LETTER TO SHAREHOLDERS
the effects of
foreign exchange
Exco’s fiscal 2017 results in many respects mirrored
the record performance we achieved in fiscal 2016.
Sales of $584.2 million, EBITDA of $83.2 million and
adjusted EPS of $1.03 were essen�ally unchanged
from the respec�ve figures the prior year, par�cularly
before
rate
movements. Free cash flow however grew by 19% to a
record $49.0 million even as we con�nued to invest in
our future. Our strong cash flow supported a 14%
increase in Exco’s dividend and enabled us to modestly
reduce our share count while bolstering our balance
sheet, nearly elimina�ng our net debt posi�on.
Notwithstanding these accomplishments, it is hard to
say we are overly sa�sfied with our results given our
expecta�on for earnings growth going into the year.
But with a broader economic backdrop that remains
generally favorable, ample opportuni�es to capitalize
on, and con�nued progress on our various opera�onal
ini�a�ves we are very op�mis�c that our earnings will
return to growth in fiscal 2018.
Industry Trends Remain Encouraging Despite Pullback
in North America
Indeed, with NAFTA
North American industry vehicle sales and produc�on
figures during 2017 certainly have the “peak auto”
theorists chirping.
region
produc�on off 1% from our prior fiscal year, we
certainly felt the impact on our results. More so,
overall NAFTA region light vehicle produc�on was off
7% in the second half of our fiscal year, including a 16%
decline in passenger car volumes. Nonetheless, these
declines occurred a�er two successive years of
industry records, so we hardly think the sky is falling.
Conversely, we believe NAFTA region sales and
produc�on volumes are more likely to plateau near
current levels for the next few years rather than fall
further. Underpinning our view are factors that are
hard to
ignore. US monthly employment gains
con�nue at a strong pace, the average vehicle fleet age
remains over 11 years and con�nues to climb, access
to consumer credit remains good, and GDP growth
con�nues to forge ahead, among other factors. As
well, regardless of overall volumes, we expect the mix
shi� towards SUVs and CUVs and away from cars will
con�nue in North America. This is ul�mately to our
benefit given that the larger size of these vehicles offer
more poten�al for both our interior trim and tooling
products.
Over in Europe, the trend of automo�ve produc�on
volumes appears healthier. Produc�on volumes
increased modestly over our past fiscal year and are
widely expected to head higher again in the year
ahead. As well, produc�on con�nues to grow even
faster in Eastern Europe where we have a well-placed
presence in Bulgaria. Our Moroccan opera�ons are
also well situated in a low-cost jurisdic�on to service
Western Europe. We established this presence long
ago when Morocco’s automo�ve industry was s�ll
quite nascent, however the sector in that country is
now growing very strongly, as is demand for our
various interior trim components and capabili�es.
Moulding Our Future Around Our Opportuni�es
Exco has capitalized on many opportuni�es over the
years, demonstrated by our latest 5-year compounded
average annual growth in sales and EBITDA of 19% and
14% respec�vely. While fiscal 2017 saw a pause in this
remarkable trend, we nonetheless remain encouraged
by the opportuni�es we see for future growth – in
both our business segments.
In our tooling businesses, “light-weigh�ng” remains a
cri�cal theme for auto manufacturers as they strive to
meet regulatory requirements to improve fuel econo-
my and reduce emissions. Aluminum – the primary
metal of use for our tooling – is key to mee�ng these
requirements given its superior strength-to-weight
ra�o. Accordingly, aluminum is increasingly replacing
various heavier components made from steel in
vehicles with an internal combus�on engine (ICE). And
while we expect the ICE will prevail as the dominate
powertrain for a long �me, aluminum is also used
extensively throughout electric vehicles to minimize
weight and
range
performance. Consequently, we expect the trend
towards increased aluminum use in the automo�ve
industry is likely to play out rather steadily beyond the
next decade in one form or another. This has very
posi�ve long-term growth implica�ons for all three of
our tooling businesses as more moulds, extrusion dies
and consumable components will increasingly be
therefore maximize ba�ery
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
LETTER TO SHAREHOLDERS
required. Importantly, this strong undercurrent –
together with the significant end market diversity of
our extrusion tooling business – means a good por�on
of our Cas�ng & Extrusion segment is well insulated
from auto sales cyclicality.
Where we do have greater exposure to the cyclicality
of auto volumes - in our interior trim business – we are
not just at the mercy of the markets. Over �me we
have managed to dampen our downside risks – and
magnify our upside poten�al – by drama�cally grow-
ing our content per vehicle (CPV), a key benchmark of
our success. Since fiscal 2012, our CPV has grown by a
CAGR of 26% in North America and an even more
impressive CAGR of 40% in Europe. Yet, with just $14
of CPV in North America and $7 of CPV in Europe, we
have seemingly endless poten�al for addi�onal
content growth.
Execu�ng on Our Ini�a�ves
To capitalize on our opportuni�es, we con�nue to
execute on several
ini�a�ves. In our Cas�ng &
Extrusion segment, our ini�a�ves are broadly aimed at
i) solidifying our leading posi�ons through investments
ii) growing
in technology and produc�vity and,
through greenfield
in new markets.
investments
Within our Automo�ve Solu�ons segment, we are
generally focused on i) improving various measures of
diversity, ii) growing our CPV, and iii) ac�vely seeking
acquisi�ons that can further enhance these measures.
Two years ago,
increased price
in the face of
compe��on, we undertook a large capital program to
radically transform the way we manufacture our large
moulds. Our goals were clear: we would drama�cally
improve our efficiency, raise our throughput, and
enhance our quality to strengthen our compe��ve
posi�on. While our progress has been slower than we
ini�ally expected,
I’m pleased to say that the
implementa�on of our new manufacturing process is
nearing comple�on, and we are more confident than
ever that our goals will be achieved. We are now able
to produce moulds in less than half the �me it took us
just a couple years ago and we expect further
improvement over �me as we con�nue to refine our
processes. As well, by incorpora�ng 3D printed com-
ponents into the mould design, our customers can
achieve a level of quality and reliability previously
impossible. Our large mould results were generally
so� again in fiscal 2017 as we con�nued to absorb
persistent pricing pressures and complete
the
implementa�on of the new manufacturing process.
However, we expect steady improvement from current
levels as ac�vity levels pick up and we increasingly
harness the benefits of the changes we’ve made. It
goes without saying, we would be materially worse off
today had we not pursued this path of innova�on and
Indeed, we believe we have
differen�a�on.
leapfrogged our compe��on with unrivaled speed,
quality and capabili�es to the be�erment of our future
results.
in
We also con�nue to invest heavily in our Extrusion
group to harmonize our manufacturing process across
our five plants and cement our posi�on as the leading
the Western
extrusion die manufacturer
hemisphere. These efforts have resulted
in an
improved flow of product through our facili�es with
be�er on-�me performance despite higher volumes.
In turn, we have been able to
leverage these
improvements with a modest degree of pricing power.
Our cost structure
improving too as we can
increasingly access labour savings from our opera�ons
located in lower-cost jurisdic�ons and obtain the
benefits of fluidity from our mul�-plant footprint. With
the great strides we’ve made in our harmoniza�on
ini�a�ve we expect to realize further gains in fiscal
2018.
is
Elsewhere in the tooling group, we con�nue to benefit
from the seasoning of our greenfield extrusion
opera�ons in Colombia, Texas and Brazil as well as
Castool’s opera�ons in Thailand. In fiscal 2017 each of
these opera�ons recorded improved top and bo�om
line results and they grew their combined revenue and
EBITDA by approximately 20% and 100% respec�vely
from the prior year with only Brazil remaining in a net
loss posi�on. We expect our exis�ng greenfields will
contribute addi�onal growth
in fiscal 2018 with
minimal capital requirements and a low blended tax
rate suppor�ng the genera�on of incremental free
cash flow. For our next chapter, we are currently
considering a greenfield investment in our extrusion
business to be�er service the local market in Mexico.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
LETTER TO SHAREHOLDERS
Over in our Automo�ve Solu�ons segment, AFX com-
pleted its first full year of opera�ons under Exco’s own-
ership. While lower passenger car volumes dampened
its results in the second half of fiscal 2017, we remain
very sa�sfied with our latest acquisi�on. We have no
doubt that AFX will succeed in its efforts to expand its
business around an endless array of leather-based
products that it can provide within its core capabili�es,
increasing its CPV. At a higher level, a�er inves�ng
significant management �me to bring AFX’s systems up
to Exco standards, we are now exploring ways to bene-
ficially expand AFX’s premium leather cu�ng capabili-
�es and supplier connec�ons into our broader opera-
�ons.
Its no secret that ALC’s opera�ons have proven to be a
drag on Exco’s results over the past couple of years.
While we put some of this pain behind us with the
closure of South Africa in late fiscal 2016 and Lesotho
in early fiscal 2017, ALC’s results con�nue to lag our
expecta�ons. This situa�on con�nued through our
latest fiscal year as the new Audi A5 seat cover
program ramped up to volumes much lower than we
ini�ally expected. Nonetheless, we remain unde-
terred. ALC’s Bulgarian opera�ons remain strategically
important to us given its low-cost loca�on is well
situated to service the growing automo�ve industry in
Eastern Europe. Importantly, we see a path towards
restoring profitability through closer integra�on of ALC
and Polydesign’s well established opera�ons in Moroc-
co. Specifically, we intend to leverage Polydesign’s
products, capabili�es and customers to increase the
volume and diversity of products at ALC. While prog-
ress from this ini�a�ve is already tangible, we expect it
will begin to lead to an improvement in ALC’s results
through fiscal 2018 and beyond.
Meanwhile our long standing interior trim businesses
con�nue to grow strongly as they focus on products
that enhance the appeal of the vehicle with much
success. Innova�on con�nues at a strong pace with
new flexible ne�ng storage and restraint systems,
bumper covers, cargo trays and many other products
finding their way into more and more vehicles. On a
combined basis, Polydesign, Neocon and Polytech
recorded collec�ve growth of 12% during fiscal 2017
despite rela�vely fla�sh auto produc�on, indica�ng a
similar growth of CPV. As well, Polydesign absorbed
significant front-end inefficiencies associated with its
growth, which required comple�on of a building
expansion and headcount growth of 45% through
fiscal 2017.
Well Posi�oned to Return to Earnings Growth in
Fiscal 2018
So, its easy to see why we believe we are well
posi�oned to grow our earnings over the coming year.
While the renego�a�on of the North American Free
Trade agreement is likely to remain an overhang on the
sector, we are comforted by the fact that our North
American opera�ons source very li�le of their raw
material requirements outside the NAFTA region. As
well, while we have a sizeable presence in Mexico,
these opera�ons pay a significant amount of US tax.
This offers the poten�al for great benefit to Exco if the
proposal to reduce the US corporate income tax rate to
20% becomes law.
sheet
In any event, Exco’s balance
remains
excep�onally strong with a net debt to EBITDA ra�o of
just 0.1 �mes. This financial strength and our solid
liquidity posi�on provides us with the capacity to take
advantage of our opportuni�es and weather any
unforeseen challenges. Moreover, we expect to
con�nue to generate significant cash flow well in
excess of our maintenance and growth capital
requirements. We expect to use our free cash flow to
fund our very manageable dividend payment – which
is just 31% of our 2017 adjusted net income – as well
as share repurchases and
in support of future
acquisi�on ac�vity.
In closing, I would like to recognize the dedica�on and
hard work of our 6,609 employees. I sincerely thank
you for your efforts. With your con�nued support I am
certain Exco will make the most of our future
opportuni�es.
Sincerely,
Brian A. Robbins, President and CEO
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
CONTENTS
5
Management's Discussion and Analysis
20
21
25
Independent Auditors’ Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be
read in conjunction with the consolidated financial statements and related notes for the year ended September 30,
2017. This MD&A has been prepared as of November 29, 2017.
Additional information on 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 .
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.
In this MD&A, reference may be made to EBITDA, EBITDA Margin, adjusted EPS and free cash flow which are not
measures of financial performance under International Financial Reporting Standards (“IFRS”). Exco calculates
EBITDA as earnings before other income/expense, interest, taxes, depreciation and amortization and EBITDA Margin
as EBITDA divided by sales. Exco calculates adjusted EPS as earnings before other income/expense and free cash
flow as cash provided by operating activities less interest paid less investment in fixed assets net of proceeds of
disposal. EBITDA, EBITDA Margin, adjusted EPS 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.
CAUTIONARY STATEMENT
Information in this document relating to: projected North American light vehicle sales and production, original
equipment manufacturer’s (OEM) capital investment levels, the rate and intensity of OEM development of all-electric
or hybrid powertrain systems, the level of order backlog 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 found mainly in the MD&A section
but also elsewhere throughout this document. 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, 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 integrate acquisitions and the rate at which our
operation in Brazil achieves 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
EXCO TECHNOLOGIES LIMITED
4
ANNUAL REPORT 2017
different from those expressed or implied. For a more extensive discussion of Exco’s risks and uncertainties see the
‘Risks and Uncertainties’ section in this Annual Report, our Annual Information Form (“AIF”) and other reports and
securities filings made by the Company. This information is available at www.sedar.com.
While Exco believes that the expectations expressed by such forward-looking statements are reasonable, we cannot
assure that they will 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 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
CORE BUSINESSES
Exco is a global designer, developer and manufacturer of dies, moulds, components and assemblies, and consumable
equipment for the die-cast, extrusion and automotive industries. The Company reports in two business segments.
The Casting and Extrusion segment designs, develops and manufactures die-casting and extrusion tooling and
consumable parts for both aluminum die-casting and aluminum extrusion machines. Operations are based in North
America, South America and Thailand and serve automotive and industrial markets around the world. Exco is a leader
in most of these markets. In die-casting and extrusion tooling markets, Exco is further entrenching itself by reducing
lead times and manufacturing costs through design and process enhancements. In the die-cast tooling group a major
equipment capital project is underway that is increasing capacity, reducing lead times, further improving quality and
reducing costs. In the machine consumables market, Exco is leveraging its long tradition as a reliable, high-quality
supplier of consumable components for the injection system of die-cast machines and aluminum extrusion presses by
evaluating, coordinating and ultimately maximizing customers’ overall equipment performance and longevity. The
Canadian, European, South American and United States markets are Exco’s primary focus for die-cast moulds,
extrusion dies and machine consumable parts. However, with respect to the latter, we commenced operations of a new
facility in Thailand in 2014 which we believe will enable us to better penetrate the European and Asian market for
those products.
The Automotive Solutions segment designs, develops and manufactures automotive interior trim components and
assemblies primarily for passenger and light truck vehicles. The Polytech and Polydesign businesses manufacture
synthetic net and other cargo restraint products, injection-moulded components, shift/ brake boots, related interior trim
components and assemblies. Polydesign is also a manufacturer and/or finisher of injection moulded interior trim and
instrument panel components, sun visors, seat covers, head rests and other cut and sew products. Automotive Leather
Company is a manufacturer of leather/fabric seat covers for automobile interiors and increasingly other wrap and sew
components. Neocon is a supplier of soft plastic trunk trays, rigid plastic trunk organizer systems, floor mats and
bumper covers. AFX Industries is a tier 2 supplier of leather and leather-like interior trim components to the North
American automotive market. AFX also supplies die cut leather sets for seating and many other interior trim
applications as well as injection-molded, hand-sewn, machine-sewn and hand-wrapped interior trim components of
all sorts. Automotive Solutions manufacturing facilities are located in Canada, the United States, Mexico, Bulgaria,
and Morocco supplying the automotive markets in North America, Europe and to a lesser extent, Asia.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
VISION AND STRATEGY
For the past few years, Exco has pursued several key strategies designed to achieve sustainable revenue and earnings
growth. These include: (1) strengthening our technological leadership and competitive position in our chosen markets
through automation and technology, (2) minimizing our cost structure, (3) shifting our productive capacity to low-
cost jurisdictions in closer proximity to our customers’ operations, (4) diversifying our revenue base with new products
and services that leverage our competitive strengths, and (5) capitalizing on organic and inorganic growth
opportunities in both our existing and select developing markets.
