MONCTON, NB,
Sept. 9, 2013 /CNW/ - Major Drilling
Group International Inc. (TSX: MDI) today reported results for its
first quarter of fiscal year 2014, ended July 31, 2013.
Highlights
|
In millions
of Canadian dollars
(except earnings per share) |
|
Q1-14 |
|
Q1-13 |
Revenue |
|
$108.2 |
|
$237.6 |
Gross profit |
|
35.1 |
|
81.3 |
|
As percentage of sales |
|
32.5% |
|
34.2% |
EBITDA(1) |
|
19.6 |
|
60.1 |
|
As percentage of revenue |
|
18.1% |
|
25.3% |
Net earnings |
|
1.5 |
|
31.9 |
Earnings per share |
|
0.02 |
|
0.40 |
(1) |
Earnings before interest, taxes, depreciation and amortization,
excluding restructuring charges (see "non-gaap financial
measure") |
- Earnings before taxes for the quarter, excluding restructuring
charges, were $5.8 million.
- Cash on hand at quarter-end was $61.1
million while total debt was $30.6
million, for a net cash position of $30.5 million.
- Major Drilling posted quarterly
revenue of $108.2 million, down 54%
from the $237.6 million recorded for
the same quarter last year.
- Gross margin percentage for the quarter was 32.5%, compared to
34.2% for the corresponding period last year.
- General and Administrative costs are down 25% from the same
quarter last year and 15% from the previous quarter three months
ago.
- Net earnings (including a restructuring charge of $2.0 million) were $1.5
million or $0.02 per share for
the quarter, compared to net earnings of $31.9 million or $0.40 per share for the same quarter last
year.
- Given the Company's financial strength, the Board of Directors
has declared a semi-annual dividend of $0.10 per share to be paid on November 1, 2013.
"With the uncertainty around economic matters
impacting the mining market, we continued to see some customers
delaying or cancelling their exploration drilling plans. In a
number of jurisdictions, uncertainty as to the policies of host
governments or issues of land tenure also continues to have an
impact on activity levels. These factors, combined with the fact
that sources of funding for junior mining companies remain limited,
have led to decreased activity in all regions. Lower levels of
demand have significantly increased competitive pressures and will
likely continue to have an impact for the rest of calendar 2013.
Despite lower pricing levels, we maintained good margin performance
thanks to the improved productivity of our crews and to the
cost-cutting measures that we have implemented. However, going
forward, further reductions in pricing will be more difficult to
offset by gains in productivity," said Francis McGuire, President and CEO of
Major Drilling.
"The Company continues to have a variable cost
structure whereby most of its direct costs, including field staff,
go up or down with contract revenue and a large part of the
Company's other expenses relate to variable incentive compensation
based on the Company's profitability. In fact, in the last twelve
months, staffing is down by 45% or 2,300 positions. During the
quarter, we incurred additional restructuring costs of $2.0 million relating to a further reduction of
staff. Also, senior management's salaries and directors' fees were
reduced during the quarter. At the same time, the Company's
financial strength allows it to continue to invest in safety, to
maintain its equipment in excellent condition, and to retain
skilled employees, all of which are essential to react quickly when
the industry recovers."
"Despite the difficult environment, we expect
operations to generate positive cash flow in fiscal 2014.
Major Drilling remains in excellent
financial position with $61.1 million
in cash and total debt of $30.6
million at the end of the quarter, for a net cash position
of $30.5 million. During the quarter,
our net cash decreased by $8.2
million as we paid our semi-annual dividend of $7.9 million and also paid last year's annual
employee profit-share of $6.4
million, which varies year-to-year. The Company will
continue to focus on cash management by limiting capital
expenditures, by reducing inventory and by closely monitoring
costs. Capital expenditures for the quarter were $5.2 million as we purchased three rigs and
support equipment, while retiring seven rigs. During the quarter,
the Company also paid down $11.2
million of its revolving bank loan in order to reduce its
finance costs."
