MONCTON, NB, March 2, 2015 /CNW/ - Major Drilling Group
International Inc. (TSX: MDI) (the "Company") today reported
results for its third quarter of fiscal year 2015, ended
January 31, 2015.
Highlights
|
|
|
|
|
|
|
|
|
|
In millions of
Canadian dollars
(except loss per
share)
|
Q3-15
|
Q3-14
|
YTD-15
|
YTD-14
|
Revenue
|
$69.8
|
$71.8
|
$224.5
|
$272.3
|
Gross
profit
|
7.8
|
17.8
|
45.2
|
82.9
|
|
As percentage of
sales
|
11.2%
|
24.7%
|
20.1%
|
30.4%
|
EBITDA(1)
|
(6.6)
|
0.6
|
6.5
|
35.9
|
|
As percentage of
revenue
|
(9.4%)
|
0.9%
|
2.9%
|
13.2%
|
Net loss
|
(19.0)
|
(12.8)
|
(36.5)
|
(30.4)
|
Loss per
share
|
(0.24)
|
(0.16)
|
(0.46)
|
(0.38)
|
(1)
|
Earnings before
interest, taxes, depreciation and amortization, excluding
restructuring charges and goodwill impairment (see "non-GAAP
financial measures")
|
- Cash on hand at quarter-end was $50.7
million while total debt was $18.8
million, for a net cash position of $31.9 million.
- Quarterly revenue was $69.8
million, down 3% from the $71.8
million recorded for the same quarter last year.
- Gross margin percentage for the quarter was 11.2%, compared to
24.7% for the corresponding period last year.
- Net loss was $19.0 million or
$0.24 per share for the quarter,
compared to a net loss of $12.8
million or $0.16 per share for
the prior year quarter.
- The Company has declared a semi-annual dividend of $0.02 per share to be paid on May 1, 2015. This represents a reduction
from the previous semi-annual dividend of $0.10 per share, in order to preserve the
Company's ability to promptly respond to an increase in activity or
to opportunities should they arise.
"Our third quarter was extremely
challenging. Year-over-year revenue was relatively flat. The
gains made with the addition of our new percussive drilling
division were offset by the loss of revenue in our energy business
and the closures of our operations in Australia and the Democratic Republic of Congo ("DRC")," said
Francis McGuire, President and CEO
of Major Drilling Group International Inc.
"Third quarter margins are typically impacted by a slowdown
during the holiday season, but this quarter was hit particularly
hard. The three main elements affecting margins were: reduced
pricing; extensive mobilizations and repositioning costs; and high
repair and purchasing costs in anticipation of the post-Christmas
startups. We have seen a significant decrease in higher margin
specialized drilling and a much greater focus on production related
drilling, which generates lower revenue and has lower margins.
Revenue and margins should return to their pre-holiday levels as we
move forward."
"As we go through this challenging period, we continue to focus
on cash preservation. Major Drilling remains net debt free, with a
net cash position of $31.9 million at
the end of the quarter, a decrease of $0.4
million during the quarter. The Company spent
$2.6 million on net capital
expenditures this quarter, adding 2 underground drills while
retiring 11 rigs," added Mr. McGuire.
"Given the current low commodity price environment and the
uncertainty over how long it will persist, the Company's
Board of Directors has approved an amended dividend policy,
declaring a cash dividend of $0.02
per common share payable on May 1,
2015 to shareholders of record as of April 7, 2015. The Company believes that it is
prudent to lower the amount of its semi-annual dividend to ensure
that it balances its cash inflows with capital expenditure
requirements, preserves its ability to adequately respond to a
future upturn in the mining industry and emerge as one of the
strongest drilling companies. This dividend is designated as
an "eligible dividend" for Canadian tax purposes," said Mr.
McGuire.
"Long-term, we believe that most commodities will face an
imbalance between supply and demand as mining reserves
continue to decrease due to the lack of exploration, while
despite an economic slowdown, worldwide consumption continues to
increase. At some point in the near future, the need to
develop resources in areas that are increasingly difficult to
access will significantly increase, at which time we expect to see
a resurgence in demand for specialized drilling."
