Major Drilling Group International Inc. (TSX: MDI), a leading
provider of specialized drilling services to the mining sector
(“Major Drilling” or the “Company”), today reported results for the
third quarter of fiscal 2022, ended January 31, 2022.
Highlights
- Revenue of $138.8 million, up 38% compared to same period last
year.
- EBITDA(1) for the quarter was $18.4 million, an increase of
110% compared to same period last year.
- Net earnings of $5.7 million or $0.07 per share, up from a loss
of $1.5 million or $0.02 per share for the same period last
year.
- Net cash(1) improved by $36 million in the quarter to a net
cash position of $6.1 million.
“Our third quarter of fiscal year 2022 was very
satisfying with elevated activity levels in November that continued
well into December until the usual seasonal reduction in operations
due to holiday shutdowns. Despite the Omicron variant causing minor
delays, January got off to a much earlier start than in previous
years. While these factors drove the increase in revenue for the
quarter, they also provide a strong indication of increased
activity as we move into calendar 2022, reinforcing the market
backdrop, and pointing to exciting times ahead for us at Major
Drilling,” said Denis Larocque, President and CEO of Major
Drilling.
“We continued to see increased demand for our
specialized services as customers turn to more challenging drill
programs as the upcycle progresses. I am particularly pleased to
see that our proactive staff training and retention efforts have
allowed us to support this early start to the year and deliver
value to our customers. Our strategy of holding rigs and inventory
ready for immediate deployment to customers also continues to
deliver results, as the industry deals with supply chain
disruptions.”
“During the quarter, we benefited from both new
contracts and contract renewals with incrementally favourable
terms, which more than offset the impacts of our annual maintenance
and overhaul work carried out over the holiday period. Going
forward, our new pricing should offset cost inflation of supply and
labour as competition for skilled drilling crews continues to be a
challenge our industry is facing in the most operationally intense
markets,” added Mr. Larocque.
“I’m pleased to report that the Company achieved
seasonally strong financial performance in the quarter, generating
$18.4 million in EBITDA. As a result of this strong cash
generation, our net cash position improved by $36.1 million to a
net cash position of $6.1 million,” said Ian Ross, CFO of Major
Drilling. “We have achieved this cash generation while spending
$12.2 million on capital expenditures during the quarter, adding 5
new drill rigs and support equipment for existing rigs being
deployed to the field. We also disposed of 8 older, less efficient
rigs, bringing the total rig count to 600. In order to respond to
current market demand and stay ahead of supply chain challenges, we
expect to take possession of at least 8 drills next quarter. These
rigs will be immediately deployed in the field.”
“There are numerous positive drivers influencing
the Company’s outlook today,” noted Mr. Larocque:
- Gold prices are at high levels as
reserves remain low and mining companies continue to struggle to
replace resource depletion;
- Copper prices have more than
doubled over the last two years and have recently reached an
all-time high, at a time when the world is accelerating its efforts
toward decarbonization, requiring enormous amounts of copper, which
will exacerbate the projected supply deficit;
- Nickel prices are up more than 40%
over the last year, as the world races to secure supplies for
electric vehicle batteries as inventories dwindle;
- Lack of exploration throughout the
recent industry downturn has led to depleting reserves;
- It takes 10 to 15 years to bring a
mine into production; and
- New mineral deposits will come from
areas more difficult to access, requiring more specialized
drilling.
“With these fundamentals continuing firmly in
place, the outlook for the Company and the pricing environment
through our fiscal fourth quarter and beyond remain extremely
encouraging,” stated Mr. Larocque.
“Finally, Mr. Kelly Johnson, Senior
Vice-President Operations for North America and Africa, has
announced his long planned intention to retire in June of this
year,” said Mr. Larocque. “Mr. Johnson will retain his position as
Senior Vice-President continuing to assist in the strategic
management and operations of the Company until June after which he
will provide consulting services to the Company.”
“Kelly started in the drilling industry in 1978
with Midwest Drilling until its acquisition by Major Drilling in
1998 and held a broad range of leadership roles across the
Company’s operations. With a career that spans more than four
decades with the Company, his leadership has made a significant
contribution to Major Drilling’s success, and he has certainly left
his mark on the industry through his expertise and knowledge. Kelly
has been a mentor to many in the Company and his influence has made
a lasting impact on generations of people. He leaves his post with
an impressive leadership team fully prepared to respond to future
challenges and to meet the increasing expectations of our loyal
customers. Going forward, the regional management of North America
will be reporting directly to the CEO,” noted Mr. Larocque.
In millions of Canadian dollars (except earnings per share) |
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
Revenue |
|
$ |
138.8 |
|
|
$ |
100.4 |
|
|
$ |
460.4 |
|
|
$ |
304.0 |
|
Gross margin |
|
|
16.9 |
% |
|
|
11.0 |
% |
|
|
19.8 |
% |
|
|
16.1 |
% |
Adjusted gross margin (1) |
|
|
24.2 |
% |
|
|
20.3 |
% |
|
|
26.4 |
% |
|
|
25.5 |
% |
EBITDA (1) |
|
|
18.4 |
|
|
|
8.7 |
|
|
|
73.4 |
|
|
|
42.0 |
|
As percentage of revenue |
|
|
13.3 |
% |
|
|
8.7 |
% |
|
|
15.9 |
% |
|
|
13.8 |
% |
Net earnings (loss) |
|
|
5.7 |
|
|
|
(1.5 |
) |
|
|
31.0 |
|
|
|
7.7 |
|
Earnings (loss) per share |
|
|
0.07 |
|
|
|
(0.02 |
) |
|
|
0.38 |
|
|
|
0.10 |
|
(1) See “Non-IFRS Financial Measures” |
Third Quarter Ended January 31,
2021
Total revenue for the quarter was $138.8 million
up 38% from revenue of $100.4 million recorded in the same quarter
last year. The unfavourable foreign exchange translation impact on
revenue for the quarter, when comparing to the effective rates for
the same period last year, was approximately $3 million, with a
minimal impact on net earnings as expenditures in foreign
jurisdictions tend to be in the same currency as revenue.