"The current economic environment will continue
to significantly impact drilling in the short to medium-term,
particularly on gold projects where the Company has a significant
presence. Also, lower levels of demand have increased competitive
pressures, which will impact pricing going forward. With the number
of projects being either delayed or cancelled around the world, we
believe that in the medium-term, most commodities could face an
imbalance between supply and demand, and that the need to develop
resources in areas that are increasingly difficult to access will
increase, which should increase demand for specialized drilling,"
said Mr. McGuire.
"Given the Company's financial strength, the
Board of Directors has declared a semi-annual dividend of
$0.10 per common share, which will be
paid on November 1, 2013 to
shareholders of record as of October 10,
2013. This dividend is designated as an "eligible dividend"
for Canadian tax purposes."
First quarter ended July 31, 2013
Total revenue for the quarter was $108.2 million, down 54% from the record revenue
of $237.6 million recorded in the
same quarter last year. Uncertainty around economic matters
impacting the mining market caused some customers to delay or
cancel their exploration drilling plans, which impacted the
quarter's results compared to last year. In a number of
jurisdictions, uncertainty as to the policies of host governments
or issues of land tenure also had an impact on quarter results.
Also, many junior customers have scaled back or suspended drilling
activities as compared to last year.
Revenue for the quarter from Canada-U.S.
drilling operations decreased by 53% to $53.4 million compared to the same period last
year. Although Canadian revenue was down 43% compared to the same
quarter last year, U.S. operations were more affected, in part due
to the scale down of its environmental division.
South and Central American revenue was down 69%
to $21.7 million for the quarter,
compared to the same quarter last year. All of the countries in
this region, particularly Mexico,
Chile and Argentina, were affected by a reduction in
work by juniors and the cancellation or reduction of projects.
Additionally, in Colombia,
geopolitical factors have slowed exploration efforts of many mining
companies.
Australian, Asian and African operations
reported revenue of $33.1 million,
down 40% from the same period last year. Three main factors
affected the region's revenue: 1) Australia, where projects have been cancelled
due to high costs being incurred by mining companies and new mining
taxes, 2) Mongolia, which is
affected by political uncertainty around mining laws, and 3)
Tanzania, where the Company is
closing its operations.
The overall gross margin percentage for the
quarter was 32.5%, down from 34.2% for the same period last year,
but still a historically strong margin. Reduced pricing due to
increased competitive pressures and delays impacted margins,
however the Company has been able to recapture some of this loss
through productivity gains and cost cutting.
General and administrative costs were down 25%
from last year at $13.0 million for
the quarter compared to $17.3 million
in the same period last year. With the decrease in activity, the
Company has reduced its general and administrative costs by
implementing reductions of salaried employees, restructuring
certain branches, and reducing management salaries.
Other expenses for the quarter were $1.1 million, down from $5.3 million in the same quarter last year, due
primarily to lower incentive compensation expenses given the
Company's decreased profitability.
During the quarter, the Company incurred a loss
on exchange of $1.2 million compared
to a gain on exchange of $1.4 million
last year. This year's loss on exchange was primarily due to
monetary items in Chile,
Australia and Argentina where currencies had significant
variances during the quarter.
The Company recorded a restructuring charge of
$2.0 million consisting primarily of
retrenchment costs following additional staff reduction initiatives
implemented during the quarter across the Company.
The Annual and Special Meeting of the
shareholders of Major Drilling Group
International Inc. will be held at The TMX Broadcast Centre,
Gallery, The Exchange Tower, 130 King St. W., Toronto, Ontario, on Wednesday, September 11, 2013 at 3:00 pm EDT. This will be followed by a
shareholder engagement meeting, where Directors of the Company will
be available to address any shareholder issues. The meeting will be
held by teleconference at 647-427-7450 (please mention Major Drilling - Shareholder Engagement Session)
and in person at Global Prime Office, 130 King St. W., Suite 1800,
at 4:15 pm EDT. If you plan on
attending in person, please RSVP to Chantal
Melanson at chantal.melanson@majordrilling.com or call
506-857-8636.
Non-GAAP Financial Measure
In this news release, the Company uses the
non-GAAP financial measure, EBITDA. The Company believes this
non-GAAP financial measure provides useful information to both
management and investors in measuring the financial performance of
the Company. This measure does not have a standardized meaning
prescribed by GAAP and therefore it may not be comparable to
similarly titled measures presented by other publicly traded
companies, and should not be construed as an alternative to other
financial measures determined in accordance with GAAP.
