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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Exco Technologies Limited    XTC   CA30150P1099

EXCO TECHNOLOGIES LIMITED

(XTC)
  Report
Delayed Quote. Delayed Toronto Stock Exchange - 08/13 03:59:20 pm
6.55 CAD   --.--%
08/01EXCO TECHNOLOGIES : 3rd Quarter 2020
PU
07/29Exco Results for Third Quarter Ended June 30, 2020
GL
07/06EXCO TECHNOLOGIES LIMITED : Announces Third Quarter Results on July 29, 2020
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Exco Technologies : 3rd Quarter 2020

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08/01/2020 | 12:41pm EDT

Unaudited Condensed Interim Report

to the shareholders

for the nine months ended

June 30, 2020

CASTING AND EXTRUSION

AUTOMOTIVE SOLUTIONS

CONTENTS

1 Management Discussion and Analysis

10 Condensed Interim Consolidated Financial Statements

14 Notes to Condensed Interim Consolidated Financial Statements

Three Months Ended

Nine Months Ended

June 30

June 30

(in $ thousands except per share amounts)

2020

2019

2020

2019

Sales

$70,962

$119,944

$311,629

$385,533

Net income (loss)

(848)

7,477

16,705

19,859

Basic earnings (loss) per share

($0.02)

$0.18

$0.42

$0.48

Diluted earnings (loss) per share

($0.02)

$0.18

$0.42

$0.48

Weighted avg basic common shares o/s (000's)

39,751

41,253

39,946

41,334

The following management's interim discussion and analysis of operations and financial position are prepared as at July 29, 2020 and should be read in conjunction with the condensed interim consolidated financial statements as at and for the three and nine months ended June 30,2020 and consolidated financial statements and Management's Discussion and Analysis ("MD&A") in the Company's 2019 Annual Report.

This MD&A has been prepared by reference to the MD&A disclosure requirements established under National Instrument 51-102 "Continuous Disclosure Obligations" ("NI 51-102") of the Canadian Securities Administrators. Additional information regarding Exco, including copies of its continuous disclosure materials such as its annual information form, is available on its website at www.excocorp.com or through the SEDAR website at www.sedar.com.

Use of Non-IFRS Measures

In this MD&A, reference may be made to Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EPS, Adjusted Net Income, Adjusted Pretax Profit and Free Cash Flow which are not measures of financial performance under International Financial Reporting Standards ("IFRS"). Exco calculates Adjusted EBITDA as earnings before other income/expense, interest, taxes, depreciation and amortization and Adjusted EBITDA Margin as Adjusted EBITDA divided by sales. Exco calculates Adjusted EPS as earnings before other income/expense divided by the weighted average number of shares. Adjusted Net Income is calculated as net income before other income/expense and Adjusted Pretax Profit as segmented earnings before other income/expense, interest and taxes. Free Cash Flow is calculated as cash provided by operating activities less interest paid less investment in fixed assets net of proceeds of disposal. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS, Pretax Profit and Free Cash Flow are used by management, from time to time, to facilitate period-to-period operating comparisons and we believe some investors and analysts use these measures as well when evaluating Exco's financial performance. These measures, as calculated by Exco, do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other issuers.

MANAGEMENT DISCUSSION AND ANALYSIS

In response to the unprecedented global COVID-19 pandemic, Exco continues to take the necessary actions to protect the health and safety of our employees, meet the ongoing needs of our customers

1

and minimize the adverse impact on our finances, while making the necessary investments to further strengthen our various businesses for the recovery as it takes hold.

Consolidated sales for the third quarter ended June 30, 2020 were $71.0 million compared to $119.9 million in the same quarter last year - a decrease of $49.0 million, or 41%. Year-to-date sales were $311.6 million compared to $385.5 million the prior year - a decrease of $73.9 million or 19%. The average USD/CAD exchange rate was 3% higher in the quarter ($1.38 versus $1.34) and 2% higher year-to-date ($1.35 versus $1.33), increasing sales by $1.6 million and $2.7 million in the respective periods. The average EUR/CAD exchange rate was 2% higher in the quarter ($1.53 versus $1.50) and 1% lower year-to-date ($1.50 versus $1.51), increasing sales by $0.1 million during the quarter and reducing sales by $0.6 million year-to-date.

The Automotive Solutions segment reported sales of $28.2 million in the third quarter - a decrease of $42.9 million, or 60% compared to last year. Year-to-date segment sales totaled $169.9 million

  • a decrease of $63.8 million, or 27% compared to last year. Foreign exchange rate movements increased segment sales by $0.8 million in both the current quarter and year-to-date periods. Reductions in sales during the quarter were primarily driven by the virtual standstill of automotive production in North America and Europe as a result of COVID-19 response measures through much of April and May 2020. Economic activity picked up as the quarter progressed, with June segment sales showing a marked improvement over May, although at a level still well below the prior year. Year-to-date results were additionally affected by $19.8 million of revenues generated by ALC in the first quarter of fiscal 2019 before that entity was deconsolidated from Exco's results. Excluding foreign exchange rate movements and the impact of ALC on Exco's results in Q1 F19, segment revenues were lower by $43.6 million, or 61% during the quarter and $44.8 million, or 21% year- to-date. This compares favorably to combined overall industry vehicle production volumes in North America and Europe, which were lower by roughly 68% during the quarter and 30% year-to-date. The segment's outperformance compared to the industry during the quarter was primarily attributable to the sale of accessory product sales to OEM's in North America, which are more closely aligned to vehicle sales levels than production volumes. To that end, US light vehicle sales levels held up significantly better than overall production levels during the quarter, falling by approximately 33% year over year. Segment sales outperformance compared to the industry in both the quarter and year-to-date periods were also helped by a number of program launches for both new and existing products that commenced earlier in the fiscal year. Looking forward, combined OEM production levels in Europe and North America are expected to normalize at around 90% of prior year levels through the remaining two calendar quarters of 2020. However there remains significant uncertainty around these expectations due to the unknown impact of COVID-19. In the interim, Exco remains focused on its product development, sales and marketing efforts to gain market share, and ensuring it is able meet future demand, while complying with any stay-at-home orders in the regions where it operates.