Third quarter ended January 31,
2015
Total revenue for the quarter was $69.8
million, down 3% from revenue of $71.8 million recorded in the same quarter last
year. There have been continued delays in the decision making
process on the part of many of the Company's senior customers in
regards to their 2015 exploration drilling programs, and many
junior customers have suspended drilling activities. The favourable
foreign exchange translation impact for the quarter, when comparing
to the effective rates for the same period last year, is estimated
at $2.6 million on revenue but
negligible on net earnings.
Revenue for the quarter from Canada-U.S. drilling operations
increased by 27% to $41.1 million
compared to the same period last year. The increase relates to
the Taurus acquisition and is somewhat offset by the slowdown in
the energy sector.
South and Central American revenue was down 8% to $17.2 million for the quarter, compared to the
same quarter last year. Chile and
Argentina were affected by a
reduction in work by juniors and the cancellation of certain
projects, while Mexico saw a
slight increase in demand compared to the same period last
year.
Australian, Asian and African operations reported revenue of
$11.5 million, down 45% from the same
period last year. Several factors affected the region's
revenue this quarter compared to last year. The Company closed
its operations in Australia
earlier in the year, and also closed its operations in the DRC due
to ongoing administrative difficulties associated with operating in
that country. Also, Mongolia
continues to be affected by political uncertainty around mining
laws.
The overall gross margin percentage for the quarter was 11.2%,
down from 24.7% for the same period last year. Third quarter
margins are typically impacted by a slowdown during the holiday
season combined with higher than usual mobilizations,
demobilizations and increased repairs during this period. Margins
continue to be affected by reduced pricing due to increased
competitive pressures. As well, customers are focusing on mine
site drilling, especially underground drilling, which tends to have
lower margins.
General and administrative costs decreased 3% from last year at
$11.7 million for the quarter despite
an increase due to foreign exchange translation and the Taurus
acquisition. With the decrease in activity, the Company has
reduced its general and administrative costs by implementing
reductions of salaried employees and restructuring certain
branches.
Foreign exchange loss was $0.8
million compared to a loss of $3.3
million last year. Most of last year's quarterly loss
was related to the devaluation of the Argentine peso and the
Company crystalized currency losses by converting some of its
Argentine pesos into U.S. dollar investments, although at a
significant discount, to protect against further devaluations.
The income tax provision for the quarter was a recovery of
$1.7 million compared to a recovery
of $0.5 million for the prior year
period. The tax recovery for the quarter was impacted by
non-tax affected losses and non-deductible expenses.
Net loss was $19.0 million or
$0.24 per share ($0.24 per share diluted) for the quarter,
compared to a net loss of $12.8
million or $0.16 per share
($0.16 per share diluted) for the
prior year quarter.
Non-GAAP Financial Measures
In this news release, the Company uses the non-GAAP financial
measure, EBITDA, excluding restructuring charges and goodwill
impairment. 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 15
to 18 of the 2014 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 services
companies. To support its customers' mining operations, mineral
exploration and environmental activities, Major Drilling maintains
field operations and offices in Canada, the United
States, Mexico, South
America, Asia, and
Africa.
Financial statements are attached.
Webcast/Conference Call Information
Major Drilling will provide a simultaneous webcast and
conference call of its quarterly results on Tuesday, March 3, 2015 at 9:00 AM (EST). 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.
To access the conference call, please dial 647-427-7450 and
ask for Major Drilling's Third Quarter Conference Call. To
ensure your participation, please call in approximately five
minutes prior to the scheduled call.
For those unable to participate, a taped rebroadcast will be
available approximately two hours after the completion of the call
until midnight, Tuesday March 10,
2015. To access the rebroadcast, dial 416-849-0833,
514-807-9274, 403-451-9481 or 902-455-3955 and enter the passcode
81564254. The webcast will also be archived for 90 days and
can be accessed on the Major Drilling website at
www.majordrilling.com or on the CNW Group website at
www.newswire.ca.
