Exco Technologies Limited - Fourth Quarter ended September 30, 2008

    Quarterly Dividend Declared

   
TORONTO, Nov. 26 /CNW/ - Exco Technologies Limited (TSX-XTC) today
announced results for its fourth quarter ended September 30, 2008. In
addition, the Company announced that a quarterly cash dividend of $0.0175 per
share will be paid December 30, 2008 to shareholders of record on December 15,
2008. The dividend is an "eligible dividend" in accordance with the Income Tax
Act of Canada.

    <<
    -------------------------------------------------------------------------
                                     12 Months Ended          3 Months ended
                                       September 30            September 30

                                         ($000s, except per share amounts)

                                    2008        2007        2008        2007
                                    ----        ----        ----        ----
    Sales                       $201,681    $201,759     $50,132     $50,485
    Net income (loss) from
     continuing operations(*)   ($13,398)     $5,794    ($20,753)      ($752)
    Net loss from discontinued
     operations                    ($536)    ($2,732)      ($425)    ($1,321)
    Net income (loss)           ($13,934)     $3,062    ($21,178)    ($2,073)
    Basic and diluted earnings
     (loss) per share from
     continuing operations        ($0.33)      $0.14      ($0.51)     ($0.02)
    Basic and diluted (loss)
     per share from
     discontinued operations      ($0.01)     ($0.07)     ($0.01)     ($0.03)
    Basic and diluted earnings
     (loss) per share             ($0.34)      $0.07      ($0.52)     ($0.05)
    Common shares
     outstanding              40,948,276  41,478,476  40,948,276  41,478,476

     (*) includes non-cash goodwill charge of $23.6 million for Neocon Canada
         and Polytech.
    -------------------------------------------------------------------------
    >>

    The financial results for the 2008 and 2007 reflect the classification of
Exco's Techmire business as a discontinued operation.
    In the fourth quarter sales of $50.1 million were flat compared to last
year's sales of $50.5 million. The value of the U.S. dollar having
strengthened by an average of one cent against the Canadian dollar in the
quarter had a negligible impact on sales. The Automotive Solutions segment
experienced a strong quarter with an increase in sales of $3.5 million or
17.7% to $23.3 million from $19.8 million last year. Increased European sales
by Polydesign more than offset the reduction in North American sales by
Polytech and the Neocon businesses. The Casting and Extrusion segment recorded
reduced quarterly sales of 12.6% or $3.9 million to $26.9 million from $30.7
million last year. Lower sales at Castool and the large mould businesses
(Extec had no sales for the quarter) were responsible for this reduction and
overwhelmed the slight increase in sales in the extrusion die businesses. Sale
of large moulds will improve as deliveries of our Phoenix engine block and six
speed transmission orders begins to take place throughout this year.
    The Company reported a fourth quarter net loss from continuing operations
of $20.8 million compared to a loss of $800 thousand in 2007. This loss
includes non deductible goodwill charges of $23.6 million taken in the fourth
quarter to reflect impairment at our Neocon Canada and Polytech. This is a
non-cash item that does not affect the Company's cash flow, operations,
margins or bank covenants. The Company also expensed numerous other items in
the quarter relating to the closure of its Extec facility in Ontario, the
termination of its aircraft operating lease, general restructuring charges and
bad debt write-offs. The Company also recorded a pre-tax charge of $500
thousand from discontinued operations in the quarter to reduce the carrying
value of the Techmire facility to its current fair market value. Details of
these items are reconciled to net income in the table below.

    <<
                                                      Q.4-2008      Q.4-2007
                                                    -------------------------
    Reported fully diluted loss per share               ($0.52)       ($0.05)
    Goodwill impairment charges                           0.57          0.03
    Loss from terminating aircraft lease                  0.01          0.03
    Restructuring charges                                 0.01          0.01
    Extec closing expenses                                0.01          0.00
    Bad debt write-offs                                   0.01          0.00
    Discontinued operations - Techmire                    0.01          0.03
                                                    -------------------------
    Fully diluted earnings per share before above
     items                                               $0.10         $0.05
                                                    -------------------------
                                                    -------------------------
    >>