The North American automotive industry remained generally solid in fiscal 2017, with most OEMs and tier one
suppliers having strong sales and improving credit fundamentals. Production of light vehicles however appears to have
plateaued and there is an increasing separation of trends between passenger cars and light trucks (including sport
utility vehicles) whereby demand for the former has been declining and demand for the latter is holding fairly steady
or declining very slightly. Nonetheless, volumes remain near historical highs supported by low interest rates, low gas
prices, an aging fleet and widespread introduction of new vehicle models. As well, automobile manufacturers continue
to invest in the development and production of more innovative and fuel-efficient powertrains in response to consumer
demand, as well as U.S. government-mandated Corporate Average Fuel Economy (“CAFE”) standards, although these
standards are under review in the 2021 to 2025 timeframe. In Europe comparable legislation requiring co2 emissions
to be reduced is similarly driving innovation to reduce vehicle weight and improvement in powertrain design. These
developments provide meaningful growth opportunities for our tooling businesses, but also for some of our interior
trim businesses, which often sell components that are generally lighter in weight than the products they aim to displace.
During fiscal 2017, Exco continued to solidify its technological leadership with the production of die-cast moulds for
light-weight structural parts that use advanced aluminum alloys such as silafont. To date, Exco has shipped numerous
such moulds. As well, quoting activity and new order flow for various additional structural part programs is
increasingly robust. Exco believes moulds for structural aluminum components will increasingly be a significant
driver of growth for the foreseeable future and that this demand will occur regardless of prevailing powertrain
developments. To point, reducing weight in an electric vehicle is critical to extend the range of the battery. This
business unit has also landed orders for nine and ten speed transmission cases and numerous four and three cylinder
engine block programs which are at the vanguard of OEM efforts to improve vehicle fuel efficiency. Offsetting these
positive benefits however is the maturation of certain established programs that have benefited Exco’s large mould
group over the past several years. Some of these programs were long-running requiring a high number of moulds that
have similar or identical configurations. Typically, programs such as these provide a larger base over which to absorb
any engineering/ development costs and also provide Exco with the opportunity to become more efficient with each
successive mould produced. Recently, automotive OEM’s have increased the speed at which they alter powertrain
designs in order to achieve their fuel efficiency and emission reduction goals. This provides Exco with less opportunity
to leverage the efficiency measures as noted in the forgoing. In response to - and in anticipation of - these trends
continuing, Exco has invested significant capital in new machinery and equipment to reduce costs, increase efficiency,
meet shorter lead times, further enhance the quality of its products and expand capacity.
Demand for extrusion dies remains generally firm as end market applications for extruded aluminum components are
quite diverse and correlate well with GDP, which continues to grow modestly in North America, our largest market
for extrusion dies. As well, demand for extruded aluminum components within the automotive end market continues
to grow above market rates owing to the same light-weighting trends noted above. Moreover, anti-dumping and/or
countervailing duties against Chinese imports into Canada and the US on aluminum extrusions remain in place
following completion of the 2016 sunset review.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
Over the past several years Exco has expanded its footprint in the Americas to gain increased exposure to markets that
the Company expects will have higher growth prospects over the longer term. These investments have included a new
extrusion die production facility in Medellin, Colombia, which commenced operations in January 2012 and a new
extrusion die production facility near Sao Paulo, Brazil, which commenced operations in June 2014. These
investments produced mixed results in fiscal 2017 with our Colombia operations performing very strongly while our
Brazilian operations remain challenged by the weak economic environment in that country. Nonetheless, the financial
performance of our Brazilian operations improved compared to fiscal 2016 and we continue to grow from a small
base, while we hone our skills and capabilities, positioning ourselves for the economic recovery when it eventually
takes place.
In addition to its investments in South America, Exco has expanded its presence in the North America extrusion die
market to provide increased growth in a distinct market segment where proximity to customers is a key element to
success. In 2013, the Company acquired and subsequently expanded an existing toolshop in Wylie Texas to better
service the south-central region of the United States. Exco is now focused on harmonizing the manufacturing process
of its various extrusion die plants and implementing various changes in order to improve the growth prospects and the
efficiency of these operations.
Our Castool business also has solid growth prospects, globally. Demand growth for Castool’s machine consumable
parts prompted us to build a production facility in 2014 in Thailand to more efficiently serve our customers while
taking advantage of lower production and shipping costs to Asia and Europe. This facility has been producing since
July 2014 and is now generating consistent profitability.
Over the past few years, strong vehicle production volumes in both North American and Europe have helped fuel sales
and profit growth in our Automotive Solutions interior trim segment. Furthermore, particularly in North America, a
good proportion of the vehicles produced are refreshed or completely new models with a growing representation of
SUV’s and light trucks, which have greater cabin and cargo areas. Meanwhile, we continue to expand our capabilities
and broaden our product offerings. All of this helps us to increase our content per vehicle and replace older programs
which have been ‘costed down’ over the years with new programs reflecting current costs and better margins. Cost
inflation of raw materials has also remained muted in recent years, in keeping with commodities in general.
While we believe North American and European automobile production volumes appear sustainable near current
levels for the next few years, we believe prospects for further growth are limited by several structural trends. These
include: a steadily aging population and historically high levels of consumer and government debt. As a result, it is
likely that the US and the Euro zone economies will, over the long term, underperform the economies of most
developing countries – particularly, in Latin and South America and Southeast Asia. Admittedly emerging economies
are currently under pressure. Brazil is a case in point. However, over the long term we believe the underlying structural
trends will reassert themselves.
Exco remains committed to establishing a larger presence in these markets to plant the seeds of revenue and earnings
growth for future years. Our focus has been traditionally on relatively low-risk opportunities in markets that are already
familiar to us, and which leverage our technological leadership and existing product and service capabilities – such as
South America and Asia. Exco has exported to these emerging markets for many years and we are familiar with the
customers and the general business climate. We have also operated several large plants in low-cost jurisdictions such
as Mexico and Morocco for many years with exceptional performance and financial results. The increasingly
sophisticated customers in these emerging markets are looking for superior quality, innovative product solutions and
the benefit of local sourcing, product development and service. By manufacturing locally, we also significantly reduce
transportation costs and mitigate the effect of unfavorable currency trends.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
Notwithstanding Exco’s investment in developing markets, we also continue to look for selective acquisitions that
will bolster our position and enhance profitability in North America and Europe. On March 1, 2014 we purchased
Automotive Leather Company which specializes in the manufacture and export of luxury leather interior trim
components to the middle and luxury automotive sector. The primary customer is BMW and its tier one supplier
Faurecia although other German OEMs and their tiers are also customers. This acquisition provided us with a facility
in Eastern Europe, to which European automotive manufacturing continues to migrate, and a central European
technical and service centre from which we can better serve our European customers. ALC’s operations in South
Africa and Lesotho were less compelling. Consequently, Exco closed its operations in South Africa in fiscal 2016 and
ceased production in Lesotho in November 2016. ALC is seeking to diversify its products and customers in Bulgaria
by leveraging its customer relationships, capabilities and products from Polydesign’s Morroccan operations.
On April 4, 2016 we acquired AFX Industries LLC for consideration of US$73.4 million excluding US$4.4 million
of assumed debt. The acquisition builds on Exco’s significant leather-based interior trim stable of products while also
providing new customers, suppliers, products and capabilities in a region that is very familiar to us. AFX is based in
Port Huron, Michigan with manufacturing operations in Matamoros, Mexico. The company is a tier 2 supplier of
leather and leather-like interior trim components to the North American automotive market. AFX supplies die-cut
leather sets for seating and many other interior trim applications as well as injection-molded, hand sewn, machine-
sewn and hand-wrapped interior components of all types.
2017 RESULTS
Consolidated Results - Sales
Annual sales totalled $584.2 million compared to $589.0 million last year – a decrease of $4.8 million or 1% over last
year. The US dollar averaged 1% lower ($1.31 versus $1.32) against the Canadian dollar over the year reducing sales
by $2.1 million. The Euro was essentially unchanged versus the Canadian dollar over the year on average ($1.46),
although a degree of rounding and fluctuations in the exchange rate throughout the year caused sales to be lower by
$0.8 million.
Selected Annual Information
The following table sets out selected financial data relating to the Company’s years ended September 30, 2017 and
2016. This financial data should be read in conjunction with the Company’s audited consolidated financial statements
for these years:
(in $ millions except per share amounts)
Sales
Net income for the year
Earnings per share from net income
Basic
Diluted
Earnings per share from adjusted net income (Adjusted EPS)
Basic
Diluted
Total assets
Cash dividend paid per share
EBITDA
2017
$584.2
$42.5
$1.00
$1.00
$1.03
$1.03
$431.2
$0.31
$83.2
2016
$589.0
$47.6
$1.12
$1.11
$1.04
$1.03
$452.9
$0.27
$83.4
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
Segment Sales
● Automotive Solutions Segment
Sales in this segment were $401.0 million – an increase of $4.0 million or 1% from the prior year. AFX contributed
$104.5 million to sales in the current year compared to $66.9 million last year, when only six months of sales were
recorded. Excluding AFX, segment sales totalled $296.5 million – a decrease of $33.4 million or 10% from the prior
year. This sales reduction was primarily driven by the loss of sales associated with the voluntary closure of ALC’s
money-losing operations in South Africa in fiscal 2016 and Lesotho in early fiscal 2017. Combined, these operations
contributed $37.2 million of sales in fiscal 2016 and $5.4 million in 2017 for a net reduction of $31.8 million year
over year. Sales were also lower at ALC’s remaining operations in Bulgaria due to the wind-down of the BMW 5-
Series seat cover program by February 2017, which were only partially compensated by revenues from the launch of
new business, including the Audi A5 seat cover program. Elsewhere, Polytech and Neocon recorded growth on a
combined basis helped by new product launches and modestly higher production of light truck vehicles in North
America, for which each of these businesses have meaningful exposure. Passenger car production however was down
in North America, which had a modest negative impact on the performance of Polytech and Neocon but a larger
negative impact on the performance of AFX, which has greater concentration of its products on these types of vehicles.
Lastly, sales were materially higher at Polydesign driven mostly by new program launches and aided by slightly higher
European vehicle production volumes. The appreciation of the Canadian dollar versus the US dollar in fiscal 2017
compared to fiscal 2016 reduced sales at Polytech, Neocon and AFX by a total of $1.3 million compared to the prior
year. Fluctuations in the Euro against the Canadian dollar reduced segment sales by $0.8 million year over year.
• Casting and Extrusion Segment
Sales in this segment were $183.3 million – a decrease of $8.9 million or 5% from the prior year. The sales decline
was driven by lower revenues in the large mould group and to a lesser extent the Castool group, partially compensated
by higher sales in the Extrusion group. Large mould revenue declines continue to reflect a difficult pricing
environment as well as lower sales of moulds and maintenance work on established programs countered by an increase
of “first-off” and “one-off” moulds associated with recently launched powertrain and structural part programs. These
newer programs typically have a much lower level of efficiency relative to mature programs, resulting in reduced
throughput, which adversely impacts revenues and margins. However, despite the lower sales, volumes and quoting
activity for new large mould programs generally remained robust throughout the year and backlog levels are strong
and building. Castool sales reflect ongoing market penetration of the group’s innovative product offerings together
with reasonably good market conditions for consumable equipment in North America, South America and Asia. The
sales decline in fiscal 2017 arose mostly from reduced demand for certain of Castool’s capital equipment in North
America as well as incremental pricing pressure due to intensifying competition. However, sales from Castool
Thailand, which commenced production in the last fiscal quarter of 2014 grew strongly over fiscal 2016. The sales
increase in the Extrusion group was widespread and supported by stronger results from each of the group’s flagship
operations in Markham and Michigan together with the ongoing benefit of its newer operations in Texas, Brazil and
Colombia which recorded collective revenue growth of 17% compared to the prior year. The lower average value of
the US dollar compared to the Canadian dollar reduced sales by $0.8 million in this segment in the current year. The
change of the Euro against the Canadian dollar described in ‘Consolidated Results – Sales’ above had a negligible
impact on sales in this segment in the current year.
Cost of Sales
Cost of sales totalled $454.2 million – a decrease of $5.9 million or 1% from the prior year. Cost of sales as a
percentage of sales remained stable at 78% as slightly lower direct material costs were offset by slightly higher direct
labor and factory overhead costs. This, in turn, is largely driven by a mix shift between the company’s various
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
businesses and business segments. Inflationary pressures remain muted for Exco’s major input materials –
petroleum/natural gas based resin and plastic products in the Automotive Solutions segment and tool grade steel in
the Casting and Extrusion segment, where a focus on global sourcing has also helped contain costs.
Selling, General and Administrative Expenses
Selling, general and administrative expense in the current year increased to $46.8 million from $45.9 million last year,
an increase of 2%. As a percentage of sales, these expenses increased to 8.0% from 7.8% the prior year. Fiscal 2017
selling, general and administrative expenses were higher mainly due to a full year of related expenses at AFX and
slightly higher selling expenses at the Castool and Extrusion groups. These increases were partially offset by a
reduction in expenses related to the closure of ALC’s operations in South Africa and Lesotho. Fiscal 2016 expenses
included $1.5 million of transaction costs required to complete the AFX acquisition, which expenses were not repeated
in fiscal 2017.
Depreciation and Amortization
Consolidated depreciation in fiscal 2017 totalled $15.8 million compared to $14.8 million last year driven by higher
depreciation arising from our increased investment in the Casting and Extrusion Segment in recent years as well as
full year of depreciation expense associated with the acquisition of AFX. The increase in amortization expense to $4.8
million in fiscal 2017 from $3.2 million the prior year was attributable to a full year of AFX as a portion of the AFX
acquisition was classified as intangible assets, mostly reflecting the fair value of customer relationships. The carrying
value of total intangible assets amounted to $39.8 million as at September 30, 2017. The Company expects the
associated annual amortization expense will total approximately $4.5 million in fiscal 2018, although could vary
depending on USD/ CAD exchange rates.
With respect to segmentation, depreciation expense increased to $12.4 million in the Casting and Extrusion segment
from $11.5 million last year while depreciation expense in the Automotive Solutions segment increased to $3.3 million
from $3.2 million last year. Amortization of intangible assets increased very modestly to $0.8 million in the Casting
and Extrusion segment but increased to $4.0 million from $2.5 million last year within the Automotive Solutions
segment driven by a full year of amortization related to AFX’s intangible assets.
Interest
Net interest expense in the current year totalled $1.3 million which was unchanged from the prior year. Average debt
levels were modestly higher in fiscal 2017 compared to fiscal 2016 as fiscal 2017 essentially included a full year of
AFX related acquisition debt compared to a half year in fiscal 2016. The pay down of debt in fiscal 2017 with cash
flow however muted this impact. A rise in benchmark interest rates during fiscal 2017 compared to fiscal 2016 also
contributed very modestly to the interest expense.
Income Taxes
Exco’s reported income tax rate was 29.2% compared to a reported income tax rate of 29.7% in fiscal 2016. Included
in the prior year’s income tax expense was $0.9 million of withholdings taxes paid on the repatriation of surplus from
a subsidiary. Excluding this tax charge as well as the $3.4 million of settlement gain, Exco’s adjusted income tax rate
in the prior year would have been 29.9%. Comparatively, excluding the $1.2 million in ALC closure costs in fiscal
2017, the adjusted income tax rate in current fiscal year would have been 28.6%. The lower adjusted income tax rate
in fiscal 2017 reflects an increased proportion of earnings from jurisdictions which have a lower tax rate.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
Net Income
• Consolidated
The Company reported consolidated net income of $42.5 million or basic and diluted earnings of $1.00 per share
compared to consolidated net income of $47.6 million or basic and diluted earnings of $1.12 and $1.11 per share
respectively – a decrease of $5.1 million or 11%. Net income in fiscal 2017 and fiscal 2016 was impacted by non-
recurring items. These items consist of a $1.2 million ($0.03 per share) charge to earnings in fiscal 2017 related to the
permanent closure of ALC’s operations in Lesotho and a $3.4 million ($0.08 per share) gain recorded in fiscal 2016
related to the settlement of a commercial arbitration dispute. Excluding these two items, net income would have been
$43.7 million ($1.03 per basic and diluted share) in fiscal 2017 and $44.1 million ($1.04 per basic and $1.03 per
diluted share, respectively) in fiscal 2016.
• Automotive Solutions Segment (Operating Earnings)
The Automotive Solutions segment recorded operating earnings of $51.1 million for the year compared to $48.0
million last year – an increase of $3.1 million or 6%. Segment results benefited from a full year of contributions from
AFX as well as higher combined earnings at Polytech, Neocon and Polydesign. Each of these businesses continued to
introduce new product launches and benefited from stable costs for metal subcomponents, resin sheet and other plastic
raw material inputs. ALC continued to experience operating losses in fiscal 2017 despite the closure of its South
African and Lesotho operations due to losses at ALC’s Bulgarian operations. These operations were adversely
impacted in fiscal 2017 by lost volumes from the wind-down of BMW 5-Series program, start up costs associated
with the launch of new programs and inventory obsolescence charges.
