(1) Earnings before interest, taxes, depreciation and amortization.
(2) Before net change in non-cash working capital.
24
20
21
22
23
461.2
489.9
619.3
412.3
Casting & Extrusion Technologies
Automotive Solutions
PRODUCTION FACILITIES
Dartmouth, NS
Uxbridge, ON
Newmarket, ON
Markham, ON
Chesterfield, MI
Toledo, OH
Queretaro, MX (3)
Matamoros, MX (2)
Wylie, TX
Medellin, Colombia
Sorocaba, Brazil
Tangier, Morocco
Aldenhoven, Germany
Weissenburg, Germany
Brescia, Italy (2)
Kenitra, Morocco
Chonburi, Thailand
DILUTED EARNINGS
PER SHARE
EBITDA(1)
SALES
CASH FLOW
FROM OPERATING
ACTIVITIES (2)
($ millions)
($ millions)
($ millions)
637.8
24
20
21
22
23
62.8
49.7
70.2
49.5
24
20
21
22
23
70.1
53.0
74.5
53.5
24
20
21
22
23
$0.98
$0.49
$0.68
$0.69
82.2
$0.76
71.6
EXCO TOOLING SOLUTIONS
1
LETTER TO STAKEHOLDERS F2024
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Precision in Motion
Dear Stakeholders,
In F2024, Exco delivered on our growth objectives amid
an evolving industry landscape. We achieved record
revenue of $638 million, generated EBITDA of $82
million, and produced earnings per share of $0.76. Free
Cash Flow also grew substantially to $54 million, which
we allocated to drive future growth and strengthen our
financial position. We invested $14 million in growth
capital expenditures, returned $19 million to sharehold-
ers, and reduced our net debt to $73 million.
Our theme, “Precision in Motion,” has shaped our oper-
ational and strategic efforts this past year. By enhancing
the precision of our products and processes, we are
building a robust foundation to address market
challenges and seize opportunities for sustainable
growth.
Adapting to Industry Change
The automotive industry, our primary market, is under-
going significant transformation. While recent years
have seen strong demand for light vehicles, the
near-term outlook reflects softer conditions driven by
economic pressures with production adjustments
taking effect. At the same time, the pace of electric
vehicle (EV) adoption has moderated, the lifespan of
internal combustion engines (ICE) is extending, and the
use of hybrid powertrains is gaining momentum. How-
ever, the longer-term outlook for the automotive indus-
try remains very positive, with easing interest rates
expected to improve vehicle affordability and the need
to replace an aging fleet driving renewed growth in
consumer demand. Additionally, improving safety and
technology features are creating new opportunities, as
advancements such as advanced driver-assistance
systems (ADAS) and enhanced connectivity are increas-
ingly influencing consumer preferences and fostering
greater demand.
Exco is uniquely positioned to thrive in this evolving
landscape. Our operations are designed to serve all
powertrain types—EVs, ICE, and hybrids—without
reliance on infrastructure dedicated to any single
technology. While EVs remain a critical component of
our growth strategy, and we are confident in their
long-term potential, our adaptability ensures we can
meet the diverse needs of the market, regardless which
direction it takes.
Over time, we expect the transition towards EVs will
drive the increasing adoption of transformative technol-
ogies like giga-presses, which enable the production of
entire vehicle subframes in a single aluminum casting.
This technology significantly improves OEM manufac-
turing efficiency, reduces complexity, and enhances
sustainability. As giga-press technology gains traction,
Exco is well-equipped to deliver the advanced tooling
solutions required for their implementation.
Beyond the die-cast market, the extrusion market is also
expected to experience long-term growth fueled by
global sustainability initiatives. Lightweight, recyclable
materials like aluminum are increasingly favored as
industries prioritize reducing their environmental
footprint. Simultaneously, extruders are focused on
improving productivity and workplace safety, and Exco’s
products are specifically designed to support these
goals with innovative features that enhance operational
efficiency and safety. As extrusion tooling becomes
LETTER TO STAKEHOLDERS F2024
2
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
larger and more complex, Exco’s advanced capabilities
and expertise position us as a trusted leader in deliver-
ing innovative solutions tailored to these evolving
demands.
Casting and Extrusion:
Significant Investments Yielding Results
In recent years, Exco has strategically invested in
expanding our Casting and Extrusion segment. These
investments include geographic expansions through
acquisitions and greenfield projects, advanced equip-
ment acquisitions, and technological enhancements,
including highly efficient heat treatment furnaces.
These initiatives have solidified our leadership in alumi-
num tooling and enable us to address growing global
demand for larger, more sophisticated die-cast and
extrusion components.
While the full returns on these investments will take
time to materialize, the progress is evident. The
segment has demonstrated strong top-line growth
complemented by meaningful margin expansion,
driven by operational efficiencies and economies of
scale from our expanded footprint. Moving forward, we
anticipate additional productivity gains and scale bene-
fits from these investments, which will increasingly
contribute to Exco’s financial objectives.
Interior Trim and OEM Accessories:
Growing Content, Value, and Margins
Our Automotive Solutions group remains a cornerstone
of Exco’s long-term growth strategy, focused in the
areas of interior trim products and OEM accessories. By
leveraging our low-cost operations and a relentless
drive for operational excellence, we continue to meet
the evolving demands of OEMs while increasing our
content per vehicle.
Among our offerings, accessory products stand out as
high-growth and high-margin. These value-added
products provide OEMs with opportunities to differenti-
ate their vehicles and enhance profitability, a trend that
continues to gain momentum. Exco’s innovative design
and manufacturing capabilities position us as a clear
leader in this space, delivering solutions as a tier I suppli-
er to the OEMs that elevate vehicle appeal while meet-
ing customer needs.
We are also addressing inflationary challenges tied to
legacy programs, which have affected margins. As these
older programs mature, they are being replaced by
newer programs with more favorable economics. This
transition is expected to drive margin improvements
across the segment, reinforcing its profitability and
contribution to Exco’s long-term success.
Innovation and Sustainability:
Precision in Action
Innovation is at the core of Exco’s strategy, driving our
ability to deliver precision and sustainability. Our leader-
ship in 3D printing of tool steel allows us to produce
highly complex, customized tooling components with
unmatched precision. This reduces waste while enhanc-
ing the performance and durability of our customers’
tooling, which is increasingly critical as the industry
transitions to larger, more complex components.
In addition to 3D printing, Exco continues to embrace
advanced technologies such as artificial intelligence (AI)
and machine learning. These tools optimize production
processes, improve decision-making, and enhance
LETTER TO STAKEHOLDERS F2024
3
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
operational responsiveness, ensuring efficiency and
precision throughout our facilities.
Our commitment to innovation also extends to materi-
als science. By incorporating sustainable raw materials
that enhance performance and minimize environmen-
tal impact, we align with industry priorities while
strengthening our leadership in eco-friendly manufac-
turing. Examples of these initiatives are highlighted
across our divisions and detailed in our Sustainability
Report.
Path Forward and Financial Outlook
Looking ahead, Exco’s strong foundation, innovative
spirit, and talented team position us as a leader in the
evolving automotive and extrusion industries. We are
confident that our strategic investments in people,
facilities, and equipment will unlock growth opportuni-
ties and enable us to deliver sustained value to our
shareholders and customers alike.
With the benefits of recent capital expenditures, Exco is
targeting annual revenue of $750 million, EBITDA of
$120 million, and EPS of approximately $1.50 by the end
of F2026. While challenges remain, we are ready to
navigate uncertainties and seize opportunities as we
continue moving forward with “Precision in Motion.”
Sincerely,
Darren M. Kirk, MBA, CFA
President and CEO
CONTENTS
5
Management’s Discussion and Analysis
24
Independent Auditor’s Report
28
Consolidated Financial Statements
32
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 of Exco Technologies Limited
(“Exco”, or “Company”) for the year ended September 30, 2024. This MD&A has been prepared as of November
27, 2024.
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.sedarplus.ca.
In this MD&A, reference may be made to EBITDA, EBITDA Margin, Pretax Profit, Net Debt, Free Cash Flow and
Maintenance Fixed Asset Additions which are not defined measures of financial performance under International
Financial Reporting Standards (“IFRS”). A reconciliation to these non-GAAP measures is provided within this
MD&A. Exco calculates EBITDA as earnings before interest, taxes, depreciation and amortization and EBITDA
Margin as EBITDA divided by sales. Exco calculates Pretax Profit as segmented earnings before other
income/expense, interest and taxes. Net Debt represents the Company’s consolidated net indebtedness position
offsetting cash from bank indebtedness, current and long-term debt. It is calculated as Long-term debt plus Current
portion of Long-term debt plus Bank indebtedness less Cash and cash equivalents. Free Cash Flow is calculated as
cash provided by operating activities less interest paid and Maintenance Fixed Asset Additions. Maintenance Fixed
Asset Additions represent management’s estimate of the investment in fixed assets that is required for the Company
to continue operating at current capacity levels. Given the Company’s elevated planned capital spending on fixed
assets for growth initiatives (including additional Greenfield locations, energy efficient heat treatment equipment and
increased capacity) in recent years, the Company has modified its calculation of Free Cash Flow to include
Maintenance Fixed Asset Additions and not total fixed asset purchases. This change is meant to enable investors to
better gauge the amount of generated cash flow that is available for these investments as well as acquisitions and/or
returns to shareholders in the form of dividends or share buyback programs. EBITDA, EBITDA Margin, Pretax Profit
and Free Cash Flow are used by management, from time to time, to facilitate period-to-period operating comparisons
and we believe some investors and analysts use these measures as well when evaluating Exco’s financial performance.
These measures, as calculated by Exco, do not have any standardized meaning prescribed by IFRS and are not
necessarily comparable to similar measures presented by other issuers.
CAUTIONARY STATEMENT
Information in this document relating to: projected 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
4
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
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. We use words such as "anticipate", "may",
"will", "should", "expect", "believe", "estimate", “5-year target” and similar expressions to identify forward-looking
information and statements especially with respect to growth, outlook and financial performance of the Company's
business units, contribution of our start-up business units, contribution of awarded programs yet to be launched, margin
performance, financial performance of acquisitions, liquidity, operating efficiencies, improvements in, expansion of
and/or guidance or outlook as to future revenue, sales, production sales, margin, earnings, earnings per share, including
the outlook for the year ending fiscal 2026.
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, the global economic recovery from any future outbreak of
epidemic, pandemic, or contagious diseases that may emerge in the human population, which may have a material
effect on how we and our customers operate our businesses and the duration and extent to which this will impact our
future operating results, the impacts of international conflicts on the global financial, energy and automotive markets,
including increased supply chain risks, assumptions about the number of automobiles produced in North America and
Europe, the potential for overseas automotive OEMs to make inroads in North America and Europe, including the
implementation of tariffs that Governments may use to protect domestic OEMs, production mix between passenger
cars and trucks, the number of extrusion dies required in North America, South America, and Europe, the rate of
economic growth in North America, Europe and emerging market countries, investment by OEMs in drivetrain
architecture and other initiatives intended to reduce fuel consumption and/or the weight of automobiles in response to
rising climate risks, raw material prices, supply disruptions, economic conditions, inflation, currency fluctuations,
trade restrictions, energy rationing in Europe and elsewhere, our ability to integrate acquisitions, our ability to continue
increasing market share, or launch of new programs and the rate at which our current greenfield operations in Mexico
and Morocco achieve sustained profitability, recoverability of capital assets, goodwill and intangibles (based on
numerous assumptions inherently uncertain), and cyber security and its impact on Exco’s operations. These forward-
looking statements include known and unknown risks, uncertainties, assumptions and other factors which may cause
actual results or achievements to be materially different from those expressed or implied. For a more extensive
discussion of Exco’s risks and uncertainties see the ‘Risks and Uncertainties’ section in this Annual Report and other
reports and securities filings made by the Company. This information is available at www.sedarplus.ca.
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 operating segments.
5
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
The Casting and Extrusion segment designs, develops and manufactures tooling and consumable parts for both
aluminum die-casting and aluminum extrusion machines. Operations are based in North America, South America,
Europe, Thailand and Morocco and serve automotive and industrial markets around the world. Exco is a leader in
most of its markets which principally consist of North America for die-cast tooling, Europe, North, Central and South
America for extrusion tooling and globally for consumable tooling parts and related equipment. Across its markets,
Exco is focused on further entrenching itself by reducing lead times and manufacturing costs through design and
process enhancements. Major capital projects have been implemented in recent years to increase capacity, reduce lead
times, further improve quality and reduce costs while pushing the envelope on innovation. Exco’s expansion into 3D
printing tooling components in recent years is a good example of this. The Company is now a clear industry leader in
the design, engineering and manufacturing of 3D printed tooling components globally. 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 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. 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, and Morocco supplying the automotive
markets in North America, Europe and to a lesser extent, Asia.
VISION AND STRATEGY
The Company’s vision is “to be the benchmark for innovation, efficiency and quality in the industries we serve.” The
Company’s mission is to “enhance the look and functionality of passenger vehicles and tool up light metal industries
for superior performance.” Exco has pursued several key strategies to achieve sustainable revenue and earnings
growth. These include: (1) strengthening our leadership and competitive position in our chosen markets through
automation and technology, (2) minimizing our cost structure, (3) maintaining the bulk of our productive capacity in
lower-cost jurisdictions and/or in close 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 – see “Marketplace opportunities and
efficiency initiatives”, below.
Exco was founded on a commitment to excellence and a culture of entrepreneurship and dedication to ethical business
practices. We encourage continuance of these traits by providing incentives for our managers to grow their business
and giving our employees the latitude to push the envelope on innovation while adhering to our Code of Conduct.
MARKETPLACE OPPORTUNITIES AND EFFICIENCY INITIATIVES
In the automotive sector, Original Equipment Manufacturers (OEMs) continue to move towards electric or hybrid
vehicles and to reduce vehicle weight in all passenger vehicles to improve fuel efficiency. Exco’s products form an
integral part of this industry transformation.
6
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Lightweight metals such as aluminum are increasingly displacing steel in order to make conventional (internal
combustion engine) vehicles more environmentally friendly. As well, electric and hybrid vehicles make extensive use
of aluminum components to reduce weight and therefore maximize battery range and performance. Exco’s Casting
and Extrusion segment, which comprises 48% of total revenues, is especially well positioned to benefit from this
ongoing transition.