The Casting and Extrusion segment reported sales of $42.8 million for the third quarter - a decrease of $6.1 million, or 13%, from the same period last year. Year-to-date, the segment reported sales of $141.7 million - a decrease of $10.1 million, or 7% over the prior year. Foreign exchange movements increased segment sales by $1.0 million in the quarter and $1.5 million year-to-date. Segment sales held up better during the quarter than general economic conditions would otherwise suggest given the long cycle and/or essential nature of much of the segment's products, which feed into many critical industries. Within the group, sales were higher in the Large Mould group for both

2

the quarter and year-to-date periods. The programs of this group tend to be relatively long cycle and continued to advance despite the vehicle production stoppage at all OEM's ultimately served by the group through much of April and May 2020. In addition, quoting activity remains decent with discussions ongoing with both current and new potential customers, holding promise for future demand. Extrusion group sales were lower during the quarter due to much softer overall market conditions, including in the building and construction sector, which is the largest driver of demand for extrusion tooling. Exco however believes it outperformed the industry, helped by the benefits of our multi-plant footprint and harmonized manufacturing methods at our various locations. Year-to- date group sales were affected by modestly softer industry conditions that existed prior to the emergence of COVID-19 but tempered by sales from our new Extrusion facility in Mexico, which commenced commercial production April 1, 2019. At Castool, the group's revenues were lower as market conditions softened for both consumable and capital equipment goods in the quarter. This was evident in both the extrusion - and particularly die-cast - end markets. However, with the startup of automotive OEM production in the months of May and June, trends within the group improved in the latter half of the quarter. Also within the segment, steel price surcharges and steel tariffs continued to reduce during the quarter. As Exco generally aims to pass such amounts on to its customers, they positively impact on revenues when higher, but have the opposite impact when lower.

Consolidated net loss for the third quarter was $0.8 million or basic and diluted loss of $0.02 per share compared to an income of $7.5 million or $0.18 earnings per share in the same quarter last year. Year-to-date, consolidated net income was $16.7 million or $0.42 per basic share compared to $19.9 million or $0.48 per basic share last year - a decrease in net income of 16%. Excluding a net expense of $6.4 million in the prior year-to-date period related to the deconsolidation of ALC, Adjusted Net Income was lower by 36%. The consolidated effective income tax rate for the current quarter was 10% compared to 20% the prior year period with the difference primarily attributable to the impact of operating losses in certain jurisdictions partially offset by gains elsewhere. Year-to- date, the consolidated effective income tax rate was 21% compared to 29% last year. The income tax rate in the prior year-to-date period was unfavorably impacted by the non-deductibility of Other Expense related to the writedown of ALC in the amount of $6.4 million and $2.1 million of operating losses at ALC. Excluding these items, the effective income tax rate for the prior year-to-date period was 22%.

The Automotive Solutions segment reported pretax losses of $3.8 million in the third quarter compared to pretax profits of $7.9 million in the same quarter last year. Year-to-date, the segment reported pretax profit of $13.7 million - a decrease of $13.2 million or 49% compared to the prior year period. For the quarter, segment profitability was negatively impacted by lost absorption of overheads and other fixed costs arising from sharply lower sales together with the continuance of labor costs for certain production workers in Mexico where there is limited ability to temporarily lay-off employees onto government support programs. Management took significant action during the quarter to minimize the negative impact on its results, including implementing work share arrangements, restraining expenses, temporarily laying off workers where possible and availing itself of certain government support programs. In addition to the above, year-to-date results were hampered by the impact of the strike at General Motors, unfavorable product mix shifts in the first quarter of fiscal 2020 and an increase in accounts receivable and other provisions in the second quarter of fiscal 2020. Year-to-date profitability however benefited from reduced bonus payments to production workers in Mexico as well as the elimination of ALC's operations, which contributed

3

operating losses of $2.1 million in the first quarter of fiscal 2019. To counter ongoing pricing pressures and rising input costs, management remains focused on improving the efficiency of its operations and reducing its overall cost structure. Pricing discipline also remains a focus, although there is typically limited, if any, ability to attain increased pricing for the duration of current programs, which typically range from three to five years. Pricing for new programs however embed management's expectations for higher future costs.

The Casting and Extrusion segment reported $4.9 million of pretax profit in the third quarter - an increase of $1.1 million or 28% from the same quarter last year. Year-to-date, the segment reported pretax profit of $13.8 million - a decrease of $0.2 million, or effectively unchanged compared to the prior year period. Higher profitability during the quarter was supported by continued progress with various efficiency initiatives, a favorable mix shift towards higher margin programs in the Large Mould group, lower steel prices and receipt of R&D credits. As well, Management undertook significant action to minimize the negative impact of lower sales volumes during the quarter, including implementing work-share arrangements, restraining expenditures generally and availing government support programs, where possible.

The Corporate segment expenses were $1.9 million in the third quarter compared to $2.3 million in the prior year quarter, with lower incentive compensation expense contributing to the reduction. Year-to-date, Corporate expenses totaled $5.8 million, which was unchanged from the prior year period.

Consolidated Adjusted EBITDA for the third quarter totaled $4.7 million compared to $14.5 million in the same quarter last year - a decrease of $9.8 million, or 68%. Year-to-date, consolidated Adjusted EBITDA totaled $37.7 million compared to $49.4 million last year - a decrease of $11.7 million, or 24%. For the quarter, Adjusted EBITDA as a percentage of sales decreased to 6.6% compared to 12.1% the prior year driven by operating losses in the Automotive Solutions segment partially offset by improvement in segment margins in the Casting & Extrusion segments as well as a reduction in Corporate cash expenses.

Financial Resources, Liquidity and Capital Resources

Operating cash flow before net change in non-cash working capital totaled $5.0 million in the third quarter compared to $13.0 million in the same period last year. Year-to-date, operating cash flow before net change in non-cash working capital totaled $33.5 million compared to $42.4 million the prior year period. The year over year variance in both periods is primarily driven by lower Adjusted Net Income. As well, current period results included higher amounts for depreciation driven by the addition of our new greenfield extrusion tooling facility in Mexico, building expansion at Castool, and the adoption of right-of-use asset accounting. Deferred income taxes, a non-cash charge to earnings, were also lower in the current year period. Non-cash working capital contributed $15.6 million of cash in the current quarter compared to $2.6 million the prior year period. Year-to-date,non-cash working capital contributed $15.4 million of cash compared to a use of $7.1 million the prior year period. The non-cash working capital improvements were mainly driven by reductions to inventory and receivables arising from the sales decline partially offset by a reduction in payables. Consequently, net cash provided by operating activities amounted to $20.6 million in the current quarter compared to $15.6 million in the same quarter last year. Year-to-date, net cash provided by operating activities amounted to $48.9 million compared to $35.4 million the prior year period.

4

Cash used in financing activities in the current quarter was $4.0 million compared to $10.4 million of cash used in the same quarter last year. Year-to-date, cash used in financing activities totaled $11.7 million compared to $35.1 million the prior year period. The lower cash use in the quarter and year-to-date periods was primarily due to reduced optional net debt payments as the company favored strengthening its cash position due to the uncertain economic backdrop driven by the COVID-19 crises. Year over year variances were also due to modestly higher dividend payments and reduced share repurchases in the current year periods, including a suspension of further share repurchases through the quarter in order to preserve capital.