    Apart from the above items, pre tax earnings more than tripled in the
quarter at our European operations. All North American business units
experienced weaker earnings and the large mould businesses, not including
Extec, recorded combined losses of $0.02 per share reflecting low capacity
utilization and the cost of restructuring charges taken in the fourth quarter.
    Gross margin in the quarter was 21.7% compared to 25.9% last year
reflecting the poor performance of the large mould businesses, excluding
Extec, which operated well below capacity throughout the quarter and recorded
a loss of $0.02 per share.
    Operating cash flow from operations before net changes in non-cash
working capital improved during the quarter to $3.8 million from $3.1 million
last year. After non-cash working capital is considered, operating cash flow
in the current quarter decreased to $694 thousand from $3.8 million in the
prior year. Exco has no net bank debt and its net cash position remained
strong at $3.5 million.
    "The Company has faced a difficult business environment in the fourth
quarter including a 'par' Canadian dollar, high raw material costs and
declining automotive output" said Brian Robbins, President and CEO of Exco.
"The recent weakness of the Canadian dollar and declining steel and resin
costs are welcome developments that, if sustained, will help to improve the
Company's margin and earnings".
    (For further information 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 November
26, 2008.)

    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 1,950 people and service a diverse and broad
customer base.

    Management will hold a conference call to discuss the fourth quarter
results on Friday November 28, 2008 at 11:00 am (EST). The local dial in
number for the call is (416) 644-3414 or toll free 1-800-733-7571. 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 November 28, 2008 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 2007 Annual
Report, in our 2007 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 September 30, 2008 and 2007 have not been reviewed
by the auditors of the Company.

    <<
    EXCO TECHNOLOGIES LIMITED
    INTERIM CONSOLIDATED BALANCE SHEETS
    (Unaudited)
    ($ in thousands)

    -------------------------------------------------------------------------
                                                           As at       As at
                                                       September   September
                                                        30, 2008    30, 2007
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash                                                $8,141      $5,677
      Accounts receivable (note 3)                        34,120      30,288
      Inventories                                         30,527      29,296
      Prepaid expenses and deposits                        3,013       2,429
      Assets held for sale (note 6)                        5,068       5,568
      Discontinued operations (note 6)                       540       1,349
    -------------------------------------------------------------------------
    Total current assets                                  81,409      74,607

      Mortgage receivable (note 7)                           600           -
      Fixed assets                                        74,915      73,380
      Goodwill (note 5)                                   10,086      33,672
      Future income tax assets                             1,373       2,407
    -------------------------------------------------------------------------
                                                        $168,383    $184,066
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
      Bank indebtedness                                   $4,634      $1,112
      Accounts payable and accrued liabilities            25,125      25,216
      Income taxes payable                                   641         840
      Customer advance payments                              944       1,377
      Current portion of long-term debt                        -          85
      Discontinued operations (note 6)                         -         693
    -------------------------------------------------------------------------
    Total current liabilities                             31,344      29,323
    -------------------------------------------------------------------------

      Future income tax liabilities                        5,277       8,475
    -------------------------------------------------------------------------
    Total liabilities                                     36,621      37,798
    -------------------------------------------------------------------------

    Shareholders' Equity
      Share capital (note 2)                              35,681      36,142
      Contributed surplus (note 2)                         2,789       2,364
      Retained earnings                                  109,912     128,000
      Accumulated other comprehensive loss (note 2)      (16,620)    (20,238)
    -------------------------------------------------------------------------
    Total shareholders' equity                           131,762     146,268
    -------------------------------------------------------------------------
                                                        $168,383    $184,066
    -------------------------------------------------------------------------

    See accompanying notes



    EXCO TECHNOLOGIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE
    INCOME (LOSS)
    (Unaudited)
    ($ in thousands)

                                     3 Months ended         12 Months ended
                                      September 30            September 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Sales                        $50,132     $50,485    $201,681    $201,759
    -------------------------------------------------------------------------
    Cost of sales and
     operating expenses before
     the following (note 4)       39,271      37,430     158,519     151,997
      Selling, general and
       administrative
       (notes 2 and 3)             7,613       9,128      25,690      28,835
      Depreciation and
       amortization                2,252       2,283       9,345       9,801
      Goodwill impairment
       charges (note 5)           23,586       1,093      23,586       1,093
      (Gain) loss on sale of
       fixed assets (note 7)         297        (132)     (2,135)       (522)
      Interest expense (income)       46          (5)        210         219
    -------------------------------------------------------------------------
                                  73,065      49,797     215,215     191,423
    -------------------------------------------------------------------------

    Income (loss) from
     continuing operations
     before income taxes         (22,933)        688     (13,534)     10,336
    Provision for (recovery of)
     income taxes                 (2,180)      1,440        (136)      4,542
    -------------------------------------------------------------------------

    Income (loss) from
     continuing operations       (20,753)       (752)    (13,398)      5,794
    Loss from discontinued
     operations, net of tax
     (note 6)                       (425)     (1,321)       (536)     (2,732)
    -------------------------------------------------------------------------
    Net income (loss) for
     the period                  (21,178)     (2,073)    (13,934)      3,062
    -------------------------------------------------------------------------

