve months ended September 30, 2009 are as
follows:
September September
30, 2009 30, 2008
-------------------------------------------------------------------------
Risk free interest rates 2.48% 4.00%
Expected dividend yield 6.24% 1.71%
Expected volatility 36.89% 26.00%
Expected time until exercise 5.63 years 6.10 years
Weighted average fair value of the
options granted $0.18 $0.84
-------------------------------------------------------------------------
-------------------------------------------------------------------------
On November 18, 2005, the Company's Board of Directors adopted a Deferred
Share Unit Plan ("DSU Plan") for eligible directors. The deferred share
units will be redeemed by the Company in cash payable after the eligible
director departs from the Board. The number of units in the table below
is expressed in whole numbers and has not been rounded to the nearest
thousand:
Number of
units
issued Expense
-------------------------------------------------------------------------
December 31, 2008 11,535 ($18)
March 31, 2009 12,088 8
June 30, 2009 10,144 22
September 30, 2009 7,377 40
-------------------------------------------------------------------------
41,144 $52
------------------------
------------------------
Contributed surplus
Contributed surplus consists of accumulated stock option expense less the
fair value of the options at the grant date that have been exercised and
reclassified to share capital. The following is a continuity schedule of
contributed surplus:
2009 2008
-------------------------------------------------------------------------
Balance, beginning of the year $2,789 $2,364
Stock option compensation expense 67 137
-------------------------------------------------------------------------
Balance, December 31 2,856 2,501
Stock option compensation expense 102 97
-------------------------------------------------------------------------
Balance, March 31 2,958 2,598
Stock option compensation expense 88 95
-------------------------------------------------------------------------
Balance, June 30 3,046 2,693
Stock option compensation expense 84 96
-------------------------------------------------------------------------
Balance, September 30 $3,130 $2,789
------------------------
------------------------
Normal course issuer bid
The Company received approval from the Toronto Stock Exchange for a
normal course issuer bid for a 12-month period beginning on May 8, 2009
replacing the normal course issuer bid which expired on May 7, 2009. The
Company's Board of Directors authorized the purchase of up to 2,000,000
common shares, representing approximately 5% of the Company's outstanding
common shares. During the twelve months ended September 30, 2009, the
Company purchased 282,100 common shares under both bids (2008 - 530,200)
at a total cost of $538 (2008 - $1,843). The cost to purchase these
shares exceeded their stated value by $292 (2008 - $1,382). This excess
has been charged against retained earnings.
3. FIXED ASSETS
September 30, 2009
-------------------------------------------------------------------------
Accumulated
Depreciation
and Net
Cost Amortization Book Value
-------------------------------------------------------------------------
Land $6,653 $- $6,653
Buildings 45,165 14,257 30,908
Machinery and equipment 165,137 131,576 33,561
Tools 5,755 5,181 574
---------------------------------------
$222,710 $151,014 $71,696
---------------------------------------
---------------------------------------
September 30, 2008
-------------------------------------------------------------------------
Accumulated
Depreciation
and Net
Cost Amortization Book Value
-------------------------------------------------------------------------
Land $6,972 $- $6,972
Buildings 44,128 14,059 30,069
Machinery and equipment 182,099 144,768 37,331
Tools 8,278 7,735 543
---------------------------------------
$241,477 $166,562 $74,915
---------------------------------------
---------------------------------------
At September 30, 2009, the Company had building, machinery and deposits
relating to fixed assets of $3,739 (2008 - $4,906). These assets are not
being depreciated because they are under construction and not in use.
Fixed assets under capital leases amounted to $428 (2008 - nil) less
accumulated depreciation of $154 (2008- nil).
4. FINANCIAL INSTRUMENTS
Financial instruments of the Company consist primarily of cash, accounts
receivable, mortgage receivable, bank indebtedness, accounts payable and
accrued liabilities, customer advance payments, capital lease obligations
and forward foreign exchange contracts. With the exception of forward
foreign exchange contracts which the Company fair values quarterly and
recognizes any changes in value in the consolidated statements of
earnings and comprehensive loss the carrying value of these financial
instruments approximates their fair value due to their nature.
