MONCTON, NB, Sept. 6, 2011 /CNW/ -- MONCTON, NB, Sept. 6, 2011
/CNW/ - Major Drilling Group International Inc. (TSX: MDI) today
reported results for its first quarter of fiscal year 2012, ended
July 31, 2011. These are the first results the Corporation is
presenting following its adoption of the International Financial
Reporting Standards ("IFRS") effective May 1, 2011. The previous
fiscal year's results have been restated accordingly with only
minor changes. Highlights
__________________________________________________________________
|In millions of Canadian dollars (except earnings per| Q1-12|
Q1-11| |share) | | |
|____________________________________________________|______|______|
|Revenue |$164.2|$109.5|
|____________________________________________________|______|______|
|Gross profit | 51.5| 26.5|
|____________________________________________________|______|______|
| |As percentage of sales | 31.4%| 24.2%|
|_|__________________________________________________|______|______|
|Net earnings | 17.9| 5.1|
|____________________________________________________|______|______|
|Earnings per share | 0.25| 0.07|
|____________________________________________________|______|______|
|Cash flow from operations (*) | 36.8| 15.3|
|____________________________________________________|______|______|
*before changes in non-cash operating working capital items,
interest and income taxes -- Major Drilling posted quarterly
revenue of $164.2 million, an increase of 50% from the $109.5
million recorded for the same quarter last year. -- Gross margin
percentage for the quarter improved significantly to 31.4%,
compared to 24.2% last year, and up from 25.4% in the fourth
quarter of fiscal 2011. -- Net earnings were $17.9 million or $0.25
per share ($0.25 per share diluted) for the quarter, compared to
net earnings of $5.1 million or $0.07 per share ($0.07 per share
diluted) for the prior year quarter. -- The Company has increased
its semi-annual dividend to $0.08 per share, to be paid on November
1, 2011, which represents a 9.1% increase from the previous
dividend. "Activity levels continue to be robust in every
region. Our revenue increased during the quarter by 50% to
$164.2 million and we continue to see inquiries from all categories
of customers," said Francis McGuire, President and CEO of Major
Drilling Group International Inc. "We continue to be successful in
delivering growth as well as diversifying the scope of our drilling
services. While drilling for gold remains our most important
contributor, accounting for 48% of our revenue, 17% of our revenue
now comes from energy, coal and environmental drilling.
Drilling for base metals and uranium accounts for the remaining 35%
of our revenue." Margins in this quarter improved significantly and
were influenced by three factors. First, ramp-up costs such as
mobilization and up front purchases have now normalized.
Second, our efforts on training and recruitment have allowed us to
increase the number of shifts in the field this quarter.
Third, the contracts that were signed or renewed this quarter
reflected the stronger pricing environment. The next period
in which a significant number of renewals are expected to occur is
at the end of the calendar year. "Looking at the balance of fiscal
2012, assuming that customers continue with their stated plans, we
expect to see continuing growth. Our continuing efforts on
training and recruitment should allow our global utilization rates
to continue to improve as each month goes by and as we continue to
add more drillers," noted Mr. McGuire. "Net capital expenditures
for the quarter were $20.7 million as we purchased 21 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, now 60% of our rigs are less than
five years old in an industry where rigs tend to last 20 years."
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
$21.1 million. Our goal remains to keep relatively low debt
levels. "Despite the recent events in the global economy, we have
not seen our customers modify their activity patterns. Demand
for drilling services continues to grow," said Mr. McGuire.
"Most of our senior and intermediate customers are in a much better
financial position than three years ago and many of our junior
customers have recently raised money. In addition, the price of
gold is double what it was in 2008, the price of copper is close to
historic highs, and both are well above average costs of
production. Our biggest operational challenge continues to be
the shortage of labour. We continue to aggressively and
successfully invest in the recruitment and training of new
drillers." The Company has determined that it is appropriate to
increase our semi-annual dividend to $0.08 per common share, which
will be paid on November 1, 2011 to shareholders of record as of
October 10, 2011. This dividend is designated as an "eligible
dividend" for Canadian tax purposes. First quarter ended July 31,
2011 Total revenue for the quarter was $164.2 million, up 50% from
the $109.5 million recorded in the same quarter last year. All of
the Company's regions contributed to this growth. The unfavourable
foreign exchange translation impact for the quarter, when comparing
to the effective rates for the same period last year, is estimated
at $4 million on revenue. Revenue for the quarter from Canada-U.S.
drilling operations increased by 52% to $61.4 million compared to
the same period last year. U.S. mineral drilling operations
continued a strong recovery, particularly from its senior mining
customers. Our energy division continued to be affected by floods
in North Dakota during the quarter but operations have now returned
to normal. In Canada, activity levels continue to increase.
South and Central American revenue was up 28% to $51.3 million for
the quarter, compared to the prior year quarter. The increase was
primarily driven by strong growth in our Mexican, Argentinean and
Colombian operations. Australian, Asian and African operations
reported revenue of $51.4 million, up 77% from the same period last
year. Australia accounted for a significant portion of this
growth as operations recovered from floods in Queensland although
all our contracted rigs did not return to the field until
August. Mongolia, Tanzania, and the new operation in
Mozambique also contributed to the strong growth. The overall gross
margin percentage for the quarter was 31.4%, up from 24.2% for the
same period last year. Ramp-up costs such as mobilization and up
front purchases have now normalized. Also, training and recruitment
efforts allowed the Company to increase the number of shifts in the
field during the quarter. Finally, the contracts that were
signed or renewed this quarter reflected the stronger pricing
environment. General and administrative costs were $12.3 million
for the quarter compared to $9.6 million in the same period last
year. The increase was due to the addition of a new operation
in Mozambique and also increased costs to support the strong growth
in activity levels. Other expenses for the quarter were $2.6
million, up from $2.1 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 Thursday, September 8, 2011 at
10:00 am EDT. 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 17 to 20 of the 2011 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, September 7, 2011 at 8:30 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 2011 2010 TOTAL REVENUE $ 164,152 $ 109,480 DIRECT
COSTS 112,653 82,948 GROSS PROFIT 51,499 26,532 OPERATING EXPENSES
General and administrative 12,318 9,553 Other expenses 2,603 2,072
Loss (gain) on disposal of property, plant and equipment 600 (112)
Foreign exchange loss 321 92 Finance costs 822 286 Depreciation and
