Exco Technologies Limited — Interim / Quarterly Report 2020

Jan 29, 2020

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Unaudited Condensed Interim Report to the shareholders for the three months ended December 31, 2019

CASTING AND EXTRUSION

AUTOMOTIVE SOLUTIONS

NOTICE TO READER

The attached unaudited condensed interim consolidated financial statements have been prepared by management of the Company. The condensed interim consolidated financial statements for the three-month periods ended December 31, 2019 and 2018 have not been reviewed by the auditors of the Company.

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EXCO TECHNOLOGIES LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

$ (000)'s

	As at As at December 31, 2019 September 30, 2019
ASSETS Current Cash and cash equivalents Accounts receivable Inventories Prepaid expenses and deposits Derivative instruments Income taxes recoverable	(note 2) $22,565 $26,488 92,133 93,552 68,062 73,260 2,739 2,874 1,242 - 198 1,875
Total current assets	186,939 198,049
Property, plant and equipment, net (note 4) Intangible assets, net (note 5) Goodwill (note 5) Deferred tax assets	130,041 126,787 32,358 33,891 62,291 62,834 1,343 1,174
Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current Bank indebtedness Trade accounts payable Accrued payroll liabilities Other accrued liabilities Derivative instruments Provisions Customer advance payments Long-term debt - currentportion(note 7)	$412,972 $422,735
	$4,931 $578 38,204 44,183 7,966 12,643 7,255 8,041 - 278 2,610 2,672 2,894 1,747 91 93
Total current liabilities	63,951 70,235
Long-term debt - long-term portion (note 7) Deferred tax liabilities	12,091 17,093 9,264 8,920
Total liabilities	85,306 96,248
Shareholders' equity Share capital (note 8) Contributed surplus Accumulated other comprehensive income Retained earnings	50,117 50,538 4,435 4,349 8,783 9,480 264,331 262,120
Total shareholders' equity	327,666 326,487
Total liabilities and shareholders' equity	$412,972 $422,735

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

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EXCO TECHNOLOGIES LIMITED

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

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

	Three months ended December 31
	2019 2018
Sales	$120,423 $142,124
Cost of sales Selling, general and administrative expenses Depreciation (note 4) Amortization (note 5) (Gain) on disposal of property, plant and equipment Interest expense, net Other expense(note 12)	93,861 113,143 11,221 10,404 4,378 3,766 999 1,038 (41) (3) 179 253 - 6,076
	110,597 134,677
Income before income taxes Provision for income taxes(note 11)	9,826 7,447 1,768 3,629
Net income for the period Other comprehensive income (loss) Items that may be reclassified to profit or loss in subsequent periods: Net unrealized gain (loss) on derivatives designated as cash flow hedges(a) Unrealizedgain(loss)on foreign currencytranslation	8,058 3,818
	1,121 (1,376) (1,818) 12,076
Comprehensive income Income per common share Basic Diluted Weighted average number of common shares outstanding Basic Diluted	(697) 10,700
	$7,361 $14,518
	$0.20 $0.09 $0.20 $0.09 40,222 41,483 40,222 41,510

(a) Net of income tax payable of $400 for the three- month period ended December 31, 2019 (2018 - net of income tax recoverable of $491 for the three- month period ended December 31, 2018)

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

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EXCO TECHNOLOGIES LIMITED

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

$ (000)'s

				Accumulated other comprehensive income	Accumulated other comprehensive income	Accumulated other comprehensive income
				Net unrealized gain
				(loss) on	Unrealized gain
				derivatives	(loss) on foreign	Total accumulated
		Contributed	Retained	designated as cash	currency	other comprehensive	Total shareholders'
	Share capital	surplus	earnings	flow hedges	translation	income (loss)	equity
Balance, October 1, 2019	$50,538	$4,349	$262,120	($207)	$9,687	$9,480	$326,487
Net income for the period	-	-	8,058	-	-	-	8,058
Dividend paid (note 3)	-	-	(3,617)	-	-	-	(3,617)
Stock option grants	-	86	-	-	-	-	86
Exercise of stock options	-	-	-	-	-	-	-
Repurchase of Share Capital (note 8)	(421)	-	(2,230)	-	-	-	(2,651)
Other comprehensive income(loss)	-	-	-	1,121	(1,818)	(697)	(697)
Balance, December 31, 2019	$50,117	$4,435	$264,331	$914	$7,869	$8,783	$327,666