    Other comprehensive
     income (loss)
      Unrealized gain (loss)
       on foreign currency
       translation of
       self-sustaining
       operations (note 2)           461      (2,881)      3,618      (5,528)
    -------------------------------------------------------------------------
    Comprehensive loss          ($20,717)    ($4,954)   ($10,316)    ($2,466)
    -------------------------------------------------------------------------

    Earnings (loss) per
     common share
      Basic and diluted from
       continuing operations      ($0.51)     ($0.02)     ($0.33)      $0.14
      Basic and diluted from
       discontinued operations    ($0.01)     ($0.03)     ($0.01)     ($0.07)

      Basic and diluted earnings  ($0.52)     ($0.05)     ($0.34)      $0.07
    -------------------------------------------------------------------------

    See accompanying notes



    EXCO TECHNOLOGIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    (Unaudited)
    ($ in thousands)

    -------------------------------------------------------------------------
                                                            Accumu-
                                                             lated
                                                             other
                                                            compre-    Total
                                        Contri-            hensive     share-
                               Share     buted  Retained    income   holders'
                             capital   surplus  earnings     (loss)   equity
    -------------------------------------------------------------------------

    Balance,
     October 1, 2007         $36,142    $2,364  $128,000  ($20,238) $146,268
    -------------------------------------------------------------------------
    Net income for
     the quarter                   -         -     1,315         -     1,315
    Dividends                      -         -      (618)        -      (618)
    Stock option expense           -       137         -         -       137
    Repurchase of
     share capital              (228)        -      (721)        -      (949)
    Unrealized losses
     on translation of
     self-sustaining
     operations                    -         -         -      (277)     (277)
    -------------------------------------------------------------------------
    Balance,
     December 31, 2007        35,914     2,501   127,976   (20,515)  145,876
    -------------------------------------------------------------------------
    Net income for
     the quarter                   -         -     2,844         -     2,844
    Dividends                      -         -      (719)        -      (719)
    Stock option expense           -        97         -         -        97
    Repurchase of
     share capital              (171)        -      (520)        -      (691)
    Unrealized gains
     on translation of
     self-sustaining
     operations                    -         -         -     4,167     4,167
    -------------------------------------------------------------------------
    Balance,
     March 31, 2008           35,743     2,598   129,581   (16,348)  151,574
    -------------------------------------------------------------------------
    Net income
     for the quarter               -         -     3,085         -     3,085
    Dividends                      -         -      (718)        -      (718)
    Stock option expense           -        95         -         -        95
    Repurchase of
     share capital               (27)        -       (71)        -       (98)
    Unrealized losses
     on translation of
     self-sustaining
     operations                    -         -         -      (733)     (733)
    -------------------------------------------------------------------------
    Balance,
     June 30, 2008            35,716     2,693   131,877   (17,081)  153,205
    -------------------------------------------------------------------------
    Net loss
     for the quarter               -         -   (21,178)        -   (21,178)
    Dividends                      -         -      (717)        -      (717)
    Stock option expense           -        96         -         -        96
    Repurchase of
     share capital               (35)        -       (70)        -      (105)
    Unrealized gains
     on translation of
     self-sustaining
     operations                    -         -         -       461       461
    -------------------------------------------------------------------------
    Balance,
     September 30, 2008      $35,681    $2,789  $109,912  ($16,620) $131,762
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    EXCO TECHNOLOGIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)
    ($ in thousands)

                                     3 Months ended         12 Months ended
                                      September 30           September 30
    -------------------------------------------------------------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES:
    Net income (loss) from
     continuing operations      ($20,753)      ($752)   ($13,398)     $5,794
    Add (deduct) items not
     involving a current
     outlay of cash
      Goodwill impairment
       charges (note 5)           23,586       1,093      23,586       1,093
      Depreciation and
       amortization                2,252       2,283       9,345       9,801
      Stock-based compensation
       expense (note 2)               73         148         402         597
      Future income taxes         (2,120)        186      (2,186)        707
      (Gain) loss on sale of
       fixed assets (note 7)         297        (132)     (2,135)       (522)
      Loss on financial instrument
       valuation (note 3)            488         271         376         228
    -------------------------------------------------------------------------
                                   3,823       3,097      15,990      17,698
    Net change in non-cash working
     capital balances related to
     continuing operations        (3,129)        656      (3,699)      1,857
    -------------------------------------------------------------------------
    Cash provided by operating
     activities of continuing
     operations                      694       3,753      12,291      19,555
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES:
    Increase (decrease) in bank
     indebtedness                  1,638      (2,484)      2,760      (6,936)
    Decrease in long-term debt         -         (31)        (85)       (332)
    Dividends paid (note 2)         (717)       (622)     (2,772)     (2,486)
    Repurchase of share capital
     (note 2)                       (105)          -      (1,843)       (613)
    Issue of share capital (note 2)    -         115           -         277
    -------------------------------------------------------------------------
    Cash provided by(used in)
     financing activities of
     continuing operations           816      (3,022)     (1,940)    (10,090)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES:
    Investment in fixed assets    (2,875)     (2,330)    (11,238)    (13,959)
    Proceeds on sale of fixed
     assets                           25         161       3,087       2,567
    -------------------------------------------------------------------------
    Cash used in investing
     activities of continuing
     operations                   (2,850)     (2,169)     (8,151)    (11,392)
    -------------------------------------------------------------------------