amortization (note 15) 8,580 7,147 25,244 19,038 EARNINGS BEFORE
INCOME TAX 26,255 7,494 INCOME TAX - PROVISION (RECOVERY) (note 12)
Current 5,984 2,943 Deferred 2,379 (583) 8,363 2,360 NET EARNINGS
(note 15) $ 17,892 $ 5,134 EARNINGS PER SHARE (note 13) Basic * $
0.25 $ 0.07 Diluted ** $ 0.25 $ 0.07 *Based on 72,040,376 and
71,354,739 daily weighted average shares outstanding for the fiscal
year to date 2012 and 2011, respectively. The total number of
shares outstanding on July 31, 2011 was 72,040,376. **Based on
72,920,523 and 71,749,419 daily weighted average shares outstanding
for the fiscal year to date 2012 and 2011, respectively. Major
Drilling Group International Inc. Interim Condensed Consolidated
Statements of Comprehensive Earnings (in thousands of Canadian
dollars) (unaudited) Three months ended July 31 2011 2010 NET
EARNINGS $ 17,892 $ 5,134 OTHER COMPREHENSIVE EARNINGS Unrealized
gains on foreign currency translation (net of tax of $0) 1,809
5,637 COMPREHENSIVE EARNINGS $ 19,701 $ 10,771 Major Drilling Group
International Inc. Interim Condensed Consolidated Statements of
Changes in Equity For the three months ended July 31, 2010 and 2011
(in thousands of Canadian dollars) (unaudited) Share Foreign based
Retained currency Share payments translation capital reserve
earnings reserve Total BALANCE AS AT MAY 1, 2010 $ 144,919 $ 9,236
$ 153,358 $ - $ 307,513 Exercise of stock options 134 - - - 134
Share based payments reserve - 516 - - 516 145,053 9,752 153,358 -
308,163 Comprehensive earnings: Net earnings - - 5,134 - 5,134
Unrealized gains on foreign currency translations - - - 5,637 5,637
Total comprehensive earnings - - 5,134 5,637 10,771 BALANCE AS AT
JULY 31, 2010 $ 145,053 $ 9,752 $ 158,492 $ 5,637 $ 318,934 BALANCE
AS AT APRIL 30, 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 Major Drilling Group International Inc. Interim
Condensed Consolidated Statements of Cash Flows (in thousands of
Canadian dollars) (unaudited) Three months ended July 31 2011 2010
OPERATING ACTIVITIES Earnings before income tax $ 26,255 $ 7,494
Operating items not involving cash Depreciation and amortization
(note 15) 8,580 7,147 Loss (gain) on disposal of property, plant
and equipment 600 (112) Share based payments reserve 554 516
Finance costs 822 286 36,811 15,331 Changes in non-cash operating
working capital items (8,833) (3,270) Finance costs paid (822)
(286) Income taxes (paid) received (5,013) 107 Cash flow from
operating activities 22,143 11,882 FINANCING ACTIVITIES Repayment
of long-term debt (2,190) (2,281) Proceeds from long-term debt
10,000 - Proceeds from short-term debt - 10,400 Issuance of common
shares - 134 Dividends paid (5,283) (4,750) Cash flow from
financing activities 2,527 3,503 INVESTING ACTIVITIES Business
acquisitions (net of cash acquired) (note 16) - (2,352) Acquisition
of property, plant and equipment (21,410) (8,919) Proceeds from
disposal of property, plant and equipment 684 540 Cash flow used in
investing activities (20,726) (10,731) Effect of exchange rate
changes (367) 332 INCREASE IN CASH 3,577 4,986 CASH, BEGINNING OF
THE PERIOD 16,215 30,232 CASH, END OF THE PERIOD $ 19,792 $ 35,218
Major Drilling Group International Inc. Interim Condensed
Consolidated Balance Sheets As at July 31, 2011, April 30, 2011 and
May 1, 2010 (in thousands of Canadian dollars) (unaudited) July 31,
2011 April 30, 2011 May 1, 2010 ASSETS CURRENT ASSETS Cash $ 19,792
$ 16,215 $ 30,232 Trade and other receivables 109,045 100,300
62,128 Income tax receivable 3,053 2,720 10,053 Inventories 73,244
69,864 63,170 Prepaid expenses 7,880 8,439 4,813 213,014 197,538
170,396 PROPERTY, PLANT AND EQUIPMENT (note 7) 248,647 235,473
198,935 DEFERRED INCOME TAX ASSETS 7,947 11,575 9,379 GOODWILL
(note 8) 28,673 28,316 26,475 INTANGIBLE ASSETS (note 9) 1,043
1,235 1,074 $ 499,324 $ 474,137 $ 406,259 LIABILITIES CURRENT
LIABILITIES Trade and other payables $ 85,931 $ 88,599 $ 53,992
Income tax payable 5,601 4,297 2,830 Short-term debt 8,032 7,919 -
Current portion of long-term debt (note 10) 8,251 8,402 8,887
107,815 109,217 65,709 CONTINGENT CONSIDERATION 2,626 2,612 2,011
LONG-TERM DEBT (note 10) 24,597 16,630 15,041 DEFERRED INCOME TAX
LIABILITIES 16,346 17,993 15,985 151,384 146,452 98,746
SHAREHOLDERS' EQUITY Share capital (note 11) 150,642 150,642
144,919 Share based payments reserve 10,834 10,280 9,236 Retained
earnings 188,317 170,425 153,358 Foreign currency translation
reserve (1,853) (3,662) - 347,940 327,685 307,513 $ 499,324 $
474,137 $ 406,259 MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE MONTHS ENDED JULY 31, 2011 AND 2010 (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 International Financial Reporting Standards ("IFRS")
require entities that adopt IFRS to make an explicit and unreserved
statement, in their first annual IFRS financial statements, of
compliance with IFRS. The Company will make this statement when it
issues its financial statements for the year ending April 30, 2012.
These 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 the Company expects to adopt in its
consolidated financial statements for the year ending April 30,
2012. Basis of consolidation The 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 The
condensed consolidated financial statements have been prepared on
the historical cost basis, as explained in the accounting policies
below. Historical cost is generally based on the fair value of the
consideration given in exchange for assets. 3. FUTURE ACCOUNTING
CHANGES Certain new standards, interpretations, amendments and
improvements to existing standards were issued by the IASB or
International Financial Reporting Interpretations Committee
("IFRIC") that are mandatory for accounting periods beginning in
later periods. The standards impacted that are applicable to the
Company are as follows: IFRS 9 Financial Instruments ("IFRS 9")
IFRS 9 was issued in November 2009 and will replace IAS 39
Financial Instruments: Recognition and Measurement ("IAS 39"). The
new standard replaces the current multiple classification and
measurement models for financial assets and liabilities with a
single model that has only two classification categories: amortized
cost and fair value. IFRS 9 is effective for
annual periods beginning on or
after January 1, 2013. The Company is
currently evaluating the impact of this standard on its
consolidated financial statements. IFRS 10 Consolidated Financial
Statements ("IFRS 10") IFRS 10 establishes principles for the
presentation and preparation of consolidated financial statements
when an entity controls one or more other entities. IFRS 10
supersedes IAS 27 Consolidated and Separate Financial Statements
and SIC-12 Consolidation - Special Purpose Entities and is
effective for annual periods beginning on or after January 1, 2013.
Earlier application is permitted. The Company is currently
evaluating the impact of this standard on its consolidated
financial statements. IFRS 11 Joint Arrangements ("IFRS 11") IFRS
11 introduces new accounting requirements for joint arrangements,
replacing IAS 31 Interests in Joint Ventures. IFRS 11 divides joint
arrangements into two types, each having its own accounting model.
A 'joint operation' continues to be accounted for using
proportional consolidation, whereas a 'joint venture' must be
accounted for using equity accounting. IFRS 11 is effective
for fiscal years beginning on or after January 1, 2013. IFRS 12
Disclosure of Interests in Other Entities ("IFRS 12") IFRS 12
applies to entities that have an interest in a subsidiary, a joint
arrangement, an associate or an unconsolidated structured entity.
