MONCTON, NB, June 7, 2011 /CNW/ -- MONCTON, NB, June 7, 2011 /CNW/
- Major Drilling Group International Inc. (TSX: MDI) today reported
results for its fourth quarter of fiscal 2011, ended April 30,
2011. Highlights
_____________________________________________________________________
|In millions of Canadian dollars | Q4-11|Q4-10|Fiscal 2011|Fiscal
2010| |(except earnings per share) | | | | |
|________________________________|______|_____|___________|___________|
|Revenue |$137.3|$97.4| $482.3| $307.9|
|________________________________|______|_____|___________|___________|
|Gross profit | 34.9| 22.4| 120.4| 74.4| | As percentage of sales |
25.4%|23.0%| 25.0%| 24.2%|
|________________________________|______|_____|___________|___________|
|Net earnings (loss) | 9.4| 3.2| 27.6| (0.5)|
|________________________________|______|_____|___________|___________|
|Earnings (loss) per share | $0.13|$0.05| $0.39| ($0.01)|
|________________________________|______|_____|___________|___________|
|Cash flow from operations | | | | | |(before changes in non-cash |
| | | | |working capital items) | $19.2| $9.4| $60.9| $30.6|
|________________________________|______|_____|___________|___________|
-- Major Drilling posted quarterly revenue of $137.3 million, up 41
percent from the $97.4 million recorded for the same quarter last
year. -- Net earnings were $9.4 million or $0.13 per share ($0.13
per share diluted) for the quarter, compared to net earnings of
$3.2 million or $0.05 per share ($0.04 per share diluted) for the
prior year quarter. -- During the quarter, the Company enacted a 3
for 1 stock split. Amounts per share have been adjusted accordingly
and are now presented post-split. "As expected, demand for drilling
services continued to grow during the quarter although weather
conditions prevented us from fully capitalizing on our contracts in
hand. In Australia, we continued to be affected by floods in
Queensland where weather conditions caused a third of our
contracted rigs to remain idle during the quarter. In Canada,
extreme winter conditions impacted revenue, while in the U.S.,
floods in North Dakota affected our energy operations. In
both Australia and the U.S., these conditions affected the most
specialized and productive rigs in our fleet. These
operations should recover during the quarter," said Francis
McGuire, President and CEO of Major Drilling. "In addition to the
weather, the strong pickup in activity in the industry has brought
transitional issues, which affected our margins during the
quarter. Also, many suppliers in the industry are facing the
same transitional issues as drilling firms. This has created
temporary bottlenecks, which will gradually get resolved as the
whole industry grapples with the ramp-up. For example, fuel
shortages in Mongolia have caused clients to declare a "force
majeure" temporarily affecting many of our rigs. The clients
have advised that they plan to drill these meters when local
conditions allow and we will be employing all of our efforts to
meet our clients' needs. Despite these delays, our utilization
rates are climbing and we are experiencing pricing improvements on
all new contracts." "During the quarter, we have invested heavily
in building up our labour force. In October 2010, we had
3,400 people on our weekly payroll. By April, we had
4,000. Wage increases were required to retain and attract the
most experienced drillers, which are key to high-quality customer
service. As the pool of available experienced drillers is
drying up, we have had to increase the number of trainee drillers,
which has and will continue to temporarily affect productivity as
they gain experience. In the four key areas where the labour
shortage is most problematic (Canada, the USA, Australia and Chile)
we have now established four new training centres. The goals
for these centres are to improve our retention rate for new
entrants but also to speed up their learning curve to minimize the
impact on productivity." "Activity levels in the current fiscal
year should be robust. Intermediate and junior mining
companies with advanced projects continue to ramp up their already
busy drilling programs by adding rigs. Most senior mining
companies have significantly increased their exploration budgets
for calendar 2011, and junior mining companies have had good access
to capital markets. Also, we continue to see inquiries from
all categories of customers. As demand expands, the industry
is nearing capacity in terms of labour and pricing should continue
to improve as the year progresses." "Net capital expenditures for
the quarter were $22.1 million as we purchased 25 rigs while
retiring 21 rigs through our modernization program. We also
added 15 drills through our Mozambique acquisition. In fiscal 2012,
the Company expects to spend approximately $70 million in capital
expenditures, with the intent of purchasing 40 rigs, approximately
30 being replacements of older rigs with low utilization
rates. The rigs we intend to purchase will help improve
productivity and safety while reducing training time for
crews. With the shortage of crews re-emerging as an issue,
our focus turns to increasing the earning power of each crew and
each rig. Also, this year we will be investing heavily in
support equipment and vehicles, which are key to utilization and
productivity." "When we experience significant increases in
activity, the Company's working capital requirements
increase. These working capital requirements, combined with
our investments in capital expenditures during the quarter, brought
our net debt levels, net of cash, to $16.7 million. We are
forecasting significant investments in capex in the upcoming first
quarter to gear up for present demand but these investments will
diminish as the year progresses." "Finally, as announced on March
24, 2011, we are very pleased to welcome Resource Drilling
(Mozambique) and its employees into the Major Drilling group.