The Company classifies its financial instruments as follows:
-------------------------------------------------------------------------
Cash Financial assets - held for trading
Accounts receivable* Financial assets - loans and
receivables
Mortgage receivable* Financial assets - loans and
receivables
Bank indebtedness Financial liabilities - held for
trading
Accounts payable and accrued Financial liabilities - other
liabilities financial liabilities
Customer advance payments Financial liabilities - held for
trading
Forward foreign exchange Financial assets/liabilities -
contracts held for trading
Capital lease obligations* Financial liabilities - other
financial liabilities
-------------------------------------------------------------------------
* Recorded at amortized cost
Foreign exchange contracts
The Company has forward foreign exchange contracts to sell US$1,800 over
the next three months at the rate ranges from 1.08 to 1.13 Canadian
dollars for each US dollar sold. The Company also entered into a series
of put and call options ("Collars") extending through to September 22,
2011. The total value of these collars is 83.1 million Mexican pesos
(September 30, 2008 - 138.1 million Mexican pesos). The selling price
ranges from 11.00 to 12.20 Mexican pesos to each U.S. dollar.
Management estimates that a combined loss of $1,338 (2008 - loss of $231)
would be realized if these contracts and collars were terminated on
September 30, 2009. As at September 30, 2009, the estimated fair value
loss of $1,107 (2008 - loss of $376) has been included in the selling,
general and administrative expense on the consolidated statements of
earnings and comprehensive loss and the loss of $1,338 (2008 - loss of
$231) is recorded in the accounts payable and accrued liabilities.
Financial risk management
The Company, through its financial assets and liabilities, is exposed to
various risks. The following analysis provides a measurement of the risks
and how they are managed:
a) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third
party fails to meet its contractual obligations. The Company's primary
credit risk is its outstanding trade accounts receivable. The carrying
amount of its outstanding trade accounts receivable represents the
Company's estimate of its maximum credit exposure. The Company regularly
monitors its credit risk exposure and takes steps such as credit approval
procedures, establishing credit limits, utilizing credit assessments and
monitoring practices to mitigate the likelihood of these exposures from
resulting in an actual loss. The carrying amount of the trade accounts
receivable disclosed in the unaudited interim consolidated balance sheets
is net of allowances for doubtful accounts, estimated by the Company's
management, based on prior experience and assessment of current financial
conditions of customers as well as the general economic environment. When
a receivable balance is considered uncollectible, it is written off
against the allowance for doubtful accounts. Subsequent recoveries of
amounts previously written off are credited against operating expenses in
the consolidated statements of earnings and comprehensive loss. As at
September 30, 2009, the accounts receivable balance (net of allowance for
doubtful accounts) is $26,711 (September 30, 2008 - $34,120) and the
Company's five largest trade debtors accounted for 41% of the total
accounts receivable balance (2008 - 44%). At September 30, 2009, accounts
receivable in the amount of $9,557 are insured against default.
The following table presents a breakdown of the Company's accounts
receivable balances:
2009 2008
-------------------------------------------------------------------------
Trade accounts receivable $26,425 $34,191
Employee receivable* 283 64
Sales tax receivable 414 160
Vendor rebates - 81
Others 51 105
Allowance for doubtful accounts (462) (481)
-------------------------------------------------------------------------
Total accounts receivable, net $26,711 $34,120
------------------------
------------------------
* The indebtedness of the Chief Executive Officer of the Company is a
loan in the amount of $186 evidenced by a promissory note due on the
date on which the Company makes demand. The promissory note provides
for a maximum loan amount of $200. Interest is payable on the
outstanding balance at a rate equal to the Company's cost of
borrowing plus 1%. No security has been provided to the Company and
no other understanding, agreement or intention to limit recourse
exists. In addition, the Company is owed a total of $46 on account of
non-business expenses paid by the Company on behalf of this officer
and interest accrued on the outstanding loan.
The aging of trade accounts receivable balances is as follows:
2009 2008
-------------------------------------------------------------------------
Not past due $19,698 $26,593
Past due 1-30 days 3,829 4,155
Past due 31-60 days 1,042 1,035
Past due 61-90 days 1,513 599
Past due over 90 days 343 1,809
Less: allowance for doubtful accounts (462) (481)
-------------------------------------------------------------------------
Total trade accounts receivable, net $25,963 $33,710
------------------------
------------------------
The movement in the allowance for doubtful accounts is as follows:
2009 2008
-------------------------------------------------------------------------
Opening balance $481 $696
Bad debt expense 1,754 1,120
Write-offs (1,773) (1,335)
-------------------------------------------------------------------------
Closing balance $462 $481
------------------------
------------------------
b) Liquidity risk
Liquidity risk refers to the possibility that the Company may not be able
to meet its financial obligations as they come due. The Company manages
its liquidity risk by minimizing its financial leverage and arranging
credit facilities in order to ensure sufficient funds are available to
meet its financial obligations. This is achieved by continuously
monitoring its cash flows from its operating, investing and financing
activities. As at September 30, 2009, the Company has a net cash balance
of $11,364 (2008 - $3,507) and unused credit facilities of
$24,379 (2008 - $43,546).
c) Foreign exchange risk
The Company's functional and reporting currency is in Canadian dollars.
