TORONTO, April 27 /CNW/ - Exco Technologies Limited (TSX-XTC) today
announced results for its second quarter ended March 31, 2006. These results
include a non-cash goodwill impairment charge and inventory provision of $9.7
million associated with the Techmire operation. In addition, the Company
announced that a quarterly cash dividend of $0.0125 per share will be paid
June 30, 2006 to shareholders of record on June 15, 2006.
In the quarter, management reviewed the Techmire operation as this
business continued to under perform. As a result of this review management
recognized that decade high Canadian dollar strength and record high prices
for zinc and other raw materials which Techmire machines are designed to
process have significantly impacted the prospects of this business. In order
to meet these challenges management instituted the following measures in the
quarter: 1) reduction of staff by approximately 25%; 2) limiting research and
development expenditures to products which can be brought to market in the
near term; and 3) focusing sales on a narrower range of core products. This
has prompted management to recognize a goodwill impairment charge of $8.3
million and increase Techmire's inventory provision by $1.4 million. With
these changes management believes it can achieve its goal of significantly
reducing Techmire's losses over the balance of fiscal 2006 and 2007 and
thereafter return Techmire to profitability, albeit at lower sales levels.
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6 Months Ended 3 Months ended
March 31 March 31
($000s, except per share amounts)
2006 2005 2006 2005
---- ---- ---- ----
Sales $104,157 $100,790 $53,968 $52,507
Net income (loss)
before taxes(x) ($3,694) $7,741 ($6,653) $3,430
Net income (loss) ($5,364) $4,930 ($7,359) $2,173
Basic and Diluted
earnings (loss) per share ($0.13) $0.12 ($0.18) $0.05
Common shares outstanding 41,606,000 41,616,000 41,606,000 41,616,000
(x) Including non-cash charge of $8.3 million for Techmire goodwill and
$1.4 million Techmire inventory provision.
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Consolidated sales for the quarter ended March 31, 2006 were $54.0
million compared to $52.5 million in the prior second quarter - an increase of
$1.5 million or 2.9%. During the second quarter, the Casting & Extrusion
segment reported a 9% sales increase to $34.3 million compared to $31.4
million last year. The Automotive Solutions segment reported sales of $19.6
million in the quarter versus $21.1 million last year. This is a decrease of
$1.5 million or 7%.
Exco's pre-tax earnings were reduced in the quarter by a goodwill
impairment charge of $8.3 million and an inventory provision of $1.4 million.
These non-cash charges relate to the Techmire operation which has been
impacted by a persistently strong Canadian dollar, the high cost of zinc and
technical challenges of developing new products.
Net income in the quarter, excluding the impact of the non-cash goodwill
and inventory charges, was down slightly to $0.04 per share compared to $0.05
per share last year. Techmire operating losses before the inventory write-down
in the quarter of $0.02 per share masked the improvement in earnings.
Excluding the impact of the inventory provision ($0.02 per share), the
goodwill impairment charge ($0.20 per share) and Techmire's operating losses
($0.03 per share) Exco's net income would have been unchanged from last year
at $2.9 million or $0.07 per share. Earnings in the large mould businesses
were up over last year in excess of 40% as rising volumes contributed to more
efficient overhead absorption. The extrusion businesses experienced an
increase in quarterly earnings in excess of 60% as selling price increases and
surcharge recoveries began to take hold in the market. Automotive Solutions
segment earnings fell overall as lower profits at Polytech and Neocon in North
America more than offset earnings improvement at Polydesign.
Cash flow from operations improved to $1.6 million in the quarter
compared to $1.1 million in the same period last year. The goodwill impairment
charge and inventory provision were non-cash items and do not affect cash
flow. Cash used in investing activities was down by almost 60% in the quarter
as Exco reduced expenditures on fixed assets.
Exco's performance through the year will continue to be impacted by a
very unstable business environment. Recent highs in the value of the Canadian
dollar will continue to be a drag on both our revenue and profit prospects.
Rising interest rates are expected to reduce demand for automobiles and
adversely impact the construction industry and industrial markets. Lower
automotive component production is expected to persist throughout 2006 and be
further aggravated by possible supply disruptions occasioned by insolvencies
of certain lower tier North American suppliers.
Neocon and Polydesign have won new business which is expected to launch
throughout the latter part of this year and the first quarter of next fiscal
year. Sales in the Casting and Extrusion segment are also expected to continue
growing as the large mould business continues to quote on programs and the
extrusion businesses and Castool increase market share. The difficult raw
material environment appears to be moderating in certain areas and should
afford our businesses an opportunity to improve gross margin.
Furthermore, the Company announced that it will be renewing its normal
course issuer bid for an additional twelve month period until May 7, 2007.
Under the terms of the renewed bid, Exco may acquire up to 2,050,000 common
shares, representing approximately 5% of Exco's currently issued and
outstanding common shares. All purchases will be made through the facilities
of, and in accordance with the rules of the Toronto Stock Exchange. All shares
purchased under the bid will be cancelled. Under Exco's current normal course
issuer bid which expires on May 6, 2006, Exco has to date purchased 106,600
common shares at an average price per share of $3.97. The Board of Directors
of Exco believes that the purchase of shares under the bid to be an
appropriate and desirable use of available funds.
Exco Technologies Limited is a global supplier of innovative technologies
servicing the die-cast, extrusion and automotive industries. Through our 13
strategic locations, we employ 1,950 people and service a diverse and broad
customer base.
(for further information please refer to Management Discussion and
Analysis, Financial Statements, and Notes posted at 'Sedar.com')
Management will hold a conference call to discuss the second quarter
results on Friday April 28, 2006 at 11:00 am (EST). The local dial in number
for the call is (416) 644-3416 or toll free 1-800-814-4859. To access the live
audio webcast, please log on to www.excocorp.com or www.q1234.com a few
minutes before the event. Real Player is required for access. For those unable
to participate on April 28, 2006, an archived version will be available on the
Exco website.
Information in this document relating to projected growth, improvements
in productivity and future results constitutes forward-looking statements.
Readers are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions or
expectations upon which such statements are based will occur. Forward-looking
statements include 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 or implied by such statements. These risks, uncertainties and
assumptions include, among other things: industry cyclicality; global economic
conditions, causing decreases in automobile production volume and demand for
capital goods; price reduction pressures; pressure to absorb certain fixed
costs; dependence on major customers; technological changes; fluctuations in
currency exchange and interest rates; employee work stoppages; dependence on
key employees; the competitive nature of the automotive and capital goods
industries, product supply and demand; and other risks, uncertainties and
assumptions as described in the Company's 2005 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 represented by such
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct. Readers are cautioned that the
foregoing list of important factors is not exhaustive. Furthermore, the
Company disclaims any obligations to update any such factors or publicly
announce the result of any such revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
%SEDAR: 00003420E
