Exco Technologies Announces Results for Fourth Quarter and Year Ended September 30, 2019
-- Sales of $121.8 million for the quarter and $507.3 million for the year -- EPS of $0.17 for the quarter and Adjusted EPS of $0.80 for the year -- EBITDA of $13.3 million in the quarter and $62.6 million for year -- Free Cash Flow of $36.5 million or $0.89 per share in Fiscal 2019 -- Returned $26.9 million to shareholders in fiscal 2019 through share repurchases and dividends -- Balance sheet in a $8.7 million net cash position
TORONTO, Nov. 27, 2019 (GLOBE NEWSWIRE) -- Exco Technologies Limited (TSX-XTC) today announced results for its fourth quarter and year ended September 30, 2019. In addition, the Company announced the quarterly dividend of $0.09 per common share which will be paid on December 30, 2019 to shareholders of record on December 16, 2019. The dividend is an “eligible dividend” in accordance with the Income Tax Act of Canada.
Three Months Twelve Months ended September ended 30 September 30 ------------------------------------------ --------------- --------------- (in $ millions except per share amounts) ------------------------------------------ ------------------------------- 2019 2018 2019 2018 ------------------------------------------ - ----- - ----- - ----- - ----- Sales $ 121.8 $ 139.5 $ 507.3 $ 575.6 Net income for the period $ 6.8 $ 11.6 $ 26.6 $ 42.3 Diluted earnings per share from net income Reported $ 0.17 $ 0.27 $ 0.65 $ 1.00 Adjusted 1 $ 0.17 $ 0.27 $ 0.80 $ 1.00 Cash dividend paid per share $ 0.09 $ 0.085 $ 0.355 $ 0.335 EBITDA1 $ 13.3 $ 20.1 $ 62.6 $ 76.6
“Fiscal 2019 proved to be a more difficult year than we anticipated and our fourth quarter was no exception”, said Darren Kirk, CEO of Exco. “But we are optimistic for improved results in the year ahead as our various businesses remain extremely well positioned, our underlying sales momentum is solid and we expect relief from the inflationary cost pressures we faced over much of the past year”, added Kirk.
Fourth quarter consolidated sales were $121.8 million – a decrease of $17.7 million or 13% from the prior year. Excluding $26.2 million in revenue from ALC in the fourth quarter of fiscal 2018, consolidated revenues increased by $8.5 million, or 8% year over year. Over the quarter, exchange rate movements increased sales by $0.8 million.
The Automotive Solutions segment experienced a 22% decrease in sales, or a reduction of $19.7 million, to $69.4 million from $89.0 million in the fourth quarter of 2018. The decrease was driven by the deconsolidation of ALC from Exco’s consolidated results in January 2019. Excluding $26.2 million of contributions from ALC in the fourth quarter of fiscal 2018, segment sales increased by $6.6 million, or 11%. In North America, overall vehicle production volumes were roughly 2% lower during the quarter compared to a year ago. The group’s three North American businesses however recorded higher revenues as newer programs ramped up, particularly at AFX. In Europe, market conditions softened during the quarter with a notable reduction in the amount of near-term takeover business available. Polydesign nonetheless recorded solid growth year over year driven by new programs launched both during the year and in the quarter.
The Casting and Extrusion segment recorded sales of $52.4 million compared to $50.5 million last year – an increase of $1.9 million or 4%. Segment sales gains were driven mainly by the Castool group, which continued to experience strong demand for its capital equipment goods and generally firm demand for its consumable tooling. Markets in Asia however remained soft, negatively impacting the group’s operations in Thailand. Revenue generated by the Extrusion group were essentially flat during the quarter despite the benefit of sales from the group’s new facility in Mexico, which began commercial production on April 1, 2019. Sales gains from this facility were offset by softer market conditions for extrusion dies elsewhere in North America. Within the segment, US steel tariffs continued to reduce during the quarter as certain steel distributors began receiving exemptions of these tariffs earlier in the year. Large mould group sales were higher due to customer timing requirements, commencement of work on new programs, and an improvement in the demand of spare parts. Looking forward, overall quoting activity for new work within our tooling operations remains decent. While there are certainly pockets of market weakness, we believe we are well positioned to growth through market share gains. Our Large Mould group is no exception where we see opportunity to take advantage of our enhanced capabilities, including the ability to deliver high quality complex moulds relatively quickly together with our leadership position in additive manufacturing for certain mould components.