Cash used in investing activities in the third quarter was stable at $4.3 million compared to the same quarter last year. Year-to-date, cash used in investing activities totaled $16.7 million compared to $19.2 million the prior year. The difference was due to the timing of capital expenditures and in part due to delays associated with spending plans in light of COVID-19.

The Company's financial position and liquidity remain strong. Exco's net cash position totaled $23.7 million as at June 30, 2020 compared to $8.7 million as at September 30, 2019. Principal sources of liquidity include generated Free Cash Flow, $47.4 million of balance sheet cash and $27.0 million of unused availability under its $50 million committed credit facility, which matures February 2023. Pursuant to the terms of the credit facility, Exco is required to maintain compliance with certain financial covenants, which the Company was in compliance with as at June 30, 2020. In response to the developments resulting from the COVID-19 pandemic, the Company has stress tested its financial and liquidity position and expects to remain in compliance with its financial covenants.

Exco's operating leases have been recognized as Right of Use assets in accordance with IFRS 16 Leases and included in the balance sheet within Property, plant and equipment and other accrued liabilities. Exco owns all 15 of its manufacturing facilities and essentially all of its production equipment. The Company leases 4 sales and support centers in Troy, Michigan, Port Huron, Michigan and warehouses in Brownsville, Texas. The following table summarizes all short-term and long-term commitments Exco has entered.

June 30, 2020

Total

< 1 year

1-3 years

4-5 years

Bank Indebtedness

$612

$612

Trade accounts payable

25,327

25,327

Long term debt

23,095

95

23,000

Lease commitments*

1,448

511

909

28

Purchase commitments

16,508

16,508

Capital expenditures

3,072

3,072

$70,062

$46,125

$23,909

$28

  • Exco leases facilities, automobiles, material handling vehicles and other miscellaneous office equipment. It is not Exco's policy to purchase these assets at the expiry of their terms but occasionally it may purchase the assets at the end of the lease terms when the purchase options are favorable. Exco does not expect any material liquidity or capital resource impacts from these possible purchases.

5

Quarterly results

The following table sets out financial information for each of the eight quarters through to the third quarter ended June 30, 2020

($ thousands except per

June 30,

March 31,

December 31,

September 30,

share amounts)

2020

2020

2019

2019

Sales

$70,962

$120,244

$120,423

$121,815

Net income (loss)

($848)

$9,495

$8,058

$6,773

Earnings (loss) per share

Basic

($0.02)

$0.24

$0.20

$0.17

Diluted

($0.02)

$0.24

$0.20

$0.17

($ thousands except per

June 30,

March 31,

December 31,

September 30,

share amounts)

2019

2019

2018 1

2018

Sales

$119,944

$123,465

$142,124

$139,538

Net income

$7,477

$8,564

$3,818

$11,587

Earnings per share

Basic

$0.18

$0.21

$0.09

$0.27

Diluted

$0.18

$0.21

$0.09

$0.27

1 Net income in the first quarter of fiscal 2019 was reduced by the recognition of a $6.1 million ($0.15 per share) provision related to the voluntary liquidation of ALC Bulgaria

Exco typically experiences softer sales and profits in the first and fourth fiscal quarters, which coincides with our customers' plant shutdowns during the holiday season and summer months. This year several automotive OEM's have announced plans to shorten summer shutdowns in order to make up for COVID- 19 induced production stoppages in April and May.

Non-IFRS Measures

The following table provides a reconciliation of net income for the periods to adjusted net income, adjusted pretax profit, adjusted EBITDA, adjusted basic earnings per share as well as a reconciliation of cash provided by operating activities to free cash flow.

Three Months ended

Nine Months ended

June 30

June 30

(in $

thousands)

2020

2019

2020

2019

Net income (loss)

($848)

$7,477

$16,705

$19,859

Other expense

-

-

-

6,409

Adjusted net income (loss)

(848)

7,477

16,705

26,268

Provision for (recovery) income tax

(91)

1,840

4,346

8,072

Adjusted pretax profit (loss)

(939)

9,317

21,051

34,340

6

Depreciation

4,415

3,965

13,087

11,303

Amortization

1,021

1,020

3,047

3,064

Net interest expense

183

181

519

660

Adjusted EBITDA

4,680

14,483

37,704

49,367

Sales

$70,962

$119,944

$311,629

$385,533

Adjusted EBITDA margin

6.6%

12.1%

12.1%

12.8%

Weighted average basic shares outstanding

39,751

41,253

39,946

41,334

Adjusted EPS

(0.02)

$0.18

$0.42

$0.64

Cash provided by operating activities

$20,620

$15,647

$48,936

$35,379

Interest

(183)

(181)

(519)

(660)

Investment in fixed assets net of proceeds of

(4,253)

(4,293)

(16,695)

(19,241)

disposal

Free cash flow

$16,184

$11,173

$31,722

$15,478

Recent Accounting Changes and Effective Dates

Please see the notes to the Company's consolidated financial statements for the year ended September 30, 2019 and the condensed interim financial statements for the periods ended June 30, 2020 for information regarding the accounting changes effective October 1, 2019.

Controls and Procedures

Based on the current Canadian Securities Administrators (the "CSA") rules under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, the Chief Executive Officer and Chief Financial Officer (or individuals performing similar functions as a chief executive officer or chief financial officer) are required to certify as at June 30, 2020 that they are responsible for establishing and maintaining disclosure controls and procedure and internal control over financial reporting. No changes were made in the Corporation's internal control over financial reporting during the Corporation's most recent interim period, that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

Outstanding Share Capital

As at June 30, 2020 Exco had 39,750,597 common shares issued and outstanding and stock options outstanding to purchase up to 957,000 common shares at exercise prices ranging from $8.56 to $14.58.

Forward -looking information

This Management Discussion and Analysis contains forward-looking information and forward-looking statements within the meaning of applicable securities laws. We use words such as "may", "will", "should", "expect", "believe", "estimates" and similar expressions to identify forward-looking information and statements especially with respect to growth and financial performance of the Company's business units, contribution of our start-up business units, contribution of awarded programs yet to be launched, margin performance, financial performance of acquisitions, liquidity and operating efficiencies are forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements throughout this document and are also cautioned that the foregoing list of important factors is not exhaustive. These forward looking statements are based on our plans, intentions or expectations which are based on, among

7

other things, the current uncertain global economic impact of the COVID-19 pandemic or similar outbreak of epidemic, pandemic, or contagious diseases that may emerge in the human population, which may have a material effect on how we and our customers operate our businesses and the duration and extent to which this will impact our future operating results, financial performance, and overall demand for our products, assumptions about the number of automobiles produced in North America and Europe, the number of extrusion dies required in North America and South America, the rate of economic growth in North America, Europe and emerging market countries, investment by OEMs in drivetrain architecture and other initiatives intended to reduce fuel consumption and/or the weight of automobiles in response to rising climate risk , raw material prices, economic conditions including the availability and cost of labor, currency fluctuations, trade restrictions, our ability to turnaround, close or otherwise dispose of unprofitable operations in a timely manner, our ability to integrate acquisitions and the rate at which our operations in Brazil and Mexico achieve sustained profitability. These forward-looking statements include known and unknown risks, uncertainties, assumptions and other factors which may cause actual results or achievements to be materially different from those expressed or implied. The Company will update its disclosure upon publication of each fiscal quarter's financial results and otherwise 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 a more extensive discussion of Exco's risks and uncertainties see the 'Risks and Uncertainties' section in our 2019 Annual Report, our 2019 Annual Information Form ("AIF") and other reports and securities filings made by the Company. This information is available at www.sedar.com.