Accumulated other comprehensive income

				Net unrealized gain
				(loss) on	Unrealized gain
				derivatives	on foreign	Total accumulated
		Contributed	Retained	designated as cash	currency	other comprehensive	Total shareholders'
	Share capital	surplus	earnings	flow hedges	translation	income (loss)	equity
Balance, October 1, 2018	$51,230	$4,391	$263,647	$572	$10,323	$10,895	$330,163
Adjustment to Opening Retained earnings (note 2)	-	-	(2,994)	-	-	-	($2,994)
Net income for the period	-	-	3,818	-	-	-	3,818
Dividend paid (note 3)	-	-	(3,524)	-	-	-	(3,524)
Stock option grants	-	110	-	-	-	-	110
Repurchase of Share Capital (note 8)	(507)	-	(3,445)	-	-	-	(3,952)
Other comprehensive income(loss)	-	-	-	(1,376)	12,076	10,700	10,700
Balance, December 31, 2018	$50,834	$4,467	$257,502	($804)	$22,399	$21,595	$334,398

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

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EXCO TECHNOLOGIES LIMITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

$ (000)'s

	2019 2018 Three months ended December 31
OPERATING ACTIVITIES: Net income for the period Add non-operating and items not involving a current outlay of cash Depreciation (note 4) Amortization (note 5) Stock-based compensation expense Deferred income taxes Net interest expense Non-cash provision for ALC and Other expense (note 12) (Gain)on disposal ofproperty,plant and equipment	$8,058 $3,818 4,378 3,766 999 1,038 156 82 (181) 153 179 253 - 6,076 (41) (3)
Net change in non-cash workingcapital(note 10)	13,548 15,183 (3,784) (10,211)
Cash provided by operating activities FINANCING ACTIVITIES: Increase in bank indebtedness (Repayment) of long-term debt Interest paid, net Dividends paid (note 3) Repurchase of share capital Issuance of share capital	9,764 4,972
	4,353 3,120 (5,004) (9,771) (179) (253) (3,617) (3,524) (2,651) (3,952) - 77
INVESTING ACTIVITIES: Purchase of property, plant and equipment (note 4) Purchase of intangible assets (note 5) Proceeds from disposal ofproperty, plant and equipment Cash used in financing activities	(7,098) (14,303)
	(7,642) (8,606) (66) (40) 1,169 26
Cash used in investing activities Effect of exchange rate changes on cash Net (decrease) in cash during the period Cash, beginningofperiod	(6,539) (8,620)
	(50) 1,681
	(3,923) (16,270) 26,488 31,343
Cash, end of period	$22,565 $15,073

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

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

1. CORPORATE INFORMATION

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These unaudited condensed interim consolidated financial statements present the Company’s financial results of operations and financial position as at and for the three- month period ended December 31, 2019 and have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). The accounting policies used in preparing these unaudited condensed interim financial statements are consistent with those used in the preparation of the 2019 audited annual consolidated financial statements except as noted below.

The Company’s preparation of unaudited condensed interim financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the application of the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements were the same as those that applied to the Company’s consolidated financial statements as at and for the year ended September 30, 2019 with the exception of the adoption of IFRS 16.

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

These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s 2019 audited annual consolidated financial statements, which are available at www.sedar.com and on the Corporation’s website at www.excocorp.com. The unaudited condensed interim consolidated financial statements and accompanying notes for the three- month period ended December 31, 2019 were authorized for issue by the Board of Directors on January 29, 2020.

Basis of consolidation

The condensed interim consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company, its subsidiaries. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has all of the following: power over the investee; exposure or rights to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect its returns. The financial statements of the subsidiaries are included in the condensed interim consolidated financial statements from the date that control commences until the date that control ceases (see Note 12). All intercompany transactions and balances have been eliminated on consolidation.

The Company has an interest in a joint operation, whereby the joint operators have a contractual arrangement that establishes joint control over the economic activities of the individual entity. The Company recognized its share of the joint operation’s

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

assets, liabilities, revenues and expenses in the condensed interim consolidated financial statements.