Revenue for the quarter from Canada - U.S.
drilling operations increased by 37.9% to $78.3 million, compared
to the same period last year. Projects ran deeper into December and
started up quicker in January, which helped offset the typical
seasonal slowdown.
South and Central American revenue increased by
46.8% to $32.0 million for the quarter, compared to the same
quarter last year. With COVID-19 restrictions easing in most
jurisdictions, activity levels ramped up, boosting revenue from the
prior period.
Australasian and African revenue increased by
30.7% to $28.5 million, compared to the same period last year. The
McKay acquisition was the main driver in the quarter-over-quarter
growth for this region.
Gross margin percentage for the quarter was
16.9%, compared to 11.0% for the same period last
year. Depreciation expense, totaling $10.1 million, is
included in direct costs for the current quarter, versus $9.3
million in the same quarter last year. Adjusted gross margin, which
excludes depreciation expense, was 24.2% for the quarter, compared
to 20.3% in the prior year quarter. Margins are typically lower in
the third quarter due to seasonal slowdowns and significant
scheduled maintenance, however this year, there was less impact in
North America as many drill programs minimized their holiday
shutdown plans. Australasia encountered the typical seasonal
slowdown while the South and Central American region was negatively
impacted by seasonality as well as ramp-up costs in certain
jurisdictions as activity levels began to recover from the impacts
of COVID-19.
General and administrative costs were $14.1
million, an increase of $2.4 million compared to the same quarter
last year. The increase was driven by the addition of the
Australian operations, inflationary wage adjustments, and the
resumption of some travel as COVID-19 restrictions loosened in most
jurisdictions.
The income tax provision for the quarter was an
expense of $1.3 million compared to nil for the prior year period.
The increase from the prior year period was due to increased
profitability.
Net earnings were $5.7 million or $0.07 per
share ($0.07 per share diluted) for the quarter, compared to a loss
of $1.5 million or $0.02 per share ($0.02 per share diluted) for
the prior year quarter.
Non-IFRS Financial Measures
The Company’s financial data has been prepared
in accordance with IFRS, with the exception of certain financial
measures detailed below. The measures below have been used
consistently by the Company’s management team in assessing
operational performance on both segmented and consolidated levels,
and in assessing the Company’s financial strength. The Company
believes these non-IFRS financial measures are key, for both
management and investors, in evaluating performance at a
consolidated level and are commonly reported and widely used by
investors and lending institutions as indicators of a company’s
operating performance and ability to incur and service debt, and as
a valuation metric. These measures do not have a standardized
meaning prescribed by IFRS and therefore 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 IFRS.
Adjusted gross profit/margin - excludes
depreciation expense:
(in $000s CAD) |
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
138,752 |
|
|
$ |
100,387 |
|
|
$ |
460,440 |
|
|
$ |
303,959 |
|
Less: direct costs |
|
115,325 |
|
|
|
89,329 |
|
|
|
369,115 |
|
|
|
254,924 |
|
Gross profit |
|
23,427 |
|
|
|
11,058 |
|
|
|
91,325 |
|
|
|
49,035 |
|
Add: depreciation |
|
10,145 |
|
|
|
9,306 |
|
|
|
30,163 |
|
|
|
28,481 |
|
Adjusted gross profit |
|
33,572 |
|
|
|
20,364 |
|
|
|
121,488 |
|
|
|
77,516 |
|
Adjusted gross margin |
|
24.2 |
% |
|
|
20.3 |
% |
|
|
26.4 |
% |
|
|
25.5 |
% |
EBITDA - earnings before interest, taxes, depreciation,
and amortization:
(in $000s CAD) |
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
5,676 |
|
|
$ |
(1,467 |
) |
|
$ |
31,026 |
|
|
$ |
7,690 |
|
Finance costs |
|
373 |
|
|
|
337 |
|
|
|
1,244 |
|
|
|
961 |
|
Income tax provision |
|
1,338 |
|
|
|
26 |
|
|
|
8,554 |
|
|
|
3,263 |
|
Depreciation and
amortization |
|
11,013 |
|
|
|
9,853 |
|
|
|
32,541 |
|
|
|
30,048 |
|
EBITDA |
$ |
18,400 |
|
|
$ |
8,749 |
|
|
$ |
73,365 |
|
|
$ |
41,962 |
|
Net cash/net debt – cash net of debt,
excluding lease liabilities reported under IFRS 16
Leases:
|
Current quarter ended |
|
|
Previous quarter ended |
|
|
|
|
|
(in $000s CAD) |
January 31, 2022 |
|
|
October 31, 2021 |
|
|
April 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
78,306 |
|
|
$ |
42,673 |
|
|
$ |
22,359 |
|
Contingent consideration |
|
(22,176 |
) |
|
|
(22,640 |
) |
|
|
(1,907 |
) |
Long-term debt |
|
(50,016 |
) |
|
|
(50,039 |
) |
|
|
(15,462 |
) |
Net cash (debt) |
$ |
6,114 |
|
|
$ |
(30,006 |
) |
|
$ |
4,990 |
|
Forward-Looking Statements
This news release includes certain information
that may constitute “forward-looking information” under applicable
Canadian securities legislation. All statements, other than
statements of historical facts, included in this news release that
address future events, developments, or performance that the
Company expects to occur (including management’s expectations
regarding the Company’s objectives, strategies, financial
condition, results of operations, cash flows and businesses) are
forward-looking statements. Forward-looking statements are
typically identified by future or conditional verbs such as
“outlook”, “believe”, “anticipate”, “estimate”, “project”,
“expect”, “intend”, “plan”, and terms and expressions of similar
import. All forward-looking information in this news release is
qualified by this cautionary note.
