MONCTON, NB,
March 5, 2012 /PRNewswire/ - Major
Drilling Group International Inc. (TSX: MDI) today reported results
for its third quarter of fiscal 2012, ended January 31, 2012.
Highlights |
|
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|
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|
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|
|
|
In millions of Canadian dollars
(except earnings per share) |
|
Q3-12 |
|
Q3-11 |
|
YTD-12 |
|
YTD-11 |
|
|
|
|
|
|
|
|
|
Revenue |
|
$182.2 |
|
$107.7 |
|
$560.2 |
|
$345.0 |
Gross profit |
|
47.1 |
|
23.9 |
|
172.7 |
|
85.5 |
|
As percentage of sales |
|
25.9% |
|
22.2% |
|
30.8% |
|
24.8% |
EBITDA(1) |
|
27.0 |
|
10.8 |
|
117.4 |
|
50.5 |
|
As percentage of sales |
|
14.8% |
|
10.0% |
|
21.0% |
|
14.6% |
Net earnings |
|
9.6 |
|
1.7 |
|
59.0 |
|
18.1 |
Earnings per share |
|
0.12 |
|
0.02 |
|
0.79 |
|
0.25 |
|
(1) Earnings before
interest, taxes, depreciation and amortization (see "non-gaap
measures") |
- Major Drilling posted quarterly
revenue of $182.2 million, up nearly
70% from the $107.7 million recorded
for the same quarter last year. This represents the highest level
of third quarter revenue in the Company's history.
- Gross margin percentage for the quarter was 25.9% compared to
22.2% for the corresponding period last year.
- EBITDA increased 150% to $27.0
million compared to the corresponding period last year.
- Record third quarter earnings were reported at $9.6 million or $0.12 per share for the quarter, compared to
earnings of $1.7 million or
$0.02 per share for the prior year
quarter.
- The Company has increased its semi-annual dividend by 12.5% to
$0.09 per share to be paid on
May 2, 2012.
"The Company achieved the highest third quarter
revenue and profits in its history. Demand for drilling services
continues to increase and customers remain anxious to secure rigs
and crews," said Francis McGuire,
President and CEO of Major Drilling.
"The third quarter is always seasonally the weakest quarter of our
fiscal year, as mining and exploration companies shut down, often
for extended periods over the holiday season. Nevertheless, we
recorded the highest ever utilization rate for a third quarter in
our history. We saw our EBITDA grow by 150% compared to the
corresponding period last year, despite the heavy ramp-up costs and
delays in Canada, which were
caused by mild weather."
"Going forward, the outlook for the fourth
quarter remains strong, although weather continued to be somewhat
challenging throughout February. During the third quarter, we
renewed many of our contracts with pricing catching up to market
conditions. We expect demand from gold and copper projects to
continue to be strong in calendar 2012 assuming prices remain well
above economical thresholds required for sustained exploration.
Strong demand from coal and iron ore projects has also added a
layer of work, which was not present at the peak in 2008," said Mr.
McGuire. "Intermediate and junior mining companies with advanced
projects have ramped up their already busy drilling programs by
adding rigs, and most senior mining companies have increased their
exploration budgets for 2012. We are starting to see increased
demand for underground services around the world as mines are
moving some surface drilling activities underground. Even though
underground drilling tends to have lower margins, the Company
expects to invest more in this area given that these contracts
provide more financial stability, and target a different labour
force."
"Our biggest operational challenge continues to
be the speed at which we can grow the labour force and shrink the
productivity gap of new drillers as they gain experience. We
continue to aggressively and successfully invest in the recruitment
and training of new drillers. Our ongoing efforts on recruitment
and training should allow our global utilization rates to continue
to improve as we add more drillers. We are also pleased to report
that we have been able to reduce our turnover rate of new entrants
by half over the last 12 months. As competition for drillers heats
up, wage increases will be required in certain areas to retain and
attract the most experienced drillers, which are key to
high-quality customer service," observed Mr. McGuire.
"Net capital expenditures for the quarter were
$22.5 million as we purchased 19
rigs. We also retired eight rigs through our modernization
program. We are continuing the renewal of our fleet, which
helps improve productivity, safety and speeds up the training of
crews. The greater reliability of these rigs therefore allows us to
increase the earning power of each crew. In fact, 60% of our rigs
are now less than five years old in an industry where rigs tend to
last 20 years."
"The Company is pleased to announce that today
its Board of Directors increased its cash dividend by 12.5% to
$0.09 per common share payable on
May 2, 2012 to shareholders of record
as of April 6, 2012. This dividend is
designated as an "eligible dividend" for Canadian tax purposes,"
said Mr. McGuire.
"The Company would like to take this opportunity
to welcome Fred Dyment to its Board
of Directors. Mr. Dyment is a Chartered Accountant with over
35 years of experience in the oil and natural gas industry and in
international business. He held increasingly senior positions at
Ranger Oil Limited, including Chief Financial Officer and President
and Chief Executive Officer."
Third quarter ended January 31,
2012
Total revenue for the third quarter was
$182.2 million compared to
$107.7 million recorded for the prior
year period. Part of the increase comes from the acquisition of the
Bradley operations. Even without considering this acquisition,
revenue was still the highest third quarter revenue in the
Company's history. All of the Company's regions contributed to this
growth.
Revenue from Canada-U.S. drilling operations was
up 83% to $69.8 million for the
quarter compared to $38.2 million for
the same period last year. U.S. mineral drilling operations
continued a strong recovery, particularly from its senior mining
customers. In Canada, increased
activity levels, combined with the acquisition of Bradley,
contributed to the growth of revenue.
In South and Central
America, revenue for the quarter was $59.2 million, up 61% from $36.8 million recorded in the prior year quarter.
The increase was primarily driven by strong growth in our Mexican
and Chilean operations, combined with the addition of the Bradley
operations in Colombia and
Suriname.
Australian, Asian and African drilling
operations reported revenue of $53.2
million, up 63% from $32.7
million reported in the same period last year. Australia and Mongolia accounted for a significant portion
of this growth. New operations in Burkina
Faso, Mozambique and the
DRC, combined with the addition of Bradley's operations in
the Philippines, accounted for the
rest of the growth in the region.
The overall gross margin percentage for the
quarter was 25.9% compared to 22.2% for the same period last year.
Third quarter margins are always impacted by a slowdown during the
holiday season combined with higher than usual mobilizations,
demobilizations and increased repairs during this period. This
quarter, mild weather in Canada
also caused delays in mobilizing to certain jobs.
General and administrative costs were
$16.5 million for the quarter
compared to $10.1 million in the same
period last year. The increase was due to three main factors: i)
new Bradley operations; ii) new operations in Burkina Faso, Mozambique and the DRC; and iii) increased
costs to support the strong growth in activity levels.
Other expenses were $3.4
million for the quarter compared to $1.6 million for the same period last year, due
to higher incentive compensation expenses given the Company's
improved profitability and increased provision for bad debt.
Depreciation and amortization expense increased
to $12.0 million for the quarter
compared to $8.0 million for the same
quarter last year. Two thirds of the increase relates to the
acquisition of Bradley, including the amortization of intangible
assets, which are amortized over four years. Investments in
equipment over the last year account for the rest of the
increase.
Non-GAAP Financial Measures
In this news release, the Company uses the
following non-GAAP financial measures: EBITDA and EBITDA margin.
The Company believes these non-GAAP financial measures provide
useful information to both management and investors in measuring
the financial performance of the Company. These measures do not
have a standardized meaning prescribed by GAAP and therefore they
may not be comparable to similarly titled measures presented by
other publicly traded companies, and should not be construed as an
alternative to other financial measures determined in accordance
with GAAP.
Some of the statements contained in this press
release may be forward-looking statements, such as, but not limited
to, those relating to worldwide demand for gold and base metals and
overall commodity prices, the level of activity in the minerals and
metals industry and the demand for the Company's services, the
Canadian and international economic environments, the Company's
ability to attract and retain customers and to manage its assets
and operating costs, sources of funding for its clients,
particularly for junior mining companies, competitive pressures,
currency movements, which can affect the Company's revenue in
Canadian dollars, the geographic distribution of the Company's
operations, the impact of operational changes, changes in
jurisdictions in which the Company operates (including changes in
regulation), failure by counterparties to fulfill contractual
obligations, and other factors as may be set forth, as well as
objectives or goals, and including words to the effect that the
Company or management expects a stated condition to exist or occur.
Since forward-looking statements address future events and
conditions, by their very nature, they involve inherent risks and
uncertainties. Actual results in each case could differ materially
from those currently anticipated in such statements by reason of
factors such as, but not limited to, the factors set out in the
discussion on pages 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 on every
continent.
Financial statements are attached.
Major Drilling
will provide a simultaneous webcast of its quarterly conference
call on Tuesday, March 6,
2012 at 9:00 AM (EST).
To access the webcast please go to the investors/webcast section
of Major Drilling's website at
www.majordrilling.com and click the attached link, or go
directly to the CNW Group website at www.newswire.ca for
directions. Participants will require Windows MediaPlayer, which
can be downloaded prior to accessing the webcast. 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 |
|
Nine
months ended |
|
January 31 |
|
January 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUE |
$ |
182,188 |
|
$ |
107,720 |
|
$ |
560,194 |
|
$ |
345,018 |
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT
COSTS |
|
135,068 |
|
|
83,847 |
|
|
387,520 |
|
|
259,512 |
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
47,120 |
|
|
23,873 |
|
|
172,674 |
|
|
85,506 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
16,522 |
|
|
10,118 |
|
|
41,956 |
|
|
29,640 |
|
Other expenses |
|
3,388 |
|
|
1,573 |
|
|
12,036 |
|
|
6,005 |
|
Loss (gain) on disposal of
property, plant and equipment |
|
635 |
|
|
391 |
|
|
1,316 |
|
|
(427) |
|
Foreign exchange (gain) loss |
|
(384) |
|
|
1,028 |
|
|
(19) |
|
|
(220) |
|
Finance costs |
|
874 |
|
|
265 |
|
|
2,660 |
|
|
876 |
|
Depreciation and amortization
(note 15) |
|
12,017 |
|
|
8,048 |
|
|
29,963 |
|
|
22,742 |
|
|
33,052 |
|
|
21,423 |
|
|
87,912 |
|
|
58,616 |
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE
INCOME TAX |
|
14,068 |
|
|
2,450 |
|
|
84,762 |
|
|
26,890 |
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX -
PROVISION (RECOVERY) (note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
(3,910) |
|
|
597 |
|
|
13,377 |
|
|
9,447 |
|
Deferred |
|
8,412 |
|
|
182 |
|
|
12,367 |
|
|
(683) |
|
|
4,502 |
|
|
779 |
|
|
25,744 |
|
|
8,764 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
EARNINGS |
$ |
9,566 |