It operates in Canada with subsidiaries located in the United States,
Mexico and Morocco. It is exposed to foreign exchange transaction and
translation risk through its operating activities and self-sustaining
foreign operations. Unfavourable changes in the exchange rates may affect
the operating results and shareholders' equity of the Company. In order
to mitigate the foreign currency exposure, the Company reduces part of
its foreign exchange risk by sourcing a significant portion of its
manufacturing inputs in the currency that its sales are denominated in.
In addition to above natural hedge, depending on the timing of foreign
currency receipts and payments, the Company will occasionally enter into
short term forward foreign exchange contracts to mitigate part of the
remaining foreign exchange exposure. These contracts are classified as
"held for trading" on the balance sheet and fair valued each quarter. The
resulting gain or loss on the valuation of these financial instruments is
recognized in the consolidated statements of earnings and comprehensive
loss. The Company does not mitigate the translation risk exposure of its
self-sustaining foreign operations due to the fact that these investments
are considered to be long-term in nature.
With all other variables held constant, the following table outlines the
Company's foreign exchange exposure at one percent fluctuation between
various currencies compared with the average year to date exchange rate.
-------------------------------------------------------------------------
1 % 1 % 1 % 1 %
Fluctuation Fluctuation Fluctuation Fluctuation
USD vs. Dirham vs. Euro vs. USD vs.
CDN CDN Dirham MXN peso
-------------------------------------------------------------------------
Earnings (loss) before
income taxes +/- $586 +/- $11 +/- $36 +/- $50
-------------------------------------------------------------------------
Other comprehensive
income (loss) +/- $1,616 +/- $157 na na
-------------------------------------------------------------------------
-------------------------------------------------------------------------
d) Interest rate risk
The Company's exposure to interest rate risk relates to its net cash
position and variable rate credit facilities. The Company mitigates its
interest risk exposure by reducing or eliminating its overall debt
position. As at September 30, 2009, the Company has a net cash position
of $11,364 (2008 - $3,507); therefore its interest rate risk exposure is
insignificant.
5. INVENTORIES
2009 2008
-------------------------------------------------------------------------
Raw materials $9,056 $12,628
Work in process 10,434 12,322
Finished goods 3,439 4,905
Production supplies 401 672
-------------------------------------------------------------------------
$23,330 $30,527
------------------------
------------------------
Inventories are valued at the lower of cost and net realizable value,
with cost being determined substantially on a first-in, first-out basis.
Cost includes the cost of materials and, in the case of work in process
and finished goods, direct labour and the applicable share of
manufacturing overhead.
During the twelve months ended September 30, 2009, inventories of $62,146
(2008 - $94,100) were expensed of which $1,152 were from the write downs
of inventory (2008 - $694) were included in cost of goods sold. No
reversals of write downs were recorded during the twelve months ended
September 30, 2009 and 2008.
6. CAPITAL MANAGEMENT
The Company defines capital as net debt and shareholders' equity. As at
September 30, 2009, total managed capital was $114,918 (September 30,
2008 - $131,762) consisting of nil net debt (September 30, 2008 - nil)
and shareholders' equity of $114,918 (September 30, 2008 - $131,762).
The Company's objectives when managing capital are to:
- utilize short-term funding sources to manage its working capital
requirements and fund capital expenditures required to execute its
operating and strategic plans, and
- maintain low overall debt levels relative to shareholders' equity
with a strong bias for short-term debt in order to minimize the cost
of capital and allow maximum flexibility to respond to current and
future industry, market and economic risks and opportunities.
The following ratios are used by the Company to monitor its capital:
September September
30, 2009 30, 2008
-------------------------------------------------------------------------
Net debt to equity 0.00:1 0.00:1
Current ratio 2.58:1 2.55:1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The following table details the net debt calculation used in the net debt
to equity ratio as at the periods ended as indicated:
September September
30, 2009 30, 2008
-------------------------------------------------------------------------
Bank indebtedness $- $4,634
Capital lease obligations 273 -
Less: cash (11,364) (8,141)
-------------------------------------------------------------------------
Net debt nil nil
------------------------
------------------------
The current ratio is calculated by dividing current assets (excluding
cash and assets held for sale) by current liabilities (excluding bank
indebtedness).