Forward-looking information is necessarily based
upon various estimates and assumptions including, without
limitation, the expectations and beliefs of management related to
the factors set forth below. While these factors and assumptions
are considered reasonable by the Company as at the date of this
document in light of management’s experience and perception of
current conditions and expected developments, these statements are
inherently subject to significant business, economic and
competitive uncertainties and contingencies. Known and unknown
factors could cause actual results to differ materially from those
projected in the forward-looking statements and undue reliance
should not be placed on such statements and information.
Such forward-looking statements are subject to a
number of risks and uncertainties that include, but are not
limited to: the level of activity in the mining industry and the
demand for the Company’s services; the level of funding for the
Company’s clients (particularly for junior mining companies);
implications of the COVID-19 pandemic; competitive pressures;
global political and economic environments; the integration of
business acquisitions and the realization of the intended benefits
of such acquisitions; the Company’s dependence on key customers;
exposure to 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; as well as other risk factors described under “General
Risks and Uncertainties” in the Company’s Annual Information Form
for the most recently completed fiscal year, available on the SEDAR
website at www.sedar.com. Should one or more risk, uncertainty,
contingency, or other factor materialize or should any factor or
assumption prove incorrect, actual results could vary materially
from those expressed or implied in the forward-looking
information.
Forward-looking statements made in this document
are made as of the date of this document and the Company disclaims
any intention and assumes no obligation to update any
forward-looking statement, even if new information becomes
available, as a result of future events, or for any other reasons,
except as required by applicable securities laws.
About Major Drilling
Major Drilling Group International Inc. is one
of the world’s largest drilling services companies primarily
serving the mining industry. Established in 1980, Major Drilling
has over 1,000 years of combined experience and expertise within
its management team alone. The Company maintains field operations
and offices in Canada, the United States, Mexico, South America,
Asia, Africa, and Australia. Major Drilling provides a complete
suite of drilling services including surface and underground
coring, directional, reverse circulation, sonic, geotechnical,
environmental, water-well, coal-bed methane, shallow gas,
underground percussive/longhole drilling, surface drill and blast,
and a variety of mine services.
Webcast/Conference Call Information
Major Drilling Group International Inc. will
provide a simultaneous webcast and conference call to discuss its
quarterly results on Friday, March 4, 2022 at 9:00 AM (EST). To
access the webcast, which includes a slide presentation, please go
to the investors/webcast section of Major Drilling’s website at
www.majordrilling.com and click on the link. Please note that this
is listen-only mode.
To participate in the conference call, please
dial 416-340-2217, participant passcode 1150288# and ask for Major
Drilling’s Third Quarter Results Conference Call. To ensure your
participation, please call in approximately five minutes prior to
the scheduled start of the call.
For those unable to participate, a taped
rebroadcast will be available approximately one hour after the
completion of the call until Monday, April 4, 2022. To access the
rebroadcast, dial 905-694-9451 and enter the passcode 5874470#. The
webcast will also be archived for one year and can be accessed on
the Major Drilling website at www.majordrilling.com.
For further information:Ian Ross, Chief
Financial OfficerTel: (506) 857-8636Fax: (506)
857-9211ir@majordrilling.com
Major Drilling Group International
Inc.Interim Condensed Consolidated Statements of
Operations(in thousands of Canadian dollars,
except per share
information)(unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
January 31 |
|
|
January 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUE |
$ |
138,752 |
|
|
$ |
100,387 |
|
|
$ |
460,440 |
|
|
$ |
303,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT COSTS (note
6) |
|
115,325 |
|
|
|
89,329 |
|
|
|
369,115 |
|
|
|
254,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
23,427 |
|
|
|
11,058 |
|
|
|
91,325 |
|
|
|
49,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative (note 6) |
|
14,086 |
|
|
|
11,742 |
|
|
|
41,824 |
|
|
|
34,536 |
|
Other expenses |
|
2,326 |
|
|
|
862 |
|
|
|
8,348 |
|
|
|
3,341 |
|
(Gain) loss on disposal of property, plant and equipment |
|
(2 |
) |
|
|
(462 |
) |
|
|
(411 |
) |
|
|
(451 |
) |
Foreign exchange (gain) loss |
|
(370 |
) |
|
|
20 |
|
|
|
740 |
|
|
|
(305 |
) |
Finance costs |
|
373 |
|
|
|
337 |
|
|
|
1,244 |
|
|
|
961 |
|
|
|
16,413 |
|
|
|
12,499 |
|
|
|
51,745 |
|
|
|
38,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE
INCOME TAX |
|
7,014 |
|
|
|
(1,441 |
) |
|
|
39,580 |
|
|
|
10,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
(RECOVERY) (note7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
2,108 |
|
|
|
896 |
|
|
|
7,452 |
|
|
|
4,760 |
|
Deferred |
|
(770 |
) |
|
|
(870 |
) |
|
|
1,102 |
|
|
|
(1,497 |
) |
|
|
1,338 |
|
|