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUE
|
$
|
69,784
|
|
$
|
71,830
|
|
$
|
224,527
|
|
$
|
272,309
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT
COSTS
|
|
61,998
|
|
|
54,060
|
|
|
179,338
|
|
|
189,406
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
7,786
|
|
|
17,770
|
|
|
45,189
|
|
|
82,903
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
11,667
|
|
|
12,070
|
|
|
33,907
|
|
|
37,386
|
|
Other
expenses
|
|
1,436
|
|
|
636
|
|
|
3,980
|
|
|
2,719
|
|
Loss (gain) on
disposal of property, plant and equipment
|
|
469
|
|
|
826
|
|
|
(1,561)
|
|
|
1,259
|
|
Loss on short-term
investments
|
|
-
|
|
|
307
|
|
|
-
|
|
|
307
|
|
Foreign exchange
loss
|
|
804
|
|
|
3,291
|
|
|
2,322
|
|
|
5,295
|
|
Finance
costs
|
|
178
|
|
|
198
|
|
|
572
|
|
|
736
|
|
Depreciation of
property, plant and equipment
|
|
12,145
|
|
|
12,886
|
|
|
38,107
|
|
|
38,862
|
|
Amortization of
intangible assets
|
|
1,351
|
|
|
343
|
|
|
2,199
|
|
|
1,027
|
|
Impairment of
goodwill
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,057
|
|
Restructuring
charge
|
|
405
|
|
|
508
|
|
|
3,826
|
|
|
3,220
|
|
|
28,455
|
|
|
31,065
|
|
|
83,352
|
|
|
102,868
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME
TAX
|
|
(20,669)
|
|
|
(13,295)
|
|
|
(38,163)
|
|
|
(19,965)
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX -
(RECOVERY) PROVISION (note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
(195)
|
|
|
886
|
|
|
4,320
|
|
|
9,361
|
|
Deferred
|
|
(1,475)
|
|
|
(1,384)
|
|
|
(6,005)
|
|
|
1,049
|
|
|
(1,670)
|
|
|
(498)
|
|
|
(1,685)
|
|
|
10,410
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
$
|
(18,999)
|
|
$
|
(12,797)
|
|
$
|
(36,478)
|
|
$
|
(30,375)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER SHARE
(note 8)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.24)
|
|
$
|
(0.16)
|
|
$
|
(0.46)
|
|
$
|
(0.38)
|
Diluted
|
$
|
(0.24)
|
|
$
|
(0.16)
|
|
$
|
(0.46)
|
|
$
|
(0.38)
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Drilling
Group International Inc.
|
Interim Condensed
Consolidated Statements of Comprehensive Earnings
(Loss)
|
(in thousands
of Canadian dollars)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
January 31
|
|
January 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
NET
LOSS
|
$
|
(18,999)
|
|
$
|
(12,797)
|
|
$
|
(36,478)
|
|
$
|
(30,375)
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be
reclassified subsequently to profit or loss
|
|
|
|
|
|
|
|
|
Unrealized gains on
foreign currency translations (net of tax)
|
37,277
|
|
17,078
|
|
43,623
|
|
21,658
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
EARNINGS (LOSS)
|
$
|
18,278
|
|
$
|
4,281
|
|
$
|
7,145
|
|
$
|
(8,717)
|
Major Drilling
Group International Inc.
|
Interim Condensed
Consolidated Statements of Changes in Equity
|
For the nine
months ended January 31, 2014 and 2015
|
(in thousands of
Canadian dollars)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
|
|
Retained
|
|
Foreign
currency
|
|
|
|
|
Share
capital
|
|
payments
reserve
|
|
earnings
|
|
translation
reserve
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY
1, 2013
|
|
$
|
230,985
|
|
$
|
14,204
|
|
$
|
283,088
|
|
$
|
10,052
|
|
$
|
538,329
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
reserve
|
|
-
|
|
1,372
|
|
-
|
|
-
|
|
1,372
|
|
Dividends
|
|
-
|
|
-
|
|
(7,916)
|
|
-
|
|
(7,916)
|
|
|
230,985
|
|
15,576
|
|
275,172
|
|
10,052
|
|
531,785
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
-
|
|
-
|
|
(30,375)
|
|
-
|
|
(30,375)
|
|
Unrealized gains on
