Exco Technologies Limited - Third Quarter ended June 30, 2009 and Quarterly Dividend Declared
TORONTO, July 29/CNW/ - Exco Technologies Limited (TSX-XTC) today announced results for its third quarter ended June 30, 2009. In addition, the Company announced the continuation of its dividend and declared a $0.0175 dividend per share which will be paid on September 30, 2009 to shareholders of record on September 16, 2009. The dividend is an "eligible dividend" in accordance with the Income Tax Act of Canada.
------------------------------------------------------------------------- 9 Months ended 3 Months ended June 30 June 30 ------------------------------------------------------------------------- ($000s, except per share amounts) ----------------------------------------------- 2009 2008 2009 2008 ---- ---- ---- ---- ------------------------------------------------------------------------- Sales $106,022 $151,549 $28,345 $47,677 Net income (loss) from continuing operations ($18,030) $7,355 ($998) $3,147 Net loss from discontinued operations - ($111) - ($62) Net income (loss) ($18,030) $7,244 ($998) $3,085 Basic and diluted earnings (loss) per share ($0.44) $0.18 ($0.02) $0.08 Common shares outstanding 40,666,000 40,989,000 40,666,000 40,989,000 -------------------------------------------------------------------------
Consolidated sales from continuing operations for the quarter ended June 30, 2009 were $28.3 million compared to $47.7 million last year - a decrease of $19.4 million or 41%. Year-to-date sales were $106 million - a decrease of $45.5 million or 30% compared to last year. This reflects another quarter of exceptional contraction in global automotive production, commercial construction and overall industrial output. In addition to poor sales caused by this recessionary environment, Exco sales in this quarter were disrupted by the bankruptcies of Chrysler, General Motors and Visteon. Although each situation was different, in all cases production and releases were disrupted with the most extreme case being Chrysler which ceased all production in May and June. This quarter also reflects the cessation of sales to Indalex during its bankruptcy process and the continuing cessation of Honda CRV and Civic seat cover sales during April and May.
Net loss from continuing operations for the third quarter was $998 thousand or $0.02 per share compared to net income of $3.1 million or $0.08 per share last year. Year-to-date, Exco reported a net loss from continuing operations of $18 million or $0.44 per share compared to net income of $7.4 million or $0.18 per share in the prior year. In the quarter low sales at all business units impacted efficient absorption of overheads and caused loss from continuing operations. This loss was further widened by severances of $598 thousand, inventory write-downs of $482 thousand and bad debt write offs of $108 thousand. Offsetting this was a foreign exchange gain from fair valuation of forwards and collars of $1.15 million. Year to date net loss from continuing operations was impacted by a goodwill impairment charge of $10.1 million associated with its Polytech business unit. There are no goodwill remains on the balance sheet of the Company. Year-to-date consolidated pre tax loss from continuing operations, before the impact of this goodwill charge, was $9.4 million. Also in the second quarter, Exco 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 were non cash in nature and did not affect cash flow. Net loss in the current year was also impacted by higher than normal severance charges, bad debt write offs and a loss from fair valuation of forwards and collars in the pre tax amounts of $2 million, $1.7 million and $1.3 million respectively.
Operating cash flow from continuing operations in the current quarter decreased to $2.6 million from $4.2 million in the prior year primarily due to loss and build-up in inventory for large moulds which are to be shipped over the next two quarters. Year-to-date, operating cash flow increased slightly to $11.9 million from $11.6 million last year despite lower sales as the Company effectively reduced non-cash working capital, especially accounts receivable, in response to lower sales. Further improvement in non-cash working capital is expected to take place in the coming quarters as shipments from inventory, particularly with respect to large moulds on the Chrysler Phoenix engine block program, accelerate once the customers resume production. Aggressive measures implemented by management including staff reduction, overhead and selling, general and administrative cuts and implementation of production efficiencies have enabled the Company to generate positive operating cash flow despite North American industry production levels of less than 10 million units per annum. In addition cash flow generated from investing activities in the quarter was $1.7 million versus $2.9 million used in the same quarter last year. The sale of the Techmire building and reduced capital expenditures in the current quarter accounted for the favourable swing.
During the third quarter Exco confronted the bankruptcy of some of its largest automotive customers. The Company was able to collect, or expects to collect, essentially all accounts receivable from these customers as Exco was fortunate enough to be sourced on powertrain and interior trim programs which continue to be vital to these customers. Ironically, the vast majority of accounts receivable lost to bankruptcy in the year have stemmed from our non-automotive customer base. The Company continues to utilize, where deemed prudent to do so, Export Development Corporation insurance to minimize its exposure to customer defaults although no claims were made against this insurance in the quarter. Management believes that the period of greatest risk to its balance sheet from bankruptcy of its largest customers is behind us.
Management is cautiously optimistic about Exco's performance for the balance of the fiscal year. We have resumed shipments on the CRV and Civic seat cover programs in June with the ramp up expected to be gradual throughout the fourth quarter. Takeover business recently secured with Visteon for instrument panel and door panel leather inserts will launch at Polydesign in the next quarter and Polytech and Neocon Canada are launching new programs ranging from trays for the Toyota Prius to cluster hoods and other componentry on the Buick LaCross instrument panel. While management is not increasing its previously announced new business awards of approximately $25 million, new opportunities for interior trim components, particularly shift boots, continue to present themselves. Disruption to vehicle production caused by OEM and Tier insolvencies or efforts by OEMs to rebalance inventory now seem to be abating. This will allow for better absorption of overhead costs which management has been aggressively reducing. These efforts have caused management to cease production at Neocon USA in Alabama during the fourth quarter with a view to permanently closing and thereafter selling that facility.
Shipments of Phoenix V6 engine block moulds to Chrysler and its tier are expected to resume in the fourth quarter now that Chrysler has successfully emerged from bankruptcy protection. This should dramatically reduce inventory, increase cash flow and also enable this customer to release additional powertrain programs, especially transmission.
Management also expects that it will in the next quarter, secure significant extrusion die business as the assets of Indalex, one of its largest customers, are purchased out of bankruptcy by one of Exco's other existing customers. This business, once secured, could launch within weeks utilizing existing production capacity.
Despite the gyrations of the Canadian dollar and dramatic reduction in sales during the quarter the Company has retained a gross margin in the 20% range and generated positive cash flow from operations both before and after non cash working capital is considered. In this chaotic environment the Company has completely paid off all bank debt and improved its cash deposits to almost $9 million. However, substantial improvement in the Company's profitability will require a stabilization and increase in sales which management expects to take place over the next several quarters. With continuing focus on right sizing of the Company's capacity and fixed costs our expectation is to achieve better profitability at existing lower sales levels and to improve profitability once volumes begin to improve.
(For further information please refer to the Company's Third Quarter Interim Financial Statements in the Investor Relations section posted at www.excocorp.com after July 29, 2009. Alternatively, please refer to www.sedar.com after July 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 third quarter results on Thursday July 30, 2009 at 11:00 am (EST). The local dial in number for the call is (416) 644-3424 or toll free 1-800-594-3615. 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 July 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.
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