Accounting standards adopted in fiscal year 2020

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

IFRS 16, Leases (“IFRS 16”)

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

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

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

As such, on October 1, 2019, the Company recorded lease liabilities of $1,361 in Other Accrued Liabilities and right-of-use assets of $1,361 are included in Property, plant and equipment, recognized in the interim condensed consolidated balance sheet immediately before the date of initial application, with no net impact on retained earnings.

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

• way as short-term leases;

• Exclusion of initial direct costs from the measurement of the right-of-use asset on the date of initial application; and

• • Use of hindsight in determining the lease term where the contract contains purchase, extension, or termination options.

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

New Lease Accounting Policy

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether the contract: involves the use of an identified asset; provides the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and provides the right to direct the use of the asset. This policy is applied to contracts entered into, or modified, on or after October 1, 2019.

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

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

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

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

• fixed payments, including in-substance fixed payments;

• variable lease payments that are tied to an index or rate defined in the contract;

• amounts expected to be payable under a residual value guarantee;

• the exercise price under a purchase option that the Company is reasonably likely to exercise; and

• lease payments under an optional extension if the Company is reasonably certain to exercise the extension option, and early termination penalties required under a termination of a lease unless the Company is reasonably certain not to terminate early.

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

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

• the initial measurement of the lease liability, adjusted for any lease payments made at or before the commencement date;

• any initial direct costs incurred; and

• an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is located; less

• any lease incentives received.

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

Short term and low-value leases

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

Variable lease payments

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

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

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

3 . CASH DIVIDEND

During the three- month period ended December 31, 2019, the Company paid quarterly cash dividends totaling $3,617 (2018 -$3,524). The quarterly dividend rate in the first quarter of 2020 was $0.09 per common share (2018 - $0.085).

4. PROPERTY, PLANT AND EQUIPMENT

	Machinery
	and				Assets under	Right of Use
	Equipment	Tools	**Buildings **	Land	Construction	Assets	TOTAL
Cost
Balance as at September
30, 2019	203,928	24,407	75,263	11,978	6,552	-	322,128
Initial recognition IFRS16
assets (note 2)	-	-	-	-	-	1,361	1,361
Additions	2,878	382	104	-	4,278	-	7,642
Less: disposals	(3,912)	(27)	(27)	-	-	-	(3,966)
Reclassification	3,518	205	4	-	(3,727)	-	-
Foreign exchange
movement	(728)	(105)	(236)	(13)	41	-	(1,041)
Balance as at December
31, 2019	**$205,684 **	**$24,862 **	$75,108	$11,965	$7,144	**$1,361 **	$326,124
	Machinery
	and				Assets under	Right of Use
	Equipment	Tools	**Buildings **	Land	Construction	Assets	TOTAL
Accumulated
depreciation and
impairment losses
Balance as at September
30, 2019	140,567	18,294	36,480	-	-	-	195,341
Depreciation	3,024	481	761	-	-	112	4,378
Less: disposals	(2,810)	(27)	(1)	-	-	-	(2,838)
Foreign exchange
movement	(542)	(118)	(138)	-	-	-	(798)
Balance as at December
31, 2019	$140,239	$18,630	**$37,102 **	$-	$-	$112	$196,083
Carrying amounts
As at September 30, 2019	$63,361	$6,113	$38,783	$11,978	$6,552	$-	$126,787
As at December 31, 2019	$65,445	$6,232	$38,006	$11,965	$7,144	$1,249	$130,041

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)’s except per share amounts

5. INTANGIBLE ASSETS AND GOODWILL

	Computer		Assets under	Total
	Software	Acquisition	Construction	Intangible
	**and Other **	*Intangibles **	(Software)	Assets	Goodwill
Cost
Balance as at September 30, 2019	$21,326	$47,224	$106	$68,656	$62,834
Additions	62	-	4	66	-
Reclassifications	66	-	(66)	-	-
Foreign exchange movement	(33)	(826)	1	(858)	(543)
Balance as at December 31, 2019	$21,421	$46,398	$45	$67,864	**$62,291 **

	Computer		Assets under	Total
	Software and	Acquisition	Construction	Intangible
	**Other **	*Intangibles **	(Software)	Assets	Goodwill
Accumulated amortization
and impairment losses
Balance as at September 30, 2019	19,974	14,791	-	34,765	-
Amortization for the period	198	801	-	999	-
Foreign exchange movement	(35)	(223)	-	(258)	-
Balance as at December 31, 2019	$20,137	$15,369	**$- **	$35,506	**$- **
Carrying amounts
As at September 30, 2019	$1,352	$32,433	$106	$33,891	$62,834
As at December 31, 2019	$1,284	$31,029	$45	$32,358	$62,291

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

6. FINANCIAL INSTRUMENTS

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

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

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

During the three-month period ended December 31, 2019 there were no transfers between Level 1 and Level 2 fair value measurements.