IFRS 12 is effective for annual periods beginning on or after
January 1, 2013. The Company is currently evaluating the impact of
this standard on its consolidated financial statements. IFRS 13
Fair Value Measurements ("IFRS 13") IFRS 13 is a new standard meant
to clarify the definition of fair value, provide guidance on
measuring fair value and improve disclosure requirements related to
fair value measurement. IFRS 13 is to be applied for annual
periods beginning on or after January 1, 2013. The Company is
currently evaluating the impact of this standard on its
consolidated financial statements. 4. SIGNIFICANT ACCOUNTING
POLICIES Cash Cash is comprised of cash on hand and demand
deposits in banks, cashable at any time. Financial instruments
Financial assets and financial liabilities are initially recognized
at fair value and their subsequent measurement is dependent on
their classification as described below. Their classification
depends on the purpose for which the financial instruments were
acquired or issued, their characteristics and the Company's
designation of such instruments. Settlement date accounting is
used. Asset/Liability Classification Measurement Cash Loans and
receivables Amortized cost Trade and other receivables Loans and
receivables Amortized cost Trade and other payables Other financial
liabilities Amortized cost Short and long-term debt Other financial
liabilities Amortized cost Transaction costs are included in the
initial carrying value of financial instruments, except those
classified as fair value through profit or loss, and are amortized
into income using the effective interest method. Loans and
receivables - Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. Loans and receivables are measured at amortized
cost using the effective interest method, less any impairment.
Interest income is recognized by applying the effective interest
rate, except for short-term receivables when the recognition of
interest would be immaterial. Other financial liabilities - Other
financial liabilities are subsequently measured at amortized cost
using the effective interest method. The effective interest method
is a method of calculating the amortized cost of a financial
liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees and
points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or where
appropriate, a shorter period, to the net carrying amount on
initial recognition. Embedded derivatives - Derivatives embedded in
non-derivative host contracts that are not financial assets within
the scope of IAS 39 (e.g. financial liabilities) are treated as
separate derivatives when their risks and characteristics are not
closely related to those of the host contracts and the host
contracts are not measured at fair value. Revenue recognition
Revenue from drilling contracts is recognized based on the terms of
customer contracts that generally provide for revenue recognition
on the basis of actual meters drilled at contract rates or fixed
monthly charges or a combination of both. Revenue from ancillary
services, primarily relating to extra services to the customer, is
recorded when the services are rendered. Revenue is recognized when
collection is reasonably assured. Earnings per share Basic earnings
per share are calculated by dividing net earnings (loss) by the
weighted average number of common shares outstanding during the
year. Diluted earnings per share are determined as net earnings
(loss) divided by the weighted average number of diluted common
shares for the year. Diluted common shares reflect the
potential dilutive effect of exercising stock options. Inventories
The Company maintains an inventory of operating supplies, drill
rods and drill bits. Inventories are valued at the lower of cost
and net realizable value, determined on a first in, first out
("FIFO") basis. The value of used inventory items is considered
minimal therefore they are not valued, except for drill rods,
which, if still considered usable, are valued at 50% of cost.
Property, plant and equipment Property, plant and equipment
("PP&E") are measured at cost, less accumulated depreciation
and impairment losses. Depreciation, calculated principally on the
straight-line method, is charged to operations at rates based upon
the estimated useful life of each depreciable asset. When
significant components of an item of PP&E have different useful
lives, they are accounted for as separate assets. The following
rates apply to those assets being amortized on the straight-line
method: Residual value (%) Useful life (years) Buildings 0 15-20
Drilling equipment 0-15 5-15 Automotive and off-road 0-10 5-10
equipment Other (office, computer and shop 0 5-15 equipment) Land
and assets under construction not available for use are not
amortized. Costs for repairs and maintenance are charged to
operations as incurred. Subsequent costs are included in the assets
carrying value when it is probable that future economic benefits
associated with it will flow to the entity and when they are ready
for their intended use. Subsequent costs are amortized over the
useful life of the asset and replaced components are
de-recognized. Amortization methods, residual values and
useful lives are re-assessed at minimum on an annual basis. Leases
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognized as assets
of the Company at their fair value at the inception of the lease
or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the
consolidated balance sheet as trade and other payables. Lease
payments are apportioned between finance expenses and reduction of
the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance expenses are
recognized immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are
capitalized as borrowing costs. Contingent rentals are recognized
as expenses in the periods in which they are incurred. Operating
lease payments are recognized as an expense on a straight-line
basis over the lease term, except where another systematic basis is
more representative of the time pattern in which economic benefits
from the leased asset are consumed. Contingent rentals arising
under operating leases are recognized as an expense in the period
in which they are incurred. In the event that lease incentives are
received to enter into operating leases, such incentives are
recognized as a liability. The aggregate benefit of incentives is
recognized as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative
of the time pattern in which economic benefits from the leased
asset are consumed. Business combinations Acquisitions of
businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at
fair value, which is calculated as the sum of the acquisition-date
fair values of the assets transferred by the Company, liabilities
incurred by the Company to the former owners of the acquiree and
any equity interests issued by the Company in exchange for control
of the acquiree. Acquisition-related costs are generally recognized
in profit or loss as incurred. At acquisition date, the
identifiable assets acquired and the liabilities assumed are
recognized at their fair value. Goodwill is measured as the excess
of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of
the acquirer's previously held equity interest in the acquiree (if
any) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the
identifiable assets acquired and liabilities assumed exceeds the
sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the
acquirer's previously held interest in the acquiree (if any), then
the excess is recognized immediately in profit or loss as a bargain
purchase gain. When the consideration transferred by the Company in
a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments that arise
from additional information obtained during the 'measurement
period' (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the
contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is
classified. Contingent consideration that is classified as equity
is not re-measured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or a liability is re-measured at
subsequent reporting dates in accordance with IAS 39, or IAS 37
Provisions, Contingent Liabilities and Contingent Assets ("IAS
37"), as appropriate, with the corresponding gain or loss being
recognized in profit or loss. If the initial accounting for a
business combination is incomplete by the end of the reporting
period in which the combination occurs, the Company reports
provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the
measurement period (see above), or additional assets or liabilities
are recognized, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known,
would have affected the amounts recognized at that date. Contingent
liabilities acquired in a business combination - Contingent
liabilities acquired in a business combination are initially
measured at fair value at the acquisition date. At the end of
subsequent reporting periods, such contingent liabilities are
measured at the higher of the amount that would be recognized in
accordance with IAS 37 and the amount initially recognized less
cumulative amortization recognized in accordance with IAS 18
Revenue. Goodwill Goodwill represents the excess of the purchase
price of business acquisitions, including acquisition costs, over
the fair value of the identifiable net assets acquired. The
value of goodwill is tested for impairment at least
annually. Any impairment loss identified by this test would
be reported in earnings (loss) for the period during which the loss
occurred. Intangible assets Intangible assets that are acquired in
a business combination are recognized separately from goodwill and
are initially recognized at their fair value at the acquisition
date (which is regarded as their cost). Subsequent to initial
recognition, intangible assets acquired in a business combination
are reported at cost less accumulated amortization and accumulated
impairment losses. Intangible assets include customer relationships
and a non-compete agreement, which are amortized on a straight-line
basis over a three and five-year period, respectively. Impairment
of long-lived assets At the end of each reporting period, the
Company assesses whether there are any indicators that the carrying
values of its long-term assets are impaired. If any such indication
exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where it
is not possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the
cash-generating unit ("CGU") to which the asset belongs. A CGU is
the smallest identifiable group of assets that generate cash
inflows that are largely independent of the cash inflows from other
assets or group of assets. Where a reasonable and consistent basis
of allocation can be identified, corporate assets are also
allocated to individual CGUs, or otherwise they are allocated to
the smallest group of CGUs for which a reasonable and consistent
allocation basis can be identified. The recoverable amount is the
higher of the fair value less costs to sell and the value in use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted. If the recoverable amount
of an asset (or CGU) is estimated to be less than its carrying
amount, the carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognized immediately in
profit or loss. At the end of each reporting period the Company
assesses whether there is any indication that an impairment loss
recognized in prior periods for an asset other than goodwill may no
longer exist or may have decreased. If any such indication exists,
the Company estimates the recoverable amount of that asset. Where
an impairment loss subsequently reverses, the carrying amount of
the asset (or CGU) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognized for the asset (or CGU) in prior
years. A reversal of an impairment loss is recognized immediately
in profit or loss. Income taxes Current - The tax currently
receivable or payable is based on taxable profit for the year and
any adjustments resulting from prior years. Taxable profit differs
from profit as reported in the consolidated statement of operations
because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or
deductible. The Company's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the end of the reporting period. Deferred - The Company follows the
liability method of accounting for corporate income taxes. This
method takes a balance sheet approach and focuses on the amount of
income taxes payable or receivable that will arise if an asset is
realized or a liability is settled for its carrying amount. These
resulting assets and liabilities, referred to as "deferred income
tax assets and liabilities", are computed and recognized based on
carry forwards of unused tax losses, unused tax credits and the
differences between the carrying amount of balance sheet items and
their corresponding tax values using the enacted, or substantively
enacted, income tax rates in effect when the assets are realized or
the liabilities are settled. The Company's primary differences
arise between the tax carrying value and net book value of
property, plant and equipment. Management reduces the carrying
value of the deferred income tax assets by a valuation allowance
when it is not probable that taxable profit will be available
against which the deductible temporary difference can be utilized.
