Exco Technologies Limited - Second Quarter ended March 31, 2009 and Quarterly Dividend DeclaredTORONTO, April 29 /CNW/ - Exco Technologies Limited (TSX-XTC) today announced results for its second quarter ended March 31, 2009. In addition, the Company announced a $0.0175 dividend per share which will be paid on June 30, 2009 to shareholders of record on June 15, 2009. The dividend is an "eligible dividend" in accordance with the Income Tax Act of Canada.
------------------------------------------------------------------------- 6 Months ended 3 Months ended March 31 March 31 ------------------------------------------------------------------------- ($000s, except per share amounts) ------------------------------------------------ 2009 2008 2009 2008 ---- ---- ---- ---- ------------------------------------------------------------------------- Sales 77,677 103,872 33,233 55,898 Net income (loss) from continuing operations (17,032) 4,208 (14,607) 2,844 Net loss from discontinued operations - (49) - - Net income (loss) (17,032) 4,159 (14,607) 2,844 Basic and diluted earnings (loss) per share from continuing operations ($0.42) $0.10 ($0.36) $0.07 Basic and diluted earnings (loss) per share ($0.42) $0.10 ($0.36) $0.07 Common shares outstanding 40,674,000 41,020,000 40,674,000 41,020,000 -------------------------------------------------------------------------Consolidated sales from continuing operations for the quarter ended March 31, 2009 were $33.2 million - a decrease of $22.7 million or 40.6% over last year. Year-to-date sales were $77.7 million - a decrease of $26.2 million or 25.2% compared to last year. This reflects a quarter of exceptional contraction in global automotive production, commercial construction and overall industrial output. The Automotive Solutions segment and the large mould businesses were severely impacted by this collapse in automobile production. Production of the Honda CRV and Civic in Europe was completely shut down in January for 6 months impacting Polydesign's sales of seat covers in the quarter by approximately $8 million in sales. It is anticipated that in June deliveries of seat covers on these programs will resume. All automobile manufacturers reduced production by extending Christmas shutdowns until well into January and in some cases February and thereafter resumed production at drastically reduced levels for the balance of the quarter. Deliveries to port of entry programs were also impacted as Asian OEMs reduced vehicle exports to North America. Extrusion die and Castool sales have been steadier since they sell primarily to industrial markets and have benefited from the insolvency of smaller competitors.
Net loss from continuing operations for the second quarter was $14.6 million or $0.36 per share compared to net income of $2.8 million or $0.07 per share last year. Year-to-date, Exco reported a net loss from continuing operations of $17.0 million or $0.42 per share compared to net income of $4.2 million or $0.10 per share in the prior year. During the quarter Exco recorded a goodwill impairment charge of $10.1 million associated with its Polytech business unit compared to no goodwill impairment charge during the same quarter last year. Consolidated pre tax loss from continuing operations, before the impact of this goodwill charge, was $6.2 million compared to a pre tax profit of $3.8 million last year. After this impairment charge no goodwill remains on the balance sheet of the Company. During the quarter Exco also determined that the carrying value of certain assets held for sale and property, plant and equipment was impaired and a charge of $1.4 million was taken against the Techmire building and $590 thousand was taken against equipment held at Neocon USA. All of these charges are non cash in nature and do not affect cash flow. Net income in the quarter was also impacted by severance charges of $1.3 million pre tax incurred to reduce staff company-wide by almost 20%. Bad debt write offs in the amount of $1.4 million pre tax mostly related to the bankruptcy of a significant extrusion die customer also increased our losses in the quarter. Excluding all the above items, year-to-date pre tax profit from continuing operations was $64 thousand or a loss of $0.04 per share compared to a pre tax profit of $6.7 million last year or $0.12 per share.
Gross margin for the second quarter was 18.0% compared to 21.3% in the prior year. Year-to-date, gross margin was 18.9% compared to 21.5% last year. Gross margin in the second quarter improved in the Casting and Extrusion segment on better product mix and lower raw material costs. In the Automotive Solutions segment staffing cuts and other overhead reduction initiatives have enabled the segment to retain positive margin despite dramatically lower sales in the quarter.
Operating cash flow from continuing operations in the current quarter decreased to $3.4 million from $6.9 million in the prior year primarily due to lower income and build-up in raw material for large moulds due to be shipped throughout the balance of the fiscal year and into fiscal 2010. Year-to-date, operating cash flow increased to $9.4 million compared to $7.4 million last year largely because of the decrease in non-cash working capital required at these lower sales levels. The Company's net cash position at quarter end totalled $4.0 million compared to $3.5 million at the beginning of the fiscal year. The Company's cash position is also expected to benefit from the sale of the Company's Techmire facility later this summer. Given the Company's strong balance sheet with no net debt and its ability to generate positive operating cash flow in the quarter even at these drastically low production levels, management believes the Company is well positioned to weather this uncertainty and thrive thereafter.
The Company's cash position may also be impacted by the possible insolvency of Chrysler which, in 2008, was the Company's second largest customer at 9% of annual sales. This exposure primarily relates to the sale of large moulds and outstanding accounts receivable range from $1 million to $4 million at any given time depending on the timing of tool acceptance or delivery of moulds. The Company employs several strategies to minimize its exposure in this regard including: 1) billing before delivery is made 2) limiting total exposure to Chrysler by insisting, where possible, on payment for outstanding invoices before additional tools are delivered and 3) utilizing of the Export Development Corporation account receivable insurance program when prudent.
The Company believes that even in the event of a Chrysler bankruptcy or an association with Fiat the Phoenix V6 engine program is inherently valuable since it meets stringent future North American fuel efficiency standards. As such the Company believes tooling for this program will continue to be necessary to Chrysler in restructuring environment or desirable to other OEMs in a liquidation scenario. The Company's exposure to General Motors is much less with outstanding receivables typically less than $500 thousand for components but occasionally reaching $750 thousand if tooling is delivered.
Falling raw material prices and the weakening Canadian dollar are benefiting the Company by supporting gross margin and operating cash flow. However, substantial improvement in the Company's financial performance will require an increase in sales. Management expects this will not take place for several more quarters and will concentrate its efforts on continued right sizing of the Company's capacity and fixed costs in order to achieve profitability at these lower sales levels and to improve profitability once volumes begin to return to more traditional levels. Despite this difficult business environment Exco's Automotive Solutions segment has secured new programs representing approximately $25 million in annualized sales launching throughout the balance of 2009 and 2010, subject to volume and currency fluctuations. The large mould group has received further orders for six speed transmission moulds from the Detroit 3 for delivery during the same time frame if they successfully conclude their restructurings.
(For further information please refer to the Company's Second Quarter Interim Financial Statements in the Investor Relations section posted at www.excocorp.com after April 29, 2009. Alternatively, please refer to www.sedar.com after April 29, 2009.)
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 1,500 people and service a diverse and broad customer base.
Management will hold a conference call to discuss the second quarter results on Thursday April 30, 2009 at 11:00 am (EST). The local dial in number for the call is (416) 644-3421 or toll free 1-800-731-5774. To access the live audio webcast, please log on to www.excocorp.com or www.q1234.com a few minutes before the event. Real Player is required for access. For those unable to participate on April 30, 2009, an archived version will be available on the Exco website.
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.
For further information: Paul Riganelli, Vice-President, Finance and Chief Financial Officer, Telephone: (905) 477-3065, Website: http://www.excocorp.com
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