• Casting and Extrusion Segment (Operating Earnings)
Casting and Extrusion operating earnings decreased to $18.0 million from $24.7 million in the prior year – a difference
of $6.7 million or 27%. This decrease was primarily driven by the large mould group which continued to face a shift
in its volume away from higher margin mature contracts towards newer lower margin “first-off” contracts as well as
lower absorption rates of overhead associated with reduced demand for spare parts. As well, results were negatively
affected by the initial inefficiencies associated with the implementation of new equipment/ processes that management
expects will further enhance the company’s competitiveness. Front end inefficiencies with ramping up the new
equipment are compounded by higher depreciation expense and the need to continue running with older equipment/
processes for some time, resulting in the duplication of certain operating costs. Management expects these costs will
begin to recede through the first few quarters of fiscal 2018. Within the Castool group, profitability was lower in fiscal
2017 compared to the prior year driven by reduced demand for certain capital equipment, costs associated with
machinery reconfiguration to improve Castool’s operating efficiencies, higher sales/ marketing costs and increased
pricing pressure. Partially offsetting the reduced operating earnings of the large mould and Castool groups were
stronger results from the Extrusion group where earnings improved in each of the group’s five plants. Stronger results
were driven by higher sales and achieved despite ongoing disruption from the harmonization of manufacturing
processes at the group’s various plants. Management expects these initiatives will lead to further improvement in
results over time. The stronger Canadian dollar also negatively impacted this segment by decreasing the value of US
dollar denominated earnings from US operations. This segment’s three plants in Canada were also negatively impacted
from the stronger Canadian dollar by decreasing the value of US dollar denominated sales – for greater discussion of
foreign exchange see ‘Segment Sales – Casting and Extrusion Segment’ above.
Corporate Segment (Operating Expense)
•
Corporate expense in the current year amounted to $6.5 million compared to $7.3 million in the prior year. The year
over year reduction was primarily driven by lower incentive compensation expense in 2017, the non-recurring nature
of the $1.5 million transaction costs associated with the AFX acquisition in fiscal 2016 partially offset by foreign
exchange translation losses of $0.1 million in fiscal 2017 compared to a gain of $0.3 million the prior year.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
EBITDA
EBITDA in the current year amounted to $83.2 compared to $83.4 million in the prior year – a decrease of $0.2 million
or 0% although the EBITDA margin remained stable at 14.2%. EBITDA in the Casting and Extrusion segment was
$31.2 million, which was lower by $5.8 million, or 16% compared to fiscal 2016. The segment EBITDA margin
declined to 17.0% in fiscal 2017 compared to 19.2% the prior year. The Automotive Solution segment EBITDA was
$58.5 million, which was higher by $4.8 million, or 9% compared to fiscal 2016. The segment EBITDA margin
improved to 14.6% in fiscal 2017 compared to 13.5% the prior year. Corporate cash expenses declined to 1.1% of
sales compared to 1.2% the prior year.
Quarterly Results
The following table sets out financial information for each of the eight fiscal quarters through to the fiscal year
ended September 30, 2017:
($ thousands except per share
amounts)
September 30,
2017
Sales
Net income
Earnings per share
Basic
Diluted
$131,416
$7,521
$0.18
$0.18
($ thousands except per share
amounts)
September 30,
2016
Sales
Net income
Earnings per share
Basic
Diluted
$163,034
$10,514
$0.25
$0.25
June 30,
2017
$145,909
$10,933
$0.26
$0.26
June 30,
20162
$161,671
$16,226
$0.38
$0.38
March 31,
2017
$153,783
$12,602
December 31,
20161
$163,034
$10,514
$0.30
$0.30
$0.27
$0.27
March 31,
2016
$133,383
$8,989
December 31,
2015
$130,901
$11,828
$0.21
$0.21
$0.28
$0.28
1 Net income in the first quarter of fiscal 2017 was reduced by $1.2 million ($0.03 per share) due to charges
associated with the closure of ALC’s operations in Lesotho.
2 Net income in the third quarter of fiscal 2016 was boosted by $3.4 million ($0.08 per share) from a commercial
arbitration settlement.
Exco typically experiences softer sales and profit in the first fiscal quarter, which coincides with our customers’ plant
shutdowns in North America during the Christmas season. Exco also experiences a slowdown in the fourth fiscal
quarter as North American customers typically schedule summer plant shutdowns and Exco’s European customers
typically curtail releases during the month of August to accommodate vacations. Contributions from the acquisition
of AFX boosted results beginning in the third fiscal quarter of 2016 however sales and profitability have generally
trended down in more recent quarters as a result of the closure of ALC’s operations in South Africa in the first fiscal
quarter of 2017 and lower vehicle production in North America.
Fourth Quarter
In the fourth quarter, consolidated sales were $131.4 million – a decrease of $31.6 million or 19% from the prior year.
Over the quarter the average USD/CAD exchange rate was 5% lower ($1.25 versus $1.31 last year) reducing sales by
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ANNUAL REPORT 2017
$4.0 million. The average EUR/ CAD exchange rate was nominally higher ($1.48 versus $1.46 last year) increasing
sales by $0.3 million compared to the fourth quarter of fiscal 2016.
The Automotive Solutions segment experienced a 26% decrease in sales, or $30.6 million, to $87.1 million from
$117.7 million in the fourth quarter of 2016. The decline was mainly due to the closure of ALC’s operations in South
Africa in late fiscal 2016 and Lesotho in early fiscal 2017 coupled with the wind-down of the BMW 5-Series seat
cover program by February 2017 which was only partially compensated by the launch of new programs. AFX also
contributed to the lower sales driven by reduced vehicle production volumes of passenger cars in North America. As
well, Polytech and Neocon recorded modestly lower combined sales year over year arising mainly from reduced
production volumes of light trucks (including SUVs and CUV’s) where each of these businesses have meaningful
exposure. These factors were compounded by the timing of program launches at the segment’s various businesses
and, management believes, destocking within inventory channels which can occur at the front end of vehicle
production declines. Partially offsetting these factors were higher sales at Polydesign due mainly to ongoing program
launches. The lower average value of the US dollar compared to the Canadian dollar reduced segment sales by $2.5
million in the current quarter. The higher value of the Euro compared to the Canadian dollar increased segment sales
by $0.3 million in the current quarter.
The Casting and Extrusion segment recorded sales of $44.3 million compared to $45.3 million last year – a decrease
of $1 million or 2%. This was driven mostly by lower sales from the Castool group arising from reduced demand for
capital equipment as well as increased pricing pressure for certain consumable components, particularly in North
America. Large mould segment sales were also modestly lower compared to the prior year quarter however sales were
higher in the Extrusion group driven by increases from each of that business units five operating plants. The lower
average value of the US dollar compared to the Canadian dollar reduced segment sales by $1.5 million in the current
quarter. Fluctuations between the Canadian dollar and Euro did not meaningfully impact segment sales in the quarter.
The Company’s fourth quarter consolidated net income decreased to $7.5 million or earnings of $0.18 per share
compared to $10.5 million or earnings of $0.25 per share in the same quarter last year – an EPS decrease of 28%. The
effective income tax rate was 27.4% in the current quarter compared to 35.0% in the same quarter last year. The
effective tax rate in the current period was improved by the proportion of earnings generated in lower tax rate
jurisdictions. Also, last years tax expense included withholding taxes of $0.9 million ($0.02 per share) as summarized
in ‘Income Taxes’ above.
Fourth quarter pretax earnings in the Automotive Solutions segment totalled $8.9 million, a decrease of $5.5 million
or 38% over the same quarter last year. This deterioration was driven primarily driven by the lower sales volumes
compounded by margin weakness caused by reduced absorption of factory overhead expenses and unfavorable product
mix shifts. These trends were particularly true at AFX and to a lesser extent Polytech and Neocon during the quarter.
As well, ALC losses increased compared to the prior year driven by weaker than expected volumes from the Audi A5
seat cover program, inventory write-down charges and the non-recurring nature of a $0.6 million asset disposal gain
recognized in the prior year quarter. Polydesign recorded both strong top line growth and margin expansion during
the quarter compared to the same quarter last year.
Fourth quarter pretax earnings in the Casting and Extrusion segment fell by $1.1 million or 29% over the same quarter
last year to $2.8 million. The earnings decrease was mainly due to lower sales, unfavorable product mix shifts and
reduced absorption of fixed costs in both the large mould and Castool businesses, partially offset by stronger results
in the Extrusion group. Casting and Extrusion depreciation and amortization expenses totalled $3.3 million in both
the fourth quarter of 2017 and 2016.
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ANNUAL REPORT 2017
The Corporate segment in the fourth quarter recorded expenses of $0.9 million compared to $1.6 million last year with
the lower amount mainly due to reduced incentive compensation expense. As a result of the forgoing, EBITDA in the
quarter decreased to $15.8 million (12.0% of sales) compared to $22.2 million (13.6% of sales) last year.
FINANCIAL RESOURCES, LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities
Operating cash flow before net changes in non-cash working capital decreased by $4.9 million, or 7% to $64.7 million
from $69.5 million in fiscal 2016. This decrease is primarily the result of the lower Net Income in fiscal 2017 for
reasons described in the Net Income section, above. Other factors explaining the variance include a reduction in
deferred tax amounts compared to an increase the prior year, higher Depreciation and Amortization expense in fiscal
2017 and $0.7 million of the $1.2 million in ALC closure costs that were non-cash in nature.
Net change in non-cash working capital was $1.7 million cash provided compared to $4.1 million cash used last
year. The improvement year over year primarily reflects the lower sales levels and a focus on more efficient use of
working capital generally. Consequently, cash provided by operating activities rose 1% to $66.4 million compared
to $65.5 million last year.
Cash Flows from Financing Activities
Cash used by financing activities amounted to $41.0 million compared to a source of $32.3 million in fiscal 2016. The
variance year over year is mainly attributable to the use of bank debt to partially fund the acquisition of AFX in fiscal
2016, which was subsequently reduced with generated cash flow in fiscal 2017. The Company also paid higher
dividends of $13.2 million in fiscal 2017 compared to $11.5 million last year and spent $1.5 million to repurchase its
share capital in fiscal 2017 compared to nil the prior year.
In addition to the obligations disclosed on its consolidated statements of financial position, Exco also enters into
operating lease arrangements from time to time. Exco owns 14 of its 17 manufacturing facilities and most of its
production equipment. Leased facilities consist of ALC’s operations in Bulgaria. Exco acquired AFX’s operations in
Mexico subsequent to the end of fiscal 2017. The Company also leases a sales and support center in Troy, Michigan
and a warehouse in Brownsville, Texas. The following table summarizes the Company’s significant short-term and
long-term commitments on an undiscounted basis:
Bank indebtedness
Trade accounts payable
Long-term debt
Operating leases
Purchase commitments
Capital expenditures
Total
< 1 year
1-3 years
Over 3 years
$15,717
48,369
31,093
4,896
40,920
398
$141,393
$15,717
48,369
3,959
1,724
40,920
398
$111,087
$-
-
27,047
3,015
-
-
$30,062
$-
-
87
157
-
-
$244
∗ Exco leases facilities, automotive, 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.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
Cash Flows from Investing Activities - Capital Expenditures
Cash used in investing activities in the current year totalled $16.0 million compared to $104.9 million last year.
Included last year was $82.0 million cash paid for the acquisition of AFX compared to no such expenditures in fiscal
2017. This accounts for the major part of the investing activities reduction. Capital spending in the current year was
$16.3 million compared to $23.9 million last year. Capital spending in the prior year included $5.5 million for new
equipment related to our machinery upgrade project in the large mould facility in Newmarket Ontario, net of
Government grants of $2.9 million ($1.0 million of Government grants were received in fiscal 2017). The balance of
the capital spending is mostly related to machinery and equipment needed to maintain or upgrade our production
capacity.
In fiscal 2018, Exco plans to invest approximately $28.6 million in capital expenditures of which roughly $18.0 million
is for maintenance and ongoing equipment upgrade in the Casting and Extrusion segment, approximately $6.0 million
is for maintenance expenditures and targeted capacity additions in the Automotive Solutions segment and $4.6 million
is to purchase AFX’s leased building where its manufacturing operations are located.
We expect that in fiscal 2018 our cash flow from operations will exceed anticipated capital expenditures and,
accordingly, our cash deposits and our credit lines will be more than sufficient to meet our operating and capital
requirements.
Financial Position and Cash Balance
Exco’s financial position and liquidity remains strong. The Company’s conservative financial policies have served it
well throughout the years and has allowed it to take advantage of acquisition opportunities and further organic growth
as circumstances permit.
Exco’s net debt totalled $10.9 million as at September 30, 2017 compared to net debt of $44.6 million as at September
30, 2016, for a reduction of $33.7 million during the year. This reduction primarily occurred through the generation
of $49.0 million of free cash flow less dividends paid of $13.2 million and share repurchases of $1.5 million during
fiscal 2017.
In addition to its cash balances of $35.9 million, Exco retains access to $20.1 million of its $50.0 million committed
credit facility, which matures February 2019. 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 September
30, 2017.
Outstanding Share Capital
As at September 30, 2017, the Company had 42,499,391 common shares outstanding. In addition, as at September
30, 2017, the Company had outstanding stock options for the purchase of up to 754,340 common shares.
CRITICAL ACCOUNTING POLICIES
The preparation of Exco’s financial statements in conformity with International Financial Reporting Standards
requires management to make estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,
as well as the reported amount of revenue and expenses during the reporting period.
EXCO TECHNOLOGIES LIMITED
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ANNUAL REPORT 2017
Exco recognizes revenue upon percentage of completion of long-term contracts in the large die-cast moulds business
and upon product completion for all other businesses. For short-term contracts in the large die-cast moulds business
and all contracts in the extrusion and other tooling products and the Automotive Solutions segment products,
completion is defined as shipment to customers.
Management estimates and expenses the fair value of stock-based compensation granted after January 1, 2002. This
fair value is amortized to earnings over the remaining vesting period using the Black-Scholes option pricing model.
The Company believes that the estimate of stock-based compensation is a “critical accounting estimate” because
management is required to make significant forward-looking assumptions including expected stock volatility, the
change in expected dividend yields and the expected option term. Currently the compensation expense is recorded in
the selling, general and administration category in the consolidated statements of income and comprehensive income.
We evaluate property, plant and equipment and other long-lived assets for impairment whenever indicators of
impairment exist. Indicators of impairment include prolonged operating losses or a decision to dispose of, or otherwise
change the use of, an existing fixed or other long-lived asset.
We believe that accounting estimates related to goodwill, property, plant and equipment and other long-lived asset
impairment assessments are “critical accounting estimates” because: (i) they are subject to a significant measurement
uncertainty and are susceptible to changes as management is required to make forward-looking assumptions regarding
the impact of improvement plans on current operations, in-sourcing and other new business opportunities, program
price and cost assumptions on current and future business, the timing of new program launches and future forecasted
production volumes; and (ii) any resulting impairment loss could have a material impact on our consolidated net
income and on the amount of assets reported on our consolidated statements of financial position.
RECENT ACCOUNTING CHANGES AND EFFECTIVE DATES
Refer to Note 2 to the consolidated financial statements for information pertaining to the accounting changes and
issued accounting pronouncements effective in 2017 and future years.
DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, together with other members of
management, after evaluating the effectiveness of the Company’s disclosure controls and procedures, have concluded
that the Company’s disclosure controls and procedures are adequate and effective in ensuring that material information
relating to the Company and its consolidated subsidiaries would have been known to them.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer, together with other members
of management, after having designed internal controls over financial reporting and conducted an evaluation of its
effectiveness based on the integrated framework issued by the Committee of Sponsoring Organization of the Treadway
Commission to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial reporting in accordance with generally accepted accounting principles, have not identified any changes to
the Company’s internal control over financial reporting which would materially affect, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
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ANNUAL REPORT 2017
RISKS AND UNCERTAINTIES
The Casting and Extrusion segment is a capital goods business. Interest rates, exchange rates, corporate capital
spending, the general economic climate, business confidence and our customer’s financial strength affect the demand
for Exco’s dies, moulds and consumable parts for die-cast and extrusion machines. Abrupt changes in these factors
often bring about dramatic changes in demand and pricing. Exco believes that its broad product line, geographic
diversification and leadership position in its niche markets mitigate against this risk but some risk remains.