8

NOTICE TO READER

The attached unaudited condensed interim consolidated financial statements have been prepared by management of the Company. The condensed interim consolidated financial statements for the three- and nine- month periods ended June 30, 2020 and 2019 have not been reviewed by the auditors of the Company.

9

EXCO TECHNOLOGIES LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

$ (000)'s

As at

As at

June 30, 2020 September 30, 2019

ASSETS

(note 2)

Current

$47,442

Cash and cash equivalents

$26,488

Accounts receivable

69,633

93,552

Inventories

67,269

73,260

Prepaid expenses and deposits

3,512

2,874

Income taxes recoverable

-

1,875

Total current assets

187,856

198,049

Property, plant and equipment, net (note 4)

131,009

126,787

Intangible assets, net (note 5)

32,061

33,891

Goodwill (note 5)

65,366

62,834

Deferred tax assets

1,217

1,174

Total assets

$417,509

$422,735

LIABILITIES AND SHAREHOLDERS' EQUITY

Current

$612

Bank indebtedness

$578

Trade accounts payable

25,327

44,183

Accrued payroll liabilities

10,109

12,643

Other accrued liabilities

10,731

8,041

Derivative instruments

2,720

278

Provisions

2,907

2,672

Income taxes payable

1,732

-

Customer advance payments

2,727

1,747

Long-term debt - current portion (note 7)

95

93

Total current liabilities

56,960

70,235

Long-term debt - long-term portion (note 7)

23,000

17,093

Deferred tax liabilities

8,363

8,920

Total liabilities

88,323

96,248

Shareholders' equity

49,569

Share capital (note 8)

50,538

Contributed surplus

4,624

4,349

Accumulated other comprehensive income

12,369

9,480

Retained earnings

262,624

262,120

Total shareholders' equity

329,186

326,487

Total liabilities and shareholders' equity

$417,509

$422,735

The accompanying notes are an integral part of these condensed unaudited interim consolidated financial statements.

10

EXCO TECHNOLOGIES LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited)

$ (000)'s except for income per common share

Three months ended

Nine months ended

June 30

June 30

2020

2019

2020

2019

Sales

$70,962

$119,944

$311,629

$385,533

Cost of sales

60,386

93,888

245,690

302,533

Selling, general and administrative expenses (note 13)

5,931

11,664

28,312

33,758

Depreciation (note 4)

4,415

3,965

13,087

11,303

Amortization (note 5)

1,021

1,020

3,047

3,064

Gain on disposal of property, plant and equipment

(35)

(91)

(77)

(125)

Interest expense, net

183

181

519

660

Other expense (note 12)

-

-

-

6,409

71,901

110,627

290,578

357,602

Income (loss) before income taxes

(939)

9,317

21,051

27,931

Provision for income taxes (note 11)

(91)

1,840

4,346

8,072

Net income (loss) for the period

(848)

7,477

16,705

19,859

Other comprehensive income (loss)

Items that may be reclassified to profit or loss in subsequent periods:

Net unrealized gain (loss) on derivatives designated as cash flow hedges (a)

1,261

221

(1,800)

(570)

Unrealized gain (loss) on foreign currency translation

(8,547)

(4,319)

4,689

1,867

Comprehensive income (loss)

(7,286)

(4,098)

2,889

1,297

($8,134)

$3,379

$19,594

$21,156

Income (loss) per common share

Basic

($0.02)

$0.18

$0.42

$0.48

Diluted

($0.02)

$0.18

$0.42

$0.48

Weighted average number of common shares outstanding

Basic

39,751

41,253

39,946

41,334

Diluted

39,751

41,253

39,946

41,348

  1. Net of income tax payable of $450 and $642 recoverable for the three- and nine- month periods ended June 30, 2020 (2019 - net of payable of $79 and income tax recoverable of $203 for the three- and nine- month periods ended June 30, 2019)

The accompanying notes are an integral part of these condensed unaudited interim consolidated financial statements.

11

EXCO TECHNOLOGIES LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

$ (000)'s

Accumulated other comprehensive income

Net unrealized gain

(loss) on

Unrealized gain

derivatives

(loss)

on foreign

Total accumulated

Contributed

Retained

designated as cash

currency

other comprehensive

Total shareholders'

Share capital

surplus

earnings

flow hedges

translation

income (loss)

equity

Balance, October 1, 2019

$50,538

$4,349

$262,120

($207)

$9,687

$9,480

$326,487

Net income for the period

-

-

8,058

-

-

-

8,058

Dividend paid (note 3)

-

-

(3,617)

-

-

-

(3,617)

Stock option grants

-

86

-

-

-

-

86

Repurchase of Share Capital (note 8)

(421)

-

(2,230)

-

-

-

(2,651)

Other comprehensive income (loss)

-

-

-

1,121

(1,818)

(697)

(697)

Balance, December 31, 2019

$50,117

$4,435

$264,331

$914

$7,869

$8,783

$327,666

Net income for the period

9,495

9,495

Dividend paid (note 3)

(3,777)

(3,777)

Stock option grants

94

94

Repurchase of Share Capital (note 8)

(548)

(2,801)

(3,349)

Other comprehensive income (loss)

(4,182)

15,054

10,872

10,872

Balance, March 31, 2020

$49,569

$4,529

$267,248

($3,268)

$22,923

$19,655

$341,001

Net loss for the period

(848)

-

-

-

(848)

Dividends paid (note 3)

(3,776)

-

-

-

(3,776)

Stock option grants

95

-

-

-

95

Repurchase of Share Capital (note 8)

-

-

-

0

Other comprehensive income (loss)

-

-

-

1,261

(8,547)

(7,286)

(7,286)

Balance, June 30, 2020

$49,569

$4,624

$262,624

($2,007)

$14,376

$12,369

$329,186

Accumulated other comprehensive income

Net unrealized gain

(loss) on

Unrealized gain

derivatives

(loss)

on foreign

Total accumulated

Contributed

Retained

designated as cash

currency

other comprehensive

Total shareholders'