Fourth quarter consolidated net income decreased to $6.7 million or earnings of $0.17 per share compared to $11.6 million or earnings of $0.27 per share in the same quarter last year – an EPS decrease of 37%. The effective income tax rate was 16% in the current quarter compared to 19% in the same quarter last year. The effective tax rate in the current period was improved by approximately $1.4 million of foreign exchange gains that are not subject to tax as well as a reduction to the corporate income tax rate in the US and a greater proportion of earnings generated in lower tax rate jurisdictions.
Fourth quarter pretax earnings in the Automotive Solutions segment totalled $5.0 million, a decrease of $7.8 million or 35% over the same quarter last year. Prior year results benefited from $2.4 million of operating earnings generated by ALC (nil in the fourth quarter of fiscal 2019) as well as a $1.8 million gain from the sale of a building. Current period results benefited from foreign exchange gains but were also adversely impacted by ongoing higher labour costs at Polytech and AFX, significant inefficiencies at Polytech and Polydesign associated with launch programs, unfavorable product mix shifts, higher severance costs and inefficiencies related to the now concluded General Motors strike. While General Motors strike related costs will continue into the first quarter of fiscal 2020, management is optimistic that its overall cost structure will improve. This is expected to occur as newer programs mature and bonus payments to Mexican production staff are anticipated to be lower than in fiscal 2019.
Pretax earnings in the Casting and Extrusion segment improved by $0.6 million or 18% over the same quarter last year to $4.0 million. The earnings improvement was mainly driven by increased contributions from the Large Mould group which benefited from its ongoing efficiency efforts as well as the completion of a few loss-making programs which negatively impacted results the prior year quarter. Profitability within the Extrusion group was lower during the quarter, as it was adversely impacted by reduced market demand for extrusion dies within North America as well as operational support and start-up costs for the new Extrusion facility in Mexico. Nonetheless, despite initial losses, management remains encouraged by the early results of this facility. As is the case with Exco’s prior greenfield operations, these operations typically require several quarters after production commences to mature and reach sustained profitability. Castool’s profitability was down modestly in the quarter due to higher delivery and selling costs associated with slower market conditions in Asia as well as a mix shift towards lower margin products. Generally, management remains focused on reducing its overall cost structure and improving manufacturing efficiencies. Such activities, together with ongoing sales efforts are expected to lead to improved segment profitability over time.
The Corporate segment in the fourth quarter recorded expenses of $0.9 million compared to $1.8 million last year mainly due to lower incentive compensation expense in the current year. As a result of the forgoing, consolidated EBITDA in the quarter decreased to $13.3 million (11% of sales) compared to $20.1 million (14% of sales) last year.
Exco generated cash from operating activities of $29.4 million during the quarter and $21.2 million of Free Cash Flow after $8.3 million in net capital expenditures. This cash flow was more than sufficient to fund $3.7 million of dividends and $4.5 million in share repurchases. For the year, Exco generated Free Cash Flow of $36.5 million and returned $26.9 million to shareholders through combined dividend payments and share repurchases. Exco ended the year with $8.7 million in net cash and $59.5 million in available liquidity, including $26.5 million of balance sheet cash, continuing its practice of maintaining a very strong balance sheet and liquidity position.
For further information and prior year comparison please refer to the Company’s Fourth Quarter Condensed Financial Statements in the Investor Relations section posted at www.excocorp.com. Alternatively, please refer to www.sedar.com.
1 Non-IFRS Measures: In this News Release, reference is 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 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. Refer to the table in the Management Discussion and Analysis for a reconciliation of these non-IFRS Measures.
Quarterly Conference Call: November 28, 2019 10:00 a.m.(Toronto time)
To access the live audio webcast, please log on to www.excocorp.com or https://edge.media-server.com/mmc/p/xc6m5jri a few minutes before the event. Real Player is required for access. The conference call can be accessed by dialing toll free at (866) 572-8261 or internationally at (703) 736-7448. The conference ID is 8053376.
For those unable to participate on November 28, 2019, an archived version will be available on the Exco website.
Source: Exco Technologies Limited (TSX-XTC) Contact: Darren Kirk, President and Chief Executive Officer Telephone: (905) 477-3065 Ext. 7233 Website: http://www.excocorp.com
About Exco Technologies Limited:
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 about 5,400 people and service a diverse and broad customer base.
Notice To Reader: Forward Looking Statements
Information in this document relating to projected 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 and operating efficiencies are forward-looking statements.
This press release may contain 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 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 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 other things, assumptions about the number of automobiles produced in North America and Europe, production mix between passenger cars and trucks, 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, raw material prices, economic conditions, currency fluctuations, trade restrictions, our ability to 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 latest Annual Report, Annual Information Form (“AIF”) and other reports and securities filings made by the Company. This information is available at www.sedar.com or www.excocorp.com.