MONCTON, NB,
Sept. 5, 2012 /CNW/ - Major Drilling
Group International Inc. (TSX: MDI) today reported results for its
first quarter of fiscal year 2013, ended July 31, 2012.
Highlights
|
In millions
of Canadian dollars
(except earnings per share) |
Q1-13 |
Q1-12 |
Revenue |
$237.6 |
$164.2 |
Gross profit
|
81.3
|
51.5
|
|
As
percentage of sales |
34.2% |
31.4% |
EBITDA(1)
|
60.1
|
35.7
|
|
As
percentage of revenue |
25.3% |
21.7% |
Net
earnings |
31.9 |
17.9 |
Earnings per
share |
0.40 |
0.25 |
(1) Earnings before interest, taxes,
depreciation and amortization (see "non-gaap financial
measures")
- Major Drilling maintained record
quarterly revenue for the second quarter in a row at $237.6 million, up 45% from the $164.2 million recorded for the same quarter last
year.
- Gross margin percentage for the quarter was 34.2%, compared to
31.4% for the corresponding period last year.
- EBITDA increased 68% to $60.1
million for the quarter compared to the corresponding period
last year.
- Net earnings were also an all-time record at $31.9 million or $0.40 per share for the quarter, compared to net
earnings of $17.9 million or
$0.25 per share for the prior year
quarter.
- The Company has increased its semi-annual dividend to
$0.10 per share, to be paid on
November 1, 2012, which represents an
11.1% increase from the previous dividend.
"We are pleased to report record quarterly
results. Our revenue increased by 45% during the quarter to
$238 million and we saw our quarterly
EBITDA increase by 68% year-over-year," said Francis McGuire, President and CEO of Major
Drilling Group International Inc. "Margins in this quarter improved
mainly due to our efforts on training and recruitment, which have
allowed us to increase the number of shifts and productivity in the
field this quarter."
"Looking forward, the demand for drilling
services from the senior and intermediate mining houses
continues. Revenue from these clients increased in the last
quarter to just over $175 million
compared to $102 million in the same
quarter last year. Our customers remain committed to the
large majority of their projects in order to replace their
reserves. Senior miners will represent a greater proportion
of our drilling projects going forward as junior miners become more
and more cautious in their spending, given the difficulty in
accessing capital."
"Overall, we expect demand for specialized
drilling to continue in the year ahead. At the end of July,
specialized drilling represented 76% of our revenue and nearly half
of our projects were drilling for gold. While we are
optimistic that our senior customers will continue with the
majority of their projects, we anticipate that overall drilling
activities will decline somewhat over the next six months,
particularly with respect to our junior mining clients. In
anticipation of a slight decrease of our activity levels, we have
reduced our capital expenditure budget for fiscal 2013 to
$70 million, down from the
$100 million previously
announced. Because of our ongoing need to be able to respond
to demand for specialized services, and the need to continue to
modernize our fleet, we currently have 15 additional rigs on
order."
"Net capital expenditures for the quarter were
$23.4 million as we purchased 24 rigs
while retiring 10 rigs through our modernization program.
During the quarter, we also added a significant number of support
vehicles and other support equipment to meet changing patterns of
demand and to ensure that we continue to meet the highest levels of
safety standards. These additions should improve rig
utilization and reliability as we focus on increasing the earning
power of each crew and each rig. In fact, 60% of our rigs are
now less than five years old in an industry where rigs tend to last
20 years."
"Most of our senior and intermediate customers
are in a much better financial position than three years ago and
while the difficulties experienced by juniors have moderated our
growth plans over the short-term, it provides a strong upside
potential when their exploration activities pick up, as they must,
if the mining industry is to provide the world with the resources
it needs toward the end of the decade," said Mr. McGuire. "In
addition, the price of gold is almost double what it was in 2008,
the price of copper remains relatively high by historical
standards, and both are well above average costs of
production. In order to keep our competitive edge through
this period, we continue to aggressively and successfully invest in
the recruitment and training of new drillers."