The Company is not subject to any capital requirement imposed by
regulators; however, the Company must adhere to certain financial
covenants related to the terms of its bank credit facility. As at
September 30, 2009, the Company was in compliance with the required
financial covenants.
7. CAPITAL LEASE OBLIGATIONS
2009 2008
-------------------------------------------------------------------------
Total minimum lease payments $283 $-
Less: amount representing interest at average
rate of 4.4% (10) -
-------------------------------------------------------------------------
Capital lease obligations 273 -
Less: current portion (125) -
-------------------------------------------------------------------------
Long-term portion of capital lease obligations $148 $-
------------------------
------------------------
Future minimum lease payments are as follows:
-------------------------------------------------------------------------
Total
Capital Minimum
Lease Lease
Obligations Interest Payments
-------------------------------------------------------------------------
2010 $127 $8 135
2011 103 2 105
2012 26 - 26
2013 10 - 10
2014 7 - 7
-------------------------------------------------------------------------
$273 $10 $283
--------------------------------------
--------------------------------------
8. ASSETS HELD FOR SALE
In May 2009, the Company concluded the sale of the Techmire production
facility with a net loss of $1,415. This loss was recorded as a write-
down of assets held for sale in the second quarter of the current year
when the sale and purchase agreement was signed.
In reacting to the current economic crisis and negative trend of the
automotive industry, the Company has ceased to operate the Neocon USA
subsidiary in order to consolidate the Group operations, reduce overhead
and dispose of the production facility. Effectively, a total of $1,501 of
its fixed assets, mainly land and building, is listed for sale. The
Company expects the total proceeds from the sale of these assets to be
higher than their net book values.
9. LONG-LIVED ASSETS IMPAIRMENT
During the second quarter of the year, the Company's Automotive Solutions
segment (Neocon USA) recorded an asset impairment charge on its machinery
and equipment in the amount of $590. The impairment charge was included
in the depreciation of its fixed assets. It was determined by comparing
the current pricing of similar machinery and equipment. As a result,
management estimated the fair value of its machinery and equipment
exceeded its carrying value by $590 as at March 31, 2009.
Also in the fourth quarter of the year, events occurred which indicated
that there were potential impairments of long-lived assets at the
divisions heavily impacted by the global automotive crisis. These
indicators included 1) permanent reduced capacity in North American
automotive industry, 2) global economic recession, 3) significant sales
decline in fiscal 2009 experienced by all divisions in the automotive
segment and the large mould businesses, and 4) equally weak sales
projection in fiscal 2010 for the large mould businesses. Accordingly,
long-lived assets at these divisions were tested for impairment. The test
results indicated that there are no impairments of long-lived assets
present at these divisions at this time.
10. GOODWILL
During the second quarter of the year events occurred which indicated
that it was more likely than not that there was a significant further
decline in the fair value of the Company's Polytech division due to the
global economic crisis, generally negative development in the North
American automotive industry, continuing poor light vehicle sales and
tightening consumer credit. As a result, the Company tested the goodwill
associated with the Polytech division in advance of the annual impairment
test and the Company recorded a goodwill impairment charge of $10,086.
This impairment charge was not deductible for tax purposes; therefore
there was no corresponding tax benefit. After this impairment charge,
there remained no goodwill on the Company's balance sheet.
11. SEGMENTED INFORMATION
The Company operates in two business segments: Casting and Extrusion
Technology and Automotive Solutions. The accounting policies followed in
the operating segments are consistent with those outlined in note 1 to
the annual consolidated financial statements.
The Casting and Extrusion Technology segment designs and engineers
tooling and other manufacturing equipment. Its operations are
substantially for automotive and other industrial markets in North
America.
The Automotive Solutions segment produces automotive interior components
and assemblies primarily for cargo storage and restraint for sale to
automotive manufacturers and Tier 1 suppliers (suppliers to automakers).
The Corporate segment involves administrative expenses that are not
directly related to the business activities of the above two operating
segments.