Not only does this acquisition provide us with assets, experienced
drillers and existing contracts in Mozambique, it also provides a
foundation for our expansion in this exciting region, which shows
great mining potential, particularly for coal projects," said
Francis McGuire. Fourth quarter ended April 30, 2011 Total revenue
for the fourth quarter was $137.3 million compared to $97.4 million
recorded for the prior year period. All of the Company's
regions contributed to this growth although Australia, Canada and
U.S. revenue was affected by weather issues. Revenue from
Canada-U.S. drilling operations was up 40 percent to $52.1 million
for the quarter compared to the same period last year. U.S.
operations saw a strong recovery, particularly from its senior
mining customers, but had its energy division affected by floods in
North Dakota. In Canada, activity levels continue to increase
but margins were affected by extreme winter conditions. In South
and Central America, revenue for the quarter was $50.5 million, up
31 percent from the prior year quarter. The increase was
primarily driven by Argentina and Mexico, where activity levels
picked up substantially compared to last year. Australian, Asian
and African drilling operations reported revenue of $34.7 million,
up 61 percent from the same period last year. The revenue
increase came primarily from Mongolia, Australia and Tanzania, but
the Company also saw increases from the recent start-up of
Kazakhstan and its recent acquisition in Mozambique. The overall
gross margin percentage for the quarter was 25.4 percent compared
to 23.0 percent for the same period last year. Margins were
impacted by costs relating to the ramp-up of operations and
additional training costs as the Company geared up for new
contracts, as well as by weather issues. General and administrative
costs were $11.3 million for the quarter compared to $8.5 million
in the same period last year. The increase was due to the
addition of the new environmental, Mozambique and Kazakhstan
divisions but also increased due to the costs of supporting the
strong growth in activity levels. Other expenses were flat at $1.2
million for the quarter compared to the same period last year.
Foreign exchange gain was $0.7 million compared to a loss of $0.5
million in the prior year period. The gain was due to the effect of
exchange rate variations on monetary working capital items.
Short-term interest expense was $0.2 million for the quarter
compared to a revenue of $0.1 million last year, while interest on
long-term debt was $0.2 million compared to $0.3 million for the
prior year quarter. Amortization expense increased to $8.4 million
for the quarter compared to $7.3 million for the same quarter last
year, as additional equipment was purchased during the year. The
Company's tax expense was $4.8 million for the quarter compared to
$2.0 million for the same period last year. Net earnings were $9.4
million or $0.13 per share ($0.13 per share diluted) for the
quarter compared to net earnings of $3.2 million or $0.05 per share
($0.04 per share diluted) for the prior year quarter. Year ended
April 30, 2011 Revenue for the fiscal year ended April 30, 2011
increased 57 percent to $482.3 million from $307.9 million for the
corresponding period last year, with all regions contributing to
this growth. Revenue growth was affected by the strengthening
Canadian dollar against the U.S. dollar as compared to the same
period last year. The unfavourable foreign exchange translation
impact for the year, when comparing to the effective rates for the
same period last year, is estimated at $15 million on revenue.