|
26 |
|
|
|
8,554 |
|
|
|
3,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
(LOSS) |
$ |
5,676 |
|
|
$ |
(1,467 |
) |
|
$ |
31,026 |
|
|
$ |
7,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER
SHARE (note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.07 |
|
|
$ |
(0.02 |
) |
|
$ |
0.38 |
|
|
$ |
0.10 |
|
Diluted |
$ |
0.07 |
|
|
$ |
(0.02 |
) |
|
$ |
0.38 |
|
|
$ |
0.10 |
|
Major Drilling Group International
Inc.Interim Condensed Consolidated Statements of
Comprehensive Earnings(in thousands of Canadian
dollars)(unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
January 31 |
|
|
January 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
(LOSS) |
$ |
5,676 |
|
|
$ |
(1,467 |
) |
|
$ |
31,026 |
|
|
$ |
7,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified
subsequently to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on foreign currency translations |
|
4,397 |
|
|
|
(9,405 |
) |
|
|
3,884 |
|
|
|
(20,210 |
) |
Unrealized gain (loss) on derivatives (net of tax) |
|
(567 |
) |
|
|
122 |
|
|
|
(385 |
) |
|
|
1,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE EARNINGS
(LOSS) |
$ |
9,506 |
|
|
$ |
(10,750 |
) |
|
$ |
34,525 |
|
|
$ |
(10,685 |
) |
Major Drilling Group International
Inc.Interim Condensed Consolidated Statements of
Changes in EquityFor the nine months ended January
31, 2022 and 2021(in thousands of Canadian
dollars)(unaudited)
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings |
|
|
Other |
|
|
Share-based |
|
|
Foreign currency |
|
|
|
|
|
|
Share capital |
|
|
(deficit) |
|
|
reserves |
|
|
payments reserve |
|
|
translation reserve |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1,
2020 |
$ |
243,189 |
|
|
$ |
(35,691 |
) |
|
$ |
(611 |
) |
|
$ |
8,519 |
|
|
$ |
81,640 |
|
|
$ |
297,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
58 |
|
|
|
- |
|
|
|
- |
|
|
|
(17 |
) |
|
|
- |
|
|
|
41 |
|
Share-based compensation |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
222 |
|
|
|
- |
|
|
|
222 |
|
Stock options
expired/forfeited |
|
- |
|
|
|
3,525 |
|
|
|
- |
|
|
|
(3,525 |
) |
|
|
- |
|
|
|
- |
|
|
|
243,247 |
|
|
|
(32,166 |
) |
|
|
(611 |
) |
|
|
5,199 |
|
|
|
81,640 |
|
|
|
297,309 |
|
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
|
7,690 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,690 |
|
Unrealized gain (loss) on foreign currency translations |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(20,210 |
) |
|
|
(20,210 |
) |
Unrealized gain (loss) on derivatives |
|
- |
|
|
|
- |
|
|
|
1,835 |
|
|
|
- |
|
|
|
- |
|
|
|
1,835 |
|
Total comprehensive loss |
|
- |
|
|
|
7,690 |
|
|
|
1,835 |
|
|
|
- |
|
|
|
(20,210 |
) |
|
|
(10,685 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JANUARY
31, 2021 |
$ |
243,247 |
|
|
$ |
(24,476 |
) |
|
$ |
1,224 |
|
|
$ |
5,199 |
|
|
$ |
61,430 |
|
|
$ |
286,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1,
2021 |
$ |
243,379 |
|
|
$ |
(22,456 |
) |
|
$ |
1,067 |
|
|
$ |
5,559 |
|
|
$ |
52,614 |
|
|
$ |
280,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issue (note 10) |
|
12,911 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,911 |
|
Exercise of stock options |
|
4,030 |
|
|
|
- |
|
|
|
- |
|
|
|
(1,129 |
) |
|
|
- |
|
|
|
2,901 |
|
Share-based compensation |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
273 |
|
|
|
- |
|
|
|
273 |
|
Stock options
expired/forfeited |
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
(19 |
) |
|
|
- |
|
|
|
- |
|
|
|
260,320 |
|
|
|
(22,437 |
) |
|
|
1,067 |
|
|
|
4,684 |
|
|
|
52,614 |
|
|
|
296,248 |
|
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
|
31,026 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31,026 |
|
Unrealized gain (loss) on foreign currency translations |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,884 |
|
|
|
3,884 |
|
Unrealized gain (loss) on derivatives |
|
- |
|
|
|
- |
|
|
|
(385 |
) |
|
|
- |
|
|
|
- |
|
|
|
(385 |
) |
Total comprehensive
earnings |
|
- |
|
|
|
31,026 |
|
|
|
(385 |
) |
|
|
- |
|
|
|
3,884 |
|
|
|
34,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JANUARY
31, 2022 |
$ |
260,320 |
|
|
$ |
8,589 |
|
|
$ |
682 |
|
|
$ |
4,684 |
|
|
$ |
56,498 |
|
|
$ |
330,773 |
|
Major Drilling Group International
Inc.Interim Condensed Consolidated Statements of
Cash Flows(in thousands of Canadian
dollars)(unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
January 31 |
|
|
January 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
tax |
$ |
7,014 |
|
|
$ |
(1,441 |
) |
|
$ |
39,580 |
|
|
$ |
10,953 |
|
Operating items not involving
cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
11,013 |
|
|
|
9,853 |
|
|
|
32,541 |
|
|
|
30,048 |
|
(Gain) loss on disposal of property, plant and equipment |
|
(2 |
) |
|
|
(462 |
) |
|
|
(411 |
) |
|
|
(451 |
) |
Share-based compensation |
|
98 |
|
|
|
73 |
|
|
|
273 |
|
|
|
222 |
|
Finance costs recognized in
earnings before income tax |
|
373 |
|
|
|
337 |
|
|
|
1,244 |
|
|
|
961 |
|
|
|
18,496 |
|
|
|
8,360 |
|
|
|
73,227 |
|
|
|
41,733 |
|
Changes in non-cash operating
working capital items |
|
31,030 |
|
|
|
5,739 |
|
|
|
21,609 |
|
|
|
(6,803 |
) |
Finance costs paid |
|
(373 |
) |
|
|
(337 |
) |
|
|
(1,244 |
) |
|
|
(961 |
) |
Income taxes (paid)
recovered |
|
(1,229 |
) |
|
|
(833 |
) |
|
|
(3,668 |
) |
|
|
(3,698 |
) |
Cash flow from (used in)
operating activities |
|
47,924 |
|
|
|
12,929 |
|
|
|
89,924 |
|
|
|
30,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of lease
liabilities |
|
(338 |
) |
|
|
(169 |
) |
|
|
(1,008 |
) |
|
|
(967 |