"Given the Company's continuing ability to
generate significant cash, and our minimal debt levels, we have
determined that it is appropriate to increase our semi-annual
dividend to $0.10 per common share,
which will be paid on November 1,
2012 to shareholders of record as of October 10, 2012. This dividend is designated as
an "eligible dividend" for Canadian tax purposes."
First quarter ended July 31, 2012
Total revenue for the quarter was $237.6 million, up 45% from the $164.2 million recorded in the same quarter last
year. Most of the Company's regions contributed to this growth. The
favourable foreign exchange translation impact for the quarter,
when comparing to the effective rates for the same period last
year, is estimated at $5 million on
revenue.
Revenue for the quarter from Canada-U.S.
drilling operations increased by 84% to $112.8 million compared to the same period last
year. In Canada, operations
from the Bradley acquisition accounted for approximately half of
the increase and the pre-existing Canadian operations also saw
increased activity levels. Our U.S. operations also continued its
growth.
South and Central American revenue was up 35% to
$69.4 million for the quarter,
compared to the prior year quarter. This increase was driven by
stronger activity levels in Mexico, Chile
and Argentina, combined with
additional contracts in Colombia
and Suriname from the Bradley acquisition.
Australian, Asian and African operations
reported revenue of $55.3 million, up
8% from the same period last year. The increase came mainly
from African operations in Burkina
Faso, the DRC and Mozambique, which mitigated a decrease in
activity levels in Mongolia and
Australia.
The overall gross margin percentage for the
quarter was 34.2%, up from 31.4% for the same period last
year. New pricing on contracts that were signed or renewed
for this calendar year reflected the current stronger pricing
environment. Also, our training and recruitment efforts allowed the
Company to increase the number of shifts and productivity in the
field during the quarter.
General and administrative costs were
$17.3 million for the quarter
compared to $12.3 million in the same
period last year. The increase was mainly due to the
acquisition of Bradley and the addition of new operations in
Burkina Faso. Increased
costs to support the strong growth in activity levels accounted for
the rest.
Other expenses for the quarter were $5.3 million, up from $2.6
million in the prior year quarter, due primarily to higher
incentive compensation expenses given the Company's increased
profitability.
The Annual 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 Tuesday, September 18, 2012 at 10:00 am EDT.
Non-GAAP Financial Measures
In this news release, the Company uses the
following non-GAAP financial measures: EBITDA and EBITDA margin.
The Company believes these non-GAAP financial measures provide
useful information to both management and investors in measuring
the financial performance of the Company. These measures do not
have a standardized meaning prescribed by GAAP and therefore they
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 2012 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' mining operations, mineral
exploration and environmental activities, Major Drilling maintains operations on every
continent.
Financial statements are attached.
Major Drilling
will provide a simultaneous webcast of its quarterly conference
call on Thursday, September 6,
2012 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 |
|
|
|
|
|
|
|
|
2012 |
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