    CASH FLOWS FROM DISCONTINUED
     OPERATIONS
    Net cash provided by operating
     activities (note 6)             341       3,189          80       3,007
    Net cash provided by investing
     activities (note 6)               -       2,317           -       2,317
    -------------------------------------------------------------------------
    Net cash provided by
     discontinued operations         341       5,506          80       5,324
    -------------------------------------------------------------------------

    Effect of exchange rate changes
     on cash                         115        (111)        184        (190)

    Net increase (decrease) in cash
     during the period              (884)      3,957       2,464       3,207
    Cash, beginning of period      9,025       1,720       5,677       2,470
    -------------------------------------------------------------------------
    Cash, end of period           $8,141      $5,677      $8,141      $5,677
    -------------------------------------------------------------------------

    See accompanying notes

    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 2007 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 2007 annual consolidated financial statements,
    except for the changes described below.

    Accounting policy changes

    Effective October 1, 2007, the Company adopted the new CICA accounting
    sections: 1535 (Capital Disclosures), 3862 (Financial Instruments -
    Disclosure) and 3863 (Financial Instruments - Presentation). These new
    accounting policy changes are for disclosure purposes and have no impact
    on the Company's unaudited interim consolidated financial statements.

    Under Section 1535 (Capital Disclosures), the Company is required to
    disclose information regarding its capital and how it is managed
    including enhanced disclosure requirements with respect to the Company's
    objectives, policies and processes. In addition, it is also required to
    disclose whether the Company has complied with any externally imposed
    capital requirements to which it is subject (note 8).

    Under Section 3862 (Financial Instruments - Disclosure) and 3863
    (Financial Instruments - Presentation), the Company is required to
    disclose additional details of its financial assets and liabilities
    categories and the risks associated with the Company's financial
    instruments (note 3).

    Future accounting policy changes

    Effective October 1, 2008, the Company will adopt the new CICA accounting
    sections: 3064 (Goodwill and Intangible Assets) and 3031 (Inventories).
    The Company expects the adoption will have no material impact on its
    consolidated financial statements.

    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, whether these assets
    are separately acquired or are developed internally.

    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.

    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. The Company is
    currently formulating and developing an implementation plan to comply
    with the new standards and its future reporting requirements.

    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
    -------------------------------------------------------------------------

                                             Number of shares   Stated value
    -------------------------------------------------------------------------
    Issued and outstanding at
     September 30, 2007                            41,478,476        $36,142
      Purchased and cancelled pursuant to
       normal course issuer bid                      (262,600)          (228)
    -------------------------------------------------------------------------
    Issued and outstanding at
     December 31, 2007                             41,215,876         35,914
      Purchased and cancelled pursuant to
       normal course issuer bid                      (195,500)          (171)
    -------------------------------------------------------------------------
    Issued and outstanding at March 31, 2008       41,020,376         35,743
      Purchased and cancelled pursuant to
       normal course issuer bid                       (30,900)           (27)
    -------------------------------------------------------------------------
    Issued and outstanding at June 30, 2008        40,989,476         35,716
      Purchased and cancelled pursuant to
       normal course issuer bid                       (41,200)           (35)
    -------------------------------------------------------------------------
    Issued and outstanding at September 30, 2008   40,948,276        $35,681
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 gain of $3,618 during the twelve months ended September 30,
    2008 (twelve months ended September 30, 2007 the unrealized translation
    loss was $5,528). For the three months ended September 30, 2008 the
    unrealized translation gain was $461 (three months ended September 30,
    2007 the unrealized translation loss was $2,881). The year to date
    unrealized gain of $3,618 is primarily attributable to the strengthening
    of the U.S. dollar against the Canadian dollar as measured at
    September 30, 2008 and 2007.