More recently, die-cast aluminum components and associated tooling have been increasing significantly in both size
and complexity. Tesla has pushed the envelope in this regard, using die-casting machines that are much larger than
those used previously. This enables Tesla to cast entire subframes of the vehicle rather than assembling numerous
stamped metal components in the body shop, creating significant manufacturing efficiency gains. Other traditional
OEMs and tier foundries are following Tesla’s lead in using these larger die-cast machines (giga presses), and Exco
expects there will be significant growth in this part of the market over the next several years. Accordingly, we are
making sizeable additional investments in our people, equipment and processes to remain a leading supplier in this
market.
Our customers are also increasingly focused on improving their own productivity and our products are actively helping
in this regard. For example, we design and incorporate 3D printed components into our moulds which greatly enhances
the overall quality and performance of the die-cast process while reducing the use of steel, energy and transportation
costs. Similarly, Castool has evolved their products and systems to provide less expensive, longer lasting, more energy
efficient and safer products. The group focuses on making components and accessories that will increase the
customers’ tooling life while ensuring less scrap and energy consumption. In doing so, we promote a higher energy
and material efficiency in the value chain of production, while better service is being delivered to the end-consumer.
Our Automotive Solutions group, which manufactures various products for the interior passenger compartments and
trunks of vehicles, is also a contributor to vehicle lightweighting trends. Exco’s Automotive Solutions segment
typically makes products that are lighter in weight than competing products. For example, Neocon offers lightweight
material options that are an ideal fit for vehicles regardless of powertrain. By incorporating a foaming additive during
the extrusion process and creating air voids in the base layer, Neocon created a thermoplastic rubber (TPR) product
that is 45% lighter than a traditional thermoplastic elastomer (TPE) injection molded alternative.
Exco is committed to running its facilities as efficiently as possible, delivering the same innovative, high-quality
products to our customers with less energy, fewer materials and lower waste. In this regard, several of our businesses
have achieved ISO 14001 certification, the international standard that specifies requirements for an effective
environmental management system. More broadly, we remain focused on employing lean manufacturing principles
to reduce and eliminate waste while also making substantial investments in new, energy efficient equipment. As well,
our multi-plant footprint with standardized manufacturing processes provides superior capacity utilization and gives
proximity to market which reduces carbon emissions through reduced transportation requirements. Several other
innovative technological advancements and initiatives are being employed throughout the organization to help achieve
our goals.
FISCAL 2024 OVERVIEW
Sales, Earnings and Strategic Investments
Fiscal 2024 consolidated sales were up 3% compared to the prior year driven by a 5% increase in the Casting and
Extrusion segment and a 1% increase in the Automotive Solutions segment. Casting and Extrusion segment sales
increased on higher demand for die-cast moulds (new dies and rebuilds) and relatively stable demand for extrusion
dies and related products (in both the Americas and Europe). These factors were partially offset by lower steel prices,
7
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
which are a pass-through for certain tooling products. Automotive Solutions segment sales reflect relative stability in
North American and European automotive production levels, higher demand for accessory products, and new program
launches. These factors were partially offset by the United Autoworkers Union (UAW) strike in the first quarter,
softening conditions in Europe due to global unrest, increased competition from China, and manufacturers adjusting
production to meet European Corporate Average Fuel Economy (CAFE) standards.
Resilient demand for Exco’s products reflect the impact of the Company’s various strategic growth initiatives. These
initiatives are primarily driven by the increased adoption of electric and hybrid vehicles, the lightweighting of all
passenger motor vehicles generally, the broader global environmental sustainability movement and the adoption of
advanced die-cast and extrusion tooling to meet these global changes to manufacturing.
Earnings per share were $0.76 in fiscal 2024 compared to $0.68 in fiscal 2023 – a 12% increase. Pre-tax profits were
higher in the Casting and Extrusion segment and lower in the Automotive Solutions segment. Higher sales, more
predictable volumes, and improved labour and production efficiencies contributed to the profitability improvement in
the Casting and Extrusion segment, which more than offset much higher levels of depreciation associated with recent
capital spending activity. Pre-tax profits in the Automotive Solutions segment were negatively impacted by the first
quarter UAW strike, higher labour costs, adverse currency movements, customer driven launch delays, and employee
severance costs associated with efficiency initiatives. Overall pre-tax profits were also impacted by ongoing start-up
losses at new operations, disruption to existing operations associated with installing new equipment and upgrading
capabilities, and inflationary pressure on wages and materials generally.
During the year, the Company invested $33.9 million in capital assets and focused considerable management time and
attention on our newer facilities and acquisitions. Overall capital spending in F2024 was well below expectations at
the beginning of the year as management prioritized profitable investment opportunities and experienced a delay in
receiving certain equipment. The impact of these investments continues to suppress near-term margins and overall
profitability. But Exco expects these investments will provide meaningful profits over a multi-year horizon as the
operations season and increased scale is achieved. Our recent and current key projects are summarized as follows:
•
Castool Morocco Greenfield Facility – Opened in November 2021 and positions Castool to better penetrate the
European die cast and extrusion tooling markets for consumable and capital items. The plant is anticipated to
demonstrate steady growth in both top and bottom-line performance as operations mature;
•
Castool Mexico Greenfield Facility – Opening ceremonies for this facility occurred in October 2023 and operations
commenced concurrently. This facility has increased manufacturing capacity and positions Castool to better
penetrate markets in Latin America and the Southern United States. Depreciation expenses and start-up cash costs
increased in F2024, but financial results are expected to quickly improve in F2025 and beyond;
•
Castool Heat Treatment Operations – Fully operational and handling all of Castool Uxbridge and Large Mould
Newmarket heat treatment requirements.
•
Large Mould Group Capital Additions – All equipment to support Giga-sized moulds installed and operational.
Additional investments to support continued growth in our leading additive manufacturing (3D printing) are being
pursued;
•
Halex operations – New equipment continues to be installed at the various locations while work continues to
further integrate Halex into the broader Extrusion Group and realize synergies from the sharing of best practices;
•
Extrusion Group Heat Treatment – Installation of new vacuum heat treatment equipment in Mexico, Texas and
Markham are all fully operational. New, similar equipment has been ordered for our Michigan location for
installation in early F2025;
•
Automotive Solutions Group – New equipment continues to be installed within the previously expanded footprint
to support a growing book of business.
8
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Outlook
By the end of fiscal 2026, Exco is targeting to produce approximately $750 million annual revenue, $120 million
annual EBITDA and annual EPS of roughly $1.50. Exco has made significant progress towards achieving these targets
since they were announced in Fiscal 2021 and continues to believe its targets remain obtainable. These targets are
expected to be achieved through returns on greenfield and strategic initiatives, the launch of new programs, general
market growth, and also market share gains consistent with the Company’s operating history.
Despite current macro-economic challenges, including slightly increasing levels of unemployment, relatively high
interest rates, persistent inflation, policy shifts which may occur related to the US election, the overall outlook is
favorable across Exco’s segments into the medium term. Consumer demand for automotive vehicles remains stable in
most markets. And while dealer inventory levels have been increasing, average transaction prices for both new and
used vehicles remain firm, incentives are increasing and the average age of the broader fleet has continued to increase.
This bodes well for strong levels of future vehicle production and the sales opportunity of Exco’s various automotive
components and accessories. In addition, OEM’s are increasingly looking to the sale of higher margin accessory
products as a means to enhance their own levels of profitability. Exco’s Automotive Solutions segment derives a
significant amount of activity from such products and is a leader in the prototyping, development and marketing of
the same. Moreover, the movement towards an electrified and hybrid fleet for both passenger and commercial vehicles
is enticing new market entrants into the automotive market while causing traditional OEM incumbents to further
differentiate their product offerings, all of which is driving above average opportunities for Exco.
With respect to Exco’s Casting and Extrusion segment, the intensifying global focus on environmental sustainability
has created significant growth drivers that are expected to persist through at least the next decade. Automotive OEMs
are utilizing light-weight metals such as aluminum to reduce vehicle weight and reduce carbon dioxide emissions.
This trend is evident regardless of powertrain design - whether internal combustion engines, electric vehicles or
hybrids. As well, a renewed focus on the efficiency of OEMs in their own manufacturing process is creating higher
demand for advanced tooling that can enhance their profitability and sustainability goals. Certain OEM manufacturers
have begun utilizing much larger die cast machines (giga-presses) to cast entire vehicle sub-frames using aluminum-
based alloy rather than stamping, welding, and assembling separate pieces of ferrous metal. Exco is in discussions
with several traditional OEMs and their tier providers who appear likely to follow this trend. While the growth of
EV’s in North America and Europe has been delayed from prior expectations, contributing to a slower adoption of
giga-presses, Exco nonetheless continues to expect these trends will occur and has positioned its operations to
capitalize accordingly. Beyond the automotive industry, Exco’s extrusion tooling supports diverse industrial end
markets which are also seeing increased demand for aluminum driven by environmental trends, including energy
efficient buildings, solar panels, etc.
On the cost side, inflationary pressures have intensified post COVID while prompt availability of various input
materials, components and labour has become more challenging. The intensity of these dynamics have generally
moderated in recent quarters with the exception of labour costs in Mexico, which continue to see significant increases.
We are offsetting these dynamics through various efficiency initiatives and taking pricing action where possible
although there is typically several quarters of lag before the counter measures yield results.
The Russian invasion of Ukraine and the Middle East conflict have added additional uncertainty to the global
economy. And while Exco has essentially no direct exposure to these countries, Ukraine does feed into the European
automotive market and Europe has traditionally depended on Russia for its energy needs. Similarly, the conflict in the
Middle East creates the potential for a renewed rise in the price of oil and other commodities as well as logistics costs
and could weigh on consumer sentiment.
9
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Exco itself is also looking inwards with respect to sustainability trends to ensure its operations meet expectations. We
are investing significant capital to improve the efficiency and capacity of our operations while lowering our carbon
footprint.
Our
Sustainability
Report
is
available
on
our
corporate
website
at:
www.excocorp.com/leadership/sustainability/.
RESULTS
Consolidated Results - Sales
Annual sales totalled $637.8 million compared to $619.3 million last year – an increase of $18.5 million or 3%. The
Company continued to experience resilient demand within our Casting and Extrusion segment and sales in the
Automotive Solutions segment increased slightly as the impact of the UAW strike action and program launch delays
partially offset the Company’s higher content per vehicle while overall automotive production volumes in North
America and Europe were mostly stable. The US dollar strengthened slightly year over year ($1.36 versus $1.35)
against the Canadian dollar increasing sales by $3.3 million. The Euro averaged 3% higher ($1.48 versus $1.44)
against the Canadian dollar over the year increasing sales by $3.4 million. Excluding the impact of foreign exchange
gains, consolidated sales increased $11.8 million or 2%.
Selected Annual Information
The following table sets out selected financial data relating to the Company’s years ended September 30, 2024 and
2023. 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)
2024
2023
Sales
$637.8
$619.3
Net income for the year
$29.6
$26.3
Earnings per share from net income
Basic and diluted
$0.76
$0.68
Purchase Capital Assets
$33.9
$39.0
Total assets
$607.0
$612.1
Cash dividend paid per share
$0.42
$0.42
EBITDA 1
$82.2
$74.5
1 Refer to reconciliation of this non-GAAP measure in the ‘Non-IFRS measures’ table below.
Segment Sales
●Automotive Solutions Segment
Sales in this segment were $330.9 million – an increase of $3.8 million or 1% from the prior year. The net effect of
exchange rate changes (Euro, US, and Canadian dollar) increased sales $3.5 million compared to the prior year. The
modest sales increase was driven by customer driven delays in certain program launches, unfavorable vehicle mix,
the UAW strike in the first quarter, traditional summer shut-downs at OEM production facilities in North America
and Europe, and relatively stable vehicle production volumes in North America and Europe compared to the prior
year.
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Looking forward, industry growth may be tempered near term by relatively elevated interest rates reducing consumer
confidence, relatively high vehicle average transaction prices, rising dealer inventory levels, and softening global
economic conditions. Notwithstanding these expected impacts, interest rates have started declining, vehicle sales
remain encouraging, the vehicle fleet continues to age, and OEM incentives are rising. Exco’s sales volumes will
nonetheless benefit from awarded program launches that are expected to provide ongoing growth in our content per
vehicle. Quoting activity also remains encouraging and we believe there is ample opportunity to achieve our targeted
growth objectives.
The segment’s four businesses continue to focus their efforts on launching new programs, quoting significant new
opportunities on all vehicle types (EV, hybrid and ICE) from both tradition OEMs and new market entrants, further
broadening customer diversification and targeting higher margin activity. Management sees significant opportunity
for future growth supported by strong quoting activity for new programs in both North America and Europe and as
always continues to focus on pricing to protect margins.
•
Casting and Extrusion Segment
Sales in this segment were $306.9 million – an increase of $14.7 million or 5% from the prior year. Excluding the
impact of foreign exchange, segment sales increased $11.6 million or 4% compared to fiscal 2023. Demand for our
extrusion tooling remains firm in both North America and Europe. Extrusion sales when compared to the prior year
were negatively influenced by the elimination of steel surcharges due to lower raw material costs. High interest rates
negatively influenced the building, construction and recreational vehicle extrusion end-markets throughout the year,
but the construction end-market improved in the latter half of the year while demand within the automotive market
has continued to gain momentum and sustainable energy end markets remain strong. We remain focused on
standardizing manufacturing processes, enhancing engineering depth and centralizing critical support functions across
our various plants. These initiatives have reduced lead times, enhanced product quality, expanded product breadth and
increased capacity, contributing to share gains in our core markets. Management is also developing its Castool
greenfield locations in Morocco and Mexico which provide the opportunity to gain market share in Europe and Latin
America through better proximity to local customers.
In the die-cast tooling market, which primarily serves the automotive industry, demand and order flow for new moulds,
associated consumable tooling and rebuild work remained relatively strong throughout the year. Industry vehicle
production volumes remain healthy and new, more efficient internal combustion engine/transmission platforms are
being launched, including an increase in hybrid powertrain platforms. Battery electric platforms continue to be
developed, albeit at a slower pace compared to prior expectations. Demand for associated giga-sized tooling has
similarly pulled back, although management continues to expect this market segment will see significant growth in
the coming years. We have reworked our plants and equipment to accommodate this larger tooling and believe we
have the most advanced capabilities among our competitors globally. We also continue to invest heavily to bolster our
leading market position in 3D printing – our department currently consists of six additive printers. As well, our pace
of innovation within this market is clearly gaining momentum, yielding more applications for our additively printed
tooling components. Consequently, demand for Exco’s 3D printed tooling continues to grow strongly as customers
focus on greater efficiency in all large mould size segments – ie for both giga and non-giga sized die-cast machines.