Share capital

surplus

earnings

flow hedges

translation

income (loss)

equity

Balance, October 1, 2018

$51,230

$4,391

$263,647

$572

$10,323

$10,895

$330,163

Adjustment to Opening Retained earnings (note 2)

-

-

(2,994)

-

-

-

($2,994)

Net income for the period

-

-

3,818

-

-

-

3,818

Dividend paid (note 3)

-

-

(3,524)

-

-

-

(3,524)

Stock option grants

-

110

-

-

-

-

110

Exercise of stock options

111

(34)

-

-

-

-

77

Repurchase of Share Capital (note 8)

(507)

-

(3,445)

-

-

-

(3,952)

Other comprehensive income (loss)

-

-

-

(1,376)

12,076

10,700

10,700

Balance, December 31, 2018

$50,834

$4,467

$257,502

($804)

$22,399

$21,595

$334,398

Net income for the period

-

-

8,564

-

-

-

8,564

Dividend paid (note 3)

-

-

(3,717)

-

-

-

(3,717)

Stock option grants

-

64

-

-

-

-

64

Exercise of stock options

849

(254)

-

-

-

-

595

Repurchase of Share Capital (note 8)

(236)

-

(1,629)

-

-

-

(1,865)

Other comprehensive income

-

-

-

585

(5,890)

(5,305)

(5,305)

Balance, March 31, 2019

$51,447

$4,277

$260,720

($219)

$16,509

$16,290

$332,734

Net income for the period

-

-

7,477

-

-

-

7,477

Dividends paid (note 3)

-

-

(3,702)

-

-

-

(3,702)

Stock option grants

-

13

-

-

-

-

13

Exercise of stock options

81

(24)

-

-

-

-

57

Repurchase of Share Capital (note 8)

(282)

-

(1,672)

-

-

-

(1,954)

Other comprehensive income (loss)

-

-

-

221

(4,319)

(4,098)

(4,098)

Balance, June 30, 2019

$51,246

$4,266

$262,823

$2

$12,190

$12,192

$330,527

The accompanying notes are an integral part of these condensed unaudited interim consolidated financial statements.

12

EXCO TECHNOLOGIES LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

$ (000)'s

Three months ended

Six months ended

June 30

June 30

2020

2019

2020

2019

OPERATING ACTIVITIES:

($848)

$16,705

Net income (loss) for the period

$7,477

$19,859

Add non-operating and items not involving a current outlay of cash

Depreciation (note 4)

4,415

3,965

13,087

11,303

Amortization (note 5)

1,021

1,020

3,047

3,064

Stock-based compensation expense

220

(48)

332

203

Deferred income taxes

23

540

(72)

1,076

Net interest expense

183

181

519

660

Non-cash provision for ALC and Other expense (note 12)

-

-

-

6,409

Gain on disposal of property, plant and equipment

(35)

(91)

(77)

(125)

Net change in non-cash working capital (note 10)

4,979

13,044

33,541

42,449

15,641

2,603

15,395

(7,070)

Cash provided by operating activities

20,620

15,647

48,936

35,379

FINANCING ACTIVITIES:

(11)

34

Increase (decrease) in bank indebtedness

1,011

(8,323)

Financing from long-term debt

-

-

10,917

-

Repayment of long-term debt

(4)

(5,649)

(5,008)

(8,105)

Interest paid, net

(183)

(181)

(519)

(660)

Dividends paid (note 3)

(3,776)

(3,702)

(11,170)

(10,943)

Repurchase of share capital

-

(1,954)

(6,000)

(7,771)

Issuance of share capital

-

57

-

729

Cash used in financing activities

(3,974)

(10,418)

(11,746)

(35,073)

INVESTING ACTIVITIES:

Purchase of property, plant and equipment (note 4)

(4,292)

(4,197)

(17,670)

(19,062)

Purchase of intangible assets (note 5)

(21)

(207)

(278)

(407)

Proceeds from disposal of property, plant and equipment

60

111

1,253

228

Cash used in investing activities

(4,253)

(4,293)

(16,695)

(19,241)

Effect of exchange rate changes on cash and cash equivalents

(602)

(3,473)

459

172

Net increase (decrease) in cash during the period

11,791

(2,537)

20,954

(18,763)

De-consolidation of ALC cash (note 12)

-

-

-

(964)

Cash, beginning of period

35,651

14,153

26,488

31,343

Cash, end of period

$47,442

$11,616

$47,442

$11,616

The accompanying notes are an integral part of these condensed unaudited interim consolidated financial statements.

13

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

1. CORPORATE INFORMATION

Exco Technologies Limited (the "Company") is a global designer, developer and manufacturer of dies, moulds, components and assemblies, and consumable equipment for the die-cast, extrusion and automotive industries. Through 15 strategic locations in 7 countries, the Company services a diverse and broad customer base. The Company is incorporated and domiciled in Canada. The registered office is located at 130 Spy Court, Markham, Ontario, Canada.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These unaudited condensed interim consolidated financial statements present the Company's financial results of operations and financial position as at and for the three- and nine- month periods ended June 30, 2020 and have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"). The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those used in the preparation of the 2019 audited annual consolidated financial statements except as noted below.

The Company's preparation of unaudited condensed interim financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the application of the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements were the same as those that applied to the Company's consolidated financial statements as at and for the year ended September 30, 2019 with the exception of the adoption of IFRS 16. These areas of critical accounting estimates were impacted when the World Health Organization characterized the COVID-19 virus as a global pandemic in March 2020. There continues to be significant uncertainty as to the likely effects of this outbreak which may, among other things, impact our suppliers and customers. It is not possible to predict the impact COVID-19 will have on the Company, its financial position, and the results of operations in the future. The Company is monitoring the impact of the pandemic on all aspects of its business.

Effective October 1, 2018 the Company adopted IFRS 15, in accordance with the modified retrospective approach. During the first quarter of fiscal 2020 management identified an error related to the adoption of IFRS 15. Specifically, in evaluating its long-term large die cast mould contracts, certain cancelation provisions do not meet the requirements and as a result, the Company should have recognized revenue for these contracts at a point in time (i.e. completed contract) rather than over time (i.e. percentage of completion). Management evaluated the quantitative and qualitative aspects of this change and determined that the impact was not material to the fiscal 2019 annual consolidated financial statements nor to the fiscal 2019 interim condensed consolidated financial statements. The Company recorded an adjustment to October 1, 2018 retained earnings of $2,994 to reflect the IFRS 15 transition adjustment. In addition, in the September 30, 2019 consolidated statement of financial position the Company recorded a decrease to deferred tax liabilities of $1,052, reclassified progress billings of $737 from unbilled revenue to customer advance payments and reclassified the remaining $15,410 of unbilled revenues to inventories.