    Cash dividend

    During the twelve months ended September 30, 2008, the Company paid cash
    dividends as outlined in the table below. The dividend rate in the
    quarter was $0.0175 (2007 - $0.015) per common share.


                                                   Fiscal 2008   Fiscal 2007
    -------------------------------------------------------------------------
    December 31                                           $618          $622
    March 31                                               719           621
    June 30                                                718           621
    September 30                                           717           622
    -------------------------------------------------------------------------
    Total dividends paid                                $2,772        $2,486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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):

                     Fiscal 2008                     Fiscal 2007
            -----------------------------------------------------------------
             Options outstanding              Options outstanding
            ---------------------            ---------------------
                        Weighted                        Weighted
                Number   average                Number   average
                    of  exercise      Options       of  exercise      Options
               options     price  exercisable  options     price  exercisable
    -------------------------------------------------------------------------
    Opening
     balance   2,410,849   $4.50   1,817,387   2,302,056   $4.56   1,706,227
    Granted       73,777   $3.79           -     250,481   $4.00           -
    Vested             -       -     183,021           -       -           -
    Expired     (179,212)  $5.42    (179,212)     (5,688)  $3.52      (5,688)
    -------------------------------------------------------------------------
    Balance,
     December
     31        2,305,414   $4.41   1,821,196   2,546,849   $4.50   1,700,539
    Vested             -       -       6,000           -       -     233,848
    Cancelled    (30,000)   6.85     (24,000)          -       -           -
    -------------------------------------------------------------------------
    Balance,
     March 31  2,275,414   $4.38   1,803,196   2,546,849   $4.50   1,934,387
    Exercised          -       -           -     (42,000)  $3.85     (42,000)
    Expired            -       -           -     (40,000)  $6.04     (30,000)
    Cancelled          -       -           -      (9,000)  $4.00           -
    -------------------------------------------------------------------------
    Balance,
     June 30   2,275,414   $4.38   1,803,196   2,455,849   $4.37   1,862,387
    Exercised          -       -           -     (30,000)  $3.85     (30,000)
    Expired      (10,000)  $7.60     (10,000)    (15,000)  $3.85     (15,000)
    -------------------------------------------------------------------------
    Balance,
     September
     30        2,265,414   $4.36   1,793,196   2,410,849   $4.50   1,817,387
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 2008, payroll deductions will be made
    supporting the purchase of a maximum of 188,558 shares at $3.98 per
    share. The purchase and payroll deductions with respect to these shares
    will be completed in the first quarter of fiscal 2009. Employees must
    decide annually whether or not they wish to purchase their common shares.
    During the twelve months ended September 30, 2008 no shares (2007 - nil)
    were issued under the terms of the ESPP.

    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
    $425 for the twelve months ended September 30, 2008 (twelve months ended
    September 30, 2007 - $527) and for the three months ended September 30,
    2008 was $96 (three months ended September 30, 2007 - $129). All stock-
    based compensation has been recorded in selling, general and
    administrative expenses. The weighted average assumptions used in the
    twelve months ended September 30, 2008, measuring the fair value of stock
    options and the weighted average fair value of options granted are as
    follows:

                                                             September 30
                                                          2008          2007
    -------------------------------------------------------------------------
    Risk-free interest rates                             4.14%         4.02%
    Expected dividend yield                              0.89%         0.90%
    Expected volatility                                 26.80%        27.00%
    Expected time until exercise                    6.02 years    5.58 years
    Weighted average fair value of options granted       $1.59         $1.52
    -------------------------------------------------------------------------

    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.

                                               Number of units       Expense
    -------------------------------------------------------------------------
    December 31, 2007                                    3,958           ($7)
    March 31, 2008                                       3,533             -
    June 30, 2008                                        3,970             7
    September 30, 2008                                   6,376           (23)
    -------------------------------------------------------------------------
    Total                                               17,837          ($23)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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:

                                                            2008        2007
    -------------------------------------------------------------------------

    Balance, September 30                                 $2,364      $1,916
    Stock option compensation expense                        137         128
    -------------------------------------------------------------------------
    Balance, December 31                                  $2,501      $2,044
    Stock option compensation expense                         97         135
    -------------------------------------------------------------------------
    Balance, March 31                                     $2,598      $2,179
    Stock option compensation expense                         95         135
    Exercise of options                                        -         (46)
    -------------------------------------------------------------------------
    Balance, June 30                                      $2,693      $2,268
    -------------------------------------------------------------------------
    Stock option compensation expense                         96         129
    Exercise of options                                        -         (33)
    -------------------------------------------------------------------------
    Balance, September 30                                 $2,789      $2,364
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2008
    replacing the normal course issuer bid which expired on May 7, 2008. 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, 2008, the
    Company purchased 530,200 common shares (2007 - 156,700) at a total cost
    of $1,843 (2007 - $613). The cost to purchase these shares exceeded their
    stated value by $1,382 (2007 - $478). This excess has been charged
    against retained earnings.