-------------------------------------------------------------------------
Three Months ended September 30, 2009
-------------------------------------------------------------------------
Casting and Automotive
Extrusion Solutions Corporate Total
-------------------------------------------------------------------------
Sales $26,023 $11,671 $- $37,694
Depreciation 1,623 592 11 2,226
Goodwill impairment - - - -
Segment income (loss) 1,504 (631) (352) 521
Interest expense 70
Loss before taxes 451
Fixed asset additions 817 717 - 1,534
Fixed assets, net 51,480 18,671 1,545 71,696
Total assets $53,879 $83,982 $2,453 $140,314
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months ended September 30, 2008
-------------------------------------------------------------------------
Casting and Automotive
Extrusion Solutions Corporate Total
-------------------------------------------------------------------------
Sales $26,852 $23,280 $- $50,132
Depreciation 1,585 646 21 2,252
Goodwill impairment - 23,586 - 23,586
Segment loss (683) (21,552) (652) (22,887)
Interest expense 46
Loss before taxes (22,933)
Fixed asset additions 2,316 559 - 2,875
Fixed assets, net 53,073 20,295 1,547 74,915
Goodwill - 10,086 - 10,086
Total assets -
continuing operations 57,540 103,201 2,034 162,775
Total assets -
discontinued operations 5,608 - - 5,608
Total assets $63,148 $103,201 $2,034 $168,383
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Twelve Months ended September 30, 2009
-------------------------------------------------------------------------
Casting and Automotive
Extrusion Solutions Corporate Total
-------------------------------------------------------------------------
Sales $96,105 $47,611 $- $143,716
Depreciation 6,970 3,116 45 10,131
Goodwill impairment - 10,086 - 10,086
Segment income (loss) 2,339 (15,884) (5,280) (18,825)
Interest expense 156
Loss before taxes (18,981)
Fixed asset additions 5,280 2,697 43 8,020
Fixed assets, net 51,480 18,671 1,545 71,696
Total assets $53,879 $83,982 $2,453 $140,314
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Twelve Months ended September 30, 2008
-------------------------------------------------------------------------
Casting and Automotive
Extrusion Solutions Corporate Total
-------------------------------------------------------------------------
Sales $111,493 $90,188 $- $201,681
Depreciation 6,900 2,389 56 9,345
Goodwill impairment - 23,586 - 23,586
Segment income (loss) 3,404 (14,843) (1,885) (13,324)
Interest expense 210
Loss before taxes (13,534)
Fixed asset additions 7,606 3,514 118 11,238
Fixed assets, net 53,073 20,295 1,547 74,915
Goodwill - 10,086 - 10,086
Total assets -
continuing operations 57,540 103,201 2,034 162,775
Total assets -
discontinued operations 5,608 - - 5,608
Total assets $63,148 $103,201 $2,034 $168,383
-------------------------------------------------------------------------
-------------------------------------------------------------------------
5 YEAR FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------
2009 2008 2007 2006 2005
-------------------------------------------------------------------------
Sales $143,716 $201,681 $201,759 $199,271 $202,957
-------------------------------------------------------------------------
Net income (loss) from
continuing operations ($17,666) ($13,398) $5,794 $3,311 $14,579
-------------------------------------------------------------------------
Net income (loss) ($17,666) ($13,934) $3,062 ($616) $11,132
-------------------------------------------------------------------------
Diluted earnings (loss)
per share from
continuing operations ($0.43) ($0.33) $0.14 $0.08 $0.35
-------------------------------------------------------------------------
Diluted earnings
(loss) per share ($0.43) ($0.34) $0.07 ($0.01) $0.27
-------------------------------------------------------------------------
Cash flow from
operations before
non-cash items $4,024 $15,990 $17,698 $22,581 $27,306
-------------------------------------------------------------------------
Total net debt to
equity 0.00:1 0.00:1 0.00:1 0.04:1 0.10:1
-------------------------------------------------------------------------
Capital expenditures,
net of disposals $4,179 $8,151 $11,392 $9,774 $8,477
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CORPORATE INFORMATION
Exco Technologies Limited is a global supplier of innovative technologies
servicing the die-cast, extrusion and automotive industries. Through our
10 strategic locations, we employ 1,350 people and service a diverse and
broad customer base.
Telephone: 905-477-3065
Fax: 905-477-2449
Web: www.excocorp.com
TORONTO STOCK EXCHANGE LISTING
XTC
DIRECTORS
Laurie Bennett, Chairman
Geoffrey F. Hyland
Edward Kernaghan
Brian A. Robbins, President and CEO
Stephen Rodgers
Peter van Schaik
TRANSFER AGENT
Equity Transfer & Trust Company
200 University Avenue
Suite 400
Toronto, Ontario
M5H 4H1
Shareholder Inquiries:
Telephone: 416-361-0930
Web: www.equitytransfer.com
%SEDAR: 00003420E
For further information: Paul Riganelli, Vice-President, Finance and Chief Financial Officer, Telephone: (905) 477-3065 Ext. 7228, Website: http://www.excocorp.com
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