Forward-Looking Statements
Some of the statements contained in this press
release may be forward-looking statements, such as, but not limited
to, those relating to worldwide demand for gold and base metals and
overall commodity prices, the level of activity in the minerals and
metals industry and the demand for the Company's services, the
Canadian and international economic environments, the Company's
ability to attract and retain customers and to manage its assets
and operating costs, sources of funding for its clients,
particularly for junior mining companies, competitive pressures,
currency movements, which can affect the Company's revenue in
Canadian dollars, the geographic distribution of the Company's
operations, the impact of operational changes, changes in
jurisdictions in which the Company operates (including changes in
regulation), failure by counterparties to fulfill contractual
obligations, and other factors as may be set forth, as well as
objectives or goals, and including words to the effect that the
Company or management expects a stated condition to exist or occur.
Since forward-looking statements address future events and
conditions, by their very nature, they involve inherent risks and
uncertainties. Actual results in each case could differ materially
from those currently anticipated in such statements by reason of
factors such as, but not limited to, the factors set out in the
discussion on pages 16 to 18 of the 2013 Annual Report entitled
"General Risks and Uncertainties", and such other documents as
available on SEDAR at www.sedar.com. All such factors should be
considered carefully when making decisions with respect to the
Company. The Company does not undertake to update any
forward-looking statements, including those statements that are
incorporated by reference herein, whether written or oral, that may
be made from time to time by or on its behalf, except in accordance
with applicable securities laws.
Based in Moncton, New
Brunswick, Major Drilling Group International Inc. is one of
the world's largest metals and minerals contract drilling service
companies. To support its customers' varied exploration drilling
requirements, Major Drilling
maintains field operations and offices in Canada, the United
States, South and Central
America, Australia,
Asia, and Africa.
Financial statements are attached.
Major Drilling
will provide a simultaneous webcast of its quarterly conference
call on Tuesday, September 10,
2013 at 9:00 AM (EDT). To
access the webcast please go to the investors/webcast section of
Major Drilling's website at
www.majordrilling.com and click the attached link, or go
directly to the CNW Group website at www.newswire.ca for
directions. Participants will require Windows MediaPlayer, which
can be downloaded prior to accessing the call. Please note that
this is listen only mode.
Major Drilling
Group International Inc. |
Interim Condensed
Consolidated Statements of Operations |
(in thousands of
Canadian dollars, except per share information) |
(unaudited) |
|
|
|
|
|
|
|
Three months ended |
|
July 31 |
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
TOTAL REVENUE |
$ |
108,211 |
|
$ |
237,565 |
|
|
|
|
|
|
DIRECT COSTS |
|
73,089 |
|
|
156,287 |
|
|
|
|
|
|
GROSS PROFIT |
|
35,122 |
|
|
81,278 |
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
General and administrative |
|
13,047 |
|
|
17,299 |
|
Other expenses |
|
1,065 |
|
|
5,270 |
|
Loss on disposal of property,
plant and equipment |
|
170 |
|
|
8 |
|
Foreign exchange loss (gain) |
|
1,224 |
|
|
(1,369) |
|
Finance costs |
|
314 |
|
|
738 |
|
Depreciation of property, plant
and equipment |
|
13,175 |
|
|
12,122 |
|
Amortization of intangible