Translation of foreign currencies The consolidated financial
statements are presented in Canadian dollars, which is the
Company's presentation currency. Items included in the financial
statements of each of the Company's subsidiaries are measured using
the functional currency. The majority of the Company's subsidiaries
have a functional currency of U.S. dollars, Canadian dollars or
Australian dollars. Foreign currency transactions are
translated into the functional currency using the exchange rates
prevailing at the dates of the transaction. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities not
denominated in the functional currency of an entity are recognized
in the statement of operations. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
re-translated. For the purposes of the consolidated financial
statements, the assets and liabilities of the Company's foreign
operations (with functional currencies other than Canadian dollars)
are translated into Canadian dollars using exchange rates at the
end of the period. Income and expense items are translated at the
average rates of exchange for the period. The resulting translation
adjustments are recognized in other comprehensive income within the
foreign currency translation reserve. Additionally, foreign
exchange gains and losses related to certain intercompany loans
that are permanent in nature are included in other comprehensive
income and foreign currency translation reserve. Share-based
payments The Company uses the fair value method to measure
compensation expense at the date of grant of stock options to
employees and directors. The fair value of each tranche for all
option grants is determined using the Black-Scholes option pricing
model, which considers estimated forfeitures at time of grant, and
each tranche is amortized separately to earnings on a graded
vesting basis over the vesting period with an offset to the share
based payments reserve. When options are exercised, the
corresponding share based payments reserve and the proceeds
received by the Company are credited to share capital. The Company
records the fair value of deferred share units as compensation
expense, with offset to accrued liabilities. Provisions Provisions
are recognized when the Company has a present obligation (legal or
constructive) as a result of a past event, it is probable that the
Company will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount
recognized as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the
reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows (where the effect
of the time value of money is material). When some or all of the
economic benefits required to settle a provision are expected to be
recovered from a third party, a receivable is recognized as an
asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.
Onerous contracts - Present obligations arising under onerous
contracts are recognized and measured as provisions. An onerous
contract is considered to exist where the Company has a contract
under which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received
from the contract. Restructurings - A restructuring provision is
recognized when the Company has developed a detailed formal plan
for restructuring and has raised a valid expectation in those
affected that it will carry out the restructuring by starting to
implement the plan or announcing its main features to those
affected by it. The measurement of a restructuring provision
includes only the direct expenditures arising from the
restructuring, which are those amounts that are both necessarily
entailed by the restructuring and not associated with the ongoing
activities of the entity. 5. KEY SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL ACCOUNTING JUDGMENTS Use of estimates The preparation
of financial statements in conformity with IFRS requires management
to make judgments, estimates and assumptions that are not readily
apparent from other sources, which affect the reported amounts of
assets and liabilities at the dates of the financial statements and
the reported amounts of revenue and expenses during the reported
periods. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results could 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. Management determines the estimated useful
lives of its property, plant and equipment based on historical
experience of the actual lives of property, plant and equipment of
similar nature and functions, and reviews these estimates at the
end of each reporting period. Management reviews the condition of
inventories at the end of each reporting period and recognizes a
provision for slow-moving and obsolete items of inventory when they
are no longer suitable for use. Management's estimate of the net
realizable value of such inventories is based primarily on sales
prices and current market conditions. Amounts used for impairment
calculations are based on estimates of future cash flows of the
Company. By their nature, the estimates of cash flows, including
the estimates of future revenue, operating expenses, utilization,
discount rates and market pricing are subject to measurement
uncertainty. Accordingly, the impact in the consolidated financial
statements of future periods could be material. Property, plant and
equipment are aggregated into CGUs based on their ability to
generate largely independent cash inflows and are used for
impairment testing. The determination of the Company's CGUs is
subject to management's judgment. Tax interpretations, regulations
and legislation in the various jurisdictions in which the Company
operates are subject to change. As such, income taxes are subject
to measurement uncertainty. Deferred income tax assets are assessed
by management at the end of the reporting period to determine the
probability that they will be realized from future taxable
earnings. Compensation costs accrued for long-term share-based
payment plans are subject to the estimation of what the ultimate
payout will be using the Black Scholes pricing model, which is
based on significant assumptions such as volatility, dividend yield
and expected term. The amount recognized as provisions and accrued
liabilities, including legal, contractual, constructive and other
exposures or obligations, is the best estimate of the consideration
required to settle the related liability, including any related
interest charges, taking into account the risks and uncertainties
surrounding the obligation. In addition, contingencies will only be
resolved when one or more future events occur or fail to occur.
Therefore assessment of contingencies inherently involves the
exercise of significant judgment and estimates of the outcome of
future events. The Company assesses its liabilities and
contingencies based upon the best information available, relevant
tax laws and other appropriate requirements. Judgments The Company
applied judgment in determining the functional currency of the
Company and its subsidiaries. Functional currency was determined
based on the currency that mainly influences sales prices, labour,
materials and other costs of providing services. Property, plant
and equipment and goodwill are aggregated into CGUs based on their
ability to generate largely independent cash inflows and are used
for impairment testing. The determination of the Company's CGUs is
subject to management's judgment with respect to the lowest level
at which independent cash inflows are generated. The Company has
applied judgment in determining the degree of componentization of
property, plant and equipment. Each part of an item of property,
plant and equipment with a cost that is significant in relation to
the total cost of the item and has a separate useful life has been
identified as a separate component and is depreciated separately.
The Company has applied judgment in recognizing provisions and
accrued liabilities, including judgment as to whether the Company
has a present obligation (legal or constructive) as a result of a
past event; whether it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation; and whether a reliable estimate can be made of the
amount of the obligation. 6. FIRST TIME ADOPTION OF IFRS As
disclosed in Note 2, these interim condensed consolidated financial
statements represent the Company's initial presentation of the
financial results of operations and financial position under IFRS
for the period ended July 31, 2011 in conjunction with the
Company's annual audited consolidated financial statements to be
issued under IFRS as at and for the year ending April 30, 2012. As
a result, these interim condensed consolidated financial statements
have been prepared in accordance with IFRS 1, First-time Adoption
of International Financial Reporting Standards ("IFRS 1") and with
IAS 34 as issued by the IASB. Previously, the Company prepared its
interim and annual consolidated financial statements in accordance
with Canadian GAAP. IFRS 1 requires the presentation of comparative
information as at the May 1, 2010 transition date and subsequent
comparative periods as well as the consistent and retrospective
application of IFRS accounting policies. To assist with the
transition, the provisions of IFRS 1 allow for certain mandatory
exceptions and optional exemptions for first-time adopters to
alleviate the retrospective application of specific IFRSs.