These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company's 2019 audited annual consolidated financial statements, which are available at www.sedar.comand on the Corporation's website at www.excocorp.com. The unaudited condensed interim consolidated financial statements and accompanying notes for the three- and nine- month periods ended June 30, 2020 were authorized for issue by the Board of Directors on July 29, 2020.

Basis of consolidation

The condensed interim consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company, its subsidiaries. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has all of the following: power over the investee; exposure or rights to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect its returns. The financial statements of the subsidiaries are included in the condensed interim consolidated financial

14

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

statements from the date that control commences until the date that control ceases (see Note 12). All intercompany transactions and balances have been eliminated on consolidation.

The Company has an interest in a joint operation, whereby the joint operators have a contractual arrangement that establishes joint control over the economic activities of the individual entity. The Company recognized its share of the joint operation's assets, liabilities, revenues and expenses in the condensed interim consolidated financial statements.

Accounting standards adopted in fiscal year 2020

The Company's significant accounting policies are as outlined in the Company's consolidated financial statements as at and for the year ended September 30, 2019 except as follows:

IFRS 16, Leases ("IFRS 16")

In January 2016, the IASB issued the final publication of IFRS 16, superseding IAS 17, Leases and IFRIC 4, Determining whether an arrangement contains a lease. IFRS 16 introduced a single accounting model for lessees unless the underlying asset is of low value or short term in nature. A lessee is required to recognize, on its statement of financial position, a right- of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments. As a result of adopting IFRS 16, the Company has recognized an increase to both assets and liabilities on its interim condensed consolidated balance sheet, as well as a decrease in operating rent expense, and increases in finance and depreciation expenses, as recognized in the interim condensed consolidated statement of operations. The standard did not have a significant impact on the Company's overall consolidated operating results.

The Company adopted IFRS 16, effective October 1, 2019, under the modified retrospective approach. Comparatives for 2019 were not restated. At transition, the Company elected to use the practical expedient available under the standard that allows lease assessments made under IAS 17 and IFRIC 4 to be used for existing contracts. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or modified after October 1, 2019.

Upon initial application, lease liabilities were measured at the present value of the remaining lease payments, discounted at the relevant incremental borrowing rates as at October 1, 2019. For leases previously classified as operating leases under IAS 17, the Company measured right-of-use assets equal to the corresponding lease liabilities adjusted for any accrued payments related to that lease. For short-term leases and leases of low value assets, the Company has opted to recognize a lease expense on a straight-line basis, and this expense is presented within selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

As such, on October 1, 2019, the Company recorded lease liabilities of $1,687 in Other Accrued Liabilities and right-of-use assets of $1,687 are included in Property, plant and equipment, recognized in the interim condensed consolidated balance sheet immediately before the date of initial application, with no net impact on retained earnings.

The Company elected to use the following practical expedients upon initial application in accordance with the provisions of IFRS 16:

  • Accounting for all leases with a lease term that ends within 12 months of initial application in the same way as short-term leases;
  • Exclusion of initial direct costs from the measurement of the right-of-use asset on the date of initial application; and
  • Use of hindsight in determining the lease term where the contract contains purchase, extension, or termination options.

On transition, the Company elected to use the recognition exemptions on short-term leases or low-value leases, however, in the future, may choose to elect the recognition exemptions on a class-by-class and lease-by-lease basis.

15

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

New Lease Accounting Policy

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether the contract: involves the use of an identified asset; provides the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and provides the right to direct the use of the asset.

This policy is applied to contracts entered into, or modified, on or after October 1, 2019.

A right-of-use asset and lease liability are recorded on the date that the underlying asset is available for use, representing the commencement date.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

  • fixed payments, including in-substance fixed payments;
  • variable lease payments that are tied to an index or rate defined in the contract;
  • amounts expected to be payable under a residual value guarantee;
  • the exercise price under a purchase option that the Company is reasonably likely to exercise; and
  • lease payments under an optional extension if the Company is reasonably certain to exercise the extension option, and early termination penalties required under a termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether or not it will exercise a purchase, extension or termination option. When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The right-of-use asset is initially measured at cost, consisting of:

  • the initial measurement of the lease liability, adjusted for any lease payments made at or before the commencement date;
  • any initial direct costs incurred; and
  • an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is located; less
  • any lease incentives received.

The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. The lease term consists of the non-cancellable period of the lease; periods covered by options to extend the lease, when the Company is reasonably certain to exercise the option to extend; and periods covered by options to terminate the lease, when the Company is reasonably certain not to exercise the option. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability as described above.

Short term and low-value leases

The Company has elected to not recognise right-of-use assets and lease liabilities for short-term leases (i.e., those leases that have a lease term of twelve months or less) and leases with assets of low value (i.e., those assets with a fair market value of less than US$5,000). The expenses associated with such leases are recognized in the interim condensed consolidated statement of operations on a straight-line basis over the lease term.

16

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

Variable lease payments

Certain leases contain provisions that result in changes to lease payments over the term in relation to market indices quoted in the contract. The Company reassesses the lease liabilities related to these leases when the index or other data is available to calculate the change in lease payment.

Certain leases require the Company to make payments that relate to property taxes, insurance, or other non-rental costs. These costs are typically variable and are not included in the calculation of the right-of-use asset or lease liability, but are recorded as an expense in cost of sales in the interim condensed consolidated statement of operations in the period in which they are incurred.

3. CASH DIVIDEND

During the three- and nine- month periods ended June 30, 2020, the Company paid quarterly cash dividends totaling $3,776 and $11,170 (2019 -$3,702 and $10,943). The quarterly dividend rate in the second quarter of 2020 was $0.095 per common share (2018 - $0.09).

4. PROPERTY, PLANT AND EQUIPMENT

Machinery and

Assets under

Right of Use

Equipment

Tools

Buildings

Land

Construction

Assets

TOTAL

Cost

Balance as at September

30, 2019

203,928

24,407

75,263

11,978

6,552

-

322,128

Initial recognition IFRS16

assets (note 2)

-

-

-

-

-

1,687

1,687

Additions

4,738

650

392

877

10,976

37

17,670

Less: disposals

(5,972)

(2,375)

(23)

-

-

(10)

(8,380)

Reclassification

6,603

970

3,762

-

(11,335)

-

-

Foreign exchange

movement

221

35

183

(181)

(61)

65

262

Balance as at June 30,

2020

$209,518

$23,687

$79,577

$12,674

$6,132

$1,779

$333,367

Machinery and

Assets under

Right of Use

Equipment

Tools

Buildings

Land

Construction

Assets

TOTAL

Accumulated

depreciation and

impairment losses

Balance as at September

30, 2019

140,567

18,294

36,480

-

-

-

195,341

Depreciation

8,816

1,479

2,366

-

-

426

13,087

Less: disposals

(4,842)

(2,354)

(1)

-

-

(8)

(7,205)

Foreign exchange

movement

703

130

305

-

-

(3)