Sales in the quarter were also aided by price increases, which were implemented to protect margins from higher input
costs. Quoting remains very active and our backlog for die-cast moulds remains elevated relative to historical norms.
Cost of Sales
On a consolidated basis, cost of sales totalled $502.7 million – an increase of $14.0 million or 3% from the prior year.
Cost of sales as a percentage of sales was 79% was consistent with the prior year. Raw material costs in the Casting
and Extrusion segment (primarily tool grade steel) was generally down across all divisions. Lower steel prices resulted
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
in the reduction of steel surcharges within the extrusion operations which lowered sales, but resulted in higher margins.
Raw material costs for the Automotive Solutions segment (primarily petroleum/natural gas-based resins, leather
goods, plastic products) varied considerably depending on the product mix and demand – as a result, material costs in
this segment were relatively flat. Labour costs across both segments were up which included direct, indirect,
supervisory salaries and employee benefit costs. Management worked to improve productivity to offset these higher
costs through workforce reductions and other manufacturing efficiencies. The severance costs associated with
workforce reductions were expensed within Selling, General and Administrative expenses. Finally, in connection with
the ramp up of new plants, product launches, and developing new processes, tool, shop supplies, and associated costs
were elevated.
Selling, General and Administrative Expenses
Selling, general and administrative expense in the current year decreased 6% to $52.9 million from $56.3 million last
year. As a percentage of sales, selling, general and administrative costs decreased from 9% to 8% year over year.
Current year selling, general and administrative expenses decreased due to favorable foreign exchange rate
movements, lower incentive compensation and stock-based compensation expense, and the fiscal 2023 cyber incident
costs which are not expected to reoccur, these improvements were partially offset by incremental severance costs, as
well as higher sales commissions, tradeshows and related travel costs.
Depreciation and Amortization
Consolidated depreciation expense was $30.2 million compared to $27.2 million the prior year. Depreciation expense
within the Casting and Extrusion segment totalled $25.8 million in fiscal 2024 versus $23.1 million in fiscal 2023 and
depreciation expense within the Automotive Solutions segment totalled $4.3 million versus $4.0 million last year.
Amortization expense of $4.1 million in fiscal 2024 decreased from $4.7 million from 2023. The carrying value of
total intangible assets amounted to $27.8 million as at September 30, 2024 – down from $30.6 million a year ago.
There were essentially no additions to intangible assets in fiscal 2024. The Company expects the annual amortization
and depreciation expense will total approximately $4.8 million and $30.7 million respectively in fiscal 2025. Although
there remain some key capital asset purchases in fiscal 2025, it is anticipated that depreciation expense has largely
plateaued and these costs will decrease in the years beyond fiscal 2025.
Interest
Net interest expense in the current year totalled $8.3 million compared to $8.1 million in fiscal 2023. The increase is
due to higher interest rates in the first three quarters of fiscal 2024. Lower interest rates combined with changes to
the Company’s net debt during the year contributed to lower interest costs in the fourth quarter. With continued lower
interest rates expected during fiscal 2025 and a further anticipated reduction to net debt, the Company anticipates
lower interest costs in fiscal 2025.
Income Taxes
Exco’s effective income tax rate was 25.1% in fiscal 2024 compared to an effective income tax rate of 23.8% in fiscal
2023. The change in income tax rate is due to geographic distribution, foreign tax rate differentials, a shift in the
proportion of earnings from jurisdictions with higher tax rates, and losses that cannot be tax affected for accounting
purposes.
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ANNUAL REPORT 2024
Net Income
•
Consolidated
The Company reported consolidated net income of $29.6 million or basic and diluted earnings of $0.76 per share in
fiscal 2024, compared to consolidated net income of $26.3 million or basic and diluted earnings of $0.68 per share the
prior year.
•
Automotive Solutions Segment - Pretax profit
The Automotive Solutions segment recorded Pretax profit of $32.5 million for the year compared to $34.9 million last
year – a decrease of $2.3 million or 7%. The decrease in pretax profit is attributable to the impact of the UAW strike
in the first quarter, higher labour costs, product mix shifts, prolonged OEM production shutdowns during holiday
seasons, slower than expected ramp up of certain programs due to customer driven launch delays, and higher severance
costs. Industry vehicle production volumes remained relatively flat year-over-year and below pre-pandemic levels.
Management is optimistic that its overall cost structure will return to targeted levels in the future as scheduling and
predictability improves with strengthening volumes, new product launches continue, and the impact of efficiency
efforts take hold. Pricing discipline remains a focus and action is being taken on current programs where possible,
though there is typically a lag of a few quarters before the benefit is realized. As well, new program awards are priced
to reflect management’s expectations for higher future costs.
•
Casting and Extrusion Segment - Pretax profit
Casting and Extrusion Pretax profit was $22.5 million for the year compared to $15.1 million last year – an increase
of $7.4 million or 48%. Pretax profits increased due to higher sales within the extrusion and die-cast market (primarily
new moulds, rebuilds, mould inserts and additive printed tooling). Profit margins improved due to lower raw material
costs, increased overhead absorption and production efficiencies. These positive contributions were partially offset
by slower than expected ramp up of Castool’s newer facilities in Morocco and Mexico, a $2.7 million increase in
depreciation, and higher labour costs. Management expects to temper many of these costs over the coming quarters
through efficiency improvements and pricing action, where possible. Margins will also benefit as newer operations
mature and achieve greater scale and as utilization of new equipment that facilitates the manufacturing of large-scale
die-cast tooling improves. The higher depreciation relates to the Company’s investment in new assets that will
improve operations and provide access to new geographies to increase our market share. Castool’s new Mexican
operation opened in October 2023. This operation experienced typical start up costs and challenges but it is expected
to start contributing from increased market share gains in both the die-cast and extrusion tooling markets in Mexico,
Latin America and the Southern US. Management remains focused on reducing its overall cost structure and
improving manufacturing efficiencies and expects such activities together with its sales efforts to continue improving
segment profitability over time.
•
Corporate Segment – Pretax loss
Corporate expense in the current year amounted to $7.2 million compared to $7.4 million in the prior year. The year
over year decrease was primarily driven by favorable foreign exchange rate movements in the current year, $1.0
million cyber incident costs incurred in fiscal 2023, partially offset by higher stock based compensation expenses and
increased travel and marketing costs in the current year.
EBITDA
EBITDA in the current year amounted to $82.2 million compared to $74.5 million the prior year – an increase of $7.7
million or 10%. EBITDA margin increased to 12.9% compared to 12.0% from the prior year. EBITDA in the Casting
and Extrusion segment was $49.6 million, which was $10.0 million or 25.0% higher than fiscal 2023. Casting and
Extrusion segment EBITDA margin increased to 16.2% from 13.5% in the prior year. The Automotive Solution
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
segment EBITDA was $39.6 million, which was lower by $2.6 million, or 6.2% compared to fiscal 2023. The
Automotive Solution segment EBITDA margin decreased from 12.9% to 12.0% in fiscal 2024.
Quarterly Results
The following table sets out financial information for each of the eight fiscal quarters through to the fiscal year
ended September 30, 2024:
($ thousands except per share
amounts)
September 30,
2024
June 30,
2024
March 31,
2024
December 31,
2023
Sales
$155,447
$161,809
$163,825
$156,710
Net income
$7,734
$8,176
$8,066
$5,642
Earnings per share
Basic
$0.20
$0.21
$0.21
$0.15
Diluted
$0.20
$0.21
$0.21
$0.15
($ thousands except per share
amounts)
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Sales
$160,152
$164,551
$155,507
$139,093
Net income
$9,210
$6,263
$6,228
$4,523
Earnings per share
Basic
$0.24
$0.16
$0.16
$0.12
Diluted
$0.24
$0.16
$0.16
$0.12
Exco typically experiences softer sales and profits in the first fiscal quarter, which coincides with our customers’ plant
shutdown during the Christmas season. Exco also experiences a slowdown in the fourth fiscal quarter as customers
typically schedule summer plant shutdowns and European customers typically curtail releases during the month of
August to accommodate vacations. Fiscal 2024 and 2023 reflect the full 12 months of Halex operations in the sales
and net income (Halex was purchased in May 2022) and the impact of the Company’s new Castool Mexico and
Moroccan facilities are expected to impact sales and net income more significantly in future years.
Fourth Quarter
In the fourth quarter, consolidated sales were $155.4 million – a decrease of $4.7 million or 3% from the prior year.
Foreign exchange rate movements increased sales by $2.6 million in the quarter.
Fourth quarter sales in the Automotive Solutions segment of $79.2 million were down 10% from the prior year quarter.
Excluding the impact of foreign exchange, segment sales decreased $9.8 million, or 11%. The sales decrease was
driven by lower automotive production volumes in North America and Europe, customer driven delays in certain
program launches, and unfavorable vehicle mix. Looking forward, industry growth may be tempered near term by
increasing OEM inventory levels, elevated interest rates, relatively high vehicle average transaction prices, and
softening global economic conditions. Countering these headwinds, , central banks are lowering interest rates, vehicle
sales have remained resilient, dealer inventory levels remain below pre-COVID-19 levels, vehicle fleets continue to
age, and OEM incentives are rising. As well, Exco’s sales volumes are expected to benefit from awarded program
launches that should provide ongoing growth in our content per vehicle. Quoting activity also remains encouraging
and we believe there is ample opportunity to achieve our targeted growth objectives.
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
The Casting and Extrusion segment recorded sales of $76.3 million in the fourth quarter compared to $72.6 million
last year – an increase of $3.7 million or 5%. Excluding the impact of foreign exchange movements, the segment’s
sales were up 3% for the quarter. Demand for our extrusion tooling remained relatively resilient in both North America
and Europe, though activity slowed through the quarter with key end markets such as building and construction as
well as automotive showing signs of softer conditions. Other end markets such as sustainable energy however remain
firm. We remain focused on standardizing manufacturing processes, enhancing engineering depth and centralizing
critical support functions across our various plants. These initiatives have reduced lead times, enhanced product
quality, expanded product breadth and increased capacity, contributing to share gains in our core markets.
Management continues to develop its Castool Morocco and Mexico locations which provide the opportunity to gain
market share in Europe and Latin America through better proximity to local customers. In the die-cast tooling market,
which primarily serves the automotive industry, demand and order flow for new moulds, associated consumable
tooling and rebuild work remained firm during the quarter, though slowed slightly from recent activity. Industry
vehicle production volumes remain relatively healthy and new, more efficient internal combustion
engine/transmission platforms are being launched, including an increase in hybrid powertrain platforms. Battery
electric platforms continue to be developed, albeit at a slower pace compared to prior expectations. Demand for
associated giga-sized tooling has similarly pulled back, although management continues to expect this market segment
will see significant growth in the coming years. We have reworked our plants and equipment to accommodate this
larger tooling and believe we have the most advanced capabilities among our competitors globally. Our leading
market 3D printing group continued strong sales activity supported by six additive printers. As well, our pace of
innovation within this market is clearly gaining momentum, yielding more and more applications for our additively
printed tooling components. Consequently, demand for Exco’s 3D printed tooling continues to grow strongly as
customers focus on greater efficiency in all large mould size segments – ie for both giga and non-giga sized die-cast
machines. Sales in the quarter were also aided by price increases, which were implemented to protect margins from
higher input costs. Quoting remains very active and our backlog for die-cast moulds remains elevated relative to
historical norms.
The Company’s fourth quarter consolidated net income decreased to $7.7 million or earnings of $0.20 per share
compared to $9.2 million or earnings of $0.24 per share in the same quarter last year. The effective income tax rate
was 26% in the current quarter compared 25% in the same quarter last year. The change in income tax rate in the
quarter was impacted by geographic distribution, foreign tax rate differentials and losses that cannot be tax affected
for accounting purposes.
Fourth quarter pre-tax earnings in the Automotive Solutions segment totalled $7.8 million, a decrease of $2.1 million
or 22% over the same quarter last year. Variances in period profitability were due to lower sales, product mix shifts,
rising labour costs in all jurisdictions and foreign exchange movements. Labour costs in Mexico have been particularly
challenging in recent years and are seeing added pressure given the significant rise in wages. Vehicle production
volumes and product releases however remain relatively stable, which has led to improvements in labour scheduling
and reduced expedited shipping costs. As well, pricing action and efficiency initiatives continued to temper
inflationary pressures. Although production volumes have largely stabilized from a macroeconomic and global
perspective from recent years, volumes in the segment’s first quarter are expected to follow typical seasonality trends
due to OEM December holidays. Apart from these specific impacts, management is cautiously optimistic that its
overall cost structure should improve margins in coming quarters. Pricing discipline remains a focus and actions are
being taken on current programs where possible, though there is typically a lag of a few quarters before the impact is
realized. As well, new program awards are priced to reflect management’s expectations for higher future costs.
Fourth quarter pre-tax earnings in the Casting and Extrusion segment totalled $6.3 million, an increase of $1.0 million
or 18% over the same quarter last year. The Pretax Profit improvement is due to higher sales volumes within the die-
cast and extrusion end markets, program pricing improvements, favorable product mix, and efficiency initiatives
15
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
across the segment (including the ongoing use of lean manufacturing and automation to improve productivity through
standardization and waste elimination). In addition, volumes at Castool’s heat treatment operation continue to increase
providing savings and improved production quality while efficiency initiatives at Halex are progressing. Offsetting
these cost improvements were ongoing start-up losses at Castool’s greenfield operations and an increase in segment
depreciation ($0.5 million for the quarter) associated with recent capital expenditures. Management remains focused
on reducing its overall cost structure and improving manufacturing efficiencies and expects such activities together
with its sales efforts should lead to improved segment profitability over time.