Exco’s Automotive Solutions segment services automotive component suppliers (and Tier 1 suppliers) around the
world. The results of this segment depend on demand for automobiles, the type of automobiles (which demand has
been shifting away from passenger cars towards SUV/ CUV’s in North America) and the level of automobile
production, which can fluctuate significantly with consumer confidence, general economic conditions, the cost and/or
availability of consumer credit and gasoline, as well as, the market share of individual OEM customers. Contraction
and slowing GDP growth in emerging economies, North America and Europe may also have a dampening effect on
consumer demand for automobiles in these regions.
Exco sells to its automotive customers pursuant to purchase orders which typically sets out price per unit but not
volumes or fixed terms. These purchase orders may be terminated at any time with limited recourse for compensation
or damages and pricing is typically adjusted downward from time to time in the form of ‘cost downs’. Termination
of purchase orders and ‘cost downs’ may impact Exco’s margin and overall earnings if not contemporaneously offset
by new business at better margin or cost reductions. Furthermore, in any given year, any number of programs will be
expiring. While Exco is constantly quoting on replacement programs or new programs, there is no assurance that these
will be awarded or that if awarded, the pricing and margin will be comparable to those of programs ending.
In some cases, OEMs can decide to design the Company’s products out of the automobile (“de-contented”) or reduce
the trim level on which the Company’s products are installed for either aesthetic, cost or product redesign reasons.
While Exco believes its focus on evolving from component supplier to a designer and integrator of small assemblies
and sub-assemblies used in automotive and trunk interiors reduces the risk of de-contenting and trimming down
decisions, some of Automotive Solutions products are not critical components and may still be de-contented.
OEMs or their tiers may have excess production capacity or collective agreements which preclude efficient capacity
reduction during times of declining sales. In these cases OEMs and/or their tiers may choose to fill their excess capacity
by taking production from their suppliers and manufacturing the parts themselves. This process of ‘in-sourcing’ may
have the impact of reducing the amount of business available to suppliers such as Exco.
Exco is a global manufacturer which has organized its global production and logistics footprint based on, among other
things, the extent of duties/levies imposed on the import/export of our products and raw material inputs. As a general
rule governments have been encouraging greater trade and more liberal access to their markets by reducing or
eliminating tariffs. This has benefited Exco over the years. More recently, certain governments have postured with a
more protectionist tone. In particular, NAFTA is currently being renegotiated and the outcome is uncertain. In the
event that governments pursue protectionist trade practises with respect to automotive components or their raw
materials or subassemblies, Exco may be prejudiced.
Exco has in 2010, 2011, 2013, 2014 and 2016 made five acquisitions (Allper AG, Exco Colombia, Extrusion Texas,
Automotive Leather Company and AFX Industries) and may make others in the future. Acquisitions inherently
involve risk. While Exco has concluded many acquisitions that have been very successful, there have also been
disappointing acquisitions which have adversely impacted earnings.
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ANNUAL REPORT 2017
Exco’s Canadian operations negotiate sales contracts with customers in both Canadian and U.S. dollars and Euro. We
also purchase, where we can, raw material in these currencies. U.S. dollar and Euro purchases provide a natural hedge
against U.S. dollar and Euro sales of Exco’s Canadian operations. As for the remaining foreign exchange exposure
in these currencies not naturally hedged, Exco does not enter into forward contracts but prefers to incur U.S. dollar or
Euro debt, from time to time as appropriate. Despite these measures, Exco is structurally a net seller of U.S. dollars
and, to a lesser extent Euro, with foreign exchange losses increasing as the U.S. dollar and Euro decline in value
against the Canadian dollar. While Exco has made considerable progress in reducing its reliance on U.S. dollar sales,
markets which Exco currently services may experience rising competition from imports which have become more
competitive as a result of foreign exchange movements.
Exco’s U.S. operations earn profits in U.S. dollars. A stronger Canadian dollar results in lower Canadian dollar profit
on translation. This does not, however, affect the competitiveness of our US operations within the U.S. market or other
U.S. dollar-denominated markets. For fiscal 2018, it is estimated that Exco’s U.S. operations will be exposed to foreign
exchange risk on the translation of pre-tax profit of about US$32.0 million. If the Canadian dollar were to strengthen
or weaken by $0.01 in fiscal 2018 from a baseline level of $1.30 USD/CAD, it is estimated that pre-tax profit would
change by about $320 thousand or about $208 thousand after tax. These estimates are based on historical norms and
may be materially different in 2018 if customers deviate from their past practices.
To mitigate against the risk of adverse foreign exchange rate movements we are focused on a number of initiatives.
Wherever possible, throughout its Canadian operations, the Company is attempting to sell in Canadian dollars and
source inputs and equipment in U.S. dollars, thereby improving its natural hedge. It is very difficult to dislodge the
dominance of U.S. dollars as the commercial currency of choice. In addition, pricing in Canadian dollars may make
the Company’s products uncompetitive and result in lost business. For further discussion of exchange rate impacts see
Note 9 to the Consolidated Financial Statements.
For fiscal 2018, we estimate our Canadian operations will be exposed to fluctuation in the value of the Canadian dollar
relative to the U.S. dollar on about US$44.5 million of sales less purchases. If the Canadian dollar were to strengthen
or weaken by $0.01 in fiscal 2018 from a baseline level of $1.30 USD/CAD, we estimate pre-tax profit would change
by $450 thousand or about $338 thousand after tax. These estimates are based on historical norms and may be
materially different in fiscal 2018 if customers deviate from their past practices.
Exco’s has three manufacturing operations in Mexico and accordingly incurs a portion of its labour and other expenses
in Mexican pesos. In turn, these Mexican pesos expenses are incurred to mainly support US dollar denominated sales.
Consequently, any strengthening of the Mexican pesos against the US dollar reduces our profitability, all other things
equal. In recognition of this risk, Exco hedges a portion of its Mexican pesos/ US dollar exposure with various foreign
exchange contacts and options. For fiscal 2018, we estimate our pesos exposure net of hedges and pesos denominated
sales to be approximately 225 million pesos. If the Mexican pesos were to strengthen or weaken by 1% versus the US
dollar from a baseline USD/MEX rate of 18:1, and further assuming the Canadian dollar strengthens or weakens
against the US dollar also by 1% from a baseline USD/CAD rate of 1.30, we estimate pre-tax profit would change by
$185 thousand or about $120 thousand after tax. These estimates are based on historical norms and may be materially
different in fiscal 2018 if customers deviate from their past practices.
Exco also has manufacturing facilities in Colombia, Brazil, Thailand, Bulgaria and Morocco and Exco’s presence in
jurisdictions such as these has generally been increasing in recent years. Some of these operations incur labor costs
and often other operating expenses in local currency. In several of these countries, sales contracts and major purchases
such as material and equipment are negotiated in U.S. dollars or Euro. In other countries, sales contracts and major
purchases are negotiated in local functional currencies as well. Major long-term fluctuations in the value of the local
currencies against the U.S. dollar and Euro have the potential to affect Exco’s operating results, retained earnings and
EXCO TECHNOLOGIES LIMITED
18
ANNUAL REPORT 2017
value of its investment in these countries. Exco may enter into forward contracts or ‘collar’ contracts from time to
time in order to protect itself from currency fluctuations. These contracts are derivative instruments which, depending
on their structure, may not qualify for hedge accounting treatment and accordingly may be ‘marked to market’ each
quarter and expensed if necessary. It is difficult to anticipate fluctuations in these local currencies in the event of major
economic, fiscal or political instability in these countries.
The cost of manufacturing our products is a critical factor in determining our success over the long term.
Manufacturing has generally expanded to developing countries where competing technologies and lower labor-cost
structures exist. Exco must compete against companies doing business in these developing countries. Exco has met
this challenge by manufacturing some labour-intensive products in Mexico, Thailand, Bulgaria and Morocco;
however, many of our operations based in Canada and the U.S. must compete with products manufactured in lower-
cost environments.
A significant portion of Exco’s receivables are with automotive customers. These customers have varying degrees
of financial strength. These receivables are subject to varying degrees of collectability. The majority of these
receivables are with U.S. entities that can avail themselves of Chapter 11 protection from creditors in certain
circumstances and avoid payment of the Company’s receivables that are over 20 days from the date of the Chapter 11
filing. Exco’s receivables may also be with highly leveraged customers that may have recently merged or chosen to
leverage their balance sheet for tax purposes or otherwise increase their investment yield. Doing business with such
customers typically increases the risk of default and filing for bankruptcy protection. The Company uses its best
efforts to collect accounts receivable under 60 days but in some cases the terms may be notably longer and often in
other currencies thereby requiring Exco to bear the exchange rate risk. The Company often has the benefit of statutory
or common law liens on its products, however, it is not uncommon for significant receivables to be outstanding for
considerable periods, particularly in the large mould business.
EXCO TECHNOLOGIES LIMITED
19
ANNUAL REPORT 2017
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Exco Technologies Limited
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Exco Technologies Limited, which
comprise the consolidated statements of financial position as at September 30, 2017 and 2016, and the
consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash
flows for the years then ended and a summary of significant accounting policies and other explanatory
information.
Management's responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Exco Technologies Limited as at September 30, 2017 and 2016, and its financial performance
and its cash flows for the years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada
November 29, 2017
EXCO TECHNOLOGIES LIMITED
20
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
$(000)'s
As at
September 30, 2017 September 30, 2016
As at
ASSETS
Current
Cash and cash equivalents
Accounts receivable (note 9)
Unbilled revenue (note 8)
Inventories (note 10)
Prepaid expenses and deposits
Income taxes recoverable
Total current assets
Property, plant and equipment, net (notes 5 and 17)
Intangible assets, net (notes 6 and 17)
Goodwill (notes 6 and 17)
Deferred tax assets (note 14)
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (notes 4 and 9)
Trade accounts payable (note 9)
Accrued payroll liabilities
Other accrued liabilities
Derivative instruments (note 9)
Provisions (note 7)
Customer advance payments
Long-term debt - current portion (notes 4, 9 and 17)
Total current liabilities
Long-term debt - long-term portion (notes 4, 9 and 17)
Deferred tax liabilities (note 14)
Total liabilities
Shareholders' equity
Share capital (note 3)
Contributed surplus (note 3)
Accumulated other comprehensive income (note 3)
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
$35,876
94,332
20,207
59,782
2,532
3,646
216,375
111,524
39,849
62,091
1,382
$431,221
$15,717
48,369
12,720
10,088
314
1,339
3,223
3,959
95,729
27,134
7,100
129,963
51,707
3,998
4,232
241,321
301,258
$431,221
$27,509
107,900
19,214
67,192
3,352
1,601
226,768
114,695
45,586
64,071
1,821
$452,941
$13,469
64,948
13,275
8,690
4,158
1,382
1,654
4,173
111,749
54,514
7,273
173,536
51,366
3,566
11,190
213,283
279,405
$452,941
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board:
Brian A. Robbins
Director,
President and
Chief Executive Officer
Laurie T.F. Bennett
Director,
Chairman of
the Board
EXCO TECHNOLOGIES LIMITED
21
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
$(000)'s except for income per common share
Sales (notes 8 and 12(A))
Cost of sales
Selling, general and administrative expenses (notes 3 and 12(B))
Depreciation (note 5)
Amortization (note 6)
Loss (gain) on disposal of property, plant and equipment (note 5)
Interest expense, net (note 18)
Other expense (income) (note 19 )
Income before income taxes
Provision for (recovery of) income taxes (note 14)
Current
Deferred
Net income for the year
Other comprehensive income (loss)
Items that may be reclassified to net income in subsequent periods:
Net unrealized gain (loss) on derivatives designated as cash flow hedges (notes 3 and 9)
Unrealized loss from foreign currency translation (note 3)
Comprehensive income
Income per common share
Basic
Diluted
Weighted average number of common shares outstanding (note 13)
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
Years ended September 30
2016
$588,989
460,119
45,864
14,787
3,150
(389)
1,289
(3,440)
521,380
2017
$584,205
454,172
46,838
15,774
4,831
7
1,327
1,223
524,172
60,033
67,609
18,543
(1,029)
17,514
$42,519
2,784
(9,742)
(6,958)
$35,561
$1.00
$1.00
42,600
42,675
17,420
2,632
20,052
$47,557
(1,173)
(2,006)
(3,179)
$44,378
$1.12
$1.11
42,497
42,693
EXCO TECHNOLOGIES LIMITED
22
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
$(000)'s
Share
capital
$50,060
-
-
-
1,306
-
51,366
-
-
-
525
(184)
-
$51,707
Contributed
surplus
$3,283
-
-
682
(399)
-
3,566
-
-
591
(159)
-
-
$3,998
Retained
earnings
$177,209
47,557
(11,483)
-
-
-
213,283
42,519
(13,201)
-
-
(1,280)
-
$241,321
Accumulated other comprehensive income (loss)
Total
Unrealized gain
accumulated
(loss) on
other
foreign
comprehensive
currency
income (loss)
translation
$14,369
$16,213
-
-
-
-
-
-
-
-
(3,179)
(2,006)
11,190
14,207
-
-
-
-
-
-
-
-
-
-
(6,958)
(9,742)
$4,232
$4,465
Net unrealized
gain (loss) on
derivatives
designated as
cash flow hedges
($1,844)
-
-
-
-
(1,173)
(3,017)
-
-
-
-
-
2,784
($233)
Total
shareholders'
equity
$244,921
47,557
(11,483)
682
907
(3,179)
279,405
42,519
(13,201)
591
366
(1,464)
(6,958)
$301,258
Balance, September 30, 2015
Net income for the year
Dividends paid (note 3)
Stock option grants (note 3)
Issuance of share capital (note 3)
Other comprehensive loss (note 3)
Balance, September 30, 2016
Net income for the year
Dividends paid (note 3)
Stock option grants (note 3)
Issuance of share capital (note 3)
Repurchase of share capital (note 3)
Other comprehensive income (loss) (note 3)
Balance, September 30, 2017
The accompanying notes are an integral part of these consolidated financial statements.
EXCO TECHNOLOGIES LIMITED
23
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
$(000)'s
OPERATING ACTIVITIES:
Net income for the year
Add (deduct) items not involving a current outlay of cash
Depreciation (note 5)
Amortization (note 6)
Stock-based compensation expense (note 3)
Deferred income taxes recovery (note 14)
Net interest expense
Non-cash cost of ALC plant closures (note 19)
Loss (gain) on disposal of property, plant and equipment
Net change in non-cash working capital (note 15)
Cash provided by operating activities
FINANCING ACTIVITIES:
Increase in bank indebtedness
Financing from long-term debt (note 4)
Repayment of long-term debt (note 4)
Interest paid, net
Dividends paid (note 3)
Repurchase of share capital
Issuance of share capital (note 3)
Cash provided by (used in) financing activities
INVESTING ACTIVITIES:
Business acquisition, net of cash acquired (note 17)
Purchase of property, plant and equipment (note 5)
Purchase of intangible assets (note 6)
Proceeds from liquidation of ALC capital assets
Proceeds on disposal of property, plant and equipment
Cash used in investing activities
Years ended September 30
2016
2017
$42,519
$47,557
15,774
4,831
509
(1,029)
1,327
730
7
64,668
1,738
66,406
2,248
-
(27,594)
(1,327)
(13,201)
(1,464)
366
(40,972)
-
(15,295)
(991)
85
163
(16,038)
14,787
3,150
504
2,632
1,289
-
(389)
69,530
(4,060)
65,470
113
69,000
(24,941)
(1,289)
(11,483)
-
907
32,307
(82,024)
(22,654)
(1,292)
-
1,066
(104,904)
Effect of exchange rate changes on cash
(1,029)
(360)
Net increase (decrease) in cash during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
8,367
27,509
$35,876
(7,487)
34,996
$27,509
The accompanying notes are an integral part of these consolidated financial statements.
EXCO TECHNOLOGIES LIMITED
24
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(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
17 strategic locations in 8 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
The Company’s significant accounting policies are outlined below:
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements and accompanying notes as at and for the year ended September 30, 2017 were
authorized for issue by the Board of Directors on November 29, 2017.
Basis of consolidation
The 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 consolidated
financial statements from the date that control commences until the date that control ceases. All intercompany
transactions and balances have been eliminated on consolidation.
Functional and presentation currency
Items included in the financial statements of each of the Company’s subsidiaries are measured using the currency of
the primary economic environment in which the entity operates (the “functional currency”). The consolidated
financial statements are presented in Canadian dollars, which is the Company’s functional currency.
Transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates
of exchange at the consolidated statement of financial position dates. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss
in the consolidated statements of income and comprehensive income.
Translation of foreign operations
The results and financial position of all the group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the
•
date of the consolidated statements of financial position; and
Income and expenses for each statement of income and comprehensive income are translated at the exchange
rates prevailing at the dates of the transactions.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are
recorded in other comprehensive income.
When a foreign operation is sold, exchange differences that were recorded in accumulated other comprehensive
EXCO TECHNOLOGIES LIMITED
25
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
income (loss) are recognized in the consolidated statements of income and comprehensive income as part of the gain
or loss on sale.
Segment reporting
Management has determined the operating segments based on the information regularly reviewed for the purposes of
decision making, allocating resources and assessing performance by the Company’s chief operating decision maker,
which is the chief executive officer. Factors used to identify reportable segments include product categories, customers
served and geographical region of operations. The chief operating decision maker evaluates the financial performance
of its operating segments primarily based on net income before interest, income taxes, depreciation and amortization.
Interest in joint arrangement
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 consolidated financial statements. The financial
statements of the joint operation are prepared for the same reporting period as the Company.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of the business combination is
measured as the aggregate of the fair values (at the date of exchange) of assets acquired and liabilities incurred or
assumed. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3, Business Combinations, are recognized at their fair values at the acquisition date. Acquisition costs are
expensed as incurred.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of
the business combination over the Company’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognized. If the Company’s interest in the fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized immediately
in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Where goodwill forms part of a CGU or group of CGU and part of the operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of under this circumstance is measured
based on the relative fair values of the operation disposed of and the portion of the group of CGU retained.
Revenue recognition
Revenue is recognized when it can be measured reliably, the significant risks and rewards of ownership are transferred
to the customer, and it is probable that future economic benefits will flow to the Company. Revenue is
measured at the fair value of the consideration received, excluding discounts, rebates, sales taxes and duties.
•
•
Revenue from short-term casting contracts, extrusion and other tooling, and Automotive Solutions segment
products is recognized when the significant risks and rewards of ownership of the goods have passed to the
buyer, usually upon shipment or acceptance by customers.
Revenue from long-term large die-cast mould contracts is recognized using the percentage of completion method
according to IAS 11, Construction Contracts, under which:
- When the outcome of a contract can be reliably estimated, revenue and costs associated with a contract are
recognized as revenue and expenses, respectively, by reference to the stage of completion of the contract at
the consolidated statement of financial position dates. The stage of completion is determined by the
percentage of the costs incurred to date to the total estimated cost.
- When the outcome of a contract cannot be reliably estimated, revenue is recognized only to the extent of
contract costs incurred. When the uncertainties that prevented reliable estimation of the outcome of a
contract no longer exist, contract revenue and expenses are recognized using the percentage of completion
method.
EXCO TECHNOLOGIES LIMITED
26
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
-
-
If the expected outcome of a contract is a loss, it is recognized immediately regardless of whether or not work
has commenced on the contract.
For contracts in progress for which costs incurred plus recognized profits (less recognized losses) exceed
progress billings, a gross amount due from customers for contract work is recognized as unbilled revenue −
an asset in the consolidated statements of financial position. For all contracts in progress for which progress
billings exceed costs incurred plus recognized profits (less recognized losses), a gross amount due to
customers for contract work is recognized as customer advance payments − a liability in the consolidated
statements of financial position.
Share-based payments
The Company grants stock options to buy common shares of the Company to officers and employees. The Board of
Directors grants such options for periods of up to 10 years, with vesting periods determined at its sole discretion and
at prices equal to the average closing market prices for the five days preceding the date on which the options were
granted.
The Company follows the fair value based method of accounting for stock-based compensation. The fair value of the
options is recognized as compensation expense in selling, general and administrative expenses in the consolidated
statements of income and comprehensive income over the vesting period with a corresponding increase to contributed
surplus. The contributed surplus balance is reduced as the options are exercised, and the amount initially recorded for
the options in contributed surplus is credited to share capital, along with the proceeds received on exercise.
On November 18, 2005, the Board of Directors adopted a Deferred Share Unit (“DSU”) plan for Independent
Directors. The DSU plan replaces the past practice of granting eligible directors stock options under the Stock Option
Plan. Under the DSU plan, a portion of the quarterly remuneration of a director is credited to the director’s DSU
account in the form of deferred share units on the last business day of the quarter. The number of DSUs credited to
the director’s account is determined by dividing the portion of a director’s quarterly remuneration allocated to DSUs
by the weighted average price of the common share value traded in the last five business days of the quarter. DSUs
are fully vested upon being credited to a director’s DSU account. The DSUs will be redeemed by the Company in
cash payable 60 days after the Independent Director departs from the Board of Directors at the fair market value at the
payment date. The Company uses the fair value based method of accounting for DSUs. The fair value of DSUs is
recognized as compensation expense in selling, general and administrative expenses in the consolidated statements of
income and comprehensive income with the corresponding credit or debit to other accrued liabilities.
Income taxes
Income tax expense consists of current and deferred income taxes. Income tax expense is recognized in the
consolidated statements of income and comprehensive income.
Current income tax expense is the expected income taxes payable on the taxable income for the year, using tax rates
enacted or substantively enacted at year-end, adjusted for amendments to income taxes payable with regards to
previous years.
Deferred income taxes are recorded using the statement of financial position liability method. Under the statement of
financial position liability method, deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax
rates expected to apply when the asset is realized or the liability settled.
Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are
recognized to the extent that it is probable that taxable income will be available against which deductible timing
differences can be utilized.
Deferred income taxes are charged or credited in the consolidated statements of income and comprehensive income,
except when they relate to items credited or charged directly to equity, in which case the deferred income taxes are
also recorded in equity.
EXCO TECHNOLOGIES LIMITED
27
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that all or part of the deferred income tax asset will be utilized. Unrecognized deferred
income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable
that the benefit will be recovered.
Other comprehensive income
Other comprehensive income is the change in the Company’s net assets that results from translations, events and
circumstances from sources other than the Company’s shareholders and includes items that would not normally be
included in net income, such as foreign currency gains or losses on the translation of the financial statements of foreign
operations and foreign exchange gains or losses on the fair valuation of foreign exchange contracts designated as cash
flow hedges. The Company’s other comprehensive income, components of other comprehensive income and
cumulative translation adjustments are presented in the consolidated statements of income and comprehensive income
and the consolidated statements of changes in shareholders’ equity.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, balances with banks and short-term deposits with remaining
maturities at their acquisition date of three months or less.
Property, plant and equipment
(i)
Machinery and equipment
Machinery and equipment are recorded at cost less accumulated depreciation and accumulated impairment
losses. All direct costs related to the acquisition and installation of machinery and equipment are capitalized
until the properties to which they relate are capable of carrying out their intended use. Machinery and
equipment are depreciated using the diminishing balance method based on their estimated useful lives, which
range from 4 to 20 years.
(ii)
Other assets
Other assets are recorded at cost less accumulated depreciation and accumulated impairment losses and are
depreciated using the straight-line method based on estimated useful lives of the assets, which generally range
from 3 to 10 years, with the exception of buildings, which have estimated useful lives of 30 years. Land is
not depreciated.
Where an item of property, plant and equipment comprises major components with different useful lives, the
components are accounted for as separate items of property, plant and equipment.
Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted
for separately, including major inspection and overhaul expenditures, are capitalized. Directly attributable
expenses incurred for major capital projects are capitalized and no depreciation is recorded until the asset is
brought to a working condition for its intended use.
The costs of day-to-day servicing are expensed as incurred. These costs are more commonly referred to as
“maintenance and repairs”.
The depreciation methods and useful lives are assessed annually or when critical events occur that may affect
the useful lives and expected pattern of consumption of economic benefits embodied in the asset.
(iii)
Subsequent costs
The cost of replacing part of an item within property, plant and equipment is capitalized when the cost is
incurred or if it is probable that the future economic benefits will flow to the business unit and the cost of the
item can be measured reliably. The carrying amount of the replaced part is derecognized. All other costs are
expensed as incurred.
EXCO TECHNOLOGIES LIMITED
28
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Intangible assets
An intangible asset is defined as being identifiable, able to bring future economic benefits to the Company and
controlled by it. Intangible assets are recorded initially at cost and relate primarily to computer software, production
and technology rights and customer relationships. An intangible asset is recognized when it is probable that the
expected future economic benefits attributable to the asset will flow to the Company and the cost of the asset can be
measured reliably. Intangible assets with finite lives are amortized over their useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. Amortization is provided based
on the following estimated useful lives using the straight-line method:
-
-
-
-
Customer relationships: 5 to 15 years
Computer software and production and technology rights: 2 to 4 years
Non-compete agreements: 5 years
Trade name: 7 years
Intangible assets acquired in a business acquisition are primarily customer relationships and are initially recorded at
fair value and subsequently at cost less amortization and impairment losses. Other intangible assets are comprised of
computer software and production and technology rights.
Identifiable intangible assets are recognized separately from goodwill.
Impairment of long-lived assets and goodwill
Impairment of long-lived assets
(i)
The Company’s property, plant and equipment and intangible assets are reviewed for indicators of
impairment as at each consolidated statement of financial position date. If indication of impairment exists,
the asset’s recoverable amount is estimated and an impairment loss is recognized when the carrying amount
of an asset, or its CGU, exceeds its recoverable amount. Impairment loss is recognized in income or loss for
the period. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount
of any goodwill allocated to the CGU and then to reduce the carrying amount of the other assets in the CGU
on a pro rata basis.
The recoverable amount is the greater of the asset’s fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined
for the CGU to which the asset belongs. In determining fair value less costs to sell, recent market transactions
are taken into account, if available.
The Company bases its impairment calculation on detailed budgets that are prepared for each of the CGUs
and generally cover a period of three years. For longer periods, a long-term growth rate is calculated and
applied to project future cash flows after the third year.
An impairment loss is reversed if there is an indication that there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation, if no
impairment loss had been recognized.
(ii)
Impairment of goodwill
Goodwill is allocated to a CGU or a group of CGUs for the purpose of impairment testing based on the level
at which it is monitored by management. The Company manages its goodwill at the level of its two operating
segments, Automotive Solutions and Casting and Extrusion. Goodwill is tested for impairment annually
during the fourth quarter of the year or whenever there is an indicator that the CGU group in which it resides
may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU
group to which the goodwill relates. Where the recoverable amount of the CGU group is less than its carrying
amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future
EXCO TECHNOLOGIES LIMITED
29
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
periods. The recoverable amounts of the CGU groups are determined based on the greater of fair value less
costs to sell or value in use.
Inventories
Inventories, comprising raw materials, work in process, finished goods and production supplies, are valued at the
lower of cost and net realizable value. Cost is determined substantially on a first-in, first-out basis and an appropriate
portion of normal overhead expenditure and labour. Net realizable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and selling expenses. Obsolete, redundant and slow-moving
stock is identified and written down. When circumstances that previously caused inventories to be written down below
cost no longer exist, the amount of the write-down previously recorded is reversed.
Determination of fair value
The fair value of an asset or liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interests.
A fair value measurement on a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.
Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic
basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant
relates to an asset, the cost of the asset is reduced by the amount of the grant.
Financial instruments
As defined under IAS 39, Financial Instruments, financial assets and liabilities are recognized in the Company’s
consolidated statements of financial position when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the Company no longer has the rights to such cash flows, the risks
and rewards of ownership or control of the asset. Financial liabilities are derecognized when the obligation under the
liability is discharged, cancelled or expired.
Financial instruments recognized in the consolidated statements of financial position comprise cash and cash
equivalents, accounts receivable, trade accounts payable, bank indebtedness, other accrued liabilities, customer
advance payments, derivative instruments and long-term debt.
Financial instruments are measured at their fair values on initial recognition. After initial recognition, financial
instruments are measured at their fair values, except for financial assets classified as held to maturity or financial
liabilities classified as loans and receivables and other financial liabilities, which are measured at amortized cost using
the effective interest rate method.
Changes in fair value are included in the consolidated statements of income and comprehensive income unless
the instrument is included in a cash flow hedge. If the instruments are included in a cash flow hedging
relationship that is effective, changes in value are recorded in other comprehensive income. When the hedged forecast
transaction occurs, amounts previously recorded in other comprehensive income are recognized in the consolidated
statements of income and comprehensive income. Amounts recognized as other comprehensive income are transferred
to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or
financial expense is recognized or when a forecast purchase occurs.
Accounts receivable are initially recognized at the transaction value and subsequently carried at amortized cost less
impairment losses. The impairment loss of accounts receivable is based on a review of all outstanding amounts at
EXCO TECHNOLOGIES LIMITED
30
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
year-end. Bad debts are written off during the period in which they are identified. Trade accounts payable and
customer advance payments are initially recognized at the transaction value and subsequently carried at amortized
cost.
The Company uses derivative financial instruments, such as forward foreign currency exchange contracts in the form
of put and call option contracts (“Collars”), to hedge cash outflows anticipated to be made in Mexican peso
denominated payments against foreign currency fluctuations between US dollars and Mexican pesos. The Company
does not hold or issue derivative financial instruments for trading or speculative purposes. Such derivative financial
instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivative financial instruments are carried as financial assets when the fair
value is positive and as financial liabilities when the fair value is negative.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to
which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking
the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the
nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s
fair value in offsetting the exposure to changes in the cash flows attributable to the hedged risk. Such hedges are
expected to be effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to
determine that they actually have been effective throughout the financial reporting periods for which they were
designated.
The effective portion of the gain or loss on the hedging instrument is recognized directly in other comprehensive
income in the cash flow hedge reserve, while any ineffective portion is recognized immediately to profit or loss.
If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously
recognized in other comprehensive income is transferred to profit or loss. If the hedging instrument expires or is sold,
terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative
gain or loss previously recognized in other comprehensive income remains in other comprehensive income until the
forecast transaction or firm commitment affects profit or loss.
Forward foreign exchange contracts have been entered into with JP Morgan Chase with a long-term debt rating of A+
as determined by Standard & Poor’s. The Company does not anticipate non-performance by JP Morgan Chase.
The Company’s financial assets and liabilities recorded at fair value in the consolidated statements of financial position
have been categorized into three categories based on a fair value hierarchy. Fair value of assets and liabilities included
in Level I is determined by reference to quoted prices in active markets for identical assets and liabilities.
Assets and liabilities in Level II include valuations using inputs other than the quoted prices for which all significant
inputs are based on observable market data, either directly or indirectly. Level III valuations are based on inputs
that are not based on observable market data.
Transaction costs are expensed as incurred for financial instruments classified or designated as a derivative or
held for trading. Transaction costs for financial assets classified as available for sale are netted against the value
of the instruments at the acquisition date. Transaction costs related to other financial liabilities are added to the value
of the instrument at the acquisition date and recorded in income using the effective interest rate method.
Provisions
As required under IAS 37, Provisions, Contingent Liabilities and Contingent Assets, provisions are recorded when a
present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the
obligation can be made.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
at the consolidated statement of financial position dates, taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows. When some or all of the economic benefits required to settle a
EXCO TECHNOLOGIES LIMITED
31
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually
certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Leases
As required under IAS 17, Leases, assets held under finance leases are recognized as assets of the Company at the
lower of the fair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding amount is recognized as a finance lease liability. The finance lease liability is reduced by lease
payments less finance charges, which are expensed as part of interest expense in the consolidated statements of income
and comprehensive income. Under operating leases, payments are recognized as an expense over the term of the
relevant leases.
Employee future benefits
Leave pay
(i)
Employee entitlements to annual leave are recognized as they are earned by the employees. A provision,
stated at current cost, is made for the estimated liability at year-end.
(ii)
Termination benefits
The Company is subject to Mexican statutory laws and regulations governing employee termination benefits.
Employee future benefits include statutorily mandated accrued benefits payable to employees in the event of
termination in certain circumstances. Termination benefits are recognized as an expense and an associated
liability at the discounted value of the expected future payments.
Critical judgments and use of estimates
The preparation of the consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, revenue and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the review affects both current and future periods.
Significant accounts that require estimates as the basis for determining the stated amounts include accounting for
doubtful accounts receivable, unbilled revenue, inventories, property, plant and equipment, contingent liabilities,
income taxes, fair value of financial instruments and stock option valuation.
Measurement for doubtful accounts receivable requires management to make estimates and assumptions based on
prior experience and assessment of current financial conditions of customers, as well as the general economic
environment and industry sectors in which they operate.