Exceptions and exemptions applied IFRS 1 First-Time Adoption of
IFRS - IFRS 1 provides entities adopting IFRS for the first time, a
number of optional exemptions and mandatory exceptions, in certain
areas, to the general requirement for full retrospective
application of IFRS on the date of transition. The following are
the optional exemptions that the Company has applied: -- Business
combinations - This exemption allows the Company to not apply IFRS
3(R), Business Combinations, retrospectively to business
combinations that occurred before the date of transition. --
Share-based payments election - This exemption allows the Company
to not apply IFRS 2, Share-Based Payments ("IFRS 2") to equity
settled awards that were granted on or before November 7, 2002 or
those granted after this date that had vested before the date of
transition. The Company also did not apply IFRS 2 to cash settled
awards that were settled before the date of transition to IFRS. --
Foreign currency translation adjustment ("CTA") - This election
allows the Company, on the date of transition, to record the CTA
from all foreign operations, calculated under previous GAAP, to
retained earnings and reset the CTA balance to nil. -- Fair value
revaluation as deemed cost - This election allows the Company to
measure certain items of property, plant and equipment at the date
of transition at their fair value, and to use that fair value as
deemed cost at that date. The remaining IFRS 1 exemptions and
exceptions were not applicable or material to the preparation of
the Company's consolidated balance sheet at the date of transition
to IFRS on May 1, 2010. The following mandatory exception is
applicable to the Company: -- Estimates - in accordance with IFRS
1, hindsight is not used to create or revise estimates. The
estimates previously made by the Company under Canadian GAAP were
not revised for application of IFRS except when necessary to
reflect any differences in accounting policies between Canadian
GAAP and IFRS. The following reconciliations present the
adjustments made to the Company's previous GAAP financial results
of operations and financial position to comply with IFRS 1. A
discussion of transitional adjustments follows the reconciliations.
IFRS Opening Consolidated Balance Sheet As at May 1, 2010 (a) (b)
(c) (d) (e) (f) ASSETS Foreign currency Share Fair value
translation based Deferred as Previous payments share Contingent
deemed GAAP Adjustments reserve reserve units consideration cost
IFRS CURRENT ASSETS Cash $ 30,232 $ - $ - $ - $ - $ - $ - $ 30,232
Trade and other receivables 62,128 - - - - - - 62,128 Income tax
receivable 10,053 - - - - - - 10,053 Inventories 63,170 - - - - - -
63,170 Prepaid expenses 4,813 - - - - - - 4,813 170,396 - - - - - -
170,396 PROPERTY, PLANT AND EQUIPMENT 210,812 - - - - - (11,877)
198,935 DEFERRED INCOME TAX ASSETS 8,910 - - - - - 469 9,379
GOODWILL 24,464 - - - - 2,011 - 26,475 INTANGIBLE ASSETS 1,074 - -
- - - - 1,074 $ 415,656 $ - $ - $ - $ - $ 2,011 $ (11,408) $
406,259 LIABILITIES CURRENT LIABILITIES Trade and other payables $
54,027 $ - $ - $ - $ (35) $ - $ - $ 53,992 Income tax payable 2,830
- - - - - - 2,830 Current portion of long-term debt 8,887 - - - - -
- 8,887 65,744 - - - (35) - - 65,709 CONTINGENT CONSIDERATION - - -
- - 2,011 - 2,011 LONG-TERM DEBT 15,041 - - - - - - 15,041 DEFERRED
INCOME TAX LIABILITIES 16,602 1,713 - - - - (2,330) 15,985 97,387
1,713 - - (35) 2,011 (2,330) 98,746 SHAREHOLDERS' EQUITY Share
capital 142,435 2,484 - - - - - 144,919 Share based payments
reserve 11,142 (2,484) - 578 - - - 9,236 Retained earnings 209,025
(1,713) (44,333) (578) 35 - (9,078) 153,358 Foreign currency
translation reserve (44,333) - 44,333 - - - - - 318,269 (1,713) - -
35 - (9,078) 307,513 $ 415,656 $ - $ - $ - $ - $ 2,011 $ (11,408) $
406,259 IFRS Consolidated Balance Sheet As at July 31, 2010
(a) (c) (d) (e) (f) (g) ASSETS Fair Share Deferred value Opening
based as Previous IFRS payments share Contingent deemed Building
GAAP restatements * Adjustments reserve units consideration cost
componentization IFRS CURRENT ASSETS Cash $ 35,218 $ - $ - $ - $ -
$ - $ - $ - $ 35,218 Trade and other receivables 69,923 - - - - - -
- 69,923 Income tax receivable 8,045 - - - - - - - 8,045
Inventories 63,491 - - - - - - - 63,491 Prepaid expenses 9,523 - -
- - - - - 9,523 186,200 - - - - - - - 186,200 PROPERTY, PLANT AND
EQUIPMENT 216,773 (11,877) - - - - 181 27 205,104 DEFERRED INCOME
TAX ASSETS 9,064 469 - - - - (39) (7) 9,487 GOODWILL 25,249 2,011 -
- - 828 - - 28,088 INTANGIBLE ASSETS 1,185 - - - - - - - 1,185 $
438,471 $ (9,397) $ - $ - $ - $ 828 $ 142 $ 20 $ 430,064
LIABILITIES CURRENT LIABILITIES Trade and other payables $ 56,350 $
(35) $ - $ - $ (3) $ - $ - $ - $ 56,312 Income tax payable 3,872 -
- - - - - - 3,872 Short-term debt 10,624 - - - - - - - 10,624
Current portion of long-term debt 8,383 - - - - - - - 8,383 79,229
(35) - - (3) - - - 79,191 CONTINGENT CONSIDERATION - 2,011 - - -
828 - - 2,839 LONG-TERM DEBT 13,360 - - - - - - - 13,360 DEFERRED
INCOME TAX LIABILITIES 16,342 (617) - - - - 8 7 15,740 108,931
1,359 - - (3) 828 8 7 111,130 SHAREHOLDERS' EQUITY Share capital
142,569 2,484 599 - - - - - 145,652 Share based payments reserve
11,589 (1,906) (599) 69 - - - - 9,153 Retained earnings 214,078
(55,667) - (69) 3 - 134 13 158,492 Foreign currency translation
reserve (38,696) 44,333 - - - - - - 5,637 329,540 (10,756) - - 3 -
134 13 318,934 $ 438,471 $ (9,397) $ - $ - $ - $ 828 $ 142 $ 20 $
430,064 * total of May 1, 2010 transitional adjustments to re-state
previous GAAP to IFRS IFRS Consolidated Balance Sheet As at
April 30, 2011 (a) (c) (d) (e) (f) (g) Fair Opening Share Deferred
value ASSETS IFRS based as Previous restatements payments share
Contingent deemed Building GAAP * Adjustments reserve units
consideration cost componentization IFRS CURRENT ASSETS Cash $
16,215 $ - $ - $ - $ - $ - $ - $ - $ 16,215 Trade and other
receivables 100,300 - - - - - - - 100,300 Income tax receivable
2,720 - - - - - - - 2,720 Inventories 69,864 - - - - - - - 69,864
Prepaid expenses 8,439 - - - - - - - 8,439 197,538 - - - - - - -
197,538 PROPERTY, PLANT AND EQUIPMENT 246,509 (11,877) - - - - 726
115 235,473 DEFERRED INCOME TAX ASSETS 11,279 469 - - - - (155)
(18) 11,575 GOODWILL 25,704 2,011 - - - 601 - - 28,316 INTANGIBLE
ASSETS 1,235 - - - - - - - 1,235 $ 482,265 $ (9,397) $ - $ - $ - $
601 $ 571 $ 97 $ 474,137 LIABILITIES CURRENT LIABILITIES Trade and