$ |
237,565 |
|
$ |
164,152 |
|
|
|
|
|
|
DIRECT COSTS |
|
156,287 |
|
|
112,653 |
|
|
|
|
|
|
GROSS PROFIT |
|
81,278 |
|
|
51,499 |
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
General and administrative |
|
17,299 |
|
|
12,318 |
|
Other expenses |
|
5,270 |
|
|
2,603 |
|
Loss on disposal of property, plant and equipment |
|
8 |
|
|
600 |
|
Foreign exchange (gain) loss |
|
(1,369) |
|
|
321 |
|
Finance costs |
|
738 |
|
|
822 |
|
Depreciation of property, plant and equipment |
|
12,122 |
|
|
8,395 |
|
Amortization of intangible assets |
|
1,065 |
|
|
185 |
|
|
35,133 |
|
|
25,244 |
|
|
|
|
|
|
EARNINGS BEFORE INCOME TAX |
|
46,145 |
|
|
26,255 |
|
|
|
|
|
|
INCOME TAX - PROVISION (note 7) |
|
|
|
|
|
|
Current |
|
13,509 |
|
|
5,984 |
|
Deferred |
|
761 |
|
|
2,379 |
|
|
14,270 |
|
|
8,363 |
|
|
|
|
|
|
NET EARNINGS |
$ |
31,875 |
|
$ |
17,892 |
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE (note 8) |
|
|
|
|
|
Basic |
$ |
0.40 |
|
$ |
0.25 |
Diluted |
$ |
0.40 |
|
$ |
0.25 |
|
|
Major Drilling Group
International Inc. |
Interim Condensed Consolidated
Statements of Comprehensive Earnings |
(in thousands of Canadian
dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
Three months ended |
|
|
July 31 |
|
|
|
|
|
|
|
|
2012 |
|
|
2011 |
|
|
|
|
|
|
NET EARNINGS |
$ |
31,875 |
|
$ |
17,892 |
|
|
|
|
|
|
OTHER COMPREHENSIVE EARNINGS (LOSS) |
|
|
|
|
|
|
Unrealized gains on foreign currency translations (net of
tax) |
|
7,651 |
|
|
1,809 |
|
Unrealized loss on interest swap (net of tax) |
|
(144) |
|
|
- |
|
|
|
|
|
|
|
COMPREHENSIVE EARNINGS |
$ |
39,382 |
|
$ |
19,701 |
Major Drilling
Group International Inc. |
Interim Condensed
Consolidated Statements of Changes in Equity |
For the three
months ended July 31, 2011 and 2012 |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based |
|
Retained |
|
Foreign currency |
|
|
|
|
|
Share capital |
|
Reserves |
|
payments reserve |
|
earnings |
|
translation reserve |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1, 2011 |
|
$ |
150,642 |
|
$ |
- |
|
$ |
10,280 |
|
$ |
170,425 |
|
$ |
(3,662) |
|
$ |
327,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments reserve |
|
|
- |
|
|
- |
|
|
554 |
|
|
- |
|
|
- |
|
|
554 |
|
|
|
150,642 |
|
|
- |
|
|
10,834 |
|
|
170,425 |
|
|
(3,662) |
|
|
328,239 |
Comprehensive earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
- |
|
|
- |
|
|
17,892 |
|
|
- |
|
|
17,892 |
|
Unrealized gains on foreign currency
translations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,809 |
|
|
1,809 |
Total comprehensive earnings |
|
|
- |
|
|
- |
|
|
- |
|
|
17,892 |
|
|
1,809 |
|
|
19,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JULY 31,
2011 |
|
$ |
150,642 |
|
$ |
- |
|
$ |
10,834 |
|
$ |
188,317 |
|
$ |
(1,853) |
|
$ |
347,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
- |
|
|
- |
|
|
31,875 |
|
|
- |
|
|
31,875 |
|
Unrealized loss on interest swap |
|
|
- |
|
|
(144) |
|
|
- |
|
|
- |
|
|
- |
|
|
(144) |
|
Unrealized gains on foreign currency translations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,651 |
|
|
7,651 |
Total comprehensive
earnings (loss) |
|
|
- |
|
|
(144) |
|
|
- |
|
|
31,875 |
|
|
7,651 |
|
|
39,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JULY 31,
2012 |
|
$ |
230,670 |
|
$ |
(23) |
|
$ |
12,657 |
|
$ |
278,684 |
|
$ |
5,860 |
|
$ |
527,848 |
Major Drilling
Group International Inc. |
Interim Condensed
Consolidated Statements of Cash Flows |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
Three months
ended |
|
|
July 31 |
|
|
|
|
|
|
|
|