The Corporate segment in the fourth quarter recorded expenses of $2.0 million compared to $0.8 million last year was
primarily due mainly to higher foreign exchange gains in fiscal 2023. As a result of the foregoing, consolidated
EBITDA in the quarter was $20.6 million (13.3% of sales) compared to $22.9 million (14.3% 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 was $71.6 million in fiscal 2024 compared to
$70.2 million in the prior year. The $1.4 million year-over-year increase was driven by higher net income, depreciation
and amortization, and interest expense partially offset by a change in deferred income tax in fiscal 2024. Net change
in non-cash working capital provided $10.1 million cash in fiscal 2024 compared to $12.1 million cash used last year.
Improvements to working capital were driven primarily by lower accounts receivable due management’s focus on
collections throughout the year, slightly lower fourth quarter sales, and due to customer payment delays in 2023 due
to the UAW strike. This improvement was partially offset by lower accounts payable reflecting significant payables
in the prior year associated with obligations for our capital asset purchases. After adjusting for non-cash working
capital, cash provided by operating activities increased to $81.7 million in fiscal 2024 compared to $58.2 million in
the prior year.
Cash Flows from Financing Activities
Cash used in financing activities amounted to $32.2 million compared to cash provided by $21.8 million in fiscal
2023. The Company paid $8.3 million in interest, $16.3 million in dividends, repurchased shares through the normal
course issuer bid of $2.7 million and decreased borrowings $5.0 million. The prior year $21.8 million cash provided
reflected a net increase in borrowing of $2.6 million and no additional shares purchased through the buyback.
Exco enters into lease arrangements from time to time. Exco owns 20 of its 21 manufacturing facilities and materially
all of its production equipment. The Company also leases sales and support centers in Chesterfield, Michigan, a
warehouse in Brownsville, Texas, and the operating facility in Weissenburg Germany. The following table
summarizes the Company’s significant short-term and long-term commitments on an undiscounted basis:
(000’s)
Total
< 1 year
1-3 years
Over 3 years
Bank indebtedness
$-
-
-
-
Trade accounts payable
46,803
46,803
-
-
Long-term debt
105,000
-
105,000
-
Lease commitments
9,411
1,007
1,873
6,531
Purchase commitments
39,131
39,131
-
-
Capital expenditures
7,973
7,973
-
-
$207,998
$94,594
$106,873
$6,531
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
∗ 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.
Cash Flows from Investing Activities - Capital Expenditures
Cash used in investing activities in the current year totalled $33.7 million compared to $37.8 million last year. The
decrease in capital asset purchases reflect management’s focus on managing overall capital spending and the timing
of cash outflows in addition to the completion of our Castool Mexico facility, the heat treatment facility in Newmarket,
and various other capital improvement projects across the Company to support growth initiatives. Many of these
initiatives began in fiscal 2022 and continued into fiscal 2023. Maintenance Fixed Asset Additions in the current year
were $19.7 million compared to $14.7 million in the prior year.
In fiscal 2025, Exco plans to invest approximately $40.0 million in capital expenditures of which roughly $21.1 million
is for growth capital expenditures and $18.9 million is for Maintenance Fixed Asset Additions. Major initiatives in
fiscal 2025 include replacing existing heat treatment furnaces with high efficiency vacuum equipment in our Michigan
facility, new larger and faster additive machines within our Large Mould business, additional multi-axis milling
equipment in several locations and new equipment in our Automotive Solutions segment to support anticipated sales
growth.
Financial Position and Cash Balance
The Company’s conservative financial policies have served it well throughout the years and have allowed it to take
advantage of acquisition opportunities and make strategic organic growth investments proactively to meet market
changes.
Exco’s net debt was $73.4 million on September 30, 2024 compared to $94.2 million the prior year. In fiscal 2024,
the Company generated Free Cash Flow of $53.8 million, paid dividends of $16.3 million and made growth capital
expenditures of $14.0 million resulting in a reduction in net debt of $20.8 million.
As at September 30, 2024, Exco retained access to $46.5 million of its $153 million committed banking facility and
had cash of $31.6 million. 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 of September 30, 2024.
Non-IFRS Measures
The following tables reconcile EBITDA, EBITDA margin and Free Cash Flow for the periods to the Company’s IRFS
measures, cash provided by operating activities to free cash flow, and segment EBITDA disclosures:
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Yearly Segment EBITDA disclosure
Casting and Extrusion
Automotive Solutions
(in $ thousands)
Twelve Months ended
September 30
Twelve Months ended
September 30
2024
2023
2024
2023
Pretax Profit
$22,470
$15,142
$32,503
$34,851
Depreciation
25,809
23,141
4,344
4,006
Amortization
1,370
1,305
2,743
3,381
EBITDA
$49,649
$39,588
$39,590
$42,238
Sales
$306,906
$292,193
$330,885
$327,110
EBITDA Margin
16.2%
13.5%
12.0%
12.9%
Quarterly Segment EBITDA disclosure
Casting and Extrusion
Automotive Solutions
(in $ thousands)
Three Months ended
September 30
Three Months ended
September 30
2024
2023
2024
2023
Pretax Profit
$6,312
$5,331
$7,836
$9,985
Depreciation
6,645
6,137
1,181
1064
Amortization
357
334
223
838
EBITDA
$13,314
$11,802
$9,240
$11,887
Sales
$76,285
$72,567
$79,162
$87,585
EBITDA Margin
17.5%
16.3%
11.7%
13.6%
Outstanding Share Capital
As of September 30, 2024, the Company had 38,551,762 common shares issued and outstanding and stock options
outstanding to purchase up to 961,500 common shares at exercise prices ranging from $7.97 to $9.87 per share.
Three Months ended
September 30
Twelve Months ended
September 30
(in $ thousands)
2024
2023
2024
2023
Net income
$7,734
$9,210
$29,618
$26,284
Provision for income tax
2,686
3,023
9,915
8,221
Income before income taxes
10,420
12,233
39,533
34,505
Depreciation
7,848
7,221
30,237
27,231
Amortization
580
1,172
4,113
4,686
Net interest expense
1,772
2,275
8278
8,068
EBITDA
$20,620
$22,901
$82,161
$74,490
Sales
$155,447
$160,152
$637,791
$619,303
EBITDA margin
13.3%
14.3%
12.9%
12.0%
Cash provided by operating activities
$28,937
$17,575
$81,744
$58,169
Interest expense, net
(1,772)
(2,275)
(8,278)
(8,068)
Maintenance fixed asset additions
(5,431)
(3,487)
(19,673)
(14,681)
Free Cash Flow
$21,734
$11,813
$53,793
$35,420
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies”,
to the consolidated financial statements included in this Report. The preparation of Exco’s Consolidated 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.
We evaluate property, plant and equipment and other long-lived assets for impairment whenever indicators of
impairment exist. Indicators of impairment include reductions in profitability, budget shortfalls, 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
There were no accounting policy changes during the year ended September 30, 2024 that have a material impact to
the Company’s reporting.
IFRS 18, Presentation and Disclosure in Financial Statements
The IASB has issued IFRS 18 which is the new standard on presentation and disclosure in financial statements, with
a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to the structure
of the statement of profit or loss; disclosures in the financial statements for management-defined performance
measures); and enhanced principles on aggregation and disaggregation which apply to the primary financial statements
and notes in general. IFRS 18 will replace IAS 1. IFRS 18 will not impact the recognition or measurement of items in
the financial statements, but it might change what an entity reports as its “operating profit or loss”. IFRS 18 will apply
for reporting periods beginning on or after January 1, 2027 and also applies to comparative information. Management
is currently assessing the impact of this standard.
DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer and Chief Financial 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 as of September 30, 2024 in ensuring that material
information relating to the Company and its consolidated subsidiaries would have been known to them.
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
During the most recent period, there have been no changes in the Company’s existing policies and procedures and
other processes that comprise its internal control over financial reporting, that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Chief Executive Officer and Chief Financial Officer, together with other members of management, have designed
internal controls over financial reporting to provide reasonable assurance regarding the reliability of the Company’s
financial reporting and its compliance with the integrated framework issued by the Committee of Sponsoring
Organization of the Treadway Commission. The CEO and the CFO have supervised management in the evaluation of
the design and effectiveness of the Company’s internal controls over financial reporting as at September 30, 2024 and
believe the design and effectiveness of the internal controls to be effective.
RISKS AND UNCERTAINTIES
As automotive production has become more reliant on global suppliers for components, shortages of critical
components can disrupt worldwide vehicle production. In recent years the semiconductor chip shortage disrupted
every OEM and automotive supplier to various degrees. Although the global semiconductor supply chain has
improved since fiscal 2023, the industry remains vulnerable that shortages of other materials or parts can negatively
impact global vehicle production. The impact to the industry may include: unplanned shutdowns of production lines
and/or plants; reductions in their vehicle production plans; and changes to their product mix. These responses can
result in a number of consequences at Exco such as: lower sales; production inefficiencies due to production lines
being stopped/restarted unexpectedly based on OEMs' production priorities; premium freight costs to expedite
shipments; and/or other unrecoverable costs. Furthermore, Tier 1 and 2 suppliers such as Exco may face price increases
from suppliers. It remains unclear what the next critical component may be that will disrupt global vehicle production,
and it is difficult to predict the full impact.
Geopolitical risk and international conflict (such as the conflicts between Russia and Ukraine or Israeli and Palestine)
have the potential to exacerbate a number of risks described elsewhere in these Risk Factors, including: disruption of
vehicle production and supply chains; worsening the availability of current critical supply chain components (like
semiconductor chips since Russia and Ukraine are global suppliers of neon gas and palladium used in chip production);
exacerbating energy shortages and driving energy prices higher (particularly oil and natural gas); constraining the
supply of aluminum, palladium or other commodity metals required in automotive production; and increased
cybersecurity threats. In response to these conflicts, a number of countries, including the U.S. and European Union
member states, have taken actions such as: imposition of sanctions on regions, their leaders and certain other
individuals and entities; restrictions on banking and international trade; and other measures, with further restrictions
likely as these conflicts continue. Exco does not have manufacturing operations in these regions. However, Exco’s
global footprint creates the potential that our operations may be impacted by these sanctions or face other side effects
from these conflicts.
There is a greater risk of inflationary price increases as economic activity rebounds in our primary production markets
and supply chains. In recent years, we witnessed increasing commodity costs for steel, aluminum and resin. Tight
labour markets, low unemployment rates, and increasing collective bargaining pressures may drive wage pressures up
which increases the risk for inflationary pressure in certain markets. Inflationary pressure has eased in the last 12
months, but it is difficult to forecast and inflationary pressures could originate from new sources like tariffs or
international trade conflicts. In some cases, alternative inputs may not be available in a timely manner. The inability
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
to offset inflationary price increases through continuous improvement actions, price increases or adjustments on our
own products or otherwise, could have an adverse effect on our earnings.
Global pandemics caused by viruses or other diseases (such as COVID-19) create continued risk of further disruptions
to the automotive and manufacturing industry, including additional mandatory stay-at-home orders or other
restrictions. These orders may: restrict consumers' ability to purchase vehicles; restrict production; cause elevated
employee absenteeism; and lead to supply chain disruptions. Over the medium- to long-term, the pandemic may result
in societal changes that impact the automotive industry, positively or negatively, including as a result of expanded
work-from-home practices that reduce consumers' reliance on vehicles; and/or increased reluctance by people to utilize
modes of public transit and/or shared mobility.
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 level of automotive production and the
type of automobiles produced (ie SUV/ CUV’s versus passenger cars, and – to a lessor extent, internal combustion
engine vs hybrids vs electric), the rate at which the electric vehicle is more widely adopted and the level of automobile
production. These factors can fluctuate significantly with consumer confidence, general economic conditions, the
cost and/or availability of consumer credit and gasoline, and 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.
A significant portion of Exco’s receivables are from automotive customers. These customers have varying degrees
of financial strength which could ultimately impact the collectability of the respective receivable. 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 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.
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 a 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 or see
lower levels of penetration.
OEMs or their suppliers 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 suppliers 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 has a significant number of employees worldwide and, accordingly, the availability of labour is critical and
wages are a major manufacturing input cost. In Mexico particularly, where Exco has approximately 40% its
employees at five production facilities, all of which are represented by national labor unions, real wage increases may
materially impact the Company’s financial performance.
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EXCO TECHNOLOGIES LIMITED
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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
new programs will be awarded or that if awarded, the pricing and margin will be comparable to those of programs
ending.
The Casting and Extrusion segment is a capital goods business. Interest rates, exchange rates, corporate capital
spending, the general economic climate, business confidence and the financial strength of our customers 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 and customer diversification and leadership position in its niche markets mitigate this risk.
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. In recent
years governments have postured with more protectionist tones with respect to international trade thereby restricting
access to their markets by increasing or creating new tariffs. New tariffs and importing restrictions may have a
negative or positive impact on Exco’s operations depending on how these tariffs are implemented, the geographic
focus, and which countries add tariffs. If governments continue to pursue protectionist trade practises with respect to
automotive components or their raw materials or subassemblies, Exco may be prejudiced.
Exco has made six acquisitions in the last 13 years (Allper AG, Exco Colombia, Extrusion Texas, Automotive Leather
Company, AFX Industries and Halex) 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. Integration of acquired companies may not be effective or timely especially
with respect to operations in countries where Exco has not previously done business.
Exco’s Canadian operations negotiate sales contracts with customers in both Canadian and U.S. dollars as well as
Euro. We also purchase, where we can, raw material in these currencies. U.S. dollar and Euro purchases provide a
natural partial 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 typically 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 increasing adverse financial impact 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 while our Canadian operations are exposed to fluctuations in the
value of the Canadian dollar relative to the U.S. dollar on U.S. dollar sales less purchases. For fiscal 2025, if the
Canadian dollar were to strengthen or weaken by $0.01 in fiscal 2025 from a baseline level of $1.35 USD/CAD, it is
estimated that pre-tax profit would change by about $829 thousand or about $647 thousand after tax. These estimates
are based on historical norms and may be materially different if customers deviate from their past practices.
Exco’s has five 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.
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
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 2025, if the Mexican pesos were to strengthen or weaken by 1% versus the
US dollar from a baseline USD/MEX rate of 16.9:1, and further assuming the Canadian dollar strengthens or weakens
against the US dollar also by 1% from a baseline USD/CAD rate of 1.35, we estimate pre-tax profit would change by
$572 thousand or about $372 thousand after tax. These estimates are based on historical norms and may be materially
different if customers deviate from their past practices.