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

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

he carrying value and fair value of all financial instruments are as follows:
December 31, 2019	September 30,2019
Carrying Amount of Asset (Liability) Fair Value of Asset (Liability)	Carrying Amount of Asset (Liability) Fair Value of Asset (Liability)
Cash and cash equivalents $22,565 $22,565 $26,488 $26,488 Accounts receivable 92,133 92,133 93,552 93,552 Trade accounts payable (38,204) (38,204) (44,183) (44,183) Bank indebtedness (4,931) (4,931) (578) (578) Customer advance payments (2,894) (2,894) (1,747) (1,747) Accrued liabilities (15,221) (15,221) (20,684) (20,684) Derivative instruments 1,242 1,242 (278) (278) Long-term debt ($12,182) ($12,182) ($17,186) ($17,186)

7. LONG-TERM DEBT

On February 22, 2018, the Company closed an amendment to renew the $50,000 Committed Revolving Credit Facility with JP Morgan Chase Bank N.A, of which $12,000 was utilized as at December 31, 2019. The facility has a 3 year term and is collateralized by a general security agreement covering all assets of the Company’s subsidiaries located in Canada and the US, with the exception of real property. There are no specific repayment terms prior to maturity.

The components of long-term debt are as follows:

December 31, 2019 Bank debt $12,000 Term notes - Promissorynote 182 Subtotal 12,182 Less: currentportion (91) Long-term debt,long-termportion $12,091	September 30,2019
	$17,000 - 186
	17,186 (93)
	$17,093

Pursuant to the terms of the credit facility, Exco is required to maintain compliance with certain financial covenants. The Company was in compliance with these covenants as at December 31, 2019.

8. SHARE CAPITAL

The Company received approval from the Toronto Stock Exchange for a normal course issuer bid for a 12-month period beginning February 18, 2019. The Company’s Board of Directors authorized the purchase of up to 2,100,000 common shares representing approximately 5% of the Company’s outstanding common shares. During the quarter 338,000 common shares were repurchased (2018 - 360,500) for a total cost of $2,651 (2018 - $3,952). The cost to repurchase the common shares in the three-month period exceeded their stated value by $2,230 (2018 - $3,445) which was recorded against retained earnings.

As at December 31, 2019 the Company had 40,189,663 common shares issued and outstanding.

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

9. SEGMENTED INFORMATION

Business segments

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

The Casting and Extrusion segment designs and engineers tooling and other manufacturing equipment. Its operations are substantially for automotive and other industrial markets in North America.

The Automotive Solutions segment produces automotive interior components and assemblies primarily for seating, cargo storage and restraint for sale to automotive manufacturers and Tier 1 suppliers (suppliers to automakers). (See Note 12)

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

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

Three Months Ended December 31, 2019	Three Months Ended December 31, 2019	Three Months Ended December 31, 2019	Three Months Ended December 31, 2019	Three Months Ended December 31, 2019
	Casting and Extrusion	Automotive Solutions	Corporate	Total
Sales Intercompanysales	$53,375 (1,260)	$68,423 (115)	$- -	$121,798 (1,375)
Net sales Depreciation Amortization Pre-tax income (loss) before interest and other expense Net interest expense Income before income taxes Initial recognition IFRS 16 assets Property, plant and equipment additions Property, plant and equipment, net Intangible asset additions Intangible assets, net Goodwill Total assets Total liabilities	52,115 3,338 161 4,320 389 6,495 103,808 66 1,060 - 207,996 29,446	68,308 1,017 837 8,048 940 1,147 24,825 - 31,297 62,291 212,943 39,384	- 23 1 (2,363) 32 - 1,408 - 1 - (7,967) 16,476	120,423 4,378 999 10,005 (179) 9,826 1,361 7,642 130,041 66 32,358 62,291 412,972 85,306