2012 |
|
|
2011 |
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
Earnings before income tax |
$ |
46,145 |
|
$ |
26,255 |
Operating items not involving
cash |
|
|
|
|
|
|
Depreciation and amortization |
|
13,187 |
|
|
8,580 |
|
Loss on disposal of property,
plant and equipment |
|
8 |
|
|
600 |
|
Share-based payments reserve |
|
767 |
|
|
554 |
|
Finance costs recognized in earnings before
income tax |
|
738 |
|
|
822 |
|
|
60,845 |
|
|
36,811 |
Changes in non-cash operating working
capital items |
|
(19,695) |
|
|
(8,833) |
Finance costs paid |
|
(735) |
|
|
(822) |
Income taxes paid |
|
(7,889) |
|
|
(5,013) |
Cash flow from operating
activities |
|
32,526 |
|
|
22,143 |
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
Repayment of long-term debt |
|
(1,564) |
|
|
(2,190) |
Proceeds from long-term debt |
|
- |
|
|
10,000 |
Dividends paid |
|
(7,123) |
|
|
(5,283) |
Cash flow (used in) from financing
activities |
|
(8,687) |
|
|
2,527 |
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
Payment of
consideration for previous business acquisition |
|
(813) |
|
|
- |
Acquisition of property, plant and
equipment (note 6) |
|
(23,401) |
|
|
(21,410) |
Proceeds from disposal of property,
plant and equipment |
|
268 |
|
|
684 |
Cash flow used in investing
activities |
|
(23,946) |
|
|
(20,726) |
|
|
|
|
|
|
Effect of exchange rate changes |
|
(395) |
|
|
(367) |
|
|
|
|
|
|
(DECREASE) INCREASE IN
CASH |
|
(502) |
|
|
3,577 |
|
|
|
|
|
|
CASH, BEGINNING OF THE
PERIOD |
|
37,237 |
|
|
16,215 |
|
|
|
|
|
|
CASH, END OF THE PERIOD |
$ |
36,735 |
|
$ |
19,792 |
Major Drilling Group
International Inc. |
Interim Condensed Consolidated
Balance Sheets |
As at July 31, 2012 and April 30,
2012 |
(in thousands of Canadian
dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2012 |
|
|
April 30, 2012 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
Cash |
$ |
36,735 |
|
$ |
37,237 |
|
Trade and other receivables |
|
161,798 |
|
|
159,770 |
|
Income tax receivable |
|
4,841 |
|
|
3,314 |
|
Inventories |
|
98,752 |
|
|
95,905 |
|
Prepaid expenses |
|
11,792 |
|
|
7,476 |
|
|
313,918 |
|
|
303,702 |
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT |
|
334,586 |
|
|
318,171 |
|
|
|
|
|
|
DEFERRED INCOME TAX ASSETS |
|
2,630 |
|
|
2,859 |
|
|
|
|
|
|
GOODWILL |
|
55,366 |
|
|
54,946 |
|
|
|
|
|
|
INTANGIBLE ASSETS |
|
5,249 |
|
|
6,295 |
|
|
|
|
|
|
|
$ |
711,749 |
|
$ |
685,973 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
Trade and other payables |
$ |
95,096 |
|
$ |
115,805 |
|
Income tax payable |
|
10,330 |
|
|
3,142 |
|
Current portion of long-term debt |
|
8,675 |
|
|
8,712 |
|
|
114,101 |
|
|
127,659 |
|
|
|
|
|
|
CONTINGENT CONSIDERATION |
|
2,159 |
|
|
2,760 |
|
|
|
|
|
|
LONG-TERM DEBT |
|
40,890 |
|
|
42,274 |
|
|
|
|
|
|
DEFERRED INCOME TAX LIABILITIES |
|
26,751 |
|
|
25,581 |
|
|
183,901 |
|
|
198,274 |
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Share capital |
|
230,670 |
|
|
230,763 |
|
Reserves |
|
(23) |
|
|
121 |
|
Share-based payments reserve |
|
12,657 |
|
|
11,797 |
|
Retained earnings |
|
278,684 |
|
|
246,809 |
|
Foreign currency translation reserve |
|
5,860 |
|
|
(1,791) |
|
|
|
527,848 |
|
|
487,699 |
|
|
|
|
|
|
|
|
|
$ |
711,749 |
|
$ |
685,973 |
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31,
2012 AND 2011 (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
annual notes to consolidated financial statements for the year
ended April 30, 2012.
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 annual consolidated financial statements for the year ended
April 30, 2012.