Canada-U.S. revenue increased by 75 percent to $181.3 million
compared to $103.3 million last year with both countries
contributing to this growth. Revenue in South and Central America
increased by 58 percent to $169.4 million, compared to $107.4
million in the prior year period. Most of the growth in the
region came from Mexico, Argentina and Chile. Revenue in Australia,
Asia and Africa increased 36 percent to $131.6 million from $97.1
million in the prior year period. Mongolia and Indonesia were the
main drivers of growth in the region while the Company added
operations in Kazakhstan and Mozambique. Gross margins for the year
were 25.0 percent compared to 24.2 percent last year representing
general improvements in pricing, partially offset by increased
training, mobilization and consumable costs, to accommodate the
present growth. General and administrative costs were $40.9 million
or 8.5 percent of revenue compared to $33.4 million or 10.9 percent
of revenue in the same period last year. The increase was due
to the addition of our U.S. based environmental division and also
increased costs to support the strong growth in activity levels.
Other expenses were $6.3 million for the year compared to $5.0
million for the same period last year due primarily to higher
incentive compensation expenses given the Company's increased
profitability in the current year. Foreign exchange gain was $0.9
million for the year compared to $0.1 million in the prior year
period as a result of favorable currency variations during the year
on net monetary items. Short-term interest expense was $0.6 million
for the year compared to a revenue of $0.2 million last year, while
interest expense on long-term debt was $0.7 million compared to
$1.1 million for the same period last year. Amortization expense
increased to $31.8 million for the year, compared to $30.1 million
for the same period last year, as a result of additional equipment
being purchased during the year. Last year, the Company recorded a
restructuring charge of $1.2 million, relating mainly to
Australia. Also last year, the Company recorded a non-cash
goodwill and intangible assets impairment charge of $1.5 million in
Ecuador. The income tax provision for the year was $13.4 million
compared to $2.9 million for the prior year period. Net earnings
for the year were $27.6 million or $0.39 per share ($0.38 per share
diluted) compared to a net loss of $0.5 million or $0.01 per share
($0.01 per share diluted) for the same period last year. 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 starting on
pages 15 to 17 of the 2010 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 in Canada, the United States, South and
Central America, Australia, Asia, and Africa. Financial statements
are attached. Major Drilling will provide a simultaneous webcast of
its quarterly conference call on Wednesday, June 8, 2011 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. Consolidated Statements of Operations (in
thousands of Canadian dollars, except per share information)
(unaudited) Twelve months ended Three months ended April 30 April
30 2011 2010 2011 2010 TOTAL REVENUE $ 482,276 $ 307,856 $ 137,258
$ 97,368 DIRECT COSTS 361,857 233,483 102,345 74,996 GROSS PROFIT
120,419 74,373 34,913 22,372 OPERATING EXPENSES General and 40,947
33,437 11,333 8,507 administrative Other expenses 6,331 5,000 1,196