other payables $ 88,618 $ (35) $ - $ - $ 16 $ - $ - $ - $ 88,599
Income tax payable 4,297 - - - - - - - 4,297 Short-term debt 7,919
- - - - - - - 7,919 Current portion of long-term debt 8,402 - - - -
- - - 8,402 109,236 (35) - - 16 - - - 109,217 CONTINGENT
CONSIDERATION - 2,011 - - - 601 - - 2,612 LONG-TERM DEBT 16,630 - -
- - - - - 16,630 DEFERRED INCOME TAX LIABILITIES 18,552 (617) - - -
- 33 25 17,993 144,418 1,359 - - 16 601 33 25 146,452 SHAREHOLDERS'
EQUITY Share capital 146,600 2,484 1,558 - - - - - 150,642 Share
based payments reserve 13,183 (1,906) (1,558) 561 - - - - 10,280
Retained earnings 226,059 (55,667) - (561) (16) - 538 72 170,425
Foreign currency translation reserve (47,995) 44,333 - - - - - -
(3,662) 337,847 (10,756) - - (16) - 538 72 327,685 $ 482,265 $
(9,397) $ - $ - $ - $ 601 $ 571 $ 97 $ 474,137 * total of May
1, 2010 transitional adjustments to re-state previous GAAP to IFRS
IFRS Consolidated Statement of Operations For the three months
ended July 31, 2010 (c) (d) (f) (g) Fair Deferred value Share as
Previous based share deemed Building GAAP payments units cost
componentization IFRS TOTAL REVENUE $ 109,480 $ - $ - $ - $ - $
109,480 DIRECT COSTS 82,948 - - - - 82,948 GROSS PROFIT 26,532 - -
- - 26,532 OPERATING EXPENSES General and administrative 9,556 -
(3) - - 9,553 Other expenses 2,003 69 - - - 2,072 Gain on disposal
of property, plant and equipment (112) - - - - (112) Foreign
exchange loss 92 - - - - 92 Finance costs 286 - - - - 286
Depreciation and amortization 7,355 - - (181) (27) 7,147 19,180 69
(3) (181) (27) 19,038 EARNINGS (LOSS) BEFORE INCOME TAX 7,352 (69)
3 181 27 7,494 INCOME TAX - PROVISION (RECOVERY) Current 2,943 - -
- - 2,943 Deferred (644) - - 47 14 (583) 2,299 - - 47 14 2,360 NET
EARNINGS (LOSS) $ 5,053 $ (69) $ 3 $ 134 $ 13 $ 5,134 IFRS
Consolidated Statement of Operations For the twelve months ended
April 30, 2011 (c) (d) (f) (g) Fair Deferred value Share as
Previous based share deemed Building GAAP payments units cost
componentization IFRS TOTAL REVENUE $ 482,276 $ - $ - $ - $ - $
482,276 DIRECT COSTS 361,857 - - - - 361,857 GROSS PROFIT 120,419 -
- - - 120,419 OPERATING EXPENSES General and administrative 40,947
- 16 - - 40,963 Other expenses 7,021 561 - - - 7,582 Gain on
disposal of property, plant and equipment (377) - - - - (377) Gain
on sale of investment (313) - - - - (313) Foreign exchange gain
(892) - - - - (892) Finance costs 1,275 - - - - 1,275 Depreciation
and amortization 31,759 - - (726) (114) 30,919 79,420 561 16 (726)
(114) 79,157 EARNINGS (LOSS) BEFORE INCOME TAX 40,999 (561) (16)
726 114 41,262 INCOME TAX - PROVISION (RECOVERY) Current 13,548 - -
- - 13,548 Deferred (108) - - 188 42 122 13,440 - - 188 42 13,670
NET EARNINGS (LOSS) $ 27,559 $ (561) $ (16) $ 538 $ 72 $ 27,592
IFRS Consolidated Statement of Comprehensive Earnings (Loss)
For the three months ended July 31, 2010 (c) (d) (f) (g) Fair Share
Deferred value based as Previous payments share deemed Building
GAAP reserve units cost componentization IFRS NET EARNINGS (LOSS) $
5,053 $ (69) $ 3 $ 134 $ 13 $ 5,134 OTHER COMPREHENSIVE EARNINGS
Unrealized gain on foreign currency translation (net of tax of $0)
5,637 - - - - 5,637 COMPREHENSIVE EARNINGS (LOSS) $ 10,690 $ (69) $
3 $ 134 $ 13 $ 10,771 IFRS Consolidated Statement of Comprehensive
Earnings (Loss) For the twelve months ended April 30, 2011 (c) (d)
(f) (g) Fair Share Deferred value based as Previous payments share
deemed Building GAAP reserve units cost componentization IFRS NET
EARNINGS (LOSS) $ 27,559 $ (561) $ (16) $ 538 $ 72 $ 27,592 OTHER
COMPREHENSIVE LOSS Unrealized loss on foreign currency translation
(net of tax of $0) (3,662) - - - - (3,662) COMPREHENSIVE EARNINGS
(LOSS) $ 23,897 $ (561) $ (16) $ 538 $ 72 $ 23,930
Adjustments required to transition to IFRS: a) Adjustments -
Subsequent to the release of the April 30, 2011 annual consolidated
financial statements, management identified adjustments required
for a component of deferred tax and classification of a component
of stock-based payments in the Companies April 30, 2010, July 31,
2010 and April 30, 2011 historical annual and interim consolidated
financial statements. b) Foreign currency translation reserve - The
Company has applied the IFRS 1 exemption as described in the
"exceptions and exemptions applied" section above. c) Share-based
payments - The Company's policy under Canadian GAAP was to use the
straight-line method to account for options that vest in
installments over time. Under IFRS, each installment is accounted
for as a separate share option grant with its own distinct vesting
period, hence the fair value of each tranche differs. In addition,
Canadian GAAP permits companies to either estimate the forfeitures
at the grant date or record the entire expense as if all
share-based payments vest and then record forfeitures as they
occur. IFRS requires that forfeitures be estimated at the time of
grant to eliminate distortion of remuneration expense recognized
during the vesting period. The estimate is revised if subsequent
information indicates that actual forfeitures are likely to differ
from previous estimates. d) Deferred Share Units ("DSUs") - The
Company's policy under Canadian GAAP was to value the DSUs using
the intrinsic value at each reporting date. Under IFRS we use the
fair value, which is affected by changes in underlying volatility
of the stock as well as changes in the stock price. e) Contingent
consideration - Under Canadian GAAP, contingent consideration is
recognized as part of the purchase cost when it can be reasonably
estimated at the acquisition date and the outcome of the
contingency can be determined beyond reasonable doubt. Under IFRS,
contingent consideration, regardless of probability considerations,
is recognized at fair value at the acquisition date. The Company
has booked contingent considerations for the SMD Services and the
North Star Drilling acquisitions. Fair value as deemed cost - The
Company has applied the IFRS 1 f) exemption as described in the
"exceptions and exemptions applied" section above. g) Building
componentization - Under Canadian GAAP, costs incurred for
property, plant and equipment on initial recognition are allocated
to significant components when practicable. Under IFRS, costs
incurred for plant and equipment on initial recognition are
allocated to significant components, capitalized and depreciated
separately over the estimated useful lives of each component.