) |
Repayment of long-term
debt |
|
- |
|
|
|
(251 |
) |
|
|
(355 |
) |
|
|
(35,752 |
) |
Issuance of common shares due
to exercise of stock options |
|
34 |
|
|
|
17 |
|
|
|
2,901 |
|
|
|
41 |
|
Proceeds from draw on
long-term debt (note 11) |
|
- |
|
|
|
- |
|
|
|
35,000 |
|
|
|
- |
|
Cash flow from (used in)
financing activities |
|
(304 |
) |
|
|
(403 |
) |
|
|
36,538 |
|
|
|
(36,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions (net of
cash acquired) (note 10) |
|
- |
|
|
|
- |
|
|
|
(38,050 |
) |
|
|
- |
|
Acquisition of property, plant
and equipment (note 5) |
|
(12,203 |
) |
|
|
(5,069 |
) |
|
|
(34,981 |
) |
|
|
(20,613 |
) |
Proceeds from disposal of
property, plant and equipment |
|
121 |
|
|
|
541 |
|
|
|
1,902 |
|
|
|
1,033 |
|
Cash flow from (used in)
investing activities |
|
(12,082 |
) |
|
|
(4,528 |
) |
|
|
(71,129 |
) |
|
|
(19,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes |
|
95 |
|
|
|
(1,612 |
) |
|
|
614 |
|
|
|
(2,495 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN
CASH |
|
35,633 |
|
|
|
6,386 |
|
|
|
55,947 |
|
|
|
(28,482 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF THE PERIOD |
|
42,673 |
|
|
|
23,565 |
|
|
|
22,359 |
|
|
|
58,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, END OF THE PERIOD |
$ |
78,306 |
|
|
$ |
29,951 |
|
|
$ |
78,306 |
|
|
$ |
29,951 |
|
Major Drilling Group International
Inc.Interim Condensed Consolidated Balance
SheetsAs at January 31, 2022 and April 30,
2021(in thousands of Canadian
dollars)(unaudited)
|
January 31, 2022 |
|
|
April 30, 2021 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
Cash |
$ |
78,306 |
|
|
$ |
22,359 |
|
Trade and other receivables |
|
85,408 |
|
|
|
102,571 |
|
Income tax receivable |
|
2,747 |
|
|
|
5,973 |
|
Inventories |
|
92,254 |
|
|
|
85,585 |
|
Prepaid expenses |
|
9,958 |
|
|
|
6,710 |
|
|
|
268,673 |
|
|
|
223,198 |
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND
EQUIPMENT (note 5 and note 10) |
|
192,554 |
|
|
|
144,382 |
|
|
|
|
|
|
|
|
|
RIGHT-OF-USE
ASSETS |
|
5,826 |
|
|
|
3,773 |
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAX
ASSETS |
|
4,283 |
|
|
|
8,903 |
|
|
|
|
|
|
|
|
|
GOODWILL (note
10) |
|
22,573 |
|
|
|
7,708 |
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS
(note 10) |
|
4,891 |
|
|
|
568 |
|
|
|
|
|
|
|
|
|
|
$ |
498,800 |
|
|
$ |
388,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
Trade and other payables |
$ |
77,237 |
|
|
$ |
73,083 |
|
Income tax payable |
|
1,985 |
|
|
|
1,639 |
|
Current portion of lease liabilities |
|
1,512 |
|
|
|
803 |
|
Current portion of contingent consideration (note 10) |
|
8,289 |
|
|
|
- |
|
Current portion of long-term debt |
|
- |
|
|
|
356 |
|
|
|
89,023 |
|
|
|
75,881 |
|
|
|
|
|
|
|
|
|
LEASE
LIABILITIES |
|
4,279 |
|
|
|
2,943 |
|
|
|
|
|
|
|
|
|
CONTINGENT
CONSIDERATION (note 10) |
|
13,887 |
|
|
|
1,907 |
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT (note
11) |
|
50,016 |
|
|
|
15,106 |
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAX
LIABILITIES |
|
10,822 |
|
|
|
12,532 |
|
|
|
168,027 |
|
|
|
108,369 |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
|
Share capital |
|
260,320 |
|
|
|
243,379 |
|
Retained earnings (deficit) |
|
8,589 |
|
|
|
(22,456 |
) |
Other reserves |
|
682 |
|
|
|
1,067 |
|
Share-based payments reserve |
|
4,684 |
|
|
|
5,559 |
|
Foreign currency translation reserve |
|
56,498 |
|
|
|
52,614 |
|
|
|
330,773 |
|
|
|
280,163 |
|
|
|
|
|
|
|
|
|
|
$ |
498,800 |
|
|
$ |
388,532 |
|
MAJOR DRILLING GROUP INTERNATIONAL
INC.NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTSFOR THE THREE AND NINE MONTHS
ENDED JANUARY 31, 2022 AND 2021 (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, Mexico, South America, Asia, Africa and
Australia.
2. BASIS
OF PRESENTATION
Statement of complianceThese
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, 2021 with the exception of intangible assets
acquired (see note 10).
On March 3, 2022, the Board of Directors
authorized the financial statements for issue.
Basis of consolidationThese
Interim Condensed Consolidated Financial Statements incorporate the
financial statements of the Company and entities controlled by the
Company. Control is achieved 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.
The results of subsidiaries acquired or disposed
of during the period are included in the Consolidated Statements 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 preparationThese
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, 2021.
3. 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 are not readily apparent from other sources, which
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Depending on the severity and duration of
disruptions caused by the COVID-19 pandemic, results could be
impacted in future periods. It is not possible at this time to
estimate the magnitude of such potential future impacts.
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 depreciation purposes, property, plant and equipment
and inventory valuation, determination of income and other taxes,
assumptions used in the compilation of fair value of assets
acquired and liabilities assumed in business acquisitions, amounts
recorded as accrued liabilities, contingent consideration,
allowance for impairment of trade receivables, 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, the recognition
of provisions and accrued liabilities, and the determination of the
probability that deferred income tax assets will be realized from
future taxable earnings.