    3. FINANCIAL INSTRUMENTS

    Financial instruments of the Company consists primarily of cash, accounts
    receivable, mortgage receivable, bank indebtedness, accounts payable and
    accrued liabilities, customer advance payments, 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 income (loss) the carrying value of these financial
    instruments approximates their fair value due to their short term
    maturities 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 financial
     liabilities                    liabilities
    Customer advance payments      Financial liabilities - held for trading
    Forward foreign exchange       Financial assets - held for trading
     contracts

    (*) Recorded at amortized cost


    Foreign exchange contracts

    The Company has forward foreign exchange contracts to sell US$1,800 over
    the next 4 months at the rate ranges from 1.047 to 1.049 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 138.1 million Mexican pesos (September
    30, 2007 - 52.7 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 $231 would be realized if
    these contracts and collars were terminated on September 30, 2008. As at
    September 30, 2008, the estimated fair value loss of $231 has been
    included in the selling, general and administrative expense on the
    consolidated statements of earnings and comprehensive income (loss).

    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 sheet
    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 allowances for doubtful accounts. Subsequent recoveries of
    amounts previously written off are credited against operating expenses in
    the consolidated statements of earnings and comprehensive income (loss).
    As at September 30, 2008, the accounts receivable balance (net of
    allowances for doubtful accounts) is $34,120 (September 30, 2007 -
    $30,288) and the Company's five largest trade debtors accounted for 44%
    of the total accounts receivable balance. As at September 30, 2008, South
    American accounts receivable in the amount of $430 are insured against
    default.

    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, 2008, the Company has a net cash balance
    of $3,507 and unused credit facilities of $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 rate may affect
    the operating results of the company. The Company does not use derivative
    instruments to reduce its exposure to foreign currency risk. 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 the 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 income (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, a one percent strengthening or
    weakening of the Canadian dollar against the US dollar and Moroccan
    Dirham and a one percent fluctuation between the Euro and Dirham, US
    dollar and Mexican pesos compared with the average year to date exchange
    rate would have the following effects in the Company's year to date loss
    before income taxes and other comprehensive income (loss).

    -------------------------------------------------------------------------
              1% Weakening  1% Strengthening  1% Fluctuation  1% Fluctuation

                                                    Euro and         USD and
               USD  Dirham       USD  Dirham          Dirham        MXN peso
    -------------------------------------------------------------------------
    Income
     (loss)
     before
     income
     taxes     291      44      (291)    (44)   +/-      157    +/-       46
    -------------------------------------------------------------------------
    Other
     compre-
     hensive
     income
     (loss)  1,300     200    (1,300)   (200)             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 of September 30, 2008, the Company has a net cash position
    of $3,507; therefore its interest rate risk exposure is insignificant.

    4. RESEARCH AND DEVELOPMENT

    Research and development expensed during the twelve months ended
    September 30, 2008 were nil since the Techmire division was sold last
    year (twelve months ended September 30, 2007 - $307) and during the three
    months ended September 30, 2008 were nil (three months ended September
    30, 2007 - $73).

    5. GOODWILL IMPAIRMENT CHARGES

    During the fourth quarter of the current year, events occurred which
    indicated that it was more likely than not that there was a significant
    decline in the fair value of the Company's Neocon Canada division. These
    events included continuing sharp decline in pre-tax income, significant
    reduction in vehicle production for heavy vehicles expected by all OEMs
    in 2009 and beyond due to tight credit markets, high fuel prices and
    strong Canadian dollar environment. As a result, the Company recorded a
    goodwill impairment charge of $7,086. After this impairment charge, there
    remains no goodwill associated with the Neocon Canada division.

    In addition, the generally negative development in the North American
    automotive industry and more recently, poor light vehicle sales and
    tightening consumer credit that began in September 2008 significantly
    reduced the valuation of the Company's Polytech division. Consequently,
    the Company recorded a goodwill impairment charge of $16,500 in September
    2008. After this impairment charge, there remains $10,086 of goodwill
    associated with the Polytech division.

    The goodwill impairment charges are non-cash in nature and do not affect
    the Company's liquidity, cash flows from operating activities, or debt
    covenants and will not have an impact on future operations.