assets |
|
342 |
|
|
1,065 |
|
Restructuring charge (note
10) |
|
2,034 |
|
|
- |
|
|
31,371 |
|
|
35,133 |
|
|
|
|
|
|
EARNINGS BEFORE INCOME TAX |
|
3,751 |
|
|
46,145 |
|
|
|
|
|
|
INCOME TAX - PROVISION (RECOVERY) (note
7) |
|
|
|
|
|
|
Current |
|
3,791 |
|
|
13,509 |
|
Deferred |
|
(1,562) |
|
|
761 |
|
|
2,229 |
|
|
14,270 |
|
|
|
|
|
|
NET EARNINGS |
$ |
1,522 |
|
$ |
31,875 |
|
|
|
|
|
|
EARNINGS PER SHARE (note 8) |
|
|
|
|
|
Basic |
$ |
0.02 |
|
$ |
0.40 |
Diluted |
$ |
0.02 |
|
$ |
0.40 |
Major Drilling
Group International Inc. |
Interim Condensed
Consolidated Statements of Comprehensive Earnings |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
Three months ended |
|
July 31 |
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
NET EARNINGS |
$ |
1,522 |
|
$ |
31,875 |
|
|
|
|
|
|
OTHER COMPREHENSIVE (LOSS) EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to
profit or loss |
|
|
|
|
|
|
Unrealized (losses) gains on
foreign currency translations (net of tax) |
|
(5,029) |
|
|
7,651 |
|
Unrealized loss on interest rate
swap (net of tax) |
|
(68) |
|
|
(144) |
|
|
|
|
|
|
COMPREHENSIVE (LOSS) EARNINGS |
$ |
(3,575) |
|
$ |
39,382 |
Major Drilling
Group International Inc. |
Interim
Condensed Consolidated Statements of Changes in Equity |
For the three
months ended July 31, 2012 and 2013 |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
Reserves |
|
Share-based
payments reserve |
|
Retained
earnings |
|
Foreign currency
translation reserve |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1, 2012 |
|
$ |
230,763 |
|
$ |
121 |
|
$ |
11,797 |
|
$ |
246,809 |
|
$ |
(1,791) |
|
$ |
487,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments reserve |
|
|
(93) |
|
|
- |
|
|
860 |
|
|
- |
|
|
- |
|
|
767 |
|
|
|
230,670 |
|
|
121 |
|
|
12,657 |
|
|
246,809 |
|
|
(1,791) |
|
|
488,466 |
Comprehensive earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
- |
|
|
- |
|
|
31,875 |
|
|
- |
|
|
31,875 |
|
Unrealized gains on foreign currency translations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,651 |
|
|
7,651 |
|
Unrealized loss on interest rate swap |
|
|
- |
|
|
(144) |
|
|
- |
|
|
- |
|
|
- |
|
|
(144) |
Total comprehensive earnings |
|
|
- |
|
|
(144) |
|
|
- |
|
|
31,875 |
|
|
7,
651 |
|
|
39,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JULY 31, 2012 |
|
$ |
230,670 |
|
$ |
(23) |
|
$ |
12,657 |
|
$ |
278,684 |
|
$ |
5,860 |
|
$ |
527,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1, 2013 |
|
$ |
230,985 |
|
$ |
40 |
|
$ |
14,204 |
|
$ |
283,088 |
|
$ |
10,012 |
|
$ |
538,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments reserve |
|
|
- |
|
|
- |
|
|
530 |
|
|
- |
|
|
- |
|
|
530 |
|
|
|
230,985 |
|
|
40 |
|
|
14,734 |
|
|
283,088 |
|
|
10,012 |
|
|
538,859 |
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
- |
|
|
- |
|
|
1,522 |
|
|
- |
|
|
1,522 |
|
Unrealized loss on foreign currency translations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(5,029) |
|
|
(5,029) |
|
Unrealized loss on interest rate swap |
|
|
- |
|
|
(68) |
|
|
- |
|
|
- |
|
|
- |
|
|
(68) |
Total comprehensive loss |
|
|
- |
|
|
(68) |
|
|
- |
|
|
1,522 |
|
|
(5,029) |
|
|
(3,575) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JULY 31, 2013 |
|
$ |
230,985 |
|
$ |
(28) |
|
$ |
14,734 |
|
$ |
284,610 |
|
$ |
4,983 |
|
$ |
535,284 |
Major Drilling Group
International Inc. |
Interim Condensed Consolidated
Statements of Cash Flows |
(in thousands of Canadian
dollars) |
(unaudited) |
|
|
Three months ended |
|
July 31 |
|
|
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
Earnings before income tax |
$ |
3,751 |
|
$ |
46,145 |
Operating items not involving cash |
|
|
|
|
|
|