4. 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.
5. PROPERTY,
PLANT AND EQUIPMENT
Capital expenditures for the three and nine
months ended January 31, 2022 were $12,203 (2021 - $5,069) and
$34,981 (2021 - $20,613), respectively. The company did not obtain
direct financing for the three and nine months ended January 31,
2022 or 2021.
6.
EXPENSES BY NATURE
Direct costs by nature are as follows:
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
$ |
10,145 |
|
|
$ |
9,306 |
|
|
$ |
30,163 |
|
|
$ |
28,481 |
|
Employee salaries and benefit
expenses |
|
51,893 |
|
|
|
39,032 |
|
|
|
169,548 |
|
|
|
110,738 |
|
Cost of material |
|
20,576 |
|
|
|
15,870 |
|
|
|
67,200 |
|
|
|
47,322 |
|
Other |
|
32,711 |
|
|
|
25,121 |
|
|
|
102,204 |
|
|
|
68,383 |
|
|
$ |
115,325 |
|
|
$ |
89,329 |
|
|
$ |
369,115 |
|
|
$ |
254,924 |
|
General and administrative expenses by nature are as
follows:
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible
assets |
$ |
366 |
|
|
$ |
95 |
|
|
$ |
1,014 |
|
|
$ |
284 |
|
Depreciation |
|
502 |
|
|
|
452 |
|
|
|
1,364 |
|
|
|
1,283 |
|
Employee salaries and benefit
expenses |
|
7,584 |
|
|
|
6,830 |
|
|
|
23,052 |
|
|
|
19,879 |
|
Other general and
administrative expenses |
|
5,634 |
|
|
|
4,365 |
|
|
|
16,394 |
|
|
|
13,090 |
|
|
$ |
14,086 |
|
|
$ |
11,742 |
|
|
$ |
41,824 |
|
|
$ |
34,536 |
|
7. INCOME
TAXES
The income tax provision for the period can be reconciled to
accounting earnings before income tax as follows:
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
tax |
$ |
7,014 |
|
|
$ |
(1,441 |
) |
|
$ |
39,580 |
|
|
$ |
10,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Canadian corporate
income tax rate |
|
27 |
% |
|
|
27 |
% |
|
|
27 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax provision
based on statutory rate |
|
1,894 |
|
|
|
(389 |
) |
|
|
10,687 |
|
|
|
2,957 |
|
Non-recognition of tax
benefits related to losses |
|
247 |
|
|
|
485 |
|
|
|
894 |
|
|
|
1,847 |
|
Utilization of previously
unrecognized losses |
|
(1,244 |
) |
|
|
(62 |
) |
|
|
(5,487 |
) |
|
|
(1,615 |
) |
Other foreign taxes paid |
|
165 |
|
|
|
173 |
|
|
|
689 |
|
|
|
412 |
|
Rate variances in foreign
jurisdictions |
|
(156 |
) |
|
|
74 |
|
|
|
95 |
|
|
|
(158 |
) |
Derecognition of previously
recognized losses |
|
- |
|
|
|
- |
|
|
|
861 |
|
|
|
- |
|
Permanent differences and
other |
|
432 |
|
|
|
(255 |
) |
|
|
815 |
|
|
|
(180 |
) |
Income tax provision
recognized in net earnings |
$ |
1,338 |
|
|
$ |
26 |
|
|
$ |
8,554 |
|
|
$ |
3,263 |
|
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 favourable or unfavourable
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.
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
5,676 |
|
|
$ |
(1,467 |
) |
|
$ |
31,026 |
|
|
$ |
7,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (000s) |
|
82,389 |
|
|
|
80,641 |
|
|
|
82,156 |
|
|
|
80,638 |
|
Diluted (000s) |
|
82,793 |
|
|
|
80,829 |
|
|
|
82,587 |
|
|
|
80,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.07 |
|
|
$ |
(0.02 |
) |
|
$ |
0.38 |
|
|
$ |
0.10 |
|
Diluted |
$ |
0.07 |
|
|
$ |
(0.02 |
) |
|
$ |
0.38 |
|
|
$ |
0.10 |
|
The calculation of diluted earnings per share
for the three and nine months ended January 31, 2022 excludes the
effect of 52,500 and 42,799 options, respectively (2021 - 988,037
and 1,388,131, respectively) as they were anti‐dilutive.
The total number of shares outstanding on January 31, 2022 was
82,392,054 (2021 - 80,640,753).
9. SEGMENTED
INFORMATION
The Company’s operations are divided into the
following three geographic segments, corresponding to its
management structure: Canada - U.S.; South and Central America; and
Australasia 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, 2021. 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:
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S.* |
$ |
78,298 |
|
|
$ |
56,802 |
|
|
$ |
257,547 |
|
|
$ |
173,464 |
|
South and Central America |
|
31,976 |
|
|
|
21,820 |
|
|
|
103,950 |
|
|
|
62,928 |
|
Australasia and Africa |
|
28,478 |
|
|
|
21,765 |
|
|
|
98,943 |
|
|
|
67,567 |
|
|
$ |
138,752 |
|
|
$ |
100,387 |
|
|
$ |
460,440 |
|
|
$ |
303,959 |
|
*Canada - U.S. includes revenue of $36,284 and
$33,371 for Canadian operations for the three months ended January
31, 2022 and 2021, respectively and $134,821 and $85,090 for the
nine months ended January 31, 2022 and 2021, respectively.