foreign currency translations
|
|
-
|
|
-
|
|
-
|
|
21,658
|
|
21,658
|
Total comprehensive
loss
|
|
-
|
|
-
|
|
(30,375)
|
|
21,658
|
|
(8,717)
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT
JANUARY 31, 2014
|
|
$
|
230,985
|
|
$
|
15,576
|
|
$
|
244,797
|
|
$
|
31,710
|
|
$
|
523,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY
1, 2014
|
|
$
|
230,985
|
|
$
|
15,937
|
|
$
|
211,945
|
|
$
|
25,480
|
|
$
|
484,347
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock
options
|
|
46
|
|
(12)
|
|
-
|
|
-
|
|
34
|
|
Share issue (note
10)
|
|
8,689
|
|
-
|
|
-
|
|
-
|
|
8,689
|
|
Share-based payments
reserve
|
|
-
|
|
1,015
|
|
-
|
|
-
|
|
1,015
|
|
Dividends
|
|
-
|
|
-
|
|
(8,014)
|
|
-
|
|
(8,014)
|
|
|
239,720
|
|
16,940
|
|
203,931
|
|
25,480
|
|
486,071
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
-
|
|
-
|
|
(36,478)
|
|
-
|
|
(36,478)
|
|
Unrealized gains on
foreign currency translations
|
|
-
|
|
-
|
|
-
|
|
43,623
|
|
43,623
|
Total comprehensive
earnings
|
|
-
|
|
-
|
|
(36,478)
|
|
43,623
|
|
7,145
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT
JANUARY 31, 2015
|
|
$
|
239,720
|
|
$
|
16,940
|
|
$
|
167,453
|
|
$
|
69,103
|
|
$
|
493,216
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Loss before income
tax
|
$
|
(20,669)
|
|
$
|
(13,295)
|
|
$
|
(38,163)
|
|
$
|
(19,965)
|
Operating items not
involving cash
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
13,496
|
|
13,229
|
|
40,306
|
|
39,889
|
|
Loss (gain) on
disposal of property, plant and equipment
|
469
|
|
826
|
|
(1,561)
|
|
1,259
|
|
Loss on short-term
investments
|
-
|
|
307
|
|
-
|
|
307
|
|
Share-based payments
reserve
|
313
|
|
391
|
|
1,015
|
|
1,372
|
|
Impairment of
goodwill
|
-
|
|
-
|
|
-
|
|
12,057
|
|
Restructuring
charge
|
-
|
|
-
|
|
1,953
|
|
665
|
Finance costs
recognized in loss before income tax
|
178
|
|
198
|
|
572
|
|
736
|
|
(6,213)
|
|
1,656
|
|
4,122
|
|
36,320
|
Changes in non-cash
operating working capital items
|
16,014
|
|
1,890
|
|
18,415
|
|
1,997
|
Finance costs
paid
|
(161)
|
|
(195)
|
|
(549)
|
|
(722)
|
Income taxes
paid
|
(2,730)
|
|
(2,422)
|
|
(6,939)
|
|
(11,882)
|
Cash flow from
operating activities
|
6,910
|
|
929
|
|
15,049
|
|
25,713
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
Increase (decrease)
in demand loan
|
1,372
|
|
4,066
|
|
(1,324)
|
|
4,066
|
Repayment of
long-term debt
|
(1,655)
|
|
(1,683)
|
|
(8,154)
|
|
(18,717)
|
Issuance of common
shares
|
-
|
|
-
|
|
34
|
|
-
|
Dividends
paid
|
(8,014)
|
|
(7,916)
|
|
(15,930)
|
|
(15,832)
|
Cash flow used in
financing activities
|
(8,297)
|
|
(5,533)
|
|
(25,374)
|
|
(30,483)
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
Business acquisition
(note 10)
|
57
|
|
-
|
|
(20,834)
|
|
(205)
|
Acquisition of
short-term investments
|
-
|
|
(3,587)
|
|
-
|
|
(3,587)
|
Acquisition of
property, plant and equipment (net of direct financing) (note
6)
|
(3,536)
|
|
(6,227)
|
|
(13,593)
|
|
(17,436)
|
Proceeds from
disposal of property, plant and equipment
|
962
|
|
502
|
|
16,842
|
|
3,385
|
Cash flow used in
investing activities
|
(2,517)
|
|
(9,312)
|
|
(17,585)
|
|
(17,843)
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes
|
3,597
|
|
1,203
|
|
4,412
|
|
2,713
|
|
|
|
|
|
|
|
|
DECREASE IN
CASH
|
(307)
|
|
(12,713)
|
|
(23,498)
|
|
(19,900)
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF
THE PERIOD
|
51,053
|
|
75,124
|
|
74,244
|
|
82,311
|
|
|
|
|
|
|
|
|
CASH, END OF THE
PERIOD
|
$
|
50,746
|
|
$
|
62,411
|
|
$
|
50,746
|
|
$
|
62,411
|
Major Drilling
Group International Inc.