Exco also has manufacturing facilities in Colombia, Brazil, Thailand, Morocco and Europe 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
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 and Morocco; however, many
of our operations based in Canada, U.S. and Europe must compete with products manufactured in lower-cost
environments.
The rapid adoption of Artificial Intelligence “AI” and technological change introduces several operational risks. As
Exco and the broader automotive industry increasingly rely on AI-driven systems for manufacturing, supply chain
management, and customer engagement, they become more vulnerable to cybersecurity threats, data privacy issues,
and operational disruptions from system failures or technological obsolescence. Unanticipated errors in AI algorithms
or software bugs could disrupt production or lead to flawed decision-making processes, affecting quality and
efficiency. Furthermore, the industry-wide shift toward automation may reduce workforce requirements, potentially
impacting employee morale, requiring costly retraining programs for affected workers. Additionally, as AI technology
evolves, the need for continual software and hardware updates poses financial and operational challenges. Managing
these risks is crucial to ensuring that AI and technology remain assets to operations rather than liabilities
Although we have established and continue to enhance security controls intended to protect our IT systems and
infrastructure, there is no guarantee that such security measures will be effective in preventing unauthorized physical
access or cyber attacks. A significant breach of our IT systems could: result in theft of funds; cause disruptions in our
manufacturing operations; lead to the loss, destruction or inappropriate use of sensitive data; or result in theft of our,
our customers’ or our suppliers’ intellectual property or confidential information. The occurrence of any of the
foregoing could adversely affect our operations and/or reputation and could lead to claims against us that could have
a material adverse effect on our profitability.
23
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Independent auditor’s report
To the Shareholders of
Exco Technologies Limited
Opinion
We have audited the consolidated financial statements of Exco Technologies Limited and its subsidiaries [the
“Group”], which comprise the consolidated statements of financial position as at September 30, 2024 and 2023,
and the consolidated statements of income and comprehensive income, consolidated statements of changes in
shareholders’ equity and consolidated statements of cash flows for the years then ended, and notes to the
consolidated financial statements, including a summary of material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at September 30, 2024 and 2023, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards [“IFRS”].
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report, including in relation to this matter. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
consolidated financial statements. The results of our audit procedures, including the procedures performed to
address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial
statements.
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Key audit matter
How our audit addressed the key audit matter
Goodwill impairment
As described in note 6 to the consolidated financial
statements, the Group has a goodwill balance of
$93.9 million as at September 30, 2024, of which
$64.6 million was allocated to the group of cash
generating units [“CGUs”] comprising the Automotive
Solutions operating segment and $29.3 million to the
Extrusion group of CGUs. The Group assesses at
least annually, or more frequently if an indicator of
impairment exists, whether there has been an
impairment in the carrying value of goodwill. An
impairment is recognized if the recoverable amount
is less than the carrying amount of the group of
CGUs to which goodwill is allocated.
The Group also disclosed in note 6 that no
impairment was recorded.
For all impairment tests, the Group determines the
recoverable amount using a value in use approach.
Auditing the Group’s impairment tests was complex,
given the degree of subjectivity in evaluating the
Group’s estimates and assumptions in determining
the various recoverable amounts. Significant
assumptions included forecasted revenues and profit
margins, terminal growth rate, and the discount rate,
all of which are affected by expectations about future
market and economic conditions.
To test the estimated recoverable amounts in the
impairment tests, we performed the following
procedures, among others:
•
We assessed the reasonableness of forecasted
revenues and profit margins by comparing to
supporting documentation such as customer
contracts where available, approved budgets and
historical performance.
•
We assessed the historical accuracy of estimates
of forecasted revenue and profit margins to actual
performance.
•
We evaluated the terminal growth rate by
comparing to long term inflation expectations with
the assistance of our valuation specialists.
•
We involved our valuation specialists to assess
the appropriateness of the Group’s model and
valuation methodology applied. They also
assessed the various inputs utilized in
determining the discount rate by referencing
current industry, economic, and comparable
company capital structures, as well as Group and
cash-flow specific risk premiums.
•
We assessed the adequacy of the disclosures
included in note 6 of the consolidated financial
statements in relation to this matter.
Other information
Management is responsible for the other information. The other information comprises:
•
Management’s Discussion and Analysis
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the
Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis and Annual Report prior to the date of this auditor’s report.
If based on the work we have performed, we conclude that there is a misstatement of this other information, we
are required to report that fact in this auditor’s report. We have nothing to report in this regard.
25
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Mark Vrooman.
Toronto, Canada
November 27, 2024
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
$(000)'s
As at
As at
September 30, 2024
September 30, 2023
ASSETS
Current
Cash and cash equivalents
$31,637
$15,796
Accounts receivable (note 8)
111,428
128,449
Inventories (note 9)
110,231
111,166
Prepaid expenses and deposits
5,395
4,660
Derivative instruments (note 8)
-
5,401
Income taxes recoverable (note 13)
-
711
Total current assets
258,691
266,183
Property, plant and equipment, net (note 5)
225,433
222,429
Intangible assets, net (note 6)
27,829
30,601
Goodwill (note 6)
93,961
91,330
Deferred tax assets (note 13)
1,087
1,528
Total assets
$607,001
$612,071
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (notes 4 and 8)
$-
$4,964
Trade accounts payable (note 8)
46,483
54,043
Accrued payroll liabilities (note 8)
17,684
17,823
Other accrued liabilities (notes 3 and 8)
12,587
18,061
Derivative instruments (note 8)
858
-
Provisions (note 7)
8,633
7,191
Income taxes payable
3,716
-
Customer advance payments (note 8)
4,752
5,152
Total current liabilities
94,713
107,234
Lease liabilities – long-term portion (note 8)
7,251
6,396
Long-term debt (notes 4 and 8)
105,000
105,000
Deferred tax liabilities (note 13)
18,765
22,421
Total liabilities
225,729
241,051
Shareholders' equity
Share capital (note 3)
48,315
48,767
Contributed surplus (note 3)
6,010
5,791
Accumulated other comprehensive income (note 3)
16,248
16,829
Retained earnings
310,699
299,633
Total shareholders' equity
381,272
371,020
Total liabilities and shareholders' equity
$607,001
$612,071
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board:
Darren M. Kirk
Brian A. Robbins
President and
Director,
Chief Executive Officer
Executive Chairman
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
$(000)'s except for income per common share
2024
2023
Sales (note 11(A))
$637,791
$619,303
Cost of sales
502,679
488,709
Selling, general and administrative expenses (note 3)
52,901
56,271
Depreciation (note 5)
30,237
27,231
Amortization (note 6)
4,113
4,686
Loss (gain) on disposal of property, plant and equipment
50
(167)
Interest expense, net (note 16)
8,278
8,068
598,258
584,798
Income before income taxes
39,533
34,505
Provision for (recovery of) income taxes (note 13)
Current
11,975
5,127
Deferred
(2,060)
3,094
9,915
8,221
Net income for the year
$29,618
$26,284
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 8)
(4,612)
2,458
Unrealized gain on foreign currency translation (note 3)
4,031
9,753
(581)
12,211
Comprehensive income
$29,037
$38,495
Income per common share
Basic
$0.76
$0.68
Diluted
$0.76
$0.68
Basic
38,750
38,912
Diluted
38,750
38,912
The accompanying notes are an integral part of these consolidated financial statements.
Years ended September 30
Weighted average number of common shares outstanding (note 12)
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
$(000)'s
Share
capital
Contributed
surplus
Retained
earnings
Net unrealized
gain (loss) on
derivatives
designated as
cash flow hedges
Unrealized gain
on foreign
currency
translation
Total
accumulated
other
comprehensive
income
Total
shareholders'
equity
Balance, September 30, 2022
$48,767
$5,431
$289,693
$1,520
$3,098
$4,618
$348,509
Net income for the year
-
-
26,284
-
-
-
$26,284
Dividends paid (note 3)
-
-
(16,344)
-
-
-
($16,344)
Stock option expense (note 3)
-
360
-
-
-
-
$360
Other comprehensive income (note 3)
-
-
-
2,458
9,753
12,211
$12,211
Balance, September 30, 2023
48,767
5,791
299,633
3,978
12,851
16,829
371,020
Net income for the year
-
-
29,618
-
-
-
29,618
Dividends paid (note 3)
-
-
(16,259)
-
-
-
(16,259)
Stock option expense (note 3)
-
219
-
-
-
-
219
Repurchase of share capital (note 3)
(452)
-
(2,293)
-
-
-
(2,745)
Other comprehensive income loss (note 3)
-
-
-
(4,612)
4,031
(581)
(581)
Balance, September 30, 2024
$48,315
$6,010
$310,699
($634)
$16,882
$16,248
$381,272
The accompanying notes are an integral part of these consolidated financial statements.
Accumulated other comprehensive income
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EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
$(000)'s
2024
2023
OPERATING ACTIVITIES:
Net income for the year
$29,618
$26,284
Add (deduct) items not involving a current outlay of cash
Depreciation (note 5)
30,237
27,231
Amortization (note 6)
4,113
4,686
Stock-based compensation expense
902
684
Deferred income tax expense (recovery) (note 13)
(1,549)
3,462
Net interest expense (note 16)
8,278
8,068
loss (gain) on disposal of property, plant and equipment
50
(167)
71,649
70,248
Net change in non-cash working capital (note 14)
10,095
(12,079)
Cash provided by operating activities
81,744
58,169
FINANCING ACTIVITIES:
Decrease in bank indebtedness
(4,964)
(7,399)
Financing from long-term debt (note 4)
-
10,000
Interest paid, net
(8,278)
(8,068)
Dividends paid (note 3)
(16,259)
(16,344)
Repurchase of share capital (note 3)
(2,745)
-
Cash used in financing activities
(32,246)
(21,811)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (note 5)
(33,047)
(38,449)
Purchase of intangible assets (note 6)
(858)
(534)
Proceeds on disposal of property, plant and equipment
187
1,192
Cash used in investing activities
(33,718)
(37,791)
Effect of exchange rate changes on cash
61
205
Increase (decrease) in cash during the year
15,841
(1,228)
Cash and cash equivalents, beginning of year
15,796
17,024
Cash and cash equivalents, end of year
$31,637
$15,796
The accompanying notes are an integral part of these consolidated financial statements.
Years ended September 30
31
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
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
21 strategic locations in 9 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.
MATERIAL ACCOUNTING POLICY INFORMATION
The Company’s material 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, 2024 were
authorized for issue by the Board of Directors on November 27, 2024.
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 as at the consolidated statements 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 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 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 as at the
dates 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.
32
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
When a foreign operation is sold, exchange differences that were recorded in accumulated other comprehensive income
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, other income (expense) and income tax
expense.
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 net fair value of the identifiable assets, liabilities and contingent liabilities
recognized. If 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 has been allocated to a Cash-Generating Unit (“CGU”) or group of CGUs 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.
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.
Significant accounts that require estimates as the basis for determining the stated amounts include accounting for
inventories, property, plant and equipment, contingent liabilities, income taxes, fair value of financial instruments, and
stock option valuation. Property, plant and equipment and intangible assets (including goodwill) are reviewed for
potential impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable and, in the case of goodwill, on an annual basis. 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.
Impairment of non-financial assets exists when the carrying value of an asset, CGU or group of CGUs 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 or group of CGUs 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 terminal growth rate used
for extrapolation purposes. The key assumptions used to determine the recoverable amount, including a sensitivity
33
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
analysis, are disclosed and further explained in note 6.
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.
In a business combination, substantially all identifiable assets, liabilities and contingent liabilities acquired are recorded
at the date of acquisition at their respective fair values. One of the most significant areas of judgement and estimation
relates to the determination of the fair value of these assets and liabilities. The estimate of fair value of customer
relationships is based on future cash flows derived from expectations of revenue, margins and attrition of acquired
customer relationships.
The Company’s critical accounting estimates are affected as a result of the various ongoing economic, geopolitical and
social impacts, including the global economic recovery from any future outbreak of epidemic, pandemic or contagious
diseases that may emerge in the human population, Russian invasion of Ukraine and recessionary conditions. There
continues to be significant uncertainty as to the likely effects these items which may, among other things, impact our
employees, suppliers, and customers. It is not possible to predict the impact these items will have on the Company, its
financial position and the results of operations in the future. The Company is monitoring the impact of all these items
on all aspects of its business. Each reporting period, management carries out this assessment for indications that
goodwill and other long-lived assets may be impaired. As required, management will continue to assess these
assumptions as the situation changes. 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.
Revenue recognition
The Company recognizes revenue primarily from two categories of goods: production contracts (including finished
production parts and assemblies, short-term die cast tooling contracts, extrusion and other tooling) and long-term large
die cast mould contracts.
Revenue for production contracts is recognized at the point in time control of the goods is transferred to the customer.
Control of finished production parts, assemblies and tooling transfers when the goods are shipped from the Company’s
manufacturing facilities to the customer.
Revenue for long-term large die cast mould contracts is also recognized at the point in time control of the goods is
transferred to the customer. Point-in-time recognition is used since these contracts do not contain an enforceable right
to payment that includes a reasonable profit margin.
A receivable is recognized when control of the goods transfer to the customer, as indicated above, and consideration is
unconditional. Payment terms are generally based on the customers’ payment schedules, which typically range from
30 to 90 days from invoice date.
A customer advance payment is recognized if a payment is received or payment is due (whichever is earlier) from a
customer before the Company transfers control of the production parts or large die cast moulds.
Share-based payments
The Company issues stock-based awards to certain employees and directors. The cost of these share-based payments
equals the fair value of each tranche of awards at their grant date. The cost of the stock-based settled awards is
recognized on a proportionate basis consistent with the vesting features of each tranche of the grant.
Income taxes
Provision for income tax consists of current and deferred income taxes. Provision for income tax expense is recognized
in the consolidated statements of income and comprehensive income.
34
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
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 liability method. Under the liability method, deferred tax assets and
liabilities are recognized for future tax consequences attributable to differences between the 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.
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 realized.
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
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
declining balance method based on their estimated useful lives, which range from 4 to 20 years.
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.
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.
Subsequent costs
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. 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 when the cost is incurred and 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.
The costs of day-to-day servicing are expensed as incurred. These costs are more commonly referred to as
“maintenance and repairs”.