Several divisions engage in the construction of custom-order large die-cast moulds. Such activities fall into the scope
of IAS 11, Construction Contracts, where revenue is recognized using the percentage of completion method. Under
this method, at every reporting date, management is required to estimate the expected outcome on all outstanding
contracts as well as measurement of their progress achieved towards their completion. The estimation requires
management to make certain assumptions and judgments. These assumptions and judgments are continuously
reviewed and updated. If different assumptions are used, it is possible that different amounts would be recognized in
the consolidated financial statements.
Net realizable value of inventories is dependent upon the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses based on prior experience and assessment of current market
conditions.
Depreciation and amortization of property, plant and equipment and intangible assets are dependent upon estimates
EXCO TECHNOLOGIES LIMITED
32
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
of useful lives, which are determined with the exercise of judgment. The assessment of any impairment of property,
plant and equipment and intangible assets is dependent upon estimates of recoverable amounts that take into account
factors such as economic and market conditions and the useful lives of assets.
The estimated useful lives of property, plant and equipment and intangible assets are reviewed on an annual basis.
Assessing the reasonableness of the estimated useful lives of property, plant and equipment and intangible assets
requires judgment and is based on currently available information. Property, plant and equipment and intangible
assets are also reviewed for potential impairment on a regular basis or whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
Changes in circumstances, such as technological advances and changes to business strategy, can result in actual
useful lives and future cash flows differing significantly from estimates. The assumptions used, including rates and
methodologies, are reviewed on an ongoing basis to ensure they continue to be appropriate. Revisions to the
estimated useful lives of property, plant and equipment and intangible assets or future cash flows constitute a change
in accounting estimates and are applied prospectively.
Income taxes are determined based on estimates of the Company’s current income taxes and estimates of deferred
income taxes resulting from temporary differences. Deferred tax assets are assessed to determine the likelihood
that they will be realized from future taxable income before they expire.
Impairment of non-financial assets exists when the carrying value of an asset or CGU exceeds its recoverable amount,
which is the higher of the fair value less costs of disposal and its value in use. The fair value less costs of disposal is
based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable
market prices less incremental costs for disposing of the asset. The value-in-use calculation is based on a discounted
cash flow (“DCF”) model. The cash flows are derived from the budget for the next three years and do not include
restructuring activities that the Company is not yet committed to or significant future investments that will enhance
the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the
DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key
assumptions used to determine the recoverable amount for the CGUs, including a sensitivity analysis, are disclosed
and further explained in note 6.
Accounting standards issued but not yet applied
The following standards are not yet effective for the year ended September 30, 2017. The Company is in the process
of reviewing the standards to determine the impact on its consolidated financial statements.
IFRS 9, Financial Instruments ("IFRS 9")
IFRS 9, as issued in 2014, introduces new requirements for the classification and measurement of financial
instruments, a new expected loss impairment model that will require more timely recognition of expected credit losses
and a substantially reformed model for hedge accounting, with enhanced disclosures about risk management activity.
IFRS 9 also removes the volatility in profit or loss that was caused by changes in an entity’s own credit risk for
liabilities selected to be measured at fair value. This new standard also includes a new general hedge accounting
standard that will align hedge accounting more closely with risk management. It does not fully change the types of
hedging relationships or the requirement to measure and recognize ineffectiveness, however, it will provide more
hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to
assess the effectiveness of a hedging relationship. The Company is in the process of reviewing the standard to
determine the impact on its consolidated financial statements. IFRS 9 is effective for annual periods beginning on or
after January 1, 2018, which will be October 1, 2018 for the Company. Earlier application is permitted and the
Company does not plan to early adopt IFRS 9.
IFRS 15, Revenue from Contracts with Customers ("IFRS 15")
In May 2014 the IASB issued IFRS 15, which establishes a single comprehensive model for entities to use in
accounting for revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that
reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a
customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The
new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under
EXCO TECHNOLOGIES LIMITED
33
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
IFRS. IFRS 15 is effective for annual periods beginning on or after January 1, 2018. The Company has established a
cross-functional team to implement the guidance related to the recognition of revenue from contracts with customers.
The Company is in the process of evaluating its customer contracts and identifying contractual provisions that may
result in a change in the timing, or the amount of revenue recognized in comparison with current guidance. In addition,
the Company is assessing the enhanced disclosure requirements of the new guidance and the design of new controls
and processes designed to comply with IFRS 15. The Company has not yet selected a transition method and will adopt
the new revenue standard effective October 1, 2018.
IFRS 16, Leases (“IFRS 16”)
In January 2016, the IASB issued IFRS 16 in which lessees will have a single accounting model for all leases, with
certain exemptions and lessor accounting is substantially unchanged. The guidance would require lessees to recognize
most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. IFRS 16 is effective for
annual periods beginning on or after January 1, 2019, which will be October 1, 2019 for the Company using a modified
retrospective approach with the option to elect certain practical expedients. The Company is currently evaluating the
impact of IFRS 16 on its consolidated financial statements.
3. SHARE CAPITAL
Authorized
The Company’s authorized share capital consists of an unlimited number of common shares, an unlimited number of
non-voting preference shares issuable in one or more series and 275 special shares. None of these shares have par
value.
Issued
The Company has not issued any non-voting preference shares or special shares. Changes to the issued common shares
are shown in the following table:
Issued and outstanding as at October 1, 2015
Issued for cash under Stock Option Plan
Contributed surplus on stock options exercised
Issued and outstanding as at September 30, 2016
Issued for cash under Stock Option Plan
Contributed surplus on stock options exercised
Purchased and cancelled pursuant to normal course issuer bid
Issued and outstanding as at September 30, 2017
Common Shares
Number of Shares
42,366,906
201,268
-
42,568,174
82,317
-
(151,100)
42,499,391
Stated
Value
$50,060
907
399
51,366
366
159
(184)
$51,707
Accumulated other comprehensive income
Included in accumulated other comprehensive income in shareholders’ equity are gains and losses arising from the
translation of the Company’s foreign subsidiaries, net gain and loss on derivatives designated as cash flow hedges and
reclassification to income of net gain (loss) on cash flow hedges as summarized in the following table:
EXCO TECHNOLOGIES LIMITED
34
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Opening balance
Net unrealized gain (loss) on derivatives designated as cash flow hedges (1)
Unrealized loss on currency translation adjustments
Total other comprehensive loss for the year
Closing balance
(1) Net of deferred income tax payable of $993 (2016 - recovery of $409).
2017
2016
$11,190
$14,369
2,784
(9,742)
(6,958)
$4,232
(1,173)
(2,006)
(3,179)
$11,190
Cash dividends
During the year, the Company paid four quarterly cash dividends totaling $13,201 (2016 - $11,483). The dividend rate
per quarter increased in the second quarter of the year from $0.07 to $0.08 per common share.
Stock Option Plan
The Company has a Stock Option Plan under which common shares may be acquired by employees and officers of the
Company. The following table shows the changes to the number of stock options outstanding during the year:
Balance, beginning of year
Granted during the year
Exercised during the year
Expired during the year
Balance, end of year
2017
2016
Number of
Options
626,657
215,000
(82,317)
(5,000)
754,340
Weighted
Average
Exercise Price
$10.70
$10.48
$4.44
$10.48
$11.32
Number of
Options
879,275
25,000
(201,268)
(76,350)
626,657
Weighted
Average
Exercise Price
$8.92
$14.44
$4.50
$7.72
$10.70
The following table summarizes information about stock options outstanding and exercisable as at September 30,
2017:
Range of Exercise
Prices
$5.33 - $8.85
$8.86 - $11.29
$11.30 - $14.58
Number
Outstanding
144,690
250,000
359,650
Weighted Average
Remaining
Contractual Life
Options Outstanding
Weighted
Average
Exercise
Price
$7.03
$10.22
$13.81
years
years
years
1.69
4.25
3.25
Options Exercisable
Weighted
Average
Exercise
Price
$7.09
$8.86
$13.82
Number
Exercisable
62,000
20,000
137,300
$5.33 - $14.58
754,340
3.28
years
$11.32
219,300
$11.46
The number of common shares available for future issuance of options as at September 30, 2017 is 1,461,688 (2016 -
1,671,688). The number of options outstanding together with those available for future issuance totals 2,216,028 (2016
- 2,298,345) or 5.2% (2016 - 5.4%) of the issued and outstanding common shares. The options are granted for a term
of 5 to 10 years, and the options vest at 20% at each anniversary date from the date of grant.
Stock-based compensation
Stock-based compensation resulting from applying the Black-Scholes option pricing model to the Company’s Stock
Option Plan was $591 for the year ended September 30, 2017 (2016 - $682). All stock-based compensation has been
recorded in selling, general and administrative expenses. The weighted average assumptions used to measure the fair
EXCO TECHNOLOGIES LIMITED
35
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
value of stock options and the weighted average fair value of options granted during the years ended September 30,
2017 and 2016 are as follows:
Risk-free interest rates
Expected dividend yield
Expected volatility
Expected time until exercise
Weighted average fair value of the options granted
2017
0.95%
2.61%
31.07%
5.50 years
$2.29
2016
0.88%
1.63%
33.37%
5.50 years
$3.83
DSU Plan
The Company has a DSU plan under which members of the Company's Board of Directors who are not management
receive a portion of their annual retainers and fees in the form of DSUs, which are classified as other accrued liabilities.
The DSUs vest on the date they are granted and are settled in cash upon termination of Board service. This is a cash-
settled compensation arrangement.
During the year ended September 30, 2017, the Company granted 11,190 DSUs (2016 - 6,510 DSUs) and redeemed
28,966 DSUs. During the year ended September 30, 2017 the Company recorded stock-based compensation income
of $82 (2016 - $178 expense) related to awards under the DSU plan with a corresponding debit to other accrued
liabilities. As at September 30, 2017, 90,617 DSUs were outstanding with a carrying value of $886 recorded in other
accrued liabilities.
Contributed surplus
Contributed surplus consists of accumulated stock option expense less the fair value of the options at the grant date
that have been exercised and reclassified to share capital. The following is a continuity schedule of contributed surplus:
Balance, beginning of year
Stock option expense
Exercise of stock options
Balance, end of year
2017
$3,566
591
(159)
$3,998
2016
$3,283
682
(399)
$3,566
Normal course issuer bid
The Company received approval from the Toronto Stock Exchange for a normal course issuer bid for a 12-month
period beginning February 16, 2017. The Company’s Board of Directors authorized the purchase of up to 1,000,000
common shares representing approximately 2% of the Company’s outstanding common shares. During the year
151,100 common shares were repurchased (2016 - nil) for a total cost of $1,464. The cost to repurchase the common
shares in the year exceeded their stated value by $1,280 which was charged against retained earnings.
4. BANK INDEBTEDNESS AND LONG-TERM DEBT
The operating lines are available in US dollars, Canadian dollars, and Euros at variable rates ranging from prime minus
0.5% to prime plus 0.5%. The Company’s North American credit facilities are collateralized by a general security
agreement over its North American assets. The Bulgarian credit facilities are collateralized by a security interest over
the Company’s Bulgarian assets.
EXCO TECHNOLOGIES LIMITED
36
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Utilizations
Facilities Current
Long-term
Unused and
Available
JP Morgan, credit facility (Canada, USA)
$50,000
$6,853
$23,000
JP Morgan, operating line (Europe)
DSK Bank, operating lines (Bulgaria)
2,285
8,127
737
8,127
-
-
$60,412
$15,717
$23,000
Prime rate in Canada
Prime rate in USA
Prime rate in Eurozone
2017
2.95%
4.25%
0.00%
$20,147
1,548
-
$21,695
2016
2.70%
3.50%
0.00%
On February 18, 2016, the Company closed an agreement for a new $100,000 Committed Revolving Credit Facility
with JP Morgan Chase Bank N.A., and on July 24, 2017, the Company elected to reduce the facility to $50,000. As
at September 30, 2017, the Company had utilized the facility in the amount of $29,853 (2016 - $47,363). The facility
has a three-year term and there are no specific repayment terms prior to maturity. The facility is collateralized by a
general security agreement covering all assets of the Company’s Canadian and US subsidiaries with the exception of
real property.
The Credit Facility is available to fund working capital, capital expenditures and other general corporate purposes of
the Company and its subsidiaries, including acquisitions. Interest rates vary based on prime, bankers’ acceptance,
CDOR or LIBOR base rates plus a relevant margin depending on the level of the Company’s net leverage ratio.
Pursuant to the terms of the credit agreement, the Company is required to maintain compliance with a net worth
covenant. The Company was in compliance with these covenants as at September 30, 2017.
Additionally, the Company maintains a credit facility with JP Morgan Chase Bank N.A. London Branch related to any
needs for Euro currency. The facility totals $2,285 (EUR 1.55 million) and bears interest based on LIBOR. The
Company had utilized $737 as at September 30, 2017.
On September 15, 2017, the Company renewed a credit facility with DSK Bank in Bulgaria, which expires on July 15,
2018. The committed credit facility totals EUR 5.5 million and is comprised of a loan for EUR 4.0 million and an
accounts receivable factoring facility for specified customers to a maximum amount of EUR 1.5 million. Both
components of the credit facility bear interest based on Euribor and are demand facilities. The loan is available to fund
general working capital needs and capital expenditures in Bulgaria. The Bulgarian credit facilities are collateralized
by a security interest over the Company’s Bulgarian assets.
On April 4, 2016, the Company entered into promissory Term Notes amounting to US$9,307 in conjunction with the
acquisition of AFX Industries L.L.C. (“AFX”). The Term Notes bear interest at a rate equal to the mid-term Applicable
Federal Rate in the United States, compounded annually. The principal and interest are payable in three annual
payments on the anniversary date of the AFX acquisition. The Term Notes are unsecured.
Further, in the USA, the Company also has a long-term promissory note payable over five years and collateralized by
a specific parcel of land purchased as a factory location. The note bears interest at 6%. The interest and principal are
forgivable over a five-year period, subject to the Company meeting certain performance criteria for the specific factory
location. The note matures and expires in February 2021. As at September 30, 2017 there are no unfulfilled conditions
or contingencies attached to this loan.
EXCO TECHNOLOGIES LIMITED
37
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
The components of long-term debt are as follows:
Bank debt
Term notes
Finance leases
Promissory note
Subtotal
Less: current portion
Long-term debt, long-term portion
5. PROPERTY, PLANT AND EQUIPMENT
September 30, 2017
$23,000
7,744
-
349
31,093
(3,959)
$27,134
September 30, 2016
$46,000
12,210
18
459
58,687
(4,173)
$54,514
Cost
Balance as at
September 30, 2015
Additions
Assets acquired
Assets acquired from
business acquisition (note 17)
Reclassification
Less: disposals
Foreign exchange movement
Balance as at
September 30, 2016
Additions
Assets acquired
Reclassification
Less: disposals
Foreign exchange movement
Balance as at
September 30, 2017
Machinery
and
Equipment
Tools Buildings
Land
Assets under
Construction
Total
$180,335 $21,279
$60,487 $9,564
$7,339 $279,004
3,325
664
567
2,738
13,649
(13,311)
(472)
101
755
(1,634)
(162)
67
6,845
(176)
(50)
-
-
78
-
29
18,098
22,654
-
(21,327)
-
(72)
2,906
-
(15,121)
(727)
186,264
21,003
67,740
9,671
4,038
288,716
2,031
9,850
(2,349)
(3,247)
990
853
(1,218)
(516)
431
875
(35)
(1,447)
596
-
-
(190)
11,247
(11,578)
-
(52)
15,295
-
(3,602)
(5,452)
$192,549 $21,112
$67,564 $10,077
$3,655 $294,957
EXCO TECHNOLOGIES LIMITED
38
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Accumulated depreciation
and impairment losses
Balance as at
September 30, 2015
Depreciation for the year
Less: disposals
Foreign exchange movement
Balance as at
September 30, 2016
Depreciation for the year
Less: disposals
Reclassification
Foreign exchange movement
Balance as at
September 30, 2017
Carrying amounts
As at September 30, 2016
As at September 30, 2017
Machinery
and
Equipment
Tools Buildings
Land
Assets under
Construction
Total
$130,529
10,477
(12,749)
(738)
$15,732
1,799
(1,521)
(134)
$28,492
2,511
(175)
(202)
127,519
11,218
(2,186)
(5)
(1,996)
15,876
1,876
(1,104)
5
(466)
30,626
2,680
(35)
-
(575)
$-
-
-
-
-
-
-
-
-
$-
-
-
-
-
-
-
-
-
$174,753
14,787
(14,445)
(1,074)
174,021
15,774
(3,325)
-
(3,037)
$134,550
$16,187
$32,696
$-
$-
$183,433
$58,745
$57,999
$5,127
$4,925
$37,114
$34,868
$9,671
$10,077
$4,038
$3,655
$114,695
$111,524
As at September 30, 2017, the Company had deposits for machinery and equipment and buildings under construction
totalling $3,655 (2016 - $4,038). These assets are not being depreciated because they are under construction and not
in use.