Depreciation and amortization |
|
13,517 |
|
|
13,187 |
|
Loss on disposal of property, plant and equipment |
|
170 |
|
|
8 |
|
Share-based payments reserve |
|
530 |
|
|
767 |
|
Restructuring charge |
|
665 |
|
|
- |
Finance costs recognized in earnings before income
tax |
|
314 |
|
|
738 |
|
|
18,947 |
|
|
60,845 |
Changes in non-cash operating working capital
items |
|
(9,576) |
|
|
(19,695) |
Finance costs paid |
|
(310) |
|
|
(735) |
Income taxes paid |
|
(6,351) |
|
|
(7,889) |
Cash flow from operating activities |
|
2,710 |
|
|
32,526 |
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
Repayment of long-term debt |
|
(13,066) |
|
|
(1,564) |
Dividends paid |
|
(7,916) |
|
|
(7,123) |
Cash flow used in financing activities |
|
(20,982) |
|
|
(8,687) |
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
Payment of consideration for
previous business acquisition |
|
(205) |
|
|
(813) |
Acquisition of property, plant and equipment (note
6) |
|
(5,204) |
|
|
(23,401) |
Proceeds from disposal of property, plant and
equipment |
|
1,816 |
|
|
268 |
Cash flow used in investing activities |
|
(3,593) |
|
|
(23,946) |
|
|
|
|
|
|
Effect of exchange rate changes |
|
613 |
|
|
(395) |
|
|
|
|
|
|
DECREASE IN CASH |
|
(21,252) |
|
|
(502) |
|
|
|
|
|
|
CASH, BEGINNING OF THE PERIOD |
|
82,311 |
|
|
37,237 |
|
|
|
|
|
|
CASH, END OF THE PERIOD |
$ |
61,059 |
|
$ |
36,735 |
Major Drilling
Group International Inc. |
Interim Condensed
Consolidated Balance Sheets |
As at July 31,
2013 and April 30, 2013 |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
July 31, 2013 |
|
April 30, 2013 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
Cash |
$ |
61,059 |
|
$ |
82,311 |
|
Trade and other receivables |
|
84,572 |
|
|
98,079 |
|
Income tax receivable |
|
10,711 |
|
|
10,013 |
|
Inventories |
|
83,674 |
|
|
88,118 |
|
Prepaid expenses |
|
10,380 |
|
|
6,119 |
|
|
250,396 |
|
|
284,640 |
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT |
|
325,832 |
|
|
339,971 |
|
|
|
|
|
|
DEFERRED INCOME TAX ASSETS |
|
6,358 |
|
|
5,601 |
|
|
|
|
|
|
GOODWILL |
|
51,878 |
|
|
52,736 |
|
|
|
|
|
|
INTANGIBLE ASSETS |
|
2,938 |
|
|
3,279 |
|
|
|
|
|
|
|
$ |
637,402 |
|
$ |
686,227 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
Trade and other payables |
$ |
42,602 |
|
$ |
73,315 |
|
Income tax payable |
|
3,275 |
|
|
5,020 |
|
Current portion of long-term debt |
|
8,991 |
|
|
9,097 |
|
|
54,868 |
|
|
87,432 |
|
|
|
|
|
|
CONTINGENT CONSIDERATION |
|
150 |
|
|
231 |
|
|
|
|
|
|
LONG-TERM DEBT |
|
21,604 |
|
|
34,497 |
|
|
|
|
|
|
DEFERRED INCOME TAX LIABILITIES |
|
25,496 |
|
|
25,738 |
|
|
102,118 |
|
|
147,898 |
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Share capital |
|
230,985 |
|
|
230,985 |
|
Reserves |
|
(28) |
|
|
40 |
|
Share-based payments reserve |
|
14,734 |
|
|
14,204 |
|
Retained earnings |
|
284,610 |
|
|
283,088 |
|
Foreign currency translation reserve |
|
4,983 |
|
|
10,012 |
|
|
535
284 |
|
|
538,329 |
|
|
|
|
|
|
|
$ |
637,402 |
|
$ |
686,227 |
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31,
2013 AND 2012 (UNAUDITED)
(in thousands of Canadian dollars, except per share
information)
1. NATURE OF ACTIVITIES
Major Drilling Group International Inc. ("the
Company") is incorporated under the Canada Business Corporations
Act and has its head office at 111 St. George Street, Suite 100,
Moncton, NB, Canada. The Company's common shares are listed
on the Toronto Stock Exchange ("TSX"). The principal source
of revenue consists of contract drilling for companies primarily
involved in mining and mineral exploration. The Company has
operations in Canada, the United States, South and Central America, Australia, Asia and Africa.