3. FUTURE ACCOUNTING CHANGES
The Company has not applied the following new and revised IFRSs
that have been issued but are not yet effective:
IFRS 7 (as amended in 2011) Financial Instruments:
Disclosures
IFRS 9 (as amended in 2010) Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 1 Presentation of Financial Statements
IAS 12 (amended) Income Taxes - recovery of underlying
assets
IAS 19 Employee Benefits
IAS 27 (reissued) Separate Financial Statements
IAS 28 (reissued) Investments in Associates and Joint
Ventures
IAS 32 (amended) Financial Instruments: Presentation
The Company is currently evaluating the impact of applying these
standards to its consolidated financial statements.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL
ACCOUNTING JUDGMENTS
The preparation of financial statements in
conformity with 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,
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
With the exception of the third quarter, the
Company exhibits comparatively less seasonality in quarterly
revenue than in the past. 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 were $23,401 for the quarter ended July 31, 2012 compared to $21,410 for the same period last year.
During the quarter, the Company added 24 drill rigs through its
capital expenditure program while retiring or disposing of 10 drill
rigs through its modernization program.
7. INCOME TAXES
The income tax expense for the period can be reconciled to
accounting profit as follows:
|
|
2013 Q1 |
|
|
2012 Q1 |
|
|
|
|
|
|
Earnings before income tax |
$ |
46,145 |
|
$ |
26,255 |
|
|
|
|
|
|
Statutory Canadian corporate income tax rate |
|
29% |
|
|
29% |
|
|
|
|
|
|
Expected income tax expense based on statutory
rate |
$ |
13,382 |
|
$ |
7,614 |
Non-recognition of tax benefits related to
losses |
|
315 |
|
|
48 |
Other foreign taxes paid |
|
355 |
|
|
51 |
Rate variances in foreign jurisdictions |
|
119 |
|
|
(298) |
Other |
|
99 |
|
|
948 |
|
$ |
14,270 |
|
$ |
8,363 |
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 recorded
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 statute of
limitation lapses.
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.
|
|
2013
Q1 |
|
|
2012
Q1 |
|
|
|
|
|
|
Net earnings for the period |
$ |
31,875 |
|
$ |
17,892 |
|
|
|
|
|
|
Weighted average shares outstanding - basic (000's) |
|
79,147 |
|
|
72,040 |
|
|
|
|
|
|
Net effect of dilutive securities: |
|
|
|
|
|
Stock options (000's) |
|
637 |
|
|
881 |
Weighted average number of shares - diluted (000's) |
|
79,784 |
|
|
72,921 |
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic |
$ |
0.40 |
|
$ |
0.25 |
Diluted |
$ |
0.40 |
|
$ |
0.25 |
There were no anti-dilutive options for the three months ended
July 31, 2012. The calculation
of the diluted earnings per share for the period ended July 31, 2011 exclude the effect of 75,271
options as they were anti-dilutive.
The total number of shares outstanding on July 31, 2012 was 79,147,378.