|
Interim Condensed
Consolidated Balance Sheets
|
As at January 31,
2015 and April 30, 2014
|
(in thousands of
Canadian dollars)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
January 31,
2015
|
|
April 30,
2014
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
|
$
|
50,746
|
|
$
|
74,244
|
|
Trade and other
receivables
|
56,639
|
|
66,211
|
|
Income tax
receivable
|
14,263
|
|
12,179
|
|
Inventories
|
85,262
|
|
81,308
|
|
Prepaid
expenses
|
4,253
|
|
4,690
|
|
211,163
|
|
238,632
|
|
|
|
|
PROPERTY, PLANT
AND EQUIPMENT
|
300,319
|
|
307,288
|
|
|
|
|
DEFERRED INCOME
TAX ASSETS
|
8,782
|
|
5,825
|
|
|
|
|
GOODWILL
|
57,764
|
|
38,056
|
|
|
|
|
INTANGIBLE
ASSETS
|
7,394
|
|
1,923
|
|
|
|
|
|
$
|
585,422
|
|
$
|
591,724
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Demand
loan
|
$
|
2,735
|
|
$
|
3,909
|
|
Trade and other
payables
|
38,026
|
|
52,155
|
|
Income tax
payable
|
1,772
|
|
3,416
|
|
Current portion of
long-term debt
|
6,502
|
|
9,655
|
|
49,035
|
|
69,135
|
|
|
|
|
CONTINGENT
CONSIDERATION (note 10)
|
10,130
|
|
-
|
|
|
|
|
LONG-TERM
DEBT
|
9,612
|
|
14,187
|
|
|
|
|
DEFERRED INCOME
TAX LIABILITIES
|
23,429
|
|
24,055
|
|
92,206
|
|
107,377
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Share
capital
|
239,720
|
|
230,985
|
|
Share-based payments
reserve
|
16,940
|
|
15,937
|
|
Retained
earnings
|
167,453
|
|
211,945
|
|
Foreign currency
translation reserve
|
69,103
|
|
25,480
|
|
493,216
|
|
484,347
|
|
|
|
|
|
$
|
585,422
|
|
$
|
591,724
|
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND NINE MONTHS ENDED JANUARY 31,
2015 AND 2014 (UNAUDITED)
(in thousands of
Canadian dollars, except per share information)
1. NATURE OF ACTIVITIES
Major Drilling Group International Inc. (the "Company" or "Major
Drilling") 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 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, 2014, 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, 2014.
On March 2, 2015 the Board of
Directors authorized the financial statements for issue.
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 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 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, 2014.
3. APPLICATION OF NEW AND REVISED IFRS
The following IASB standards, now in effect, have had no
significant impact on the Company's Consolidated Financial
Statements:
IAS 32 (amended) Financial Instruments:
Presentation
IAS 36 (amended) Impairment of
Assets
IAS 39 (amended) Financial Instruments:
Recognition and Measurement
IFRIC 21 Levies
The Company has not applied the following revised IASB standards
that have been issued, but are not yet effective:
IFRS 9 (as amended in 2014) Financial Instruments
IFRS 10 (amended) Consolidated Financial Statements
IFRS
11 (amended) Joint Arrangements - Accounting for Acquisitions of
Interests in Joint Operations
IFRS 15 Revenue from
Contracts with Customers
IAS 1 (amended) Presentation of
Financial Statements
IAS 16 (amended) Property, Plant and
Equipment
IAS 27 (amended) Separate Financial
Statements
IAS 28 (amended) Investments in Associates and
Joint Ventures
IAS 38 (amended) Intangible Assets
The Company is currently in the process of assessing the impact
of the adoption of these standards on the 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 contingent considerations, 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.
6. PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for the three months ended January 31, 2015 were $3,759 (2014 - $6,227) and for the nine months ended
January 31, 2015 were $14,028 (2014 - $17,436). The Company obtained direct financing
of $223 for the three months ended
January 31, 2015 (2014 - nil) and of
$435 for the nine months ended
January 31, 2015 (2014 -
nil).
7. INCOME TAXES
The income tax expense for the period can be reconciled to
accounting loss as follows:
|
Q3
2015
|
|
Q3 2014
|
|
YTD
2015
|
|
YTD 2014
|
|
|
|
|
|
|
|
|
Loss before income
tax
|
$
|
(20,669)
|
|
$
|
(13,295)
|
|
$
|
(38,163)
|
|
$
|
(19,965)
|
|
|
|
|
|
|
|
|
Statutory Canadian
corporate income tax rate
|
27%
|
|
28%
|
|
27%
|
|
28%
|
|
|
|
|
|
|
|
|
Expected income tax
recovery based on statutory
rate
|
(5,581)
|
|
(3,723)
|
|
(10,304)
|
|
(5,590)
|
Non-recognition of
tax benefits related to losses
|
1,994
|
|
1,275
|
|
5,558
|
|
2,356
|
Other foreign taxes
paid
|
408
|
|
71
|
|
579
|
|
273
|
Rate variances in
foreign jurisdictions
|
(351)
|
|
(854)
|
|
(627)
|
|
990
|
Permanent
differences
|
876
|
|
1,726
|
|
1,310
|
|
5,394
|
De-recognition of
previously recognized tax
losses
|
-
|
|
-
|
|
-
|
|
4,536
|
Other
|
984
|
|
1,007
|
|
1,799
|
|
2,451
|
Income tax (recovery)
expense recognized in net
loss
|
$
|
(1,670)
|
|
$
|
(498)
|
|
$
|
(1,685)
|
|
$
|
10,410
|
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. LOSS PER SHARE
All of the Company's earnings are attributable to common shares
therefore net earnings are used in determining earnings per
share.
|
Q3
2015
|
|
Q3 2014
|
|
YTD
2015
|
|
YTD 2014
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(18,999)
|
|
$
|
(12,797)
|
|
$
|
(36,478)
|
|
$
|
(30,375)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – basic
(000's)
|
80,136
|
|
79,161
|
|
79,807
|
|
79,161
|
|
|
|
|
|
|
|
|
Net effect of
dilutive securities:
|
|
|
|
|
|
|
|
Stock options
(000's)
|
-
|
|
-
|
|
-
|
|
-
|
Weighted average
number of shares – diluted
(000's)
|
80,136
|
|
79,161
|
|
79,807
|
|
79,161
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.24)
|
|
$
|
(0.16)
|
|
$
|
(0.46)
|
|
$
|
(0.38)
|
Diluted
|
$
|
(0.24)
|
|
$
|
(0.16)
|
|
$
|
(0.46)
|
|
$
|
(0.38)
|
|
|
|
|
|
|
|
|
There were no anti-dilutive options for the three and nine
months ended January 31, 2015 and
2014.
The total number of shares outstanding on January 31, 2015 was 80,135,883 (2014 -
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, 2014. Management
evaluates performance based on (loss) 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
2015
|
|
Q3 2014
|
|
YTD
2015
|
|
YTD 2014
|
Revenue
|
|
|
|
|
|
|
|
|
Canada –
U.S.
|
$
|
41,115
|
|
$
|
32,389
|
|
$
|
127,347
|
|
$
|
129,421
|
|
South and Central
America
|
17,179
|
|
18,633
|
|
54,615
|
|
57,895
|
|
Australia, Asia and
Africa
|
11,490
|
|
20,808
|
|
42,565
|
|
84,993
|
|
|
|
|
|
|
|
|
|
$
|
69,784
|
|
$
|
71,830
|
|
$
|
224,527
|
|
$
|
272,309
|
|
|
|
|
|
|
|
|
(Loss) earnings from
operations
|
|
|
|
|
|
|
|
|
Canada –
U.S.