    In the fourth quarter of prior year, events occurred which indicated that
    it was more likely than not that there was a significant decline in the
    fair value of the Company's Neocon USA division. These events included a
    pre-tax loss in the prior year of $1,334, a consistent inability over
    numerous years to be profitable or achieve its budget, and difficulty in
    securing and launching sufficient business to grow its sales to a size
    necessary to effectively cover operating overheads. As a result, the
    Company recorded a goodwill impairment charge of $1,093. After this
    impairment charge, there remains no goodwill associated with the Neocon
    USA division.

    The above impairment charges were not deductible for income tax purposes;
    therefore there was no corresponding tax benefit in 2008 or 2007.

    6. DISCONTINUED OPERATIONS

    Included in discontinued operations is the Company's Techmire division
    which was located in Montreal. On September 28, 2007, the Company
    announced the sale of this division to Dynacast Canada Inc. ("Dynacast"),
    a global manufacturer of precision engineered, die-cast metal and small
    components. The cash sale included all assets of the Techmire business
    excluding the production facility which was leased to Dynacast from
    October 2007 to April 2008. The production facility is listed for sale
    and is reflected in the accompanying consolidated balance sheets as
    assets held for sale. The sale of the production facility is not expected
    to be materially different from its carrying value.

    The results from discontinued operations have been reported separately
    within these consolidated financial statements.

    Summarized financial information for discontinued operations is as
    follows:

                                                        Three Months ended

                                                       September   September
                                                        30, 2008    30, 2007
    -------------------------------------------------------------------------
    Sales                                                     $-      $2,254

    Operating losses                                       ($114)      ($752)
    Write down of assets held for sale                      (500)       (690)
    Loss on disposition                                        -        (563)
    -------------------------------------------------------------------------
    Discontinued operations before income taxes             (614)     (2,005)
    Future income taxes                                      189         684
    -------------------------------------------------------------------------
    Net losses from discontinued operations                ($425)    ($1,321)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                        Twelve Months ended

                                                       September   September
                                                        30, 2008    30, 2007
    -------------------------------------------------------------------------
    Sales                                                     $0     $10,032

    Operating losses                                       ($282)    ($2,894)
    Write down of assets held for sale                      (500)       (690)
    Loss on disposition                                        -        (563)
    -------------------------------------------------------------------------
    Discontinued operations before income taxes             (782)     (4,147)
    Future income taxes                                      246       1,415
    -------------------------------------------------------------------------
    Net losses from discontinued operations                ($536)    ($2,732)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                               As at
                                                       September   September
                                                        30, 2008    30, 2007
    -------------------------------------------------------------------------
    Net assets (liabilities) of discontinued
     operations:
    Current assets(*)                                       $540      $1,349
    Assets held for sale                                   5,068       5,568
    Property, plant and equipment                              -           -
    -------------------------------------------------------------------------
    Total assets                                           5,608       6,917
    Less: current liabilities                                  -         693
    -------------------------------------------------------------------------
    Net assets of discontinued operations                 $5,608      $6,224
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Included escrow receivable from Dynacast regarding the purchase of
    Techmire's assets which was received in full after year-end.

    7. GAIN ON SALE OF FIXED ASSETS

    In December 2007, the Company decided to consolidate its large mould
    production facilities. As a result, its Extec division was consolidated
    with other large mould operations and its production facility was
    reclassified as assets held for sale. Extec's redundant real estate and
    production facility was sold in February and May 2008, respectively, at a
    combined gain of $2,232. A second mortgage in the amount of $600 with a
    two year term at 8% interest was taken back by the Company as partial
    consideration for the sale of the production facility.

    8. CAPITAL MANAGEMENT

    The Company defines capital as net debt and shareholders' equity. As at
    September 30, 2008, total managed capital was $131,762 (September 30,
    2007 - $146,268) consisting of nil net debt (September 30, 2007 - nil)
    and shareholders' equity of $131,762 (September 30, 2007 - $146,268).

    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:

                                                            2008        2007
                                                          (as at      (as at
                                                       September   September
                                                              30)         30)
    -------------------------------------------------------------------------

    Net debt to equity                                    0.00:1      0.00:1
    Current ratio                                         2.55:1      2.25:1
    -------------------------------------------------------------------------

    The following table details the net debt calculation used in the net debt
    to equity ratio as at the periods ended as indicated:

                                                            2008        2007
                                                          (as at      (as at
                                                       September   September
                                                              30)         30)
    -------------------------------------------------------------------------

    Bank indebtedness                                     $4,634      $1,112
    Current portion of long-term debt                          -          85
    Less: cash                                            (8,141)     (5,677)
    -------------------------------------------------------------------------
    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, 2008, the Company was in compliance with the required
    financial covenants.