35
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
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
•
Trade names: 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.
Identifiable intangible assets are recognized separately from goodwill.
Impairment of long-lived assets and goodwill
(i)
Impairment of long-lived assets
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 recoverable
amount of the asset is calculated in order to determine if an impairment loss is required. If it is not possible to
estimate the recoverable amount of the individual asset, assets are grouped at the CGU level for the purpose
of assessing the recoverable amount. An impairment loss is recognized for any excess of the carrying amount
of the CGU over its recoverable amount. Impairment losses are recorded in the consolidated statements of
income and comprehensive income in the period in which they occur. 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 or CGU’s fair value less costs of disposal 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 of disposal, 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 CGU’s.
A long-term growth rate is calculated and applied to project future cash flows after the third year.
A previous 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. The amount of the reversal is limited to the difference between
the current carrying amount and the amount which would been the carrying amount had the earlier impairment
not been recognized and amortization of that carrying amount had continued. The impairment reversal is
allocated on a pro-rata basis to the existing long-lived assets of the CGU based on their carrying amounts.
Impairment reversals are recorded in the consolidated statements of income and comprehensive income in the
period in which they occur.
(ii)
Impairment of goodwill
Goodwill is allocated to a CGU or a group of CGU’s for the purpose of impairment testing based on the level
at which it is monitored by management. The Company performs a goodwill impairment test annually as at
September 30 or more frequently when there is an indicator that the goodwill may be impaired. Impairment
is determined for goodwill by assessing the recoverable amount of each CGU group to which the goodwill is
36
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
allocated. 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 periods.
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 are 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
The Company recognizes financial assets and financial liabilities initially at fair value and subsequently measures these
at either fair value or amortized cost based on their classification under IFRS 9, Financial Instruments (“IFRS 9”) as
described below:
Amortized cost:
The Company classifies financial assets held to collect contractual cash flows at amortized cost, including trade and
other receivables. The Company initially recognizes the carrying amount of such assets on the consolidated statements
of financial position at fair value plus directly attributable transaction costs, and subsequently measures these at
amortized cost using the effective interest rate method, less any impairment losses.
Fair value through profit or loss (“FVTPL”):
Financial assets and financial liabilities purchased or incurred, respectively, with the intention of generating earnings
in the near term, and derivatives other than cash flow hedges, are classified as FVTPL. This category includes cash and
cash equivalents, and derivative assets and derivative liabilities that do not qualify for hedge accounting. For items
classified as FVTPL, the Company initially recognizes such financial assets and liabilities on the consolidated
statements of financial position at fair value and recognizes subsequent changes in the consolidated statements of
income and comprehensive income. Transaction costs incurred are expensed in the consolidated statements of income
and comprehensive income.
Loans and borrowings:
The Company initially recognizes the carrying amount of such liabilities on the consolidated statements of financial
position at fair value net of directly attributable transaction costs. After initial recognition, they are subsequently
measured at amortized cost using the effective interest rate method. Gains and losses are recognized in profit or loss
when the liabilities are derecognized as well as through the effective interest rate method amortization process.
37
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
Impairment of financial assets:
The Company uses an “expected credit loss” (“ECL”) model in determining the allowance for doubtful accounts as it
relates to trade and other receivables. The Company’s ECL model aligns with the simplified approach under IFRS 9,
which measures lifetime ECL and forward-looking information. The Company’s allowance is determined by historical
experiences, and considers factors including, the aging of the balances, the customer’s credit worthiness, and updates
based on the current economic conditions, expectation of bankruptcies, and the political and economic volatility in the
markets/location of customers.
Hedge accounting:
The Company designates the change in fair value of the entire forward contract in the Company’s cash flow hedge
relationship in other comprehensive income (loss) to the extent the hedge continues to be highly effective. The related
other comprehensive income (loss) amounts are allocated to the consolidated statements of income and comprehensive
income in the same period in which the hedged item affects earnings.
Provisions
As required under IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), 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
as at the consolidated statements 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 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
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company
assesses whether the contract: involves the use of an identified asset; provides the right to obtain substantially all of the
economic benefits from the use of the asset throughout the period of use; and provides the right to direct the use of the
asset.
A right-of-use asset and lease liability are recorded on the date that the underlying asset is available for use, representing
the commencement date.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental
borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following:
•
fixed payments, including in-substance fixed payments;
•
variable lease payments that are tied to an index or rate defined in the contract;
•
amounts expected to be payable under a residual value guarantee;
•
the exercise price under a purchase option that the Company is reasonably likely to exercise; and
•
lease payments under an optional extension if the Company is reasonably certain to exercise the extension
option, and early termination penalties required under a termination of a lease unless the Company is
reasonably certain not to terminate early.
The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or
rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value
38
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
guarantee, or if the Company changes its assessment of whether or not it will exercise a purchase, extension or
termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The right-of-use asset is initially measured at cost, consisting of:
•
the initial measurement of the lease liability, adjusted for any lease payments made at or before the
commencement date;
•
any initial direct costs incurred; and
•
an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is located; less
•
any lease incentives received.
The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement date to the earlier
of the end of the useful life of the asset or the end of the lease term. The lease term consists of the non-cancellable
period of the lease; periods covered by options to extend the lease, when the Company is reasonably certain to exercise
the option to extend; and periods covered by options to terminate the lease, when the Company is reasonably certain
not to exercise the option. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for
certain remeasurements of the lease liability as described above.
Employee future benefits
(i)
Leave pay
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 each period end.
(ii)
Termination benefits
The Company is subject to Mexican statutory laws and regulations governing Mexican 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.
Accounting standards adopted in the current year
IFRS 1, Presentation of Financial Statements (“IFRS 1”), IFRS 8 Definition of Accounting Estimates (“IFRS 8”)
Effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2023, the
IASB issued amendments to IFRS 1 to allow a more general approach in classification of liabilities as current and non-
current and IFRS 8 to distinguish between accounting policies and accounting estimates. The adoption of these
amendments to IFRS 1 and IFRS 8 did not have any impact on the disclosures of the Company.
Amendments to IAS 1, Classification of Liabilities as Current or Non-current (“IAS 1”)
The amendments to paragraphs 69 to 76 of IAS 1 specify the requirements for classifying liabilities as current or non-
current. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and must be
applied retrospectively. The adoption of these amendments to IAS 1 did not have any impact on the disclosures of the
Company.
Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 in which it provided guidance
and examples to help entities apply materiality judgements to account policy disclosures. The amendments require the
disclosure of material accounting policy information rather than disclosing significant accounting policies and provided
guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments are applicable for annual periods beginning on or after January 1, 2023, with early adoption permitted.
Since the amendments to IFRS Practice Statement 2 provide non-mandatory guidance, an effective date for these
amendments is not necessary.
The amendments have resulted in the disclosure of only material accounting policy information in the Company’s
disclosures, but did not impact the measurement, recognition or presentation of any items in the Company’s
consolidated financial statements.
39
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
Amendments to IAS 12, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (“IAS 12”)
The amendment narrowed the scope of certain recognition exemptions so that it no longer applies to transactions that,
on initial recognition, give rise to equal taxable and deductible temporary differences. An entity applies the amendments
to transactions that occur on or after the beginning of the earliest comparative period presented. It also, at the beginning
of the earliest comparative period presented, recognizes deferred tax for all temporary differences related to leases and
decommissioning obligations and recognizes the cumulative effect of initially applying the amendments as an
adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at that date. The
amendment is effective for annual periods beginning on or after January 1, 2023 with early application permitted. The
adoption of this amendment to IAS 12 did not have any impact on the disclosures of the Company.
Amendments to IAS 12, International Tax Reform-Pillar Two Model Rules (“IAS 12”)
In May 2023, the IASB issued narrow-scope amendments to IAS 12 that aim to provide temporary relief from the
requirement to recognize and disclose deferred taxes arising from enacted or substantively enacted tax law that
implements the Pillar Two model rules published by the Organisation for Economic Co-operation and Development
(“OECD”), including tax law that implements qualified domestic minimum top-up taxes described in those rules. The
amendments also introduce targeted disclosure requirements for affected companies, and they require entities to
disclose:
•
The fact that they have applied the exception to recognizing and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes;
•
Their current tax expense (if any) related to the Pillar Two income taxes; and
•
During the period between the legislation being enacted or substantially enacted and the legislation
becoming effective, entities will be required to disclose known or reasonably estimable information that
would help users of financial statements to understand an entity’s exposure to Pillar Two income taxes
arising from that legislation. If this information is not known or reasonably estimable, entities are instead
required to disclose a statement to that effect and information about their progress in assessing the
exposure.
The amendments to IAS 12 are required to be applied immediately (subject to any local endorsement processes) and
retrospectively in accordance with IAS 8, including the requirement to disclose the fact that the exception has been
applied if the entity’s income taxes will be affected by enacted or substantively enacted tax law that implements the
OECD’s Pillar Two model rules. The disclosures relating to the known or reasonably estimable exposure to Pillar Two
income taxes are required for annual reporting periods beginning on or after January 1, 2023. The adoption of this
amendment to IAS 12 did not have any impact on the disclosures of the Company.
Accounting standards issued but not yet adopted
All pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the
effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected
to be relevant to the Company’s consolidated financial statements is provided below. Certain other new standards,
amendments and interpretations to existing standards may have been issued but are not expected to have a material
impact to the Company’s consolidated financial statements.
IFRS 18, Presentation and Disclosure in Financial Statements
The IASB has issued IFRS 18, the new standard on presentation and disclosure in financial statements, with a focus on
updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to:
•
the structure of the statement of profit or loss;
•
required disclosures in the financial statements for certain profit or loss performance measures that
are reported outside an entity’s financial statements (that is, management-defined performance
measures); and
•
enhanced principles on aggregation and disaggregation, which apply to the primary financial
statements and notes in general.
40
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
IFRS 18 will replace IAS 1; many of the other existing principles in IAS 1 are retained, with limited changes. IFRS 18
will not impact the recognition or measurement of items in the financial statements, but it might change what an entity
reports as its “operating profit or loss”. IFRS 18 will apply for reporting periods beginning on or after January 1, 2027
and also applies to comparative information. Management is currently assessing the impact of this standard.
Amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates
In August 2023, the IASB issued amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates. The
amendments address the lack of exchangeability of illiquid currencies and specify how an entity determines the
exchange rate when a currency is not readily exchangeable at the measurement date as well as additional required
disclosures. When a currency is not exchangeable, an entity estimates the spot rate as the rate that would have been
applied to an orderly transaction between market participants at the measurement date and that would reflect the
prevailing economic conditions. An entity must disclose information that would enable users to evaluate how a
currency’s lack of exchangeability affects financial performance, financial positions, and cash flows of an entity. The
amendments to IAS 21 are effective January 1, 2025, with early adoption permitted. The Company does expect this to
have an impact on the consolidated financial statements.
Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures
In May 2024, the IASB issued amendments to IFRS 9 and IFRS 7 to clarify the date of recognition and derecognition
of some financial assets and liabilities, with a new exception for some financial liabilities settled using an electronic
payment system. The amendments also clarify the requirements for assessing whether a financial asset meets the solely
payments of principal and interest criterion and adds disclosure requirements for financial instruments with certain
contingent features and for equity investments designated at fair value through other comprehensive income. The
amendments are effective January 1, 2026, with early adoption permitted. The amendments are required to be adopted
retrospectively by adjusting the opening balance of financial assets, financial liabilities and retained earnings at the date
of adoption. The Company is assessing the impact of the amendments on the Company’s consolidated financial
statements.
3. SHAREHOLDERS’ EQUITY
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:
Common Shares
Number of Shares
Stated
Value
Issued and outstanding as at September 30, 2023
38,912,464
48,767
Purchased and cancelled pursuant to normal course issuer bid
(360,702)
(452)
Issued and outstanding as at September 30, 2024
38,551,762
48,315
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 gains and losses on derivatives designated as cash flow hedges
and reclassification to income of net gains and losses on cash flow hedges as summarized in the following table:
41
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
2024
2023
Opening balance
$16,829
$4,618
Net unrealized gain (loss) on derivatives designated as cash flow hedges (1)
(4,612)
2,458
Unrealized gain on currency translation adjustments
4,031
9,753
Total other comprehensive income (loss) for the year
(581)
12,211
Closing balance
$16,248
$16,829
(1) Net of deferred taxes of $1,646 (2023 – $877).
Cash dividends
During the year, the Company paid four quarterly cash dividends totaling $16,259 (2023 – $16,344). The dividend rate
per quarter was $0.105 per common share.
Stock Option Plan
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.
The following table shows the changes to the number of stock options outstanding during the year:
2024
2023
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise Price
Balance, beginning of year
1,106,500
$8.82
1,046,500
$9.16
Granted
-
-
200,000
$7.97
Cancelled/Forfeited
(5,000)
$7.97
-
-
Expired
(140,000)
$9.87
(140,000)
$10.15
Balance, end of year
961,500
$8.68
1,106,500
$8.82
The following table summarizes information about stock options outstanding and exercisable as at September 30, 2024:
Options Outstanding
Options Exercisable
Range of Exercise
Prices
Number
Outstanding
Weighted Average
Remaining
Contractual Life
Weighted
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Exercise
Price
$7.97 - $8.50
450,000
2.52
years
$8.15
182,000
$8.22
$8.51 - $9.00
269,000
0.65
years
$8.56
214,500
$8.56
$9.01 - $9.78
242,500
2.71
years
9.78
97,000
$9.78
$7.97 - $9.78
961,500
2.05
years
$8.68
493,500
$8.67
42
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
The number of common shares available for future issuance of options as at September 30, 2024 is 1,085,338
(2023 – 940,338). The number of options outstanding together with those available for future issuance totals 2,046,838
(2023 – 2,046,838) or 5.3% (2023 – 5.3%) 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 $219 for the year ended September 30, 2024 (2023 – $360). All stock-based compensation has been
recorded in selling, general and administrative expenses. The weighted average assumptions used to measure the fair
value of stock options and the weighted average fair value of options granted during the years ended September 30,
2024 and 2023 are as follows:
2024
2023
Risk-free interest rates
-
2.92%
Expected dividend yield
-
5.483%
Expected volatility
-
30.30%
Expected time until exercise
-
5.50 years
Weighted average fair value of the options granted
-
$1.35
DSU plan
The Company has a Deferred Share Unit (“DSU”) plan for Independent Directors. 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. Changes in 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.