|
$
|
(7,533)
|
|
$
|
(4,278)
|
|
$
|
(5,566)
|
|
$
|
7,246
|
|
South and Central
America*
|
(5,288)
|
|
(5,731)
|
|
(10,800)
|
|
(22,304)
|
|
Australia, Asia and
Africa
|
(5,211)
|
|
(1,934)
|
|
(14,021)
|
|
1,763
|
|
(18,032)
|
|
(11,943)
|
|
(30,387)
|
|
(13,295)
|
Eliminations
|
-
|
|
(135)
|
|
-
|
|
(419)
|
|
(18,032)
|
|
(12,078)
|
|
(30,387)
|
|
(13,714)
|
Finance
costs
|
178
|
|
198
|
|
572
|
|
736
|
General corporate
expenses**
|
2,459
|
|
1,019
|
|
7,204
|
|
5,515
|
Income tax
|
(1,670)
|
|
(498)
|
|
(1,685)
|
|
10,410
|
Net
loss
|
$
|
(18,999)
|
|
$
|
(12,797)
|
|
$
|
(36,478)
|
|
$
|
(30,375)
|
|
|
|
|
|
|
|
|
*
|
Loss from
South and Central American operations includes an impairment of
goodwill totaling $12,057 for the nine-month period ended January
31, 2014.
|
**
|
General
corporate expenses include expenses for corporate offices and stock
options.
|
Canada – U.S. includes revenue
of $22,423 and $18,627 for Canadian operations for the three
months ended January 31, 2015 and
2014, respectively, and $74,060 and
$81,413 for the nine months ended
January 31, 2015 and 2014,
respectively.
|
|
Q3
2015
|
|
|
Q3 2014
|
|
|
YTD
2015
|
|
|
YTD 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada –
U.S.
|
|
$
|
7,213
|
|
|
$
|
5,727
|
|
|
$
|
19,697
|
|
|
$
|
17,199
|
|
|
South and Central
America
|
|
3,027
|
|
|
2,929
|
|
|
9,611
|
|
|
8,923
|
|
|
Australia, Asia and
Africa
|
|
2,861
|
|
|
4,053
|
|
|
9,856
|
|
|
12,146
|
|
|
Unallocated corporate
assets
|
|
395
|
|
|
520
|
|
|
1,142
|
|
|
1,621
|
|
Total depreciation
and amortization
|
|
$
|
13,496
|
|
|
$
|
13,229
|
|
|
$
|
40,306
|
|
|
$
|
39,889
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2015
|
|
|
April 30,
2014
|
|
Identifiable
assets
|
|
|
|
|
|
|
|
|
Canada –
U.S.
|
|
|
$
|
232,498
|
|
|
$
|
197,673
|
|
|
South and Central
America
|
|
|
175,716
|
|
|
178,026
|
|
|
Australia, Asia and
Africa
|
|
|
126,338
|
|
|
148,806
|
|
|
|
|
534,552
|
|
|
524,505
|
|
Unallocated and
corporate assets
|
|
|
50,870
|
|
|
67,219
|
|
|
|
|
$
|
585,422
|
|
|
$
|
591,724
|
Canada – U.S. includes
property, plant and equipment at January 31,
2015 of $86,293 (April 30, 2014 - $88,347) for Canadian operations.
10. BUSINESS ACQUISITION
Taurus Drilling Services
Effective August
1, 2014, the Company entered into the underground
percussive/longhole drilling sector with its purchase of the
operations of Taurus Drilling Services ("Taurus"), based in
Canada and the United States.
The acquisition has been accounted for using the acquisition
method and the results of this operation have been included in the
Interim Condensed Consolidated Statements of Operations from the
closing date. Through this purchase, which fits with the Company's
strategic focus on specialized drilling, the Company acquired 39
underground drill rigs, support equipment and inventory, existing
contracts and receivables, the operation's management team, and
other employees, including experienced drillers.
The purchase price for the transaction was $29.5 million (consisting of $20.7 million in cash, $8.7 million in Major Drilling shares, and
$0.1 million in assumption of debt),
and an additional maximum amount of $11.5
million (undiscounted) tied to performance. The estimated
fair value of the contingent consideration was $10.1 million at January
31, 2015. The additional payout period extends for three
years, commencing on August 1, 2014,
and payments are contingent on growing EBITDA (earnings before
interest, taxes, depreciation and amortization) run rates above
levels at the date of acquisition.