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 drilling segments are similar. The accounting policies
of the segments are the same as those described in the annual
consolidated financial statements for the year ended April 30, 2012. Management evaluates performance
based on earnings from operations in these three geographic
segments before finance costs and income taxes. Data relating
to each of the Company's reportable segments is presented as
follows:
|
|
2013
Q1 |
|
|
2012
Q1 |
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Canada - U.S. |
$ |
112,837 |
|
$ |
61,438 |
|
South and Central America |
|
69,413 |
|
|
51,292 |
|
Australia, Asia and Africa |
|
55,315 |
|
|
51,422 |
|
|
|
|
|
|
|
$ |
237,565 |
|
$ |
164,152 |
|
|
|
|
|
|
Earnings from operations |
|
|
|
|
|
|
Canada - U.S. |
$ |
25,471 |
|
$ |
9,986 |
|
South and Central America |
|
16,751 |
|
|
10,599 |
|
Australia, Asia and Africa |
|
9,021 |
|
|
11,058 |
|
|
51,243 |
|
|
31,643 |
Eliminations |
|
521 |
|
|
(25) |
|
|
51,764 |
|
|
31,618 |
Finance costs |
|
738 |
|
|
822 |
General and corporate expenses* |
|
4,881 |
|
|
4,541 |
Income tax |
|
14,270 |
|
|
8,363 |
Net earnings |
$ |
31,875 |
|
$ |
17,892 |
|
|
|
|
|
|
*General and corporate expenses include expenses for corporate
offices and stock options |
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
Canada - U.S. |
$ |
5,480 |
|
$ |
3,341 |
|
South and Central America |
|
3,212 |
|
|
2,271 |
|
Australia, Asia and Africa |
|
4,027 |
|
|
2,664 |
Unallocated corporate assets |
|
468 |
|
|
304 |
Total depreciation and amortization |
$ |
13,187 |
|
$ |
8,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
31, 2012 |
|
|
April
30, 2012 |
Identifiable assets |
|
|
|
|
|
|
Canada - U.S. |
$ |
276,970 |
|
$ |
252,233 |
|
South and Central America |
|
220,792 |
|
|
212,861 |
|
Australia, Asia and Africa |
|
195,951 |
|
|
186,442 |
|
|
693,713 |
|
|
651,536 |
Eliminations |
|
(771) |
|
|
(573) |
Unallocated and corporate assets |
|
18,807 |
|
|
35,010 |
|
$ |
711,749 |
|
$ |
685,973 |
Canada - U.S.
includes revenue for the period ended July
31, 2012 of $67,025
(July 31, 2011 - $33,225) for Canadian operations and property,
plant and equipment at July 31, 2012
of $88,034 (April 30, 2012 - $87,629).
10. 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,
2012 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 and approximates their
fair value, 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, 2012 |
|
April 30, 2012 |
|
|
|
|
|
|
Contingent consideration |
$ |
2,159 |
|
$ |
2,760 |
Long-term debt |
|
49,565 |
|
|
50,986 |
Credit risk
As at July 31, 2012, 80.5% of the
Company's trade receivables were aged as current and 1.5% of the
trade receivables were impaired.
The movement in the allowance for impairment of
trade receivables during the period was as follows:
Balance as at April 30, 2012 |
$ |
2,236 |
Increase in impairment allowance |
|
38 |
Foreign exchange translation differences |
|
25 |
Balance as at July 31, 2012 |
$ |
2,299 |
Foreign currency risk
The most significant carrying amounts of net monetary assets that:
(1) are denominated in currencies other than the functional
currency of the respective Company subsidiary; (2) cause foreign
exchange rate exposure; and (3) may include intercompany balances
with other subsidiaries, at the reporting dates are as follows:
|
July 31, 2012 |
|
April 30, 2012 |
U.S. Dollars |
$ |
14,688 |
|
$ 45,555 |
If the Canadian dollar moved by plus or minus
10% at July 31, 2012, the unrealized
foreign exchange gain or loss would move by approximately
$1,469 (April
30, 2012 - $4,556).
Liquidity risk
The following table details the Company's contractual maturities
for its financial liabilities.
Non-derivative financial liabilities: |
|
|
|
1 year |
2-3 years |
4-5 years |
thereafter |
Total |
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
$ |
95,096 |
$ |
- |
$ |
- |
$ |
- |
$ |
95,096 |
Contingent consideration |
|
753 |
|
1,255 |
|
151 |
|
- |
|
2,159 |
Long-term debt |
|
8,659 |
|
17,679 |
|
19,121 |
|
4,083 |
|
49,542 |
|
$ |
104,508 |
$ |
18,934 |
$ |
19,272 |
$ |
4,083 |
$ |
146,797 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
liabilities: |
|
|
|
1 year |
2-3 years |
4-5 years |
thereafter |
Total |
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
$ |
16 |
$ |
12 |
$ |
(5) |
$ |
- |
$ |
23 |
SOURCE MAJOR DRILLING GROUP INTERNATIONAL INC.