1,172 Foreign exchange (892) (138) (672) 525 (gain) loss Interest
expense 557 (214) 226 (86) (revenue) Interest expense on 718 1,068
173 255 long-term debt Amortization 31,759 30,058 8,388 7,275
Restructuring charge - 1,220 - - Goodwill impairment - 1,519 -
(513) 79,420 71,950 20,644 17,135 EARNINGS BEFORE INCOME 40,999
2,423 14,269 5,237 TAX INCOME TAX - PROVISION (RECOVERY) Current
13,548 5,946 4,101 2,732 Future (108) (3,059) 746 (720) 13,440
2,887 4,847 2,012 NET EARNINGS (LOSS) $ 27,559 $ (464) $ 9,422 $
3,225 EARNINGS (LOSS) PER SHARE Basic * $ 0.39 $ (0.01) $ 0.13 $
0.05 Diluted ** $ 0.38 $ (0.01) $ 0.13 $ 0.04 *Based on 71,530,882
and 71,179,311 daily weighted average shares outstanding for the
fiscal year to date 2011 and 2010, respectively and on 71,794,149
and 71,242,719 daily weighted average shares for the quarter ended
April 30, 2011 and 2010, respectively. The total number of shares
outstanding on April 30, 2011 was 72,040,376. **Based on 72,253,581
daily weighted average shares outstanding for the fiscal year to
date 2011 and on 72,984,266 and 71,896,533 daily weighted average
shares outstanding for the fourth quarter ended April 30, 2011 and
2010, respectively. For the year ended April 30, 2010 the exercise
of stock options would have been anti-dilutive. Major Drilling
Group International Inc. Consolidated Statements of Comprehensive
Earnings (Loss) (in thousands of Canadian dollars) (unaudited)
Twelve months ended Three months ended April 30 April 30 2011 2010
2011 2010 NET EARNINGS $ 27,559 $ (464) $ 9,422 $ 3,225 (LOSS)
OTHER COMPREHENSIVE LOSS Unrealized loss on translating financial
statements of self-sustaining foreign operations (3,662) (39,254)
(7,942) (14,277) COMPREHENSIVE $ 23,897 $ (39,718) $ 1,480 $
EARNINGS (LOSS) (11,052) Consolidated Statements of
Retained Earnings (in thousands of Canadian dollars) (unaudited)
Twelve months ended April 30 2011 2010 RETAINED EARNINGS, BEGINNING
OF THE YEAR $ 209,025 $ 218,983 Net earnings (loss) 27,559 (464)
Dividends (10,525) (9,494) RETAINED EARNINGS, END OF THE YEAR $
226,059 $ 209,025 Consolidated Statements of
Accumulated Other Comprehensive Loss (in thousands of Canadian
dollars) (unaudited) Twelve months ended April 30 2011 2010
ACCUMULATED OTHER COMPREHENSIVE LOSS, BEGINNING OF THE YEAR $
(44,333) $ (5,079) Unrealized losses on translating financial
statements of self-sustaining foreign operations (3,662) (39,254)
ACCUMULATED OTHER COMPREHENSIVE LOSS, END OF THE YEAR $ (47,995) $
(44,333) Major Drilling Group International Inc.
Consolidated Statements of Cash Flows (in thousands of Canadian
dollars) (unaudited) Twelve months ended Three months ended April
30 April 30 2011 2010 2011 2010 OPERATING ACTIVITIES Net earnings
(loss) $ 27,559 $ (464) $ 9,422 $ 3,225 Operating items not
involving cash Amortization 31,759 30,058 8,388 7,275 (Gain) loss
on disposal of property, plant and (377) 662 49 (272) equipment
Future income tax (108) (3,059) 746 (720) (recovery) Stock-based
2,041 1,933 578 448 compensation Goodwill impairment - 1,519 -
(513) 60,874 30,649 19,183 9,443 Changes in non-cash operating
working capital (13,023) (9,872) (18,759) (21,434) items Cash flow
from (used in) 47,851 20,777 424 (11,991) operating activities
FINANCING ACTIVITIES Repayment of long-term (8,939) (11,522)
(1,815) (2,496) debt Repayment of short-term (3,131) - (3,131) -
debt Proceeds from long-term 10,000 - 10,000 - debt Proceeds from