2. BASIS OF PRESENTATION
Statement of compliance
These Interim Condensed Consolidated Financial Statements have been
prepared in accordance with IAS 34 Interim Financial Reporting
("IAS 34") as issued by the International Accounting Standards
Board ("IASB") and using the accounting policies as outlined in the
Company's annual Consolidated Financial Statements for the year
ended April 30, 2013.
Basis of consolidation
These Interim Condensed Consolidated Financial Statements
incorporate the financial statements of the Company and entities
controlled by the Company. Control is achieved where the Company
has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed
of during the period are included in the Consolidated Statement of
Operations from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Intra-group transactions, balances, income and
expenses are eliminated on consolidation, where appropriate.
Basis of preparation
These Interim Condensed Consolidated Financial Statements have been
prepared based on the historical cost basis except for certain
financial instruments that are measured at fair value, using the
same accounting policies and methods of computation as presented in
the Company's annual Consolidated Financial Statements for the year
ended April 30, 2013, with the
exception of the impact of certain amendments to accounting
standards or new interpretations issued by the IASB, which were
applicable for fiscal years beginning on or after January 1, 2013. The adoption of these amendments
and standards has not had a material impact on the accounting
policies, methods of computation or presentation applied by the
Company.
3. FUTURE ACCOUNTING CHANGES
The Company has not applied the following new and revised IASB
standards that have been issued but are not yet effective:
|
|
IFRS 9 (as amended in 2010) Financial Instruments |
|
|
IAS 32 (amended) Financial Instruments:
Presentation |
|
|
IAS 36 Impairment of Assets |
|
|
IAS 39 Financial Instruments: Recognition and
Measurement |
The adoption of the above standards is not expected to have a
significant impact on the Company's Consolidated Financial
Statements.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL
ACCOUNTING JUDGMENTS
The preparation of financial statements in
conformity with International Financial Reporting Standards
("IFRS") requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future
periods. Significant areas requiring the use of management
estimates relate to the useful lives of property, plant and
equipment for amortization purposes, property, plant and equipment
and inventory valuation, determination of income and other taxes,
assumptions used in compilation of share-based payments, fair value
of assets acquired and liabilities assumed in business
acquisitions, amounts recorded as accrued liabilities, and
impairment testing of goodwill and intangible assets.
The Company applied judgment in determining the
functional currency of the Company and its subsidiaries, the
determination of cash generating units ("CGUs"), the degree of
componentization of property, plant and equipment, and the
recognition of provisions and accrued liabilities.
5. SEASONALITY OF OPERATIONS
The third quarter (November to January) is
normally the Company's weakest quarter due to the shutdown of
mining and exploration activities, often for extended periods over
the holiday season, particularly in South and Central America.
6. PROPERTY PLANT &
EQUIPMENT
Capital expenditures for the three months ended
July 31, 2013 were $5,204 (2012 - $23,401). The Company did not obtain direct
financing in either quarter.