Practicability of allocating costs to significant components is not
considered under IFRS. Costs incurred subsequent to the initial
purchase of property, plant and equipment are capitalized when it
is probable that future economic benefits will flow to the Company
and the costs can be measured reliably. Upon capitalization, the
carrying amount of components replaced, if any, are written off.
The Company has componentized buildings. 7. PROPERTY, PLANT
AND EQUIPMENT Changes in the property, plant and equipment balance
were as follows for the periods: Cost Land Buildings Drills Auto
Other Total Balance as at May 1, 2010 $ 1,542 $ 10,442 $ 219,751 $
75,551 $ 25,846 $ 333,132 Additions - 2,020 40,198 19,808 592
62,618 Disposals (167) (1,213) (5,416) (5,370) - (12,166) Business
acquisitions - - 7,459 2,143 19 9,621 Effect of movements in
exchange rates - (48) (4,154) (155) (956) (5,313) Balance as at
April 30, 2011 1,375 11,201 257,838 91,977 25,501 387,892 Additions
- - 16,249 4,479 682 21,410 Disposals - - (2,793) (483) - (3,276)
Effect of movements in exchange rates 3 63 (1,022) 107 534 (315)
Balance as at July 31, 2011 $ 1,378 $ 11,264 $ 270,272 $ 96,080 $
26,717 $ 405,711 Accumulated Depreciation Land Buildings Drills
Auto Other Total Balance as at May 1, 2010 $ - $ (2,363) $ (74,610)
$ (40,444) $ (16,780) $ (134,197) Disposals - 194 3,917 3,934 -
8,045 Depreciation - (668) (17,096) (11,125) (1,272) (30,161)
Effect of movements in exchange rates - 46 3,368 (460) 940 3,894
Balance as at April 30, 2011 - (2,791) (84,421) (48,095) (17,112)
(152,419) Disposals - - 1,603 389 - 1,992 Depreciation - (167)
(4,799) (3,129) (294) (8,389) Effect of movements in exchange rates
- 7 1,765 496 (516) 1,752 Balance as at July 31, 2011 $ - $ (2,951)
$ (85,852) $ (50,339) $ (17,922) $ (157,064) Net book value May 1,
2010 $ 1,542 $ 8,079 $ 145,141 $ 35,107 $ 9,066 $ 198,935 Net book
value April 30, 2011 $ 1,375 $ 8,410 $ 173,417 $ 43,882 $ 8,389 $
235,473 Net book value July 31, 2011 $ 1,378 $ 8,313 $ 184,420 $
45,741 $ 8,795 $ 248,647 There were no impairments recorded
as at May 1, 2010, April 30, 2011 or July 31, 2011. The Company has
assessed whether there is any indication that an impairment loss
recognized in prior periods for property, plant and equipment may
no longer exist or may have decreased. There were no impairments
requiring reversal as at May 1, 2010, April 30, 2011 or July 31,
2011. Capital expenditures were $21,410 and $8,969 for the periods
ended July 31, 2011 and 2010, respectively. The Company did
not obtain direct financing for the period ended July 31, 2011 but
obtained direct financing of $50 for the period ended July 31,
2010. 8. GOODWILL Changes in the goodwill balance were as follows:
Balance as at May 1, 2010 $ 26,475 Goodwill acquired 1,083 Effect
of movement in exchange rates 758 Balance as at April 30, 2011
28,316 Effect of movement in exchange rates 357 Balance as at July
31, 2011 $ 28,673 Allocation of goodwill to CGUs The
carrying amount of goodwill was allocated to CGUs as follows: April
30, 2011 May 1, 2010 Canada $ 13,223 $ 13,223 Chile 12,182 11,004
Other 2,911 2,248 $ 28,316 $ 26,475 Canada The recoverable amount
of the 'Canadian Branch' as a CGU is determined on a value-in-use
calculation, which uses cash flow projections based on financial
budgets and forward projections approved by management covering a
five-year period, and a discount rate of 14% per annum. Cash flows
beyond that period have been extrapolated using a steady 2% per
annum growth rate. While the mining services market in Canada is
cyclical in nature this organic growth rate has been achieved
across two business cycles and is seen by management as a fair and
conservative long-term average growth rate. Management believes
that any reasonably possible change in the key assumptions on which
the recoverable amount is based would not cause the aggregate
carrying amount to exceed the aggregate recoverable amount of the
CGU. Chile The recoverable amount of the 'Chilean Branch' as a CGU
is determined on a value in use calculation, which uses cash flow
projections based on financial budgets and forward projections
approved by management covering a five-year period, and a discount
rate of 15% per annum. Cash flows beyond that period have been
extrapolated using a steady 2% per annum growth rate. While the
mining services market in Chile is cyclical in nature this organic
growth rate has been achieved across two business cycles and is
seen by management as a fair and conservative long-term average
growth rate. Management believes that any reasonably possible
change in the key assumptions on which the recoverable amount is
based would not cause the aggregate carrying amount to exceed the
aggregate recoverable amount of the CGU. Key assumptions The key
assumptions in the value in use calculations for the Canadian and
Chilean CGUs are as follows: Revenue - The values assigned to the
assumptions reflect past experience, except for peak revenue that
is reasonably expected to be higher than the last peak during 2008
and 2009. The effect of the incorporation of the acquired drill
fleets and significant levels of capital expenditure within both
the Canadian and Chilean CGUs since 2007 that have been higher than
the sustaining level, have provided both CGUs with the basis on
which to grow. The growth expected is consistent with management's
plans for focusing operations in these markets and growing share in
the specialized drilling market. Gross margin - Management expects
that gross margins will remain in a range in line with historically
achieved levels. 9. INTANGIBLE ASSETS Changes in the intangible
assets balance were as follows: Balance as at May 1, 2010 $ 1,074
Intangible assets acquired 763 Amortization (761) Effect of
movement in exchange rates 159 Balance as at April 30, 2011 1,235
Amortization (191) Effect of movement in exchange rates (1) Balance
as at July 31, 2011 $ 1,043 10. LONG-TERM DEBT In the first
quarter of the current fiscal year, the Company increased its
equipment and acquisition loan by $10,000, bearing interest at
prime plus 1%, with principle repayments commencing in the first
quarter of fiscal 2013 and maturing August, 2017. 11. SHARE CAPITAL
On March 9, 2011, the Company announced a stock split for the
issued and outstanding common shares on a three for one
basis. The record date for the stock split was March 23,
2011. All share and stock option numbers have been
retroactively adjusted to reflect the stock split to provide more
comparable information. Authorized Unlimited number of fully paid
common shares, without nominal or par value, carry one vote per
share and carry a right to dividends. The movement in the Company's
issued and outstanding share capital during the period is as
follows: Number of Share shares (000's) capital Balance as at May
1, 2010 71,243 $ 144,919 Options exercised during the year 797
5,723 Balance as at April 30, 2011 72,040 150,642 Options exercised
during the period - - Balance as at July 31, 2011 72,040 $ 150,642
12. INCOME TAXES The income tax expense for the period can
be reconciled to accounting profit as follows: July 31, 2011 July
31, 2010 Earnings before income tax $ 26,255 $ 7,494 Statutory
Canadian corporate income tax 29% 30% rate Expected income tax
expense based on statutory rate $ 7,614 $ 2,248 Non-recognition of
tax benefits related 48 222 to losses Other foreign taxes paid 51
55 Rate variances in foreign jurisdictions (298) (606) Other 948
441 Total income tax provision $ 8,363 $ 2,360 13. EARNINGS PER
SHARE All of the Company's earnings are attributable to common
shares therefore net earnings are used in determining earnings per
share. July 2011 July 2010 Net earnings for the period $ 17,892 $
5,134 Weighted average shares outstanding 72,040 71,355 - basic
(000's) Net effect of dilutive securities: Stock options (000's)
881 394 Weighted average number of shares - 72,921 71,749 diluted
(000's) Earnings per share: Basic $ 0.25 $ 0.07 Diluted $ 0.25 $
0.07 The calculation of the diluted earnings per share for the
periods ended July 31, 2011 and 2010 exclude the effect of 75,271
options and 577,735 options, respectively, as they are
anti-dilutive. 14. 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 essentially the same. The
accounting policies of the segments are the same as those described
in Note 4. 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: July 31, 2011 July 31,
2010 Revenue Canada - U.S. $ 61,438 $ 40,451 South and Central
America 51,292 40,017 Australia, Asia and Africa 51,422 29,012 $
164,152 $ 109,480 Earnings from operations Canada - U.S. $ 9,986 $
5,605 South and Central America 10,599 4,521 Australia, Asia and
Africa 11,058 1,163 31,643 11,289 Eliminations (25) (231) 31,618
11,058 Finance costs 822 286 General corporate expenses* 4,541
3,278 Income tax 8,363 2,360 Net earnings $ 17,892 $ 5,134 *General
and corporate expenses include expenses for corporate offices and
stock options Depreciation and amortization Canada - U.S. $ 3,341 $
2,292 South and Central America 2,271 1,901 Australia, Asia and
Africa 2,664 2,709 Unallocated corporate assets 304 245 Total
depreciation and $ 8,580 $ 7,147 amortization July 31, 2011 April
30, 2011 May 1, 2010 Identifiable assets Canada - U.S. $ $ 134,666
$ 103,998 146,976 South and 193,905 189,083 157,937 Central America
Australia, Asia 139,396 130,071 102,574 and Africa 480,277 453,820
364,509 Eliminations (1,263) 439 460 Unallocated and 20,310 19,878
41,290 corporate assets $ $ 474,137 $ 406,259 499,324 Canada - U.S.
includes revenue in July 31, 2011 of $33,225 (July 31, 2010 -
$27,028) for Canadian operations and property, plant and equipment
at July 31, 2011 of $46,506 (April 30, 2011 - $45,325; May 1, 2010
- $38,699). 15. NET EARNINGS FOR THE YEAR Net earnings for the year
have been arrived at after charging various employee benefit
expenses as follows. Direct costs include salaries and wages
of $39,331 for July 31, 2011 ($27,838 for July 31, 2010) and other
employee benefits of $7,528 for July 31, 2011 ($6,296 for July 31,
2010); general and administrative expense includes salaries and
wages of $5,181 for July 31, 2011 ($4,002 for July 31, 2010) and
other employee benefits of $911 for July 31, 2011 ($740 for July
31, 2010); other expenses include share-based payments of $423 for
July 31, 2011 ($473 for July 31, 2010). Amortization expense for
intangible assets has been included in the line item "depreciation
and amortization" in the interim condensed consolidated statements
of operations with breakdown as follows: 2011 2010 Depreciation of
property, plant and equipment $ 8,389 $ 7,015 Amortization of
intangible assets 191 132 $ 8,580 $ 7,147 16. 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 previously
have a presence. The acquisition was accounted for using the
acquisition method and the results of this operation were included
in the statement of operations as of the closing date. The acquired
business includes drilling equipment, inventory, contracts and
personnel. 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 July 31, 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 Total assets $ 9,512
Consideration Cash $ 1,209 Trade and other payables 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 acquisition was accounted for
using the acquisition method and the results of this operation were
included in the statement of operations as of the closing date. The
acquired business includes drilling equipment, contracts and
personnel. The purchase price for the transaction was USD
$2,449 (CAD $2,567), including customary working capital
adjustments of CAD $215, financed with cash. There is also a
contingent consideration of USD $750 to the purchase price, based
on future earnings. The acquiree is expected to meet target
earnings, with payments to be made over the next five years. The
net assets acquired at fair market value at acquisition are as
follows: Assets acquired and liabilities assumed Trade receivables
(net) $ 776 Inventories 382 Prepaid expenses 18 Property, plant and
equipment 1,078 Goodwill (not tax deductible) 1,083 Intangible
assets 763 Trade and other payables (779) Net assets $ 3,321
Consideration Cash $ 2,567 Contingent consideration 754 $ 3,321 17.
DIVIDENDS The Company has declared two semi-annual dividends during
the previous year. The first dividend of $0.07333 per common share
was paid on November 1, 2010 to shareholders of record as of
October 8, 2010. The second dividend of $0.07333 per common
share was paid on May 2, 2011 to shareholders of record as of April
8, 2011. These dividends are designated as an "eligible dividend"
for Canadian tax purposes. 18. FINANCIAL INSTRUMENTS There are no
significant changes to financial instruments compared to the
Company's 2011 annual financial statements prepared under previous
GAAP except for the following: Fair value The carrying values of
cash, accounts receivable, demand credit facility and accounts
payable and accrued charges approximate their fair value due to the
relatively short period to maturity of the instruments. The
following table shows carrying values of short and long-term debt
and contingent considerations and also approximates their fair
value as almost all debts carry variable interest rates. July 31,
2011 April 30, 2011 May 1, 2010 Short-term debt $ 8,032 $ 7,919 $ -
Contingent considerations 2,626 2,612 2,011 Long-term debt 32,848
25,032 23,928 Credit risk As at July 31, 2011, 72.4% of the
Company's trade receivables were aged as current and 0.3% 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 May 1, 2010 $ 1,605 Increase in impairment allowance
493 Write-off charged against allowance (1,125) Foreign exchange
translation differences 9 Balance as at April 30, 2011 982
Write-off charged against allowance (526) Recovery of amounts
previously written off (161) Foreign exchange translation
differences 17 Balance as at July 31, 2011 $ 312 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, 2011 April 30, 2011 May 1, 2010 U.S. Dollars $ 16,609 $
14,605 $ 2,843 If the Canadian dollar moved by plus or minus 10% at
July 31, 2011, the unrealized foreign exchange gain or loss would
move by approximately $1,661 (April 30, 2011 - $1,460, May 1, 2010
- $284). Liquidity risk The following table details the Company's
contractual maturities for its financial liabilities. 1 year 2-3
years 4-5 years thereafter Total Trade and $ 85,931 $ $ $ $ 85,931
other - - - payables Contingent 955 1,671 - - 2,626 consideration
Short-term 8,032 - - - 8,032 debt Long-term 15,032 7,565 2,000 debt
8,251 32,848 $103,169 $ 16,703 $ 7,565 $ 2,000 $129,437 To view
this news release in HTML formatting, please use the following URL:
http://www.cnw.ca/en/releases/archive/September2011/06/c8497.html p
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
Copyright
Major Drilling (TSX:MDI)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Major Drilling (TSX:MDI)
Historical Stock Chart
Von Jul 2023 bis Jul 2024