short-term 10,400 - - - debt Issuance of common shares 4,165 202
2,753 174 Dividends paid (9,993) (9,488) - - Cash flow from (used
in) 2,502 (20,808) 7,807 (2,322) financing activities INVESTING
ACTIVITIES Business acquisitions (net of cash acquired) (3,776)
(1,974) (1,209) (1,974) (note 5) Acquisition of property, plant and
equipment, net of direct financing (62,568) (24,532) (22,053)
(7,250) Proceeds from disposal of property, plant and equipment
4,498 2,932 569 1,322 Cash flow used in (61,846) (23,574) (22,693)
(7,902) investing activities OTHER ACTIVITIES Foreign exchange
(2,524) (4,198) (1,490) (1,244) translation adjustment DECREASE IN
CASH (14,017) (27,803) (15,952) (23,459) CASH POSITION, BEGINNING
30,232 58,035 32,167 53,691 OF THE PERIOD CASH POSITION, END OF THE
$ 16,215 $ 30,232 $ 16,215 $ 30,232 PERIOD Major
Drilling Group International Inc. Consolidated Balance Sheets As at
April 30, 2011 and April 30, 2010 (in thousands of Canadian
dollars) (unaudited) ASSETS April April 2011 2010 CURRENT ASSETS
Cash $ 16,215 $ 30,232 Accounts receivable 100,300 62,128 Income
tax receivable 2,720 10,053 Inventories 69,864 63,170 Prepaid
expenses 8,439 4,813 Future income tax assets 194 793 197,732
171,189 PROPERTY, PLANT AND EQUIPMENT 246,509 210,812 FUTURE INCOME
TAX ASSETS 11,085 8,117 GOODWILL AND INTANGIBLE ASSETS (note 7)
26,939 25,538 $ 482,265 $ 415,656 LIABILITIES CURRENT LIABILITIES
Accounts payable and accrued charges $ 88,618 $ 54,027 Income tax
payable 4,297 2,830 Short-term debt (note 8) 7,919 - Current
portion of long-term debt 8,402 8,887 Future income tax liabilities
472 819 109,708 66,563 LONG-TERM DEBT (note 9) 16,630 15,041 FUTURE
INCOME TAX LIABILITIES 18,080 15,783 144,418 97,387 SHAREHOLDERS'
EQUITY Share capital 146,600 142,435 Contributed surplus 13,183
11,142 Retained earnings 226,059 209,025 Accumulated other
comprehensive loss (47,995) (44,333) 337,847 318,269 $ 482,265 $
415,656 MAJOR DRILLING GROUP INTERNATIONAL INC. NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE
PERIODS ENDED APRIL 30, 2011 AND 2010 (in thousands of Canadian
dollars) 1. BASIS OF PRESENTATION These interim consolidated
financial statements were prepared using accounting policies and
methods consistent with those used in the preparation of the
Company's audited consolidated financial statements for the year
ended April 30, 2010. These interim consolidated financial
statements conform in all respects to the requirements of Canadian
generally accepted accounting principles for annual financial
statements, with the exception of certain note disclosures. As a
result, these interim consolidated financial statements should be
read in conjunction with the Company's audited consolidated
financial statements and notes for the year ended April 30, 2010,
contained in the Company's 2010 annual report. 2. FUTURE ACCOUNTING
CHANGES International Financial Reporting Standards ("IFRS") In
February 2008, the Accounting Standards Board ("AcSB") confirmed
that the use of IFRS will be required in 2011 for publicly
accountable enterprises in Canada. In April 2008, the AcSB issued
an IFRS Omnibus Exposure draft proposing that publicly accountable
enterprises be required to apply IFRS, in full and without
modification, on January 1, 2011 for companies with a calendar year
end, therefore the transition date for the Company is May 1, 2011.