7. INCOME TAXES
The income tax expense for the period can be reconciled to
accounting profit as follows:
|
2014 Q1 |
|
2013 Q1 |
|
|
|
|
|
|
Earnings before income tax |
$ |
3,751 |
|
$ |
46,145 |
|
|
|
|
|
|
Statutory Canadian corporate income tax rate |
|
28% |
|
|
29% |
|
|
|
|
|
|
Expected income tax expense based on statutory rate |
$ |
1,050 |
|
$ |
13,382 |
Non-recognition of tax benefits related to losses |
|
76 |
|
|
315 |
Other foreign taxes paid |
|
125 |
|
|
355 |
Rate variances in foreign jurisdictions |
|
454 |
|
|
119 |
Other |
|
524 |
|
|
99 |
|
$ |
2,229 |
|
$ |
14,270 |
The Company periodically assesses its
liabilities and contingencies for all tax years open to audit based
upon the latest information available. For those matters where it
is probable that an adjustment will be made, the Company records
its best estimate of these tax liabilities, including related
interest charges. Inherent uncertainties exist in estimates of tax
contingencies due to changes in tax laws. While management believes
they have adequately provided for the probable outcome of these
matters, future results may include favorable or unfavorable
adjustments to these estimated tax liabilities in the period the
assessments are made, or resolved, or when the statutes of
limitations lapse.
8. EARNINGS PER SHARE
All of the Company's earnings are attributable
to common shares therefore net earnings are used in determining
earnings per share.
|
2014 Q1 |
|
2013 Q1 |
|
|
|
|
|
|
Net earnings for the period |
$ |
1,522 |
|
$ |
31,875 |
|
|
|
|
|
|
Weighted average shares outstanding - basic (000's) |
|
79,161 |
|
|
79,147 |
|
|
|
|
|
|
Net effect of dilutive securities: |
|
|
|
|
|
Stock options (000's) |
|
31 |
|
|
637 |
Weighted average number of shares - diluted (000's) |
|
79,192 |
|
|
79,784 |
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic |
$ |
0.02 |
|
$ |
0.40 |
Diluted |
$ |
0.02 |
|
$ |
0.40 |
The calculation of the diluted earnings per
share for the three months ended July 31,
2013 excludes the effect of 2,815,212 options as they were
anti-dilutive. There were no anti-dilutive options for the three
months ended July 31, 2012.
The total number of shares outstanding on July 31, 2013 was 79,161,378.
9. SEGMENTED INFORMATION
The Company's operations are divided into three
geographic segments corresponding to its management structure,
Canada - U.S., South and
Central America, and Australia, Asia and Africa. The services provided in each of the
reportable segments are essentially the same. The accounting
policies of the segments are the same as those described in the
Company's annual Consolidated Financial Statements for the year
ended April 30, 2013. Management
evaluates performance based on earnings from operations in these
three geographic segments before finance costs, general corporate
expenses and income taxes. Data relating to each of the
Company's reportable segments is presented as follows:
|
2014 Q1 |
|
2013 Q1 |
Revenue |
|
|
|
|
|
|
Canada - U.S. |
$ |
53,367 |
|
$ |
112,837 |
|
South and Central America |
|
21,738 |
|
|
69,413 |
|
Australia, Asia and Africa |
|
33,106 |
|
|
55,315 |
|
|
|
|
|
|
|
$ |
108,211 |
|
$ |
237,565 |
|
|
|
|
|
|
Earnings from operations |
|
|
|
|
|
|
Canada - U.S. |
$ |
7,363 |
|
$ |
25,426 |
|
South and Central America |
|
(2,087) |
|
|
16,583 |
|
Australia, Asia and Africa |
|
1,447 |
|
|
8,928 |
|
|
6,723 |
|
|
50,937 |
Eliminations |
|
(152) |
|
|
(228) |
|
|
6,571 |
|
|
50,709 |
Finance costs |
|
314 |
|
|
738 |
General corporate expenses* |
|
2,506 |
|
|
3,826 |
Income tax |
|
2,229 |
|
|
14,270 |
Net earnings |
$ |
1,522 |
|
$ |
31,875 |
*General and corporate expenses include expenses
for corporate offices and stock options. Amounts presented in the
previous period under general corporate expenses have been
allocated to other segments consistent with current year
presentation.