During the year ended September 30, 2024, the Company granted 21,895 DSUs (2023 – 29,033 DSUs) and redeemed
29,864 (2023 – 8,563). During the year ended September 30, 2024 the Company recorded stock-based compensation
expense of $245 (2023 – $168) related to awards under the DSU plan with a corresponding adjustment to other accrued
liabilities. As at September 30, 2024, 129,496 DSUs are outstanding with a carrying value of $1,038 recorded in other
accrued liabilities (2023 – 137,465 and $1,013).
RSU plan
The Company has a Restricted Share Unit (“RSU”) plan for officers and employees. The Board of Directors grants
RSUs with a typical vesting period of 3 years and at prices equal to the weighted average closing market prices for the
five days preceding the date on which the units were granted. The RSUs will be redeemed by the Company in cash
payable upon vesting or prior to expiry date at the fair market value at the payment date. The total expense is recognized
over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. Changes
in the fair value of RSUs 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. During the year ended September 30, 2024 the Company recorded stock-based compensation expense of
$123 (2023 – $41) related to awards under the RSU plan with a corresponding adjustment to other accrued liabilities.
43
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
2024
2023
Number of Units
Number of Units
Balance, beginning of year
18,820
-
Granted
30,927
18,820
Balance, end of year
49,747
18,820
PSU plan
The Company has a Performance Share Unit (“PSU”) plan for officers and employees. The Board of Directors grants
PSUs with a typical vesting period of 3 years and at prices equal to the weighted average closing market prices for the
five days preceding the date on which the units were granted. The PSUs will be redeemed by the Company in cash
payable upon vesting or prior to expiry date at the fair market value at the payment date provided all vesting conditions
are met. The total expense is recognized over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. Changes in the fair value of PSUs 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. During the year ended September 30, 2024, the Company
recorded stock-based compensation expense of $316 (2023 – $115) related to awards under the PSU plan with a
corresponding adjustment to other accrued liabilities.
2024
2023
Number of Units
Number of Units
Balance, beginning of year
43,914
-
Granted
56,509
43,914
Balance, end of year
100,423
43,914
Contributed surplus
Contributed surplus consists of accumulated stock option expense less the carrying amount of the options that have
been exercised and reclassified to share capital. The following is a continuity schedule of contributed surplus:
2024
2023
Balance, beginning of year
$5,791
$5,431
Stock option expense
219
360
Balance, end of year
$6,010
$5,791
Normal course issuer bid
In each of February 2024, 2023 and 2022, the Company received approval from the Toronto Stock Exchange for a
normal course issuer bid for the following 12-month period. The Company’s Board of Directors authorized the purchase
of up to 1,780,000, 1,785,000 and 1,955,000 common shares under each of these normal course issuer bids,
respectively, which represented approximately 5% of the Company’s outstanding common shares at each approval
date. During the year, 360,702 common shares were repurchased at a cost of $2,745 under these normal course issuer
bids (2023 – nil).
44
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
4. BANK INDEBTEDNESS AND LONG-TERM DEBT
The operating lines are available in Canadian dollars and Euros at variable rates ranging from prime minus 0.5% to
prime plus 0.75%. The Company’s JP Morgan credit facilities are collateralized by a general security agreement over
its North American assets.
Utilizations
Facilities
Current
Long-Term
Unused and
Available
JP Morgan, credit facility (Canada, U.S.A.)
$150,000
$-
$105,000
$45,000
JP Morgan, operating line (Europe)
1,508
-
-
$1,508
$151,508
$-
$105,000
$46,508
2024
2023
Prime rate in Canada
6.45%
7.2%
Prime rate in USA
8.0%
8.5%
Prime rate in Eurozone
3.65%
4.5%
Effective November 7, 2022, the Company closed an amendment to increase the Committed Revolving Credit Facility
(“Credit Facility”) with JP Morgan Chase Bank N.A. to $150,000, of which $105,000 has been utilized as at September
30, 2024 (2023 – $109,964). The Credit Facility has a three-year term and there are no specific repayment terms prior
to maturity. During FY 2024, the Credit Facility was renewed for an additional 3 years with next renewal date being
March 25, 2027. The Credit 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 Euribor 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 net worth and net leverage ratio
covenants. The Company is in compliance with these covenants as at September 30, 2024.
Additionally, the Company maintains an operating line facility of EUR 1.0 million with JP Morgan Chase Bank N.A.
London Branch related to any needs for euro currency. The facility totals $1,508 (EUR 1.0 million) and bears interest
based on Euribor. The Company had no utilization as at September 30, 2024 (2023 – nil).
The components of long-term debt are as follows:
September 30, 2024
September 30, 2023
Bank debt
$105,000
$109,964
Less: current portion
-
4,964
Long-term debt, long-term portion
$105,000
$105,000
45
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
5. PROPERTY, PLANT AND EQUIPMENT
Machinery
and
Equipment
Tools
Buildings
Land
Assets under
Construction
Right of
Use
Assets
Total
Cost
Balance as at September 30, 2022
$260,324
$24,824
$93,195
$14,517
$29,861
$8,551
$431,272
Additions
4,530
1,856
1,879
-
29,453
731
38,449
Reclassification
29,419
536
9,109
-
(39,064)
-
-
Less: disposals
(6,950)
(1,120)
(224)
(77)
-
(958)
(9,329)
Foreign exchange movement
3,734
399
1,696
384
459
389
7,061
Balance as at September 30, 2023
291,057
26,495
105,655
14,824
20,709
8,713
467,453
Additions
5,717
1,544
1,518
-
22,663
1,605
33,047
Reclassification
24,117
1,679
8,655
-
(34,451)
-
-
Less: disposals
(4,736)
(1,970)
(32)
-
-
(208)
(6,946)
Foreign exchange movement
(807)
(139)
234
(6)
(21)
364
(375)
Balance as at September 30, 2024
$315,348
$27,609
$116,030
$14,818
$8,900
$10,474
$493,179
Machinery
and
Equipment
Tools
Buildings
Land
Assets under
Construction
Right of
Use
Assets
Total
Accumulated depreciation and
impairment losses
Balance as at September 30, 2022
$158,910
$18,306
$45,660
$-
$ -
$1,293
$224,169
Depreciation for the year
19,926
2,509
4,029
-
-
767
27,231
Less: disposals
(6,691)
(1,088)
(186)
-
-
(340)
(8,305)
Foreign exchange movement
1,242
326
349
-
-
12
1,929
Balance as at September 30, 2023
173,387
20,053
49,852
-
-
1,732
245,024
Depreciation for the year
22,125
2,583
4,648
-
-
881
30,237
Reclassification
7
(7)
-
-
-
-
-
Less: disposals
(4,622)
(1,854)
(31)
-
-
(202)
(6,709)
Foreign exchange movement
(727)
(116)
(3)
-
-
40
(806)
Balance as at September 30, 2024
$190,170
$20,659
$54,466
$-
$-
$2,451
$267,746
Carrying amounts
As at September 30, 2023
$117,670
$6,442
$55,803
$14,824
$20,709
$6,981
$222,429
As at September 30, 2024
$125,178
$6,950
$61,564
$14,818
$8,900
$8,023
$225,433
As at September 30, 2024, the Company has deposits for machinery and equipment and building under construction
totalling $8,900 (2023 – $20,709). These assets are not being depreciated because they are under construction and not
available for use. Right of use assets are primarily comprised of building leases. The current portion of lease liabilities
$991 (2023 – $688) is included in Other accrued liabilities in the consolidated statements of financial position.
46
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
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, 2022
$9,585
$58,163
$24
$67,772
$88,699
Additions
444
-
90
534
-
Less: disposals
(831)
-
-
(831)
-
Reclassifications
33
-
(33)
-
-
Foreign exchange movement
104
(1)
2
105
2,631
Balance as at September 30, 2023
$9,335
$58,162
$83
$67,580
$91,330
Additions
631
-
227
858
-
Less: disposals
(664)
-
-
(664)
-
Reclassification
129
-
(129)
-
-
Foreign exchange movement
(12)
474
1
463
2,631
Balance as at September 30, 2024
$9,419
$58,636
$182
$68,237
$93,961
Computer
Software
and Other
Acquisition
Intangibles**
Assets under
Construction
(Software)
Total
Intangible
Assets
Goodwill
Accumulated amortization
and impairment losses
Balance as at September 30, 2022
$7,852
$25,474
$-
$33,326
$-
Amortization for the year
751
3,935
-
4,686
-
Less: disposals
(831)
-
-
(831)
-
Foreign exchange movement
1
(203)
-
(202)
-
Balance as at September 30, 2023
7,773
29,206
-
36,979
-
Amortization for the year
729
3,384
-
4,113
-
Less: disposals
(664)
-
-
(664)
-
Foreign exchange movement
(26)
6
-
(20)
-
Balance as at September 30, 2024
$7,812
$32,596
$-
$40,408
$-
Carrying amounts
As at September 30, 2023
$1,562
$28,956
$83
$30,601
$91,330
As at September 30, 2024
$1,607
$26,040
$182
$27,829
$93,961
**Acquisition intangibles are comprised of customer relationships and trade names resulting from business acquisitions
and the purchase price allocation thereof.
47
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
Impairment testing
The total goodwill of $93.9 million as at September 30, 2024 is allocated as $29.3 million to the Extrusion group of
CGUs and $64.6 million to the Automotive Solutions operating segment. The Company performed its annual
impairment test on September 30 and determined that the recoverable amounts for the Extrusion group of CGUs and
the Automotive Solutions operating segment exceed their carrying amounts and, as a result, no impairment was
recorded.
Key assumptions to value-in-use calculations
The recoverable amounts have been determined based on a value-in-use calculation using cash flow projections from
financial budgets approved by senior management. Cash flow beyond the budget period was extrapolated using a 2%
terminal growth rate, which represents the expected growth in the global economy. The discount rate applied to future
cash flows was 10.3%.
The calculation of the value-in-use is most sensitive to the following assumptions:
•
Discount rates
•
Terminal growth rate to extrapolate cash flows beyond the budget period
•
Forecasted revenue and profit margins during the budget period
The discount rate used represents the current market assessment of the risks specific to the Automotive Solutions
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 group of 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. CGU specific risk is incorporated by applying different debt to equity ratios.
Sensitivity to changes in assumptions
Management has performed sensitivities on the assumptions used in the value-in-use calculations, and the recoverable
amount still exceeds the 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.
2024
2023
Severance
$8,533
$7,091
Warranties
100
100
$8,633
$7,191
The carrying values of the above provisions are 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.
48
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
The movement in the provision accounts is as follows:
Severance
Warranties
Total
Closing balance, as at September 30, 2022
$6,309
$136
$6,445
Additions
1,997
28
2,025
Utilized
(1,261)
-
(1,261)
Reversals
(288)
(64)
(352)
Foreign exchange differences
334
-
334
Closing balance, as at September 30, 2023
$7,091
$100
$7,191
Additions
2,785
-
2,785
Utilized
(1,333)
-
(1,333)
Reversals
(12)
-
(12)
Foreign exchange differences
2
-
2
Closing balance, as at September 30, 2024
$8,533
$100
$8,633
8. FINANCIAL INSTRUMENTS
The Company classifies its financial instruments as follows:
Cash and cash equivalents
Financial assets – held for trading measured at fair value
Accounts receivable
Financial assets – measured at amortized cost
Trade accounts payable
Financial liabilities – measured at amortized cost
Bank indebtedness
Financial liabilities – measured at amortized cost
Customer advance payments
Financial liabilities – measured at amortized cost
Accrued liabilities
Financial liabilities – measured at amortized cost
Derivative instruments
Financial liabilities – measured at fair value
Long-term debt
Financial liabilities – measured at amortized cost
Foreign exchange contracts
The Company entered into a series of collars extending through to September 7, 2027 and designated them as cash flow
hedges against Mexican payroll and other local Mexican costs. The total amount of these collars is 648.0 million
Mexican pesos (2023 – 408.0 million Mexican pesos). The selling price ranges from 18.75 to 24.15 Mexican pesos to
each US dollar.
Management estimates that a cumulative loss of $858 (2023 – cumulative gain $5,401) would be realized if these collars
were terminated on September 30, 2024. Net of deferred taxes of $224, the cumulative loss of $634 is recorded in other
comprehensive income. During the year, the estimated fair value loss of $4,612, net of deferred taxes of $1,646 (2023
– gain of $2,458, net of deferred taxes of $877) has been included in other comprehensive income, and the cumulative
loss of $858 is recorded in the consolidated statements of financial position under the caption derivative instruments.
Risks and uncertainties
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 cash and cash equivalents, trade accounts receivable and foreign exchange forward
49
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
contracts with positive fair values. Cash and cash equivalents are only invested in bank term deposits and bank
commercial paper with an investment grade credit rating. Credit risk is further reduced by limiting the amount which
is invested in certain major financial institutions. The Company is also exposed to credit risk from the potential default
by any of its counterparties on its foreign exchange forward contracts. The Company mitigates this credit risk by dealing
with counterparties who are major financial institutions that the Company anticipates will satisfy their obligations under
the contracts. The carrying amount of its 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. Allowance for doubtful accounts
is estimated using the expected credit loss model. The Company uses historical experience, and considers factors
including, the aging of balances, the customer’s credit worthiness, updates based on the current economic conditions,
expectations of bankruptcies, and the political and economic volatility in the markets/locations of customers to estimate
the allowance. 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, 2024, the accounts receivable
balance (net of allowance for doubtful accounts) is $111,428 (2023 – $128,449) and the Company’s five largest trade
debtors account for 30.25% of the total accounts receivable balance (2023 – 31.8%).
The following table presents a breakdown of the Company’s accounts receivable balances:
2024
2023
Trade accounts receivable
$106,147
$124,919
Employee receivable
181
130
Sales tax receivable
5,912
2,982
Other
994
2,484
Less: allowance for doubtful accounts
(1,806)
(2,066)
Total accounts receivable, net
$111,428
$128,449
The aging of trade accounts receivable balances is as follows:
2024
2023
Not past due
$93,294
$103,768
Past due 1–30 days
9,045
14,712
Past due 31–60 days
1,428
2,250
Past due 61–90 days
632
1,600
Past due over 90 days
1,750
2,589
Less: allowance for doubtful accounts
(1,806)
(2,066)
Total trade accounts receivable, net
$104,343
$122,853
50
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
The movement in the allowance for doubtful accounts is as follows:
2024
2023
Opening balance
$2,066
$2,074
Additions
560
280
Utilized
(508)
(261)
Reversal
(321)
(58)
Exchange differences
9
31
Closing balance
$1,806
$2,066
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.