1,135

Balance as at June 30,

2020

$145,244

$17,549

$39,150

$-

$-

$415

$202,358

17

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

Machinery and

Assets under Right of Use

Carrying amounts

Equipment

Tools

Buildings

Land

Construction

Assets

TOTAL

As at September 30, 2019

$63,361

$6,113

$38,783

$11,978

$6,552

$-

$126,787

As at June 30, 2020

$64,274

$6,138

$40,427

$12,674

$6,132

$1,364

$131,009

5. INTANGIBLE ASSETS AND GOODWILL

Computer

Assets under

Total

Software

Acquisition

Construction

Intangible

and Other

Intangibles*

(Software)

Assets

Goodwill

Cost

Balance as at September 30, 2019

$21,326

$47,224

$106

$68,656

$62,834

Additions

147

-

131

278

-

Less: disposals

(12,862)

-

-

(12,862)

-

Reclassifications

195

-

(195)

-

-

Foreign exchange movement

41

1,288

5

1,334

2,532

Balance as at June 30, 2020

$8,847

$48,512

$47

$57,406

$65,366

Computer

Assets under

Total

Software and

Acquisition

Construction

Intangible

Other

Intangibles*

(Software)

Assets

Goodwill

Accumulated amortization

and impairment losses

Balance as at September 30, 2019

19,974

14,791

-

34,765

-

Amortization for the period

577

2,470

-

3,047

-

Less: disposals

(12,862)

-

-

(12,862)

-

Foreign exchange movement

41

354

-

395

-

Balance as at June 30, 2020

$7,730

$17,615

$-

$25,345

$-

Carrying amounts

As at September 30, 2019

$1,352

$32,433

$106

$33,891

$62,834

As at June 30, 2020

$1,117

$30,897

$47

$32,061

$65,366

*Acquisition intangibles are comprised primarily of customer relationships and trade names resulting from business acquisitions.

6. FINANCIAL INSTRUMENTS

Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. Presented below is a comparison of the fair value of each financial instrument to its carrying value.

The fair value of cash and cash equivalents, bank indebtedness, trade and other receivables and trade and other payables approximates their carrying amounts due to the short-term maturities of these instruments. The estimated fair value of long- term debt approximates its carrying value since debt is subject to terms and conditions similar to those available to the Company for instruments with comparable terms, and the interest rates are variable and a reflection of market-based rates.

18

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

The fair value of derivative instruments that are not traded in an active market such as over-the-counter foreign exchange options and collars is determined using quoted forward exchange rates at the consolidated statement of financial position dates and are Level 2 instruments.

During the nine-month period ended June 30, 2020 there were no transfers between Level 1 and Level 2 fair value measurements.

The carrying value and fair value of all financial instruments are as follows:

June 30, 2020

September 30, 2019

Carrying Amount

Fair Value of

Carrying Amount

Fair Value of

of Asset

Asset

of Asset (Liability)

Asset (Liability)

(Liability)

(Liability)

Cash and cash equivalents

$47,442

$47,442

$26,488

$26,488

Accounts receivable

69,633

69,633

93,552

93,552

Trade accounts payable

(25,327)

(25,327)

(44,183)

(44,183)

Bank indebtedness

(612)

(612)

(578)

(578)

Customer advance payments

(2,727)

(2,727)

(1,747)

(1,747)

Accrued liabilities

(20,840)

(20,840)

(20,684)

(20,684)

Derivative instruments

(2,720)

(2,720)

(278)

(278)

Long-term debt

($23,095)

($23,095)

($17,186)

($17,186)

7. LONG-TERM DEBT

On February 7, 2020, the Company renewed the $50,000 Committed Revolving Credit Facility to extend the maturity date to February 28, 2023. As at June 30, 2020 $23,000 was utilized (2019 - $14,000). The facility is collateralized by a general security agreement covering all assets of the Company's subsidiaries located in Canada and the US, with the exception of real property. There are no specific repayment terms prior to maturity.

The components of long-term debt are as follows:

June 30, 2020

September 30, 2019

Bank debt

$23,000

$17,000

Term notes

-

-

Promissory note

95

186

Subtotal

23,095

17,186

Less: current portion

(95)

(93)

Long-term debt, long-term portion

$23,000

$17,093

Pursuant to the terms of the credit facility, Exco is required to maintain compliance with certain financial covenants. The Company was in compliance with these covenants as at June 30, 2020. Subsequent to quarter end, the Company repaid $20,000 of its credit facility from its cash on hand.

8. SHARE CAPITAL

The Company received approval from the Toronto Stock Exchange for a normal course issuer bid for a 12-month period beginning February 18, 2020. 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 quarter and year-to-date no and

19

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

777,066 common shares, respectively were repurchased (2019 - 230,100 and 837,700) for a total cost of $nil and $6,000 respectively (2019 - $1,954 and $7,771). The cost to repurchase the common shares in the year exceeded their stated value by $5,031 (2019 - $6,746) which was recorded against retained earnings.

As at June 30, 2020 the Company had 39,750,597 common shares issued and outstanding.

9. SEGMENTED INFORMATION

Business segments

The Company operates in two business segments: Casting and Extrusion Technology ("Casting and Extrusion") and Automotive Solutions. The accounting policies followed in the operating segments are consistent with those outlined in note 2 to the consolidated financial statements.

The Casting and Extrusion 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 seating, cargo storage and restraint for sale to automotive manufacturers and Tier 1 suppliers (suppliers to automakers). (See Note 12)

The Company evaluates the performance of its operating segments primarily based on pre-tax income before interest and other expense.

The Corporate segment involves administrative expenses that are not directly related to the business activities of the above two operating segments.

Three Months Ended June 30, 2020

Casting

and

Automotive

Extrusion

Solutions

Corporate

Total

Sales

$44,333

$28,257

$-

$72,590

Intercompany sales

(1,524)

(104)

-

(1,628)

Net sales

42,809

28,153

-

70,962

Depreciation

3,556

820

39

4,415

Amortization

143

877

1

1,021

Pre-tax income (loss) before interest and other expense

4,943

(3,786)

(1,913)

(756)

Net interest expense

(183)

Income (loss) before income taxes

(939)

Property, plant and equipment additions

4,037

255

-

4,292

Property, plant and equipment, net

104,499

25,146

1,364

131,009

Intangible asset additions

22

(1)

-

21

Intangible assets, net

953

31,108

-

32,061

Goodwill

-

65,366

-

65,366

Total assets

198,613

204,660

14,236

417,509

Total liabilities

25,415

30,233

32,675

88,323

20

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

Three Months Ended June 30, 2019

Casting

and

Automotive

Extrusion

Solutions

Corporate

Total

Sales

$51,212

$71,156

$-

$122,368

Intercompany sales

(2,280)

(144)

-

(2,424)