Canada - U.S.
includes revenue for the period ended July
31, 2013 of $38,345
(July 31, 2012 - $67,025) for Canadian operations.
|
2014 Q1 |
|
2013 Q1 |
Depreciation and amortization |
|
|
|
|
|
|
Canada - U.S. |
$ |
5,809 |
|
$ |
5,480 |
|
South and Central America |
|
3,014 |
|
|
3,212 |
|
Australia, Asia and Africa |
|
4,123 |
|
|
4,027 |
|
Unallocated corporate assets |
|
571 |
|
|
468 |
Total depreciation and
amortization |
$ |
13,517 |
|
$ |
13,187 |
|
|
|
|
|
|
|
July 31, 2013 |
|
April 30, 2013 |
Identifiable assets |
|
|
|
|
|
|
Canada - U.S. |
$ |
239,435 |
|
$ |
243,027 |
|
South and Central America |
|
211,222 |
|
|
224,878 |
|
Australia, Asia and Africa |
|
158,122 |
|
|
165,318 |
|
|
608,779 |
|
|
633,223 |
Eliminations |
|
(38) |
|
|
(38) |
Unallocated and corporate assets |
|
28,661 |
|
|
53,042 |
|
$ |
637,402 |
|
$ |
686,227 |
Canada - U.S.
includes property, plant and equipment at July 31, 2013 of $93,718 (April 30,
2013 - $97,110) for Canadian
operations.
10. RESTRUCTURING CHARGE
Restructuring charge of $2,034 consists of employee severance charges
relating to the restructuring plan implemented in some of the
Company's operations in the previous quarter and continued in the
current quarter.
11. FINANCIAL INSTRUMENTS
There are no significant changes to financial
instruments compared to the Company's annual Consolidated Financial
Statements for the year ended April 30,
2013 except for the following:
Fair value
The carrying values of cash, trade and other receivables, demand
credit facility and trade and other payables approximate their fair
value due to the relatively short period to maturity of the
instruments. The following table shows carrying values of
long-term debt and contingent consideration, which approximates
their fair values, as most debts carry variable interest rates and
the remaining fixed rate debts have been acquired recently and
their carrying value continues to reflect fair value. The
fair value of the interest rate swap included in long-term debt is
measured using quoted interest rates.
|
July 31,
2013 |
|
April 30, 2013 |
|
|
|
|
|
|
Contingent consideration |
$ |
150 |
|
$ |
231 |
Long-term debt |
|
30,595 |
|
|
43,594 |
Credit risk
As at July 31, 2013, 85.1% of the
Company's trade receivables were aged as current (April 30, 2013 - 86.0%) and 3.8% of the trade
receivables were impaired (April 30,
2013 - 3.1%).
The movement in the allowance for impairment of
trade receivables during the three month periods were as
follows:
|
July 31,
2013 |
|
July 31, 2012 |
|
|
|
|
|
|
Opening balance |
$ |
2,790 |
|
$ |
2,236 |
Increase in impairment allowance |
|
203 |
|
|
38 |
Foreign exchange translation differences |
|
(41) |
|
|
25 |
Ending balance |
$ |
2,952 |
|
$ |
2,299 |
Foreign currency risk
The carrying amounts of net monetary assets that: (i) are
denominated in currencies other than the functional currency of the
respective Company subsidiary; (ii) cause foreign exchange rate
exposure; and (iii) may include intercompany balances with other
subsidiaries, is USD $1,777 as of
July 31, 2013.
If the Canadian dollar moved by plus or minus
10% at July 31, 2013, the unrealized
foreign exchange gain or loss recognized in net earnings would move
by approximately $178.
Liquidity risk
The following table details contractual maturities for the
Company's financial liabilities.
Non-derivative financial liabilities:
|
1 year |
|
2-3 years |
|
4-5 years |
|
thereafter |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
$ |
42,602 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
42,602 |
Contingent consideration |
|
150 |
|
|
- |
|
|
- |
|
|
- |
|
|
150 |
Long-term debt |
|
9,016 |
|
|
15,510 |
|
|
2,958 |
|
|
3,083 |
|
|
30,567 |
|
$ |
51,768 |
|
$ |
15,510 |
|
$ |
2,958 |
|
$ |
3,083 |
|
$ |
73,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 year |
|
2-3 years |
|
4-5 years |
|
thereafter |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
$ |
(25) |
|
$ |
51 |
|
$ |
2 |
|
$ |
- |
|
$ |
28 |
SOURCE MAJOR DRILLING GROUP INTERNATIONAL INC.