    9. SEGMENTED INFORMATION FROM CONTINUING OPERATIONS

    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 of
    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).

    -------------------------------------------------------------------------
                                       Three Months ended September 30, 2008

                                         Casting and
                                           Extrusion  Automotive
                                          Technology   Solutions       Total
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Sales                                    $26,852     $23,280     $50,132
    Depreciation and amortization              1,596         656       2,252
    Segment income (loss) before
     goodwill impairment charges                (871)      1,570         699
    Goodwill impairment charges                    -      23,586      23,586
    Segment loss after goodwill
     impairment charges                         (871)    (22,016)    (22,887)
    Interest expense                                                      46
    Loss before income taxes                                         (22,933)
    Fixed assets additions                     2,316         559       2,875
    Fixed assets - continuing operations      54,620      20,295      74,915
    Total fixed assets, net                   54,620      20,295      74,915
    Goodwill                                       -      10,086      10,086
    Total assets - continuing operations      59,574     103,201     162,775
    Total assets - discontinued operations     5,608           -       5,608
    Total assets                             $65,182    $103,201    $168,383
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                       Three Months ended September 30, 2007

                                         Casting and
                                           Extrusion  Automotive
                                          Technology   Solutions       Total
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Sales                                    $30,706     $19,779     $50,485
    Depreciation and amortization              1,666         617       2,283
    Segment income before goodwill
     impairment charge                         1,624         152       1,776
    Goodwill impairment charge                     -       1,093       1,093
    Segment income (loss) after
     goodwill impairment charge                1,624        (941)        683
    Interest income                                                       (5)
    Income from continuing operations
     before income taxes                                                 688
    Fixed asset additions                      1,455         875       2,330
    Fixed assets - continuing
     operations                               54,667      18,713      73,380
    Total fixed assets, net                   54,667      18,713      73,380
    Goodwill                                       -      33,672      33,672
    Total assets - continuing
     operations                               67,135     110,014     177,149
    Total assets - discontinued
     operations                                6,917           -       6,917
    Total assets                             $74,052    $110,014    $184,066
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                      Twelve Months ended September 30, 2008

                                         Casting and
                                           Extrusion  Automotive
                                          Technology   Solutions       Total
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Sales                                   $111,493     $90,188    $201,681
    Depreciation and amortization              6,931       2,414       9,345
    Segment income before goodwill
     impairment charges                        3,513       6,749      10,262
    Goodwill impairment charges                    -      23,586      23,586
    Segment income (loss) after
     goodwill impairment charges               3,513     (16,837)    (13,324)
    Interest expense                                                     210
    Loss before income taxes                                         (13,534)
    Fixed assets additions                     7,724       3,514      11,238
    Fixed assets - continuing
     operations                               54,620      20,295      74,915
    Total fixed assets, net                   54,620      20,295      74,915
    Goodwill                                       -      10,086      10,086
    Total assets - continuing
     operations                               59,574     103,201     162,775
    Total assets - discontinued
     operations                                5,608           -       5,608
    Total assets                             $65,182    $103,201    $168,383
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                      Twelve Months ended September 30, 2007

                                         Casting and
                                           Extrusion  Automotive
                                          Technology   Solutions       Total
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Sales                                   $120,769     $80,990    $201,759
    Depreciation and amortization              7,407       2,394       9,801
    Segment income before goodwill
     impairment charge                         6,202       5,446      11,648
    Goodwill impairment charge                     -       1,093       1,093
    Segment income after goodwill
     impairment charge                         6,202       4,353      10,555
    Interest expense                                                     219
    Income from continuing operations
     before income taxes                                              10,336
    Fixed asset additions                      9,474       4,485      13,959
    Fixed assets - continuing operations      54,667      18,713      73,380
    Total fixed assets, net                   54,667      18,713      73,380
    Goodwill                                       -      33,672      33,672
    Total assets - continuing
     operations                               67,135     110,014     177,149
    Total assets - discontinued
     operations                                6,917           -       6,917
    Total assets                             $74,052    $110,014    $184,066
    -------------------------------------------------------------------------
    >>

    %SEDAR: 00003420E


        
For further information:        

Source: Exco Technologies Limited (TSX-XTC)
Contact: Paul Riganelli, Vice-President, Finance and Chief Financial Officer
Telephone: (905) 477-3065 Ext. 7228
Website: http://www.excocorp.com

 

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