This will require the restatement, for comparative purposes, of
amounts reported by the Company for its year ended April 30, 2011,
and of the opening balance sheet as at May 1, 2010. The
Company expects the transition to IFRS to impact accounting,
financial reporting, internal control over financial reporting,
disclosure controls and procedures, taxes, and information systems
and processes. The Company has established a transition plan to
ensure the timely conversion to IFRS. 3. 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. 4. FUNCTIONAL
CURRENCY Effective May 1, 2010, the Company's operation in Chile
changed its functional currency from the U.S. dollar to the Chilean
peso. Factors considered when changing the functional currency
included contract revenue being determined in local currency, the
currency of operating costs and local regulations requiring
invoicing and settlement of these being performed in the local
currency. This change has been done in accordance with CICA
Handbook Section 1651, Foreign Currency Translation, and
consequently applied prospectively. All items were translated
to the new functional currency using the exchange rate at the date
of the change. 5. BUSINESS ACQUISITIONS Resource Drilling Effective
March 24, 2011, the Company acquired the assets of Resource
Drilling, which provides contract drilling services in Mozambique,
where Major Drilling did not have a presence. The acquired business
includes drilling equipment, inventory, contracts and
employees. The purchase price for the transaction was USD
$9,733 (CAD $9,512), including customary working capital
adjustments, financed with cash. The Company is in the process of
finalizing the valuation of assets. As at April 30, 2011, the
values allocated to net tangible assets are preliminary and are
subject to adjustments as additional information is obtained. The
estimated net assets acquired at fair market value at acquisition
are as follows: Assets acquired Inventories $ 946 Prepaid expenses
23 Property, plant and equipment 8,543 Net assets $ 9,512
Consideration Cash $ 1,209 Due to vendor 8,303 $ 9,512 North Star
Drilling Effective June 30, 2010, the Company acquired the assets
of North Star Drilling, which provides contract drilling services
to the fresh water and geothermal markets in certain mid-western
states in the US, and operates from its head office in Little
Falls, Minnesota, as well as from satellite offices in Brainerd and
Bemidji, Minnesota. The acquired business includes drilling
equipment, contracts and employees. The purchase price for
the transaction was USD $2,449 (CAD $2,567), including customary
working capital adjustments, financed with cash. There is
also a contingent consideration of USD $750 to the purchase price,
based on future earnings. The net assets acquired at fair market
value at acquisition are as follows: Assets acquired and
liabilities assumed Accounts receivable $ 776 Inventories 382
Prepaid expenses 18 Property, plant and equipment 1,078 Goodwill
329 Intangible assets 763 Accounts payable (779) Net assets $ 2,567
Consideration Cash $ 2,567 SMD Services Effective February 26,
2010, the Company acquired SMD Services based in Huntsville,
Alabama. Through this purchase, Major Drilling entered the
environmental drilling sector and acquired a small fleet of sonic,
probe and auger drill rigs, as well as a skilled management team
and personnel. The purchase price for the transaction was USD
$1,953 (CAD $2,064), including customary working capital
adjustments, financed with cash. There is also a contingent
consideration of USD $2,000 to the purchase price, based on future
earnings. The net assets acquired at fair market value at
acquisition are as follows: Assets acquired and liabilities assumed
Cash $ 90 Accounts receivable 234 Prepaid expenses 46 Property,
plant and equipment 1,605 Intangible assets 249 Accounts payable
(160) Net assets $ 2,064 Consideration Cash $ 2,064 6. INVENTORY
The cost of inventory recognized as an expense and included in
direct costs for the twelve and three months ended April 30, 2011
was $73,463 and $15,755 respectively. During the period,
there were no significant write-downs of inventory as a result of
net realizable value being lower than cost and no inventory
write-downs recognized in previous years were reversed. 7. GOODWILL
AND INTANGIBLE ASSETS April 2011 April 2010 Goodwill $ 25,704 $
24,464 Intangible assets 1,235 1,074 $ 26,939 $ 25,538 Intangible
assets include the carrying value of customer relationships and a
non-compete agreement, which are amortized on a straight-line basis
between a three and five year period. Changes in the goodwill and
intangible assets balance were as follows for the twelve and three
months ending April 30, 2011 and 2010: 2011 YTD 2010 YTD 2011 Q4
2010 Q4 Balance at beginning of the $ 25,538 $ 32,072 $ 27,058 $
26,137 period Goodwill and intangible 1,092 249 - 249 assets
acquired Amortization of intangible (761) (528) (189) (132) assets