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
$ |
9,177 |
|
|
$ |
(1,864 |
) |
|
$ |
34,915 |
|
|
$ |
9,546 |
|
South and Central America |
|
(1,610 |
) |
|
|
(1,003 |
) |
|
|
(1,030 |
) |
|
|
(2,774 |
) |
Australasia and Africa |
|
2,154 |
|
|
|
3,578 |
|
|
|
16,007 |
|
|
|
9,855 |
|
|
|
9,721 |
|
|
|
711 |
|
|
|
49,892 |
|
|
|
16,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
costs |
|
373 |
|
|
|
337 |
|
|
|
1,244 |
|
|
|
961 |
|
General corporate
expenses** |
|
2,334 |
|
|
|
1,815 |
|
|
|
9,068 |
|
|
|
4,713 |
|
Income
tax |
|
1,338 |
|
|
|
26 |
|
|
|
8,554 |
|
|
|
3,263 |
|
|
|
4,045 |
|
|
|
2,178 |
|
|
|
18,866 |
|
|
|
8,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) |
$ |
5,676 |
|
|
$ |
(1,467 |
) |
|
$ |
31,026 |
|
|
$ |
7,690 |
|
**General corporate expenses include expenses
for corporate offices and stock options.
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
$ |
7,533 |
|
|
$ |
3,598 |
|
|
$ |
21,900 |
|
|
$ |
16,184 |
|
South and Central America |
|
2,288 |
|
|
|
255 |
|
|
|
6,298 |
|
|
|
1,039 |
|
Australasia and Africa |
|
1,110 |
|
|
|
710 |
|
|
|
5,511 |
|
|
|
2,821 |
|
Unallocated and corporate assets |
|
1,272 |
|
|
|
506 |
|
|
|
1,272 |
|
|
|
569 |
|
Total capital
expenditures |
$ |
12,203 |
|
|
$ |
5,069 |
|
|
$ |
34,981 |
|
|
$ |
20,613 |
|
|
Q3 2022 |
|
|
Q3 2021 |
|
|
YTD 2022 |
|
|
YTD 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
$ |
4,990 |
|
|
$ |
4,915 |
|
|
$ |
15,011 |
|
|
$ |
15,037 |
|
South and Central America |
|
2,422 |
|
|
|
2,965 |
|
|
|
7,446 |
|
|
|
9,365 |
|
Australasia and Africa |
|
2,843 |
|
|
|
1,589 |
|
|
|
9,150 |
|
|
|
5,155 |
|
Unallocated and corporate assets |
|
758 |
|
|
|
384 |
|
|
|
934 |
|
|
|
491 |
|
Total depreciation and
amortization |
$ |
11,013 |
|
|
$ |
9,853 |
|
|
$ |
32,541 |
|
|
$ |
30,048 |
|
|
January 31, 2022 |
|
|
April 30, 2021 |
|
Identifiable assets |
|
|
|
|
|
|
|
Canada - U.S.* |
$ |
195,984 |
|
|
$ |
191,320 |
|
South and Central America |
|
107,485 |
|
|
|
99,435 |
|
Australasia and Africa |
|
199,715 |
|
|
|
111,504 |
|
Unallocated and corporate liabilities |
|
(4,384 |
) |
|
|
(13,727 |
) |
Total identifiable
assets |
$ |
498,800 |
|
|
$ |
388,532 |
|
*Canada - U.S. includes property, plant and
equipment as at January 31, 2022 of $50,162 (April 30, 2021 -
$43,409) for Canadian operations.
10. BUSINESS
ACQUISITION
McKay Drilling PTY Limited
Effective June 1, 2021, the Company acquired all
of the issued and outstanding shares of McKay Drilling PTY Limited
(“McKay”), a leading specialty drilling contractor based in Western
Australia.
The acquisition was accounted for using the
acquisition method. The Company acquired 20 drill rigs, support
equipment and inventory, existing contracts and receivables, as
well as retaining the operation’s management team, and other
employees, including experienced drillers.
The purchase price for the transaction was
$71,073, consisting of $38,050 in cash (net of cash acquired),
$12,911 in Major Drilling shares and an additional payout of
$20,112 (discounted) tied to performance. The maximum amount of the
contingent consideration is $25,000 AUD, with a payout period
extending over three years from the effective date of June 1, 2021,
contingent upon achievement of certain milestones.
As the acquisition occurred early in the first
quarter, the Company is in the process of finalizing the valuation
of assets and purchase price allocation. As at January 31, 2022,
the values allocated to net tangible and intangible assets are
preliminary and are subject to adjustments as additional
information is obtained.
Goodwill arising from this acquisition was equal
to the excess of the total consideration paid over the fair value
of the net assets acquired and represents the benefit of expected
synergies, revenue growth, an experienced labour force and future
market development.
The estimated net assets acquired at fair value
at acquisition were as follows:
Net assets acquired |
|
|
|
Trade and other
receivables |
$ |
10,475 |
|
Inventories |
|
1,595 |
|
Prepaid expenses |
|
1,773 |
|
Property, plant and
equipment |
|
44,466 |
|
Goodwill (not tax
deductible) |
|
15,543 |
|
Intangible assets |
|
5,558 |
|
Trade and other payables |
|
(7,379 |
) |
Deferred income tax
liabilities |
|
(958 |
) |
Total
assets |
$ |
71,073 |
|
|
|
|
|
Consideration |
|
|
|
Cash |
$ |
39,031 |
|
Less: cash acquired |
|
(981 |
) |
Contingent consideration |
|
20,112 |
|
Shares of Major Drilling |
|
12,911 |
|
Total
consideration |
$ |
71,073 |
|
Subsequent to the date of acquisition, the trade
and other receivables included in the above net assets acquired
have been fully collected. Intangible assets acquired are amortized
over five years.
The above consideration includes non-cash
investing activities, which are not reflected in the Interim
Condensed Consolidated Statements of Cash Flows, including the
issuance of 1,318,101 shares of Major Drilling for a total of
$12,911, and contingent consideration of $20,112 (discounted).
The Company incurred acquisition-related costs
of $454 relating to external legal fees and due diligence costs.