6. INTANGIBLE ASSETS AND GOODWILL
Computer
Software
and Other
Acquisition
Intangibles**
Assets under
Construction
(Software)
Total
Intangible
Assets Goodwill
Cost
Balance as at September 30, 2015
Additions
Assets acquired
Assets acquired from business
acquisition (note 17)
Reclassifications
Less: disposals
Foreign exchange movement
Balance as at September 30, 2016
Additions
Assets acquired
Reclassification
Foreign exchange movement
$24,212
$3,500
658
356
252
(5,618)
(27)
19,833
815
132
(166)
-
42,898
-
-
430
46,828
-
-
(2,115)
Balance as at September 30, 2017
$20,614
$44,713
-
634
-
(252)
-
-
382
176
(132)
1
$427
$27,712
$23,852
1,292
-
43,254
-
(5,618)
403
67,043
39,811
-
-
408
64,071
991
-
(2,280)
-
-
(1,980)
$65,754
$62,091
EXCO TECHNOLOGIES LIMITED
39
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Accumulated amortization
and impairment losses
Balance as at September 30, 2015
Amortization for the year
Less: disposals
Foreign exchange movement
Balance as at September 30, 2016
Amortization for the year
Foreign exchange movement
Balance as at September 30, 2017
Carrying amounts
As at September 30, 2016
As at September 30, 2017
Computer
Software
and Other
Acquisition
Intangibles**
Assets under
Construction
(Software)
Total
Intangible
Assets Goodwill
$22,829
863
(5,618)
(30)
18,044
933
(148)
$18,829
$1,114
2,287
-
12
3,413
3,898
(235)
$7,076
$-
-
-
-
-
-
-
$-
$23,943
3,150
(5,618)
(18)
21,457
4,831
(383)
$25,905
$-
-
-
-
-
-
-
$-
$1,789
$1,785
$43,415
$37,637
$382
$427
$45,586
$64,071
$39,849
$62,091
**Acquisition intangibles are comprised of customer relationships and trade names resulting from business
acquisitions and the purchase price allocation thereof (see note 2).
Of the total goodwill disclosed above, $61,820 is allocated to the Automotive Solutions segment and the remainder to
the Casting and Extrusion segment.
Of the customer relationships, $3,500 is amortized over 5 years and $37,364 is amortized over 15 years.
Impairment testing of goodwill
The Company performed the annual impairment test of goodwill allocated to the Automotive Solutions segment and
the Casting & Extrusion segment as at September 30, 2017. The recoverable amount of each segment has been
determined based on a value-in-use calculation using cash flow projections from financial budgets approved by senior
management covering a three-year period. Cash flow beyond the three-year period was extrapolated using a 1% growth
rate, which represents the expected growth in the Canadian economy. The pre-tax discount rate applied to future cash
flows was 7.8%. As a result of the analysis, management determined there was no impairment for either business
segment.
Key assumptions to value-in-use calculations
The calculation of the value-in-use for the Automotive Solutions segment is most sensitive to the following
assumptions:
-Discount rates
-Growth rate to extrapolate cash flows beyond the budget period
-Revenue and margin growth rates during budget period
The discount rate used represents the current market assessment of the risks specific to each business segment, taking
into consideration the time value of money and individual risks of the underlying assets that have not been incorporated
in the cash flow estimates. The discount rate is derived from the CGU’s weighted average cost of capital, taking into
account both debt and equity. The cost of equity is derived from the expected return on investment by the Company’s
shareholders. The cost of debt is based on the interest-bearing borrowing the Company is obliged to service. Segment-
specific risk is incorporated by applying different debt to equity ratios.
EXCO TECHNOLOGIES LIMITED
40
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Sensitivity to changes in assumptions
Management believes that within reason, possible changes to any of the above key assumptions, recoverable amounts
exceed carrying values.
7. PROVISIONS
The following table outlines the provisions at the dates of the consolidated statements of financial position and changes
to the provisions during the reporting periods.
Severance
Warranties
Claims and litigation
September 30, 2017
$1,188
151
-
September 30, 2016
$1,205
153
24
$1,339
$1,382
The fair value of the above provisions is management’s best estimate based on information available. The ultimate
amounts of the payments approximate the provision amounts and the timing of payments is expected to be within the
next twelve months. There is no reimbursement expected for any of these provisions.
The movement in the provision accounts is as follows:
Severance
Warranties
Claims and
Litigation
Closing balance, as at September 30,
2015
Additions
Acquired through business acquisition
Utilized
Reversals
Foreign exchange differences
Closing balance, as at September 30,
2016
Additions
Utilized
Foreign exchange differences
Closing balance, as at September 30,
2017
$1,753
1,003
557
(1,682)
(293)
(133)
$1,205
690
(693)
(14)
$1,188
$33
120
-
-
-
-
$153
-
-
(2)
$151
Total
$1,810
1,123
557
(1,682)
(293)
(133)
$1,382
690
(717)
(16)
$24
-
-
-
-
-
$24
-
(24)
-
$0
$1,339
8. TOOL CONSTRUCTION CONTRACTS
Contract revenue recognized under the percentage of completion method during the year amounted to $44,293
(2016 - $52,126). For contracts in progress, the following table summarizes the aggregate amount of costs incurred,
profits recognized, progress billings from customers for the related contracts and retentions being held to date.
EXCO TECHNOLOGIES LIMITED
41
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Contracts in progress:
Aggregate amount of costs incurred to date
Add: profits recognized to date
Gross: unbilled revenue
Less: progress billings
Net unbilled revenue
Due from customers
Due to customers
Net unbilled revenue
September 30, 2017
September 30, 2016
$25,360
4,112
29,472
(9,265)
$20,207
$20,833
($626)
$20,207
$17,393
5,409
22,802
(3,588)
$19,214
$19,773
($559)
$19,214
9. FINANCIAL INSTRUMENTS
The Company classifies its financial instruments as follows:
Cash and cash equivalents
Accounts receivable*
Trade accounts payable
Bank indebtedness
Customer advance payments
Accrued liabilities
Derivative instruments
Long-term debt
*Recorded net of allowance for doubtful accounts.
Financial assets – held for trading measured at fair value
Financial assets – measured at amortized cost
Financial liabilities – measured at amortized cost
Financial liabilities – measured at amortized cost
Financial liabilities – financial liabilities measured at amortized cost
Financial liabilities – financial liabilities measured at amortized cost
Financial liabilities – held for trading measured at fair value
Financial liabilities – measured at amortized cost
Foreign exchange contracts
The Company entered into a series of Collars extending through to September 25, 2020 and designated them as cash
flow hedges against Mexican payroll and other local Mexican costs. The total amount of these Collars is 624.0 million
Mexican pesos (September 30, 2016 - 384.0 million Mexican pesos). The selling price ranges from 17.295 to 22.00
Mexican pesos to each US dollar. Management estimates that a cumulative loss of $314 (September 30, 2016 - loss
of $4,158) would be realized if these Collars were terminated on September 30, 2017. Net of income tax recovery of
$81, the cumulative loss of $233 is recorded in other comprehensive income. During the year, the estimated fair value
gain of $2,784, net of deferred income tax payable of $993 (2016 - loss of $1,173 net of income tax recovery of $409)
has been included in other comprehensive income, and the cumulative loss of $314 is recorded in the consolidated
statements of financial position under the caption derivative instruments.
Financial risk management
The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis provides
a measurement of the risks and how they are managed:
a) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party fails to meet its contractual obligations. The
Company’s primary credit risk is its outstanding trade accounts receivable. The carrying amount of its outstanding
trade accounts receivable represents the Company’s estimate of its maximum credit exposure. The Company regularly
monitors its credit risk exposure and takes steps such as credit approval procedures, establishing credit limits, utilizing
credit assessments and monitoring practices to mitigate the likelihood of these exposures from resulting in an actual
loss. The carrying amount of the trade accounts receivable disclosed in the consolidated statements of financial position
is net of allowance for doubtful accounts, estimated by the Company’s management, based on prior experience and
EXCO TECHNOLOGIES LIMITED
42
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
assessment of current financial conditions of customers as well as the general economic environment. When a
receivable balance is considered uncollectible, it is written off against the allowance for doubtful accounts. Subsequent
recoveries of amounts previously written off are credited against operating expenses in the consolidated statements of
income and comprehensive income. As at September 30, 2017, the accounts receivable balance (net of allowance for
doubtful accounts) is $94,332 (2016 - $107,900) and the Company’s five largest trade debtors accounted for 37.2% of
the total accounts receivable balance (2016 – 34.6%). As at September 30, 2017, accounts receivable of $591 (2016 -
$637) are insured against default.
The following table presents a breakdown of the Company’s accounts receivable balances:
Trade accounts receivable
Employee receivable
Sales tax receivable
Other
Less: allowance for doubtful accounts
Total accounts receivable, net
The aging of trade accounts receivable balances is as follows:
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-90 days
Past due over 90 days
Less: allowance for doubtful accounts
Total trade accounts receivable, net
The movement in the allowance for doubtful accounts is as follows:
Opening balance
Additions
Utilized
Reversal
Exchange differences
Closing balance
September 30, 2017
September 30, 2016
$91,600
$100,471
240
2,345
791
(644)
203
3,595
4,197
(566)
$94,332
$107,900
September 30, 2017
September 30, 2016
$75,294
8,233
5,152
987
1,934
(644)
$87,537
10,116
884
850
1,084
(566)
$90,956
$99,905
September 30, 2017
$566
262
(174)
(23)
13
$644
September 30, 2016
$572
274
(121)
(153)
(6)
$566
b) Liquidity risk
Liquidity risk refers to the possibility that the Company may not be able to meet its financial obligations as they come
due. The Company manages its liquidity risk by minimizing its financial leverage and arranging credit facilities in
order to ensure sufficient funds are available to meet its financial obligations. This is achieved by continuously
monitoring cash flows from its operating, investing and financing activities. The Company does not carry excess credit
facilities due to the stand-by costs charged by its lenders. As at September 30, 2017, the Company has a net debt
balance of $10,934 (2016 - $44,647) and unused credit facilities of $21,695 (2016 - $56,123).
EXCO TECHNOLOGIES LIMITED
43
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum
payments. The following tables summarize the Company’s significant commitments on an undiscounted basis and
corresponding maturities:
Bank indebtedness
Trade accounts payable
Long-term debt
Operating leases
Capital expenditures
Bank indebtedness
Trade accounts payable
Long-term debt
Operating leases
Capital expenditures
Total
$15,717
48,369
31,093
4,896
398
$100,473
Total
$13,469
64,948
58,687
5,549
2,175
$144,828
September 30, 2017
< 1 Year
$15,717
48,369
3,959
1,724
398
$70,167
1-3 Years
$-
-
27,047
3,015
-
$30,062
September 30, 2016
< 1 Year
$13,469
64,948
4,173
1,604
2,175
$86,369
1-3 Years
$-
-
54,514
3,115
-
$57,629
Over 3 Years
$-
-
87
157
-
$244
Over 3 Years
$-
-
-
830
-
$830
c) Foreign exchange risk
The Company operates in Canada with subsidiaries located in the United States, Mexico, Colombia, Brazil, Thailand,
Bulgaria and Morocco. It is exposed to foreign exchange transaction and translation risk through its operating
activities. Unfavourable changes in the exchange rates may affect the operating results and shareholders’ equity of the
Company. In order to mitigate the foreign currency exposure, the Company reduces part of its foreign exchange risk
by sourcing a significant portion of its manufacturing inputs in the currency that its sales are denominated in. In
addition to the above natural hedge, the Company also uses Collars to hedge cash outflows for the Mexican payroll
and other local Mexican costs. These Collars are designated as cash flow hedges. The resulting gain or loss on the
valuation of these financial instruments is recognized in the consolidated statements of income and comprehensive
income. The Company does not mitigate the translation risk exposure of its foreign operations due to the fact that these
investments are considered to be long-term in nature.
With all other variables held constant, the following tables outline the Company’s annual foreign exchange exposure
at one percent fluctuation between various currencies compared with the average annual exchange rate.
Income before income taxes
Other comprehensive income
Income before income taxes
Other comprehensive income
1 % Fluctuation
USD vs. CAD
1 % Fluctuation
EUR vs. CAD
1 % Fluctuation
MXP vs. CAD
+/- 1,186
+/- 2,233
+/- 44
+/- 332
+/- 4
+/- 48
1 % Fluctuation
COP vs. CAD
1 % Fluctuation
BRL vs. CAD
1 % Fluctuation
ZAR vs. CAD
+/- 13
+/- 74
+/- 15
+/- 206
+/- 14
+/- 1
EXCO TECHNOLOGIES LIMITED
44
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
d) Interest rate risk
The Company’s exposure to interest rate risk relates to its net cash position, variable rate credit facilities and variable
rate long-term debt. The Company mitigates its interest rate risk exposure by reducing or eliminating its overall debt
position. Net income or loss is sensitive to the impact of a change in interest rates on the average balance of interest-
bearing financial liabilities during the year. As at September 30, 2017, the Company has a net debt position of $10,934
(2016 - $44,647 net debt).
e) Fair value
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.
Due to their short-term nature, the fair value of cash and cash equivalents, accounts receivable, trade accounts payable
and customer advance payments is assumed to approximate their carrying value.
The fair values of derivative instruments that are not traded in an active market, such as over-the-counter foreign
exchange options and Collars, are determined using quoted forward exchange rates as at the consolidated statement of
financial position dates and are Level 2 instruments.
During the year ended September 30, 2017, there were no transfers between Level 1 and Level 2 fair value
measurements.
The fair values 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 as the instruments’ terms and interest rate are market based.
The carrying value and fair value of all financial instruments are as follows:
Cash and cash equivalents
Accounts receivable
Trade accounts payable
Bank indebtedness
Customer advance payments
Accrued liabilities
Derivative instruments
Long-term debt
10. INVENTORIES
Raw materials
Work in process
Finished goods
Production supplies
Less: obsolescence provision
September 30, 2017
Carrying Amount
of Asset
(Liability)
$35,876
94,332
(48,369)
(15,717)
(3,223)
(22,808)
(314)
($31,093)
Fair Value of
Asset
(Liability)
$35,876
94,332
(48,369)
(15,717)
(3,223)
(22,808)
(314)
($31,093)
September 30, 2016
Carrying
Amount of Asset
(Liability)
$27,509
107,900
(64,948)
(13,469)
(1,654)
(21,965)
(4,158)
($58,687)
Fair Value of
Asset
(Liability)
$27,509
107,900
(64,948)
(13,469)
(1,654)
(21,965)
(4,158)
($58,687)
September 30, 2017
$38,068
7,329
14,106
3,857
(3,578)
$59,782
September 30, 2016
$43,525
9,309
14,401
3,273
(3,316)
$67,192
EXCO TECHNOLOGIES LIMITED
45
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
The movement in the obsolescence provision accounts is as follows:
Opening balance
Additions
Acquired through business acquisition
Utilized
Reversals
Exchange differences
Closing balance
September 30, 2017
$3,316
1,243
-
(770)
(94)
(117)
$3,578
September 30, 2016
$2,424
1,880
416
(1,258)
(135)
(11)
$3,316
During the year, inventories of $306,306 (2016 - $318,413) were expensed, of which $1,149 was from the write-downs
of inventories (2016 - $1,745), net of $94 reversal of write-downs (2016 - $135).
11. CAPITAL MANAGEMENT
The Company defines capital as net debt and shareholders’ equity. As at September 30, 2017, total managed capital
amounted to $312,192 (2016 - $324,052), consisting of net debt of $10,934 (2016 - $44,647) and shareholders’ equity
of $301,258 (2016 - $279,405).
The Company’s objectives when managing capital are to:
• utilize short-term funding sources to manage its working capital requirements and fund capital expenditures
required to execute its operating and strategic plans; and
• maintain low overall debt levels relative to shareholders’ equity with a strong bias for short-term debt in order to
minimize the cost of capital and allow maximum flexibility to respond to current and future industry, market and
economic risks and opportunities.