Net sales

48,932

71,012

-

119,944

Depreciation

3,273

672

20

3,965

Amortization

173

845

2

1,020

Pre-tax income (loss) before interest and other expense

3,856

7,924

(2,282)

9,498

Net interest expense

181

Income before income taxes

9,317

Property, plant and equipment additions

3,064

1,123

10

4,197

Property, plant and equipment, net

98,708

22,941

1,420

123,069

Intangible asset additions

203

4

-

207

Intangible assets, net

1,203

33,151

1

34,355

Goodwill

-

63,066

-

63,066

Total assets

212,075

210,590

(9,526)

413,139

Total liabilities

25,604

38,783

18,225

82,612

Nine Months Ended June 30, 2020

Casting

and

Automotive

Extrusion

Solutions

Corporate

Total

Sales

$146,987

$170,223

$-

$317,210

Intercompany sales

(5,244)

(337)

-

(5,581)

Net sales

141,743

169,886

-

311,629

Depreciation

10,352

2,651

84

13,087

Amortization

465

2,580

2

3,047

Pre-tax income (loss) before interest and other expense

13,751

13,653

(5,834)

21,570

Net interest expense

(519)

Income before income taxes

21,051

Initial recognition IFRS 16 assets

389

1,266

32

1,687

Property, plant and equipment additions

15,796

1,874

-

17,670

Property, plant and equipment, net

104,499

25,146

1,364

131,009

Intangible asset additions

273

5

-

278

Intangible assets, net

953

31,108

-

32,061

Goodwill

-

65,366

-

65,366

Total assets

198,613

204,660

14,236

417,509

Total liabilities

25,415

30,233

32,675

88,323

21

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

Nine Months Ended June 30, 2019

Casting

and

Automotive

Extrusion

Solutions

Corporate

Total

Sales

$159,371

$242,074

$-

$401,445

Intercompany sales

(7,523)

(8,389)

-

(15,912)

Net sales

151,848

233,685

-

385,533

Depreciation

9,121

2,128

54

11,303

Amortization

524

2,538

2

3,064

Pre-tax income (loss) before interest and other expense

13,950

26,852

(5,802)

35,000

Other expense

(6,409)

(6,409)

Net interest expense

(660)

Income before income taxes

27,931

Property, plant and equipment additions

16,788

2,166

108

19,062

Property, plant and equipment, net

98,708

22,941

1,420

123,069

Intangible asset additions

364

43

-

407

Intangible assets, net

1,203

33,151

1

34,355

Goodwill

-

63,066

-

63,066

Total assets

212,075

210,590

(9,526)

413,139

Total liabilities

25,604

38,783

18,225

82,612

10. NET CHANGE IN NON-CASH WORKING CAPITAL

Nine months ended June 30

2020

2019

Accounts receivable

$25,524

($6,278)

Inventories

6,996

3,024

Prepaid expenses and deposits

(638)

94

Trade accounts payable

(19,409)

(4,255)

Accrued payroll liabilities

(2,689)

(3,078)

Other accrued liabilities

743

1,404

Provisions

235

220

Customer advance payments

1,013

(492)

Income taxes payable

3,620

2,291

$15,395

($7,070)

11. INCOME TAXES

The consolidated effective income tax rate for the nine-month period ended June 30, 2020 was 20.6% (nine-month period ended June 30, 2019 - 28.9%). The income tax rate for the nine-month period ended June 30, 2020 was favorably impacted by higher income in lower tax jurisdictions. The income tax rate for the nine-month period ended June 30, 2019 was adversely

22

EXCO TECHNOLOGIES LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)'s except per share amounts

impacted by the non-deductibility of Other Expense related to the de-consolidation of ALC in the amount of $6,409 (note 12). Excluding ALC, the effective income tax rate for the nine-month period ended June 30, 2019 would have been 23.5%

12. DECONSOLIDATION OF ALC AND OTHER EXPENSE

On January 17, 2019, the Company's indirect wholly owned subsidiary ALC Bulgaria EOOD ("ALC") voluntarily filed a liquidation petition in Bulgaria. As a result, the Company lost control of and de-consolidated it from the Company's financial statements. The Company had recorded a $6.4 million provision during the six months ended March 31, 2019 in respect of ALC.

13. GOVERNMENT ASSISTANCE

As a result of the impact of COVID-19, the Company has applied to multiple government assistance programs. During the three months ended June 30, 2020 the Company recorded $2,963 of assistance which was recorded as a reduction of selling, general and administrative expense. The amount of assistance receivable at June 30, 2020 was $1,380.

23

CORPORATE INFORMATION

Exco Technologies Limited is a global supplier of innovative technologies servicing the die-cast, extrusion and automotive industries. Through our 15 strategic locations in 7 countries, we employ approximately 5,000 people and service a diverse and broad customer base.

Telephone: 905-477-3065

Fax: 905-477-2449

Web: www.excocorp.com

TORONTO STOCK EXCHANGE LISTING

XTC

DIRECTORS

Edward H. Kernaghan

Darren M. Kirk, President and CEO

Robert B. Magee, Lead Director

Colleen M. McMorrow

Paul E. Riganelli

Brian A. Robbins, Executive Chairman

Anne Marie Turnbull

CORPORATE OFFICERS

Brian A. Robbins, PEng

Executive Chairman

Darren M. Kirk, CFA, MBA

President and CEO

Matthew Posno, CPA, CA, MBA

Vice President Finance, CFO and Secretary

Paul E. Riganelli, MA, MBA, LLB

Executive Vice President

TRANSFER AGENT

TSX Trust Company

301-100 Adelaide Street West

Toronto, Ontario

M5H 4H1

Shareholder Inquiries:

Telephone: 1-866-600-5869

Email: tmxeinvestorservices@tmx.com

Web: www.tsxtrust.com

24

Disclaimer

Exco Technologies Limited published this content on 29 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 August 2020 16:41:15 UTC

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Financials
Sales 2020 417 M 315 M 315 M
Net income 2020 23,0 M 17,4 M 17,4 M
Net cash 2020 1,45 M 1,10 M 1,10 M
P/E ratio 2020 11,5x
Yield 2020 -
Capitalization 260 M 196 M 196 M
EV / Sales 2020 0,62x
EV / Sales 2021 0,55x
Nbr of Employees 5 000
Free-Float 58,4%
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Mean consensus HOLD
Number of Analysts 3
Average target price 7,08 CAD
Last Close Price 6,55 CAD
Spread / Highest target 10,7%
Spread / Average Target 8,14%
Spread / Lowest Target 6,87%
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Managers
NameTitle
Darren Kirk President, Chief Executive Officer & Director
Brian Andrew Robbins Executive Chairman
Matthew Posno Chief Financial Officer & Vice President
Paul E. Riganelli Director & Executive Vice President
Edward Hume Kernaghan Independent Director
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