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

$(000)’s except per share amounts

Three Months Ended December 31, 2018	Three Months Ended December 31, 2018	Three Months Ended December 31, 2018	Three Months Ended December 31, 2018	Three Months Ended December 31, 2018
	Casting and Extrusion	Automotive Solutions	Corporate	Total
Sales Intercompany sales	$55,243 (2,496)	$96,489 (7,112)	$- -	$151,732 (9,608)
Net sales Depreciation Amortization Pre-tax income (loss) before interest and other expense Other expense Net interest expense Income before income taxes Property, plant and equipment additions Property, plant and equipment, net Intangible asset additions Intangible assets, net Goodwill Total assets Total liabilities	52,747 2,946 182 5,525 - 7,917 98,046 40 1,224 - 205,382 26,460	89,377 807 856 9,806 (6,076) 591 26,329 - 36,275 65,871 243,268 58,474	- 13 - (1,555) - 98 1,459 - 3 - 1,241 30,559	142,124 3,766 1,038 13,776 (6,076) (253) 7,447 8,606 125,834 40 37,502 65,871 449,891 115,493

10. NET CHANGE IN NON-CASH WORKING CAPITAL

0. NET CHANGE IN NON-CASH WORKING CAPITAL	0. NET CHANGE IN NON-CASH WORKING CAPITAL
Three months ended December 31
2019	2018
Accounts receivable $1,027 Inventories 4,922 Prepaid expenses and deposits 136 Trade accounts payable (5,832) Accrued payroll liabilities (4,634) Other accrued liabilities (2,150) Provisions (62) Customer advance payments 1,153 Income taxespayable 1,656	($2,962) (7,392) 465 2,446 (5,925) 3,024 (97) (1,694) 1,924
($3,784)	($10,211)

11. INCOME TAXES

The consolidated effective income tax rate for the three-month period ended December 31, 2019 was 18.0% (three- month period ended December 31, 2018 – 48.7%).The income tax rate for the three-month period ended December 31, 2019 was favorably impacted by higher income in lower tax jurisdictions. The income tax rate for the three-month period ended December 31, 2018 was adversely impacted by the non-deductibility of Other Expense related to the de-consolidation of

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EXCO TECHNOLOGIES LIMITED NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) $(000)’s except per share amounts

ALC in the amount of $6,076 (note 12) as well as losses from operation at ALC Bulgaria in the amount of $2,138. Excluding ALC, the effective income tax rate for the three-month period ended December 31, 2018 would have been 23.2%

12. DECONSOLIDATION OF ALC AND OTHER EXPENSE

On January 17, 2019, the Company’s indirect wholly owned subsidiary ALC Bulgaria EOOD (“ALC”) voluntarily filed a liquidation petition in Bulgaria. As a result the Company lost control of and de-consolidated it from the Company’s financial statements.

The Company had recorded a $6.1 million provision during the three months ended December 31, 2018 in respect to ALC, the result of which was that the net assets of ALC were $nil.

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CORPORATE INFORMATION

Exco Technologies Limited is a global supplier of innovative technologies servicing the die-cast, extrusion and automotive industries. Through our 15 strategic locations in 7 countries, we employ approximately 5,400 people and service a diverse and broad customer base.

Telephone: 905-477-3065 Fax: 905-477-2449 Web: www.excocorp.com

TORONTO STOCK EXCHANGE LISTING

XTC

DIRECTORS

Edward H. Kernaghan Darren M. Kirk, President and CEO Robert B. Magee, Lead Director Colleen M. McMorrow Paul E. Riganelli Brian A. Robbins, Executive Chairman Anne Marie Turnbull

CORPORATE OFFICERS

Brian A. Robbins, PEng Executive Chairman

Darren M. Kirk, CFA, MBA President and CEO

Matthew Posno, CPA, CA, MBA Vice President Finance, CFO and Secretary

Paul E. Riganelli, MA, MBA, LLB Executive Vice President

TRANSFER AGENT

TSX Trust Company 301-100 Adelaide Street West Toronto, Ontario M5H 4H1

Shareholder Inquiries: Telephone: 1-866-600-5869 Email: tmxeinvestorservices@tmx.com Web: www.tsxtrust.com

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