The following ratios are used by the Company to monitor its capital:
Net debt to equity ratio
Net debt to EBITDA ratio
September 30, 2017
September 30, 2016
0.04:1
0.13:1
0.16:1
1.87:1
The following table details the net debt calculation used in the net debt to equity ratio as at the years ended as
indicated:
Bank indebtedness
Less: cash and short-term deposits
Net debt
September 30, 2017
$46,810
September 30, 2016
$72,156
(35,876)
$10,934
(27,509)
$44,647
The net debt to EBITDA ratio is calculated by dividing the net debt by EBITDA, and the Company calculates EBITDA
as earnings before other income/expense, interest, taxes, depreciation and amortization.
Based on the current funds available and the expected cash flow from operations, management believes that the
Company has sufficient funds to meet its liquidity requirements.
EXCO TECHNOLOGIES LIMITED
46
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
The Company is not subject to any capital requirement imposed by regulators; however, the Company must adhere to
a net worth covenant related to the terms of its bank credit facility. As at September 30, 2017, the Company was in
compliance with the required financial covenants.
12. OTHER INFORMATION
A. SEGMENTED INFORMATION
Business segments
The Company operates in two business segments: 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).
The Company evaluates the performance of its operating segments primarily based on net income before interest, other
income (expense) and income tax expense.
The Corporate segment involves administrative expenses that are not directly related to the business activities of the
above two operating segments.
Sales
Intercompany sales
Net sales
Depreciation
Amortization
Segment pre-tax income (loss) before interest and other
Other expense
Net interest expense
Income before income taxes
Property, plant and equipment additions
Property, plant and equipment, net
Intangible asset additions
Intangible assets, net
Goodwill
Total assets
Total liabilities
Casting
and
Extrusion
$190,803
(7,557)
183,246
12,404
786
17,967
-
10,505
88,422
838
1,775
271
182,850
29,268
2017
Automotive
Solutions Corporate
Total
$401,959
(1,000)
400,959
3,324
4,043
51,100
(1,223)
4,743
21,822
153
38,069
61,820
246,718
65,502
$-
-
-
46
2
(6,484)
-
47
1,280
-
5
-
1,653
35,193
$592,762
(8,557)
584,205
15,774
4,831
62,583
(1,223)
(1,327)
60,033
15,295
111,524
991
39,849
62,091
431,221
129,963
EXCO TECHNOLOGIES LIMITED
47
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Sales
Intercompany sales
Net sales
Depreciation
Amortization
Segment pretax income (loss) before interest and other
Other income
Net interest expense
Income before income taxes
Property, plant and equipment additions
Property, plant and equipment acquired through
business acquisition
Property, plant and equipment, net
Intangible asset additions
Intangibles acquired through business acquisition
Intangible assets, net
Goodwill acquired through business acquisition
Goodwill, net
Total assets
Total liabilities
Geographic and customer information
Sales
Canada
United States
Europe
Mexico
South America
Asia
Other
Casting and
Extrusion
Automotive
Solutions Corporate
Total
2016
$197,942
(5,722)
192,220
11,543
696
24,705
-
$397,697
(928)
396,769
3,217
2,454
48,012
3,440
20,057
2,382
-
92,644
977
-
1,729
-
292
181,019
26,104
2,906
20,772
309
43,254
43,851
39,811
63,779
269,233
76,948
2017
$18,273
309,818
166,314
67,073
8,852
7,169
6,706
$584,205
$- $595,639
(6,650)
-
588,989
-
14,787
27
3,150
-
65,458
(7,259)
3,440
-
(1,289)
67,609
22,654
215
-
1,279
6
-
6
-
-
2,689
70,484
2,906
114,695
1,292
43,254
45,586
39,811
64,071
452,941
173,536
2016
$22,549
288,853
208,531
49,008
7,883
7,060
5,105
$588,989
In 2017 the total billings to the Company’s largest 2 customers accounted for 13.4% and 5.1% (2016 - 14.3% and
10.1%) of total sales. The account receivable pertaining to these customers were $9,974 and $5,294 at year- end
(2016 - $10,415 and $7,196). The allocation of sales to the geographic categories is based upon the customer location
where the product is shipped. In 2017, the Company’s largest 2 customers were from the Automotive Solutions
segment and the Casting and Extrusion segment (2016 - the Company’s largest 2 customers were from the Automotive
Solutions segment).
EXCO TECHNOLOGIES LIMITED
48
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Property, plant and equipment, net
Canada
United States
Mexico
South America
Thailand
Europe
Morocco
South Africa
September 30, 2017
$40,061
31,856
8,393
10,843
7,904
3,281
9,186
-
September 30, 2016
$40,667
34,084
7,885
11,866
9,318
3,508
6,963
404
$111,524
$114,695
Property, plant and equipment are attributed to the country in which they are located.
Intangible assets, net
Canada
United States
Mexico
South America
Thailand
Europe
Morocco
South Africa
September 30, 2017
$1,459
36,985
60
162
29
1,026
128
-
September 30, 2016
$1,386
42,207
59
88
67
1,750
27
2
$39,849
$45,586
B. EMPLOYEE FUTURE BENEFITS
The Company accrues employee future benefits for all of its Mexican employees. These benefits consist of a one-time
payment equivalent to 12 days of wages for each year of service (at the employee’s most recent salary, but not to
exceed twice the legal minimum wage), payable to all employees with 15 or more years of service, as well as to certain
employees terminated involuntarily prior to vesting of their seniority premium benefit. Under Mexican labour laws,
the Company also provides statutorily mandated severance benefits to its employees terminated under certain
circumstances. Such benefits consist of a one-time payment of three months’ wages upon involuntary termination
without just cause.
The liability associated with the seniority and termination benefits is calculated as the present value of expected future
payments and amounted to $852 as at September 30, 2017 (2016 - $794) and is recorded under the caption other
accrued liabilities on the consolidated statements of financial position. In determining the expected future payments,
assumptions regarding employee turnover rates, inflation, minimum wage increases and expected salary levels are
required and are subject to review and change.
C. COMPENSATION OF KEY MANAGEMENT PERSONNEL
The remuneration of directors and other members of key management personnel during the years ended
September 30, 2017 and 2016 were as follows:
EXCO TECHNOLOGIES LIMITED
49
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Salaries and cash incentives (i)
Directors’ fees
Share-based awards (ii)
September 30, 2017
September 30, 2016
$3,907
343
120
$4,370
$5,009
327
90
$5,426
i) Key management personnel were not paid post-employment benefits, termination benefits, or other long-term
benefits during the years ended September 30, 2017 and 2016.
ii) Share-based payments are director share units granted to directors and the fair value of stock options granted to
key management personnel.
13. INCOME PER COMMON SHARE
Income per common share is calculated using net income and the monthly weighted average number of common shares
outstanding of 42,600,223 (2016 - 42,497,182). Any potential common shares for which the effect is anti-dilutive
have not been reflected in the calculation of diluted income per share. There was an immaterial dilution effect of 74,712
shares from the outstanding stock options on diluted weighted average number of common shares outstanding for 2017
(2016 - 195,863).
14. INCOME TAXES
Income before income taxes
Income tax expense at Canadian statutory rates
Manufacturing and processing deduction
Foreign rate differential
Non-taxable income net of non-deductible expenses
Losses not tax effected
Other
Reported income tax expense
Income before income taxes
Income tax expense at Canadian statutory rates
Manufacturing and processing deduction
Foreign rate differential
Non-taxable income net of non-deductible expenses
Withholding tax on dividend
Losses not tax effected
Other
Reported income tax expense
2017
$60,033
15,836
(390)
1,020
(1,937)
1,923
1,062
$17,514
100.0%
26.4%
(0.7%)
1.7%
(3.2%)
3.2%
1.8%
29.2%
2016
$67,609
100.0%
17,713
(139)
4,011
(3,377)
853
266
725
26.2%
(0.2%)
5.9%
(5.0%)
1.3%
0.4%
1.1%
$20,052
29.7%
EXCO TECHNOLOGIES LIMITED
50
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
The major components of income tax expense are as follows:
Current income tax expense
Based on taxable income for the year
Withholding tax on dividend
Deferred income tax expense (recovery)
Origination, reversal of temporary differences and losses not
recognized
Reported income tax expense
Deferred income tax assets and liabilities consist of the following temporary differences:
Deferred tax assets
Tax benefit of loss carry forward
Items not currently deductible for income tax purposes
Unrealized foreign exchange losses
Deferred tax liabilities
Tax depreciation in excess of book depreciation
Unrealized revenue and foreign exchange
Investment in subsidiaries
2017
2016
$18,543
-
18,543
$16,567
853
17,420
(1,029)
2,632
$17,514
$20,052
2017
2016
$803
262
317
1,382
(3,370)
(513)
(3,217)
(7,100)
$1,239
582
-
1,821
(4,910)
(1,090)
(1,271)
(7,273)
Net deferred income tax liabilities
($5,718)
($5,452)
15. CONSOLIDATED STATEMENTS OF CASH FLOW
Net change in non-cash working capital
The net change in non-cash working capital balances related to operations consists of the following:
Accounts receivable
Unbilled revenue
Inventories
Prepaid expenses and deposits
Trade accounts payable
Accrued payroll liabilities
Other accrued liabilities
Provisions
Customer advance payments
Income taxes payable
2017
$11,328
(1,234)
5,382
777
(15,296)
(352)
1,748
(43)
1,569
(2,141)
$1,738
2016
$9,106
(2,093)
(475)
(2,388)
2,984
3,307
(4,550)
(428)
(1,336)
(8,187)
($4,060)
EXCO TECHNOLOGIES LIMITED
51
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
16. CONTINGENT LIABILITIES.
In the ordinary course of business, the Company may be contingently liable for litigation and claims with customers,
suppliers and former employees. On an ongoing basis, the Company assesses the likelihood of any adverse judgments
or outcomes to these matters as well as potential ranges of probable costs and losses, and a determination of the
provision required, if any, for these contingencies is made after analysis of each individual issue.
During 2017, the Company agreed with a customer (the “Customer”) to utilize a government-sponsored third party
(the “Third Party”) tool financing program (the “Program”). The Program allows the Company to receive payment
from the Third Party in advance (the “Advance Payments”) of either tool delivery or the Customer’s receipt of payment
from the Original Equipment Manufacturer (the “OEM”). The Customer is obligated to pay all costs of the Program
including principal and interest. The Third Party retains recourse against the Company if the Customer fails to repay
the Advance Payments to the Third Party within 24 months of the Advance Payment. The Company has been
indemnified by the Customer in this regard and expects recourse against it to be extinguished in the normal course of
business upon the Customer’s receipt of payment from the OEM. The Advance Payments paid to the Company under
this Program amounted to $3,083 as at September 30, 2017 (2016 - nil) and related liabilities and receivables were not
recorded on the Company’s consolidated statements of financial position.
There are no material contingent liabilities as at September 30, 2017 (2016 - nil).
17. BUSINESS ACQUISITION
The Company accounts for acquisitions using the acquisition method of accounting with the results of operations
included in the Company’s consolidated financial statements from the respective date of the acquisition.
On April 4, 2016, the Company completed the acquisition of 100% of the ownership interest in AFX Industries L.L.C.
(“AFX”) for consideration of US$73,390 (CAD $95,334) excluding US$4,420 (CAD $5,742) of assumed debt. A
portion of the consideration amounting to US$9,307 (CAD $12,090) was deferred and payable over three years.
Subsequent to closing, the acquisition price was reduced by US$1.07 (CAD $1.39) million to reflect changes in the
AFX balance sheet in accordance with the acquisition agreement. This reduction is reflected in the following table
depicting the final purchase price allocation. AFX is based in Port Huron, Michigan with manufacturing operations
in Matamoros, Mexico. AFX is a Tier 2 supplier of leather and leather-like interior trim components to the North
American automotive market. AFX supplies die cut leather sets for seating and many other interior trim applications
as well as injection-moulded, hand-sewn, machine-sewn and hand-wrapped interior components of all types. The
AFX operations are complementary to the Company's existing automotive interior trim business and will provide the
Company with new production capabilities and customer relationships.
The purchase cost was allocated to the underlying assets acquired and liabilities assumed based upon the estimated
fair values at the date of acquisition. The Company determined the fair values based on discounted cash flows, market
information, and using independent valuations and management’s best estimates.
The final purchase price was allocated to the identifiable assets acquired and liabilities assumed based on the fair value
of the total consideration as follows:
EXCO TECHNOLOGIES LIMITED
52
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
Trade accounts receivable and other
Inventories
Property, plant and equipment
Bank indebtedness
Trade accounts payable, accrued liabilities and other
Long-term debt
Net identifiable assets
Intangible assets
Residual purchase price allocation to goodwill
Non-monetary net assets acquired
Cash acquired
Acquisition funded as follows:
Cash
Term Notes, payable over three years
$20,078
12,124
2,906
(3,383)
(18,666)
(2,010)
11,049
43,254
39,811
94,114
180
$94,294
$82,024
12,090
$94,114
Costs related to the AFX acquisition amounted to $1.5 million and were expensed under selling, general and
administrative expenses on the consolidated statements of income and comprehensive income.
The fair value of the trade accounts receivable equals the gross amount of the trade accounts receivable less allowance
for bad debts and amounts to $19,226. The net contractual amount was considered collectible at the date of acquisition.
AFX’s investment in a joint operation has been accounted for in accordance with the joint arrangement accounting
policy; see note 2.
The primary factors that contributed to the residual purchase price allocation and resulted in the recognition of
goodwill are: the existing AFX business; the acquired workforce; access to growth opportunities with existing
customers; and the combined strategic value to the Company’s growth plan.
18. INTEREST EXPENSE (INCOME)
The following table outlines the interest expense (income) incurred during the year:
Interest expense on bank indebtedness and long-term debt
Interest income on deposits
Net interest expense
19. OTHER EXPENSE AND INCOME
September 30, 2017
September 30, 2016
$1,338
(11)
$1,327
$1,391
(102)
$1,289
On November 12, 2016 of the current fiscal year, the Company ceased production in Lesotho and commenced the
process of liquidating and winding-up the ALC legal entities in Lesotho and South Africa. Post-production non-
operating expenses incurred for the year ended September 30, 2017 amounted to $1,223 (2016 - nil) and included non-
cash asset write-downs of $707 and a loss on disposal of capital assets of $23.
EXCO TECHNOLOGIES LIMITED
53
ANNUAL REPORT 2017
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)'s except per share amounts
On April 7, 2016 of the prior fiscal year, the Company concluded a commercial arbitration that it initiated in 2015. As
a result, the Company received a settlement payment of $3,440 during the third quarter of the 2016 fiscal year.
EXCO TECHNOLOGIES LIMITED
54
ANNUAL REPORT 2017
CORPORATE INFORMATION
Board of Directors
Transfer
Agent and Registrar
CPA, CA
Laurie T.F. Bennett,
Director
Corporate
Edward H. Kernaghan,
Vice President
Executive
Ltd.
& Partners
Kernaghan
MSc
Nicole A. Kirk, BA, MBA
Corporate
Director
Robert B. Magee, PEng
Chairman
Group
Woodbridge
TSX Trust Company
301 -100 Adelaide
West
Toronto,
M5H 4H1
Ontario
Phone: 416.361.0930
www.tsxtrust.com
Street
Auditors
Ernst & Young LLP
Chartered
Licensed
Public
Professional
Accountants
Accountants
Philip B. Matthews,
Corporate
Director
MA, CPA, CA
Stock Listing
Toronto
Stock Exchange
{XTC)
Brian A. Robbins,
PEng
President
and CEO of the Company
Corporate
Office
Colleen M.
Corporate
Director
McMorrow,
FCPA, FCA,ICD.d
Limited
Exco Technologies
130 Spy Court,
Markham,
Phone: 905.477
www.excocorp.com
Ontario
.3065
2nd Floor
L3R 5H6
2017 Annual Meeting
for the
The 2017 Annual Meeting
Shareholders
Golf Club, 14780 Leslie
on Wednesday,
January
at 4:30 pm.
will be held at Magna
St., Aurora
31, 2018
Corporate
Officers
Brian A. Robbins,
PEng
and CEO
President
Paul E. Riganelli,
MA, MBA, LLB
and COO
Vice President
Senior
CPA, CA
R.Drew Knight,
Chief Financial
Officer
Secretary
& VP Finance
Darren M. Kirk, MBA, CFA
Executive
Vice President
EXCO TECHNOLOGIES LIMITED
55
ANNUAL REPORT 2017