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:
2024
Total
< 1 Year
1–3 Years
Over 3 Years
Trade accounts payable
$46,483
$46,483
$-
$-
Long-term debt
105,000
-
105,000
-
Leases
9,411
1,007
1,873
6,531
Purchase commitments
39,131
39,131
-
-
Capital expenditures
7,973
7,973
-
-
$ 207,998
$ 94,594
$ 106,873
$
6,531
2023
Total
< 1 Year
1–3 Years
Over 3 Years
Bank indebtedness
$4,964
$4,964
$ -
$-
Trade accounts payable
54,043
54,043
-
-
Long-term debt
105,000
-
105,000
-
Leases
8,217
696
1,201
6,320
Purchase commitments
44,498
44,498
-
-
Capital expenditures
8,743
8,743
-
-
$225,465
$112,944
$106,201
$6,320
c) Foreign exchange risk
The Company operates in Canada with subsidiaries located in the United States, Mexico, Colombia, Brazil, Thailand,
Germany, Italy 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
51
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
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 other 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 operating currencies compared with the average annual exchange rate.
1% Fluctuation
USD vs. CAD
1% Fluctuation
EUR vs. CAD
1% Fluctuation
MXP vs. CAD
Income before income taxes
+/- $1,630
+/- $32
+/- $14
Other comprehensive income
+/- $3,581
+/- $830
+/- $404
1% Fluctuation
COP vs. CAD
1% Fluctuation
BRL vs. CAD
Income before income taxes
+/- $2
+/- $5
Other comprehensive income
+/- $76
+/- $49
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.
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 are 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 statements of
financial position dates and are Level 2 instruments.
The estimated fair value of long-term debt approximates its carrying value as the instruments’ terms and interest rate
are market based.
During the year ended September 30, 2024, there were no transfers between Level 1 and Level 2 fair value
measurements.
52
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
The carrying value and fair value of all financial instruments are as follows:
2024
2023
Carrying
Amount of
Asset
(Liability)
Fair Value
of Asset
(Liability)
Carrying
Amount of
Asset
(Liability)
Fair Value
of Asset
(Liability)
Cash and cash equivalents
$31,637
$31,637
$15,796
$15,796
Accounts receivable
111,428
111,428
128,449
128,449
Trade accounts payable
(46,483)
(46,483)
(54,043)
(54,043)
Bank indebtedness
-
-
(4,964)
(4,964)
Customer advance payments
(4,752)
(4,752)
(5,152)
(5,152)
Accrued liabilities
(30,271)
(30,271)
(35,884)
(35,884)
Derivative instruments
(858)
(858)
5,401
5,401
Long-term debt
($105,000)
($105,000)
($105,000)
($105,000)
9. INVENTORIES
2024
2023
Raw materials
$55,630
$54,378
Work-in-process
27,721
31,619
Finished goods
20,713
20,051
Production supplies
12,609
10,049
Less: obsolescence provision
(6,442)
(4,931)
$110,231
$111,166
The movement in the obsolescence provision accounts is as follows:
2024
2023
Opening balance
$4,931
$4,870
Additions
2,183
1,187
Utilized
(544)
(1,035)
Reversals
(165)
(153)
Exchange differences
37
62
Closing balance
$6,442
$4,931
During the year, inventories of $271,035 (2023 – $277,152) were expensed, of which $2,183 was from the write-downs
of inventories (2023 – $1,187), with reversal of write-downs of $165 (2023 – $153).
10. CAPITAL MANAGEMENT
The Company defines capital as long-term debt, bank indebtedness, and shareholders equity less cash and cash
equivalents. As at September 30, 2024, total managed capital amounts to $454,635 (2023 – $465,188), consisting of
net debt of $73,363 (2023 – $94,168) and shareholders’ equity of $381,272 (2023 – $371,020).
53
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
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:
2024
2023
Net debt to equity ratio
0.19:1
0.25:1
Net debt to EBITDA ratio
0.89:1
1.26:1
The following table details the net debt calculation used in the net debt to equity ratio as at the years ended as
indicated:
2024
2023
Bank indebtedness and long-term debt
$105,000
$109,964
Less: cash and cash equivalents
(31,637)
(15,796)
Net debt
$73,363
$94,168
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 flows from operations, management believes that the
Company has sufficient funds to meet its liquidity requirements.
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, 2024, the Company is in
compliance with the required financial covenants.
11. OTHER INFORMATION
A.
SEGMENTED INFORMATION
Operating segments
The Company has two operating 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.
54
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
2024
Casting
and
Extrusion
Automotive
Solutions
Corporate
Total
Sales
$332,900
$333,511
$-
$666,411
Intercompany sales
(25,994)
(2,626)
-
(28,620)
Net sales
306,906
330,885
-
637,791
Depreciation
25,809
4,344
84
30,237
Amortization
1,370
2,743
-
4,113
Segment pre-tax income (loss) before interest
22,470
32,503
(7,162)
47,811
Net interest expense
(8,278)
Income before income taxes
39,533
Property, plant and equipment additions
26,749
6,298
-
33,047
Property, plant and equipment, net
186,930
37,310
1,193
225,433
Intangible asset additions
774
84
-
858
Intangible assets, net
10,375
17,454
-
27,829
Goodwill
29,346
64,615
-
93,961
Total assets
402,252
236,101
(31,352)
607,001
Total liabilities
55,703
57,396
112,630
225,729
2023
Casting
and
Extrusion
Automotive
Solutions
Corporate
Total
Sales
$321,567
$329,767
$-
$651,334
Intercompany sales
(29,374)
(2,657)
-
(32,031)
Net sales
292,193
327,110
-
619,303
Depreciation
23,141
4,006
84
27,231
Amortization
1,305
3,381
-
4,686
Segment pre-tax income (loss) before interest
15,142
34,851
(7,420)
42,573
Net interest expense
(8,068)
Income before income taxes
34,505
Property, plant and equipment additions
31,980
6,455
14
38,449
Property, plant and equipment, net
186,273
34,879
1,277
222,429
Intangible asset additions
444
90
-
534
Intangible assets, net
10,487
20,114
-
30,601
Goodwill
27,844
63,486
-
91,330
Total assets
391,920
235,567
(15,416)
612,071
Total liabilities
66,801
68,074
106,176
241,051
55
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
Geographic and customer information
Sales
2024
2023
Canada
$44,383
$47,055
United States
382,995
365,533
Europe
136,768
125,829
Mexico
42,292
49,461
South America
13,853
14,435
Asia
10,412
9,764
Other
7,088
7,226
$637,791
$619,303
In 2024 the total revenue to the Company’s largest 2 customers accounted for 5.6% and 5.4% (2023 – 5.8% and 5.4%)
of total sales. The accounts receivable pertaining to these customers were $9,003 and $4,663 at year-end (2023 – $6,274
and $7,322). The allocation of sales to the geographic categories is based upon the customer location where the product
is shipped. In 2024, the Company’s largest 2 customers were from the Automotive Solutions segment and the Casting
and Extrusion segment (2023 – the Company’s largest 2 customers were from the Automotive Solutions segment and
the Casting and Extrusion segment).
Property, plant and equipment, net
2024
2023
Canada
$88,767
$89,330
United States
35,221
32,249
Mexico
38,573
43,395
South America
5,944
6,745
Europe
32,086
26,796
Thailand
5,344
5,559
Morocco
19,498
18,355
$225,433
$222,429
Property, plant and equipment are attributed to the country in which they are located.
Intangible assets, net
2024
2023
Canada
$1,113
$1,083
United States
17,353
20,096
Mexico
15
26
South America
54
13
Thailand
-
-
Europe
9,145
9,230
Morocco
149
153
$27,829
$30,601
Intangible assets are attributed to the country in which they are located.
B.
EMPLOYEE FUTURE BENEFITS
The Company accrues employee future benefits for its Mexican, Thailand and Italian employees. In Mexico 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.
56
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
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. In Thailand the severance benefit varies from 1 to 10 months dependent on
length of service. In Italy the termination benefit is a portion of employee wages that are deferred until termination.
The liability associated with the seniority and termination benefits is calculated as the present value of expected future
payments and amounts to $7,946 as at September 30, 2024 (2023 – $6,838), 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, 2024 and 2023 were as follows:
2024
2023
Salaries and cash incentives (i)
$3,868
$4,601
Directors’ fees
190
160
Share-based awards (ii)
745
715
$4,803
$5,476
i) Key management personnel were not paid post-employment benefits, termination benefits, or other long-term benefits
during the years ended September 30, 2024 and 2023.
ii) Share-based payments are DSUs granted to directors and RSUs and PSUs granted to CEO and key management
personnel.
12. INCOME PER COMMON SHARE
Income per common share is calculated using net income and the monthly weighted average number of common shares
outstanding of 38,749,776 (2023 – 38,912,464). Any potential common shares for which the effect is anti-dilutive have
not been reflected in the calculation of diluted income per share. The dilution effect from the outstanding stock options
on diluted weighted average number of common shares outstanding for 2024 is nil (2023 – nil).
13. INCOME TAXES
The consolidated effective income tax rate for 2024 was 25.1% (2023 – 23.8%) per the following tables. The change
in income tax rate is due to geographic distribution, foreign tax rate differentials and a shift in the proportion of earnings
from jurisdictions with higher tax rates or minimum tax requirements.
57
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
2024
Income before income taxes
$39,533
100.0%
Income tax expense at Canadian statutory rates
10,799
27.3%
Manufacturing and processing deduction
(323)
(0.8%)
Foreign rate differential
(76)
(0.2%)
Non-taxable income net of non-deductible expenses
(2,884)
(7.3%)
Prior period taxes in current year
38
0.1%
Losses not tax effected
2,149
5.5%
Other
212
0.5%
Reported income tax expense
$9,915
25.1%
2023
Income before income taxes
$34,505
100.0%
Income tax expense at Canadian statutory rates
9,434
27.3%
Manufacturing and processing deduction
(237)
(0.7%)
Foreign rate differential
(585)
(1.7%)
Non-taxable income net of non-deductible expenses
(2,984)
(8.6%)
Prior period taxes in current year
251
0.7%
Losses not tax effected
964
2.8%
Other
1,378
4.0%
Reported income tax expense
$8,221
23.8%
The major components of income tax expense are as follows:
2024
2023
Current income tax expense
Based on taxable income for the year
$11,975
$5,127
Deferred income tax expense (recovery)
Origination, reversal of temporary differences and losses not
recognized
(2,060)
3,094
Reported income tax expense
$9,915
$8,221
58
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
Deferred income tax assets and liabilities consist of the following temporary differences:
2024
2023
Deferred tax assets
Tax benefit of loss carry forward
$431
$613
Items not currently deductible for income tax purposes
656
915
1,087
1,528
Deferred tax liabilities
Tax depreciation in excess of book depreciation
(16,816)
(17,186)
Unrealized revenue and foreign exchange
42
51
Investment in subsidiaries
(1,991)
(5,286)
(18,765)
(22,421)
Net deferred income tax liabilities
($17,678)
($20,893)
14. CONSOLIDATED STATEMENTS OF CASH FLOWS
Net change in non-cash working capital
The net change in non-cash working capital balances related to operations consists of the following:
2024
2023
Accounts receivable
$17,303
($7,445)
Inventories
1,184
(11,745)
Prepaid expenses and deposits
(721)
(252)
Trade accounts payable
(7,680)
1,640
Accrued payroll liabilities
(178)
1,710
Other accrued liabilities
(5,287)
(6,921)
Provisions
1,442
746
Customer advance payments
(396)
1,872
Income taxes recoverable
4,428
8,316
$10,095
($12,079)
15. 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 2018, 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. As at September 30, 2024 no repayments are
59
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
EXCO TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$(000)’s except per share amounts
overdue (2023 – nil). 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 for the year ended September 30, 2024 were nil (2023 –
nil). Related liabilities and receivables are recorded on the Company’s consolidated statements of financial position in
accounts receivable and other accrued liabilities. Repayments made in the current year amounted to $2,078 (2023 –
$3,102). As at September 30, 2024 the balance outstanding under the Program is nil (2023 – $2,078).
16. INTEREST EXPENSE
The following table outlines the interest expense (income) incurred (earned) during the year:
2024
2023
Interest expense on bank indebtedness and long-term debt
$8,298
$8,112
Interest income on deposits
(20)
(44)
Net interest expense
$8,278
$8,068
60
EXCO TECHNOLOGIES LIMITED
ANNUAL REPORT 2024
CORPORATE INFORMATION
Board of Directors
Edward H. Kernaghan, MSc
Executive Vice President
Kernaghan & Partners Ltd.
Darren M. Kirk, MBA, CFA
President and CEO of the Company
Robert B. Magee, PEng
Chairman
Woodbridge Group
Colleen M. McMorrow, FCPA, FCA, ICD.D
Corporate Director
Tommy J. Skudutis
Corporate Director
Brian A. Robbins, PEng
Executive Chairman of the Company
______________________________
Corporate Officers
Brian A. Robbins, PEng
Executive Chairman
Darren M. Kirk, MBA, CFA
President and CEO
Matthew Posno, CPA, CA, MBA
Chief Financial Officer & VP Finance
Secretary
Transfer Agent and Registrar
TSX Trust Company
301 – 100 Adelaide Street West
Toronto, Ontario M5H 4H1
Phone: 416.361.0930
www.tsxtrust.com
______________________________
Auditors
Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
______________________________
Stock Listings
TSX: XTC
______________________________
Corporate Office
Exco Technologies Limited
130 Spy Court, 2nd Floor
Markham, Ontario L3R 5H6
Phone: 905.477.3065
www.excocorp.com
______________________________
F2024 Annual General
Meeting of Shareholders
Wednesday, January 22, 2025
at 4:30 pm. (Toronto Time)
Virtual Meeting: Live Webcast
https://virtual-meetings.tsxtrust.com/1721