These acquisition costs have been included in the other expenses
line of the Interim Condensed Consolidated Statements of
Operations.
The results of the McKay operations are included
in the Interim Condensed Consolidated Statements of Operations from
June 1, 2021. Since the date of acquisition, revenue attributable
to the McKay operations for the three and nine months ended January
31, 2022 was approximately $12 million and $43 million,
respectively and (loss) earnings were approximately $(1) million
and $4 million, respectively. Had the business
combination been effective as of May 1, 2021, pro-forma revenue and
net earnings of the combined entity for the nine months ended
January 31, 2022, would have been approximately $465 million and
$32 million, respectively.
11. FINANCIAL
INSTRUMENTS
Fair valueThe carrying values
of cash, trade and other receivables, demand credit facilities and
trade and other payables approximate their fair value due to the
relatively short period to maturity of the instruments. The
carrying value of contingent consideration and long-term debt
approximates their fair value as the interest applicable is
reflective of fair market rates.
Financial assets and liabilities measured at
fair value are classified and disclosed in one of the following
categories:
- Level 1 - quoted prices
(unadjusted) in active markets for identical assets or
liabilities;
- Level 2 - inputs other than quoted
prices included in level 1 that are observable for the assets or
liabilities, either directly (i.e., as prices) or indirectly (i.e.,
derived from prices); and
- Level 3 - inputs for the assets or
liabilities that are not based on observable market data
(unobservable inputs).
The Company has entered into certain derivative
financial instruments to manage its exposure to interest rate and
market risks, including an interest rate swap, with a notional
value of $15,000 maturing in May of 2022, and share-price forward
contracts with a combined notional amount of $6,216, maturing at
varying dates through June 2024.
The fair value hierarchy requires the use of
observable market inputs whenever such inputs exist. A financial
instrument is classified to the lowest level of the hierarchy for
which a significant input has been considered in measuring fair
value.
The Company’s derivatives, with fair values as
follows, are classified as level 2 financial instruments. There
were no transfers of amounts between level 1, level 2 and level 3
financial instruments for the quarter ended January 31, 2022.
|
January 31, 2022 |
|
|
April 30, 2021 |
|
|
|
|
|
|
|
|
|
Interest rate swap |
$ |
(16 |
) |
|
$ |
(106 |
) |
Share-price forward
contracts |
$ |
3,313 |
|
|
$ |
2,167 |
|
Credit riskAs at January 31,
2022, 87.0% (April 30, 2021 - 93.7%) of the Company’s trade
receivables were aged as current and 2.1% (April 30, 2021 - 1.8%)
of the trade receivables were impaired.
The movements in the allowance for impairment of
trade receivables during the nine and twelve-month periods were as
follows:
|
January 31, 2022 |
|
|
April 30, 2021 |
|
|
|
|
|
|
|
|
|
Opening
balance |
$ |
1,638 |
|
|
$ |
1,226 |
|
Increase in impairment
allowance |
|
539 |
|
|
|
588 |
|
Recovery of amounts previously
impaired |
|
(225 |
) |
|
|
(115 |
) |
Write-off charged against
allowance |
|
(418 |
) |
|
|
- |
|
Foreign exchange translation
differences |
|
(23 |
) |
|
|
(61 |
) |
Ending
balance |
$ |
1,511 |
|
|
$ |
1,638 |
|
Foreign currency risk As at
January 31, 2022, the most significant carrying amounts of net
monetary assets and/or liabilities (which may include intercompany
balances with other subsidiaries) that: (i) are denominated in
currencies other than the functional currency of the respective
Company subsidiary; and (ii) cause foreign exchange rate exposure,
including the impact on earnings before income taxes (“EBIT”), if
the corresponding rate changes by 10%, are as follows (in 000s
CAD):
|
Rate variance |
|
|
IDR/USD |
|
|
MNT/USD |
|
|
USD/AUD |
|
|
MZN/USD |
|
|
USD/CLP |
|
|
USD/BRL |
|
|
Other |
|
Net exposure on monetary assets (liabilities) |
|
|
|
|
11,269 |
|
|
|
4,267 |
|
|
|
4,026 |
|
|
|
1,079 |
|
|
|
(5,707 |
) |
|
|
(2,786 |
) |
|
|
(1,043 |
) |
EBIT impact |
+/-10% |
|
|
|
1,252 |
|
|
|
474 |
|
|
|
447 |
|
|
|
120 |
|
|
|
634 |
|
|
|
310 |
|
|
|
116 |
|
Liquidity riskEarly in the
current fiscal year, the Company negotiated an expansion of its
existing revolving term facility to an aggregate $75,000 to provide
liquidity to fund operations as it made a $35,000 draw from this
facility to fund the cash portion of the McKay acquisition. As of
January 31, 2022, the Company has unused capacity of $25,000 under
this facility.
The following table details contractual maturities for the
Company’s financial liabilities:
|
1 year |
|
|
2-3 years |
|
|
4-5 years |
|
|
Thereafter |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
$ |
77,237 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
77,237 |
|
Lease liabilities (interest
included) |
|
1,854 |
|
|
|
2,534 |
|
|
|
1,189 |
|
|
|
354 |
|
|
|
5,931 |
|
Contingent consideration
(undiscounted) |
|
8,754 |
|
|
|
16,081 |
|
|
|
- |
|
|
|
- |
|
|
|
24,835 |
|
Long-term debt (interest
included) |
|
1,576 |
|
|
|
51,170 |
|
|
|
- |
|
|
|
- |
|
|
|
52,746 |
|
|
$ |
89,421 |
|
|
$ |
69,785 |
|
|
$ |
1,189 |
|
|
$ |
354 |
|
|
$ |
160,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Drilling (TSX:MDI)
Historical Stock Chart
From Sep 2024 to Oct 2024
Major Drilling (TSX:MDI)
Historical Stock Chart
From Oct 2023 to Oct 2024