The Company is in the process of finalizing the valuation of
assets. As at January 31, 2015, the
values allocated to net tangible and intangible assets are
preliminary and are subject to adjustments as additional
information is obtained. Changes during the current quarter relate
to fair value assessments of goodwill and intangible assets.
Trade and other receivables are recorded at fair value. Goodwill
arising from this acquisition will represent the excess of the
total consideration paid over the fair value of the net assets
acquired and the benefit of expected synergies, revenue growth,
future market development and the assembled workforce of Taurus and
Major Drilling.
The estimated net assets acquired at fair value at acquisition
are as follows:
Assets
acquired:
|
|
|
Trade and other
receivables
|
$
|
5,500
|
Inventories
|
|
606
|
Prepaid
expenses
|
|
40
|
Property, plant and
equipment
|
|
9,268
|
Goodwill
|
|
18,367
|
Intangible
assets
|
|
7,095
|
Trade and other
payables
|
|
(1,223)
|
Total
assets
|
$
|
39,653
|
|
|
|
Consideration:
|
|
|
Cash
|
$
|
20,683
|
Trade and other
payable
|
|
151
|
Contingent
consideration
|
|
10,130
|
Shares of Major
Drilling
|
|
8,689
|
|
$
|
39,653
|
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 966,495 shares
of Major Drilling at $8.99 for a
total of $8,689 and contingent
consideration of $10,130.
The Company incurred acquisition-related costs of $343 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.
Revenue since the date of acquisition attributable to the
additional business generated by Taurus was $22,090. Due to the integration of the
Taurus acquisition with existing operations, it is impracticable to
estimate the revenue and net income of the combined entity for the
year as though the acquisition date was May
1, 2014.
11. FINANCIAL INSTRUMENTS
Fair value
The carrying values of cash, trade
and other receivables, demand credit facility, demand loan and
trade and other payables approximate their fair value due to the
relatively short period to maturity of the instruments. The
following table shows the carrying value of long-term debt, which
approximates its fair value, as most debts carry variable interest
rates and the remaining fixed rate debts continue to reflect fair
value. The fair value of the interest rate swap included in
long-term debt is measured using quoted interest rates.
|
January 31,
2015
|
|
April 30,
2014
|
|
|
|
|
Long-term
debt
|
$
|
16,114
|
|
|
23,842
|
During the quarter, the Company was in compliance with all
covenants and other conditions imposed by its debt agreements.
Credit risk
As at January 31, 2015, 76.4% of the Company's trade
receivables were aged as current (April 30,
2014 - 79.8%) and 7.7% of the trade receivables were
impaired (April 30, 2014 - 5.1%).
The movement in the allowance for impairment of trade
receivables during the nine-month periods were as follows:
|
January 31,
2015
|
|
January 31,
2014
|
|
|
|
|
Opening
balance
|
$
|
3,016
|
|
$
|
2,790
|
Increase in
impairment allowance
|
1,769
|
|
744
|
Recovery of amounts
previously impaired
|
(186)
|
|
-
|
Write-off charged
against allowance
|
(811)
|
|
(844)
|
Foreign exchange
translation differences
|
(144)
|
|
10
|
Ending
balance
|
$
|
3,644
|
|
$
|
2,700
|
Foreign currency risk
The carrying amounts of
net monetary assets in Canadian subsidiaries, which are denominated
in United States dollars and that
may include intercompany balances with other subsidiaries, is US
$298 as of January 31, 2015.
If the Canadian dollar moved by plus or minus 10% against
the United States dollar at
January 31, 2015, the unrealized
foreign exchange gain or loss recognized in net loss would move by
approximately US $30.
Liquidity risk
The following table details
contractual maturities for the Company's financial liabilities.
|
1 year
|
2-3 years
|
4-5 years
|
thereafter
|
Total
|
|
|
|
|
|
|
Demand
loan
|
$
|
2,735
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2,735
|
Trade and other
payables
|
38,026
|
-
|
-
|
-
|
38,026
|
Long-term
debt
|
6,807
|
6,066
|
2,244
|
1,790
|
16,907
|
|
$
|
47,568
|
$
|
6,066
|
$
|
2,244
|
$
|
1,790
|
$
|
57,668
|
SOURCE MAJOR DRILLING GROUP INTERNATIONAL INC.