Goodwill adjustment - (2,203) - (513) Goodwill impairment - (1,519)
- 513 Effect of foreign currency exchange rate changes 1,070
(2,533) 70 (716) $ 26,939 $ 25,538 $ 26,939 $ 25,538 8. SHORT-TERM
DEBT In the first quarter of the current fiscal year, the Company
borrowed 5,375 million Chilean pesos (CAD $10.4 million),
initially secured by a USD $10 million stand-by letter of credit
drawn from the Company's demand credit facility. In the third
quarter, the stand-by letter of credit was increased to USD $11
million due to the weakening of the US dollar. In the fourth
quarter, the Company re-financed this facility, reducing the
borrowing to 3,835 million Chilean pesos (CAD $7.3 million),
secured by the same stand-by letter of credit adjusted to USD $8
million and carrying interest at an annual rate of 7.7 percent,
maturing in April 2012. 9. LONG-TERM DEBT In the fourth quarter of
the current fiscal year, the Company increased its equipment and
acquisition loan by $10 million. 10. CAPITAL MANAGEMENT The Company
includes shareholders' equity (excluding accumulated other
comprehensive loss), short and long-term borrowings and demand
credit facility net of cash in the definition of capital. Total
managed capital was as follows: April 2011 April 2010 Short-term
debt $ 7,919 $ - Long-term debt 25,032 23,928 Share capital 146,600
142,435 Contributed surplus 13,183 11,142 Retained earnings 226,059
209,025 Cash (16,215) (30,232) $ 402,578 $ 356,298 The Company's
objective when managing its capital structure is to maintain
financial flexibility in order to: i) preserve access to capital
markets; ii) meet financial obligations; and iii) finance
internally generated growth and potential new acquisitions. To
manage its capital structure, the Company may adjust spending,
issue new shares, issue new debt or repay existing debt. Under the
terms of certain of the Company's debt agreements, the Company must
satisfy certain financial covenants. Such agreements also limit,
among other things, the Company's ability to incur additional
indebtedness, create liens, engage in mergers or acquisitions and
make dividend and other payments. During the period, the Company
was, and continues to be, in compliance with all covenants and
other conditions imposed by its debt agreements. In order to
facilitate the management of its capital requirements, the Company
prepares annual budgets that are updated as necessary, dependent on
various factors. The Company's objectives with regards to capital
management remain unchanged from fiscal 2010. 11. FINANCIAL
INSTRUMENTS Fair value The carrying values of cash, accounts
receivable and accounts payable and accrued charges approximate
their fair value due to the relatively short period to maturity of
the instruments. Long-term debt has a carrying value of $25,032 as
at April 30, 2011 (April 30, 2010 - $23,928), which also
approximates its fair value. Risk management The Company is exposed
to various risks related to its financial assets and
liabilities. There have been no substantive changes in the
Company's exposure to financial instrument risks, its objectives,
policies and processes for managing those risks, or the methods
used to measure them, from previous periods, unless otherwise
stated in this note. Credit risk The Company is exposed to credit
risk from its accounts receivable. The Company has adopted a policy
of dealing only with creditworthy counterparties and obtaining
sufficient collateral where appropriate, as a means of mitigating
the risk of financial loss from defaults. It carries out, on a
continuing basis, credit checks on its customers and maintains
provisions for contingent credit losses. The Company also
diversifies its credit risk by dealing with a large number of
customers in various countries. Demand for the Company's drilling
services depends upon the level of mineral exploration and
development activities conducted by mining companies, particularly
with respect to gold, nickel and copper. The Company's five largest
customers account for 19.6 percent (27 percent in 2010) of total
quarterly revenue, with no one customer representing more than 10
percent of its revenue for 2011 or 2010. The carrying amounts for
accounts receivable are net of allowances for doubtful accounts,
which are estimated based on aged analyses of receivables, past
experience, specific risks associated with the customer and other
relevant information. The maximum exposure to credit risk is the
carrying value of the financial assets. As at April 30, 2011, 84.8
percent of the Company's trade receivables were aged as current and
0.7 percent of the trade receivables were impaired. Credit risk
also arises from cash and cash equivalents and deposits with banks
and financial institutions. This risk is limited because the
counterparties are banks with high credit ratings assigned by
international credit-rating agencies. Interest rate risk The demand
loan and long-term debt of the Company bear a floating rate of
interest, which exposes the Company to interest rate fluctuations.
As at April 30, 2011, the Company has estimated that a one
percentage point increase in interest rates would cause a quarterly
decrease in net income of approximately $61 and a one percentage
point decrease in interest rates would cause a quarterly increase
in net income of $61. Foreign currency risk Foreign currency risk
arises as the Company has operations located internationally where
local operational currency is not the same as the functional
currency of the Company. A significant portion of the Company's
operations are located outside of Canada. The accounting impact of
foreign currency exposure is minimized since the operations are
classified as self-sustaining operations. In certain developing
countries, the Company mitigates its risk of large exchange rate
fluctuations by conducting business primarily in U.S. dollars. U.S.
dollar revenue exposure is partially mitigated by offsetting U.S.
dollar labour and material expenses. Monetary assets denominated in
foreign currencies are exposed to foreign currency fluctuations.
Based on the Company's foreign currency net monetary exposures and
net assets as at April 30, 2011, and assuming that all other
variables remain constant, a 10 percent rise or fall in the
Canadian dollar against the other foreign currencies would have
resulted in increases (decreases) in the net earnings and
comprehensive earnings as follows: Increase (decrease) in net
earnings Canadian dollar Canadian dollar appreciates 10%
depreciates 10% U.S. Dollar $ (1,460) $ 1,460 Increase (decrease)
in comprehensive earnings Canadian dollar Canadian dollar
appreciates 10% depreciates 10% U.S. Dollar $ (23,282) $ 23,282
Chilean Peso (3,904) 3,904 Australian Dollar (844) 844 Liquidity
risk Liquidity risk, the risk that the Company would not be able to
meet its financial obligations as they become due, arises from the
Company's management of working capital, finance charges and
principal repayments on its debt instruments. The Company manages
liquidity risk by maintaining adequate reserves, banking facilities
and reserve borrowing facilities, by continuously monitoring
forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities. Total financial liabilities,
by due date, as at April 30, 2011 are as follows: Total 1 year 2-3
years 4-5 years Accounts payable & $ 88,618 $ 88,618 $ - $ -
accrued charges Short-term debt 7,919 7,919 - - Long-term debt
25,032 8,402 12,499 4,131 $ 121,569 $ 104,939 $ 12,499 $ 4,131 12.
SEGMENTED INFORMATION 2011 YTD 2010 YTD 2011 Q4 2010 Q4 Revenue
Canada - U.S. $ 181,280 $ 103,337 $ 52,069 $ 37,257 South and
Central 169,381 107,434 50,485 38,545 America Australia, Asia and
131,615 97,085 34,704 21,566 Africa $ 482,276 $ 307,856 $ 137,258 $
97,368 Earnings (loss) from operations Canada - U.S. $ 21,429 $
10,098 $ 4,858 $ 4,704 South and Central 20,233 10,884 9,668 5,484
America Australia, Asia and 14,033 (3,823) 3,935 (1,506) Africa
55,695 17,159 18,461 8,682 Eliminations (921) (1,342) (222) (318)
54,774 15,817 18,239 8,364 Interest expense, net 1,275 854 399 169
General corporate expenses 12,500 9,801 3,571 3,471 Restructuring
charge - 1,220 - - Goodwill impairment - 1,519 - (513) Income tax
13,440 2,887 4,847 2,012 Net earnings (loss) $ 27,559 $ (464) $
9,422 $ 3,225 Goodwill impairment relates to the South and Central
American segment for the fiscal year 2010.
To view this news release in HTML formatting, please use the
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iDenis Larocque, Chief Financial Officer /ibr/ Tel:
(506) 857-8636br/ Fax: (506) 857-9211br/ a
href="mailto:ir@majordrilling.com" cr="true"ir@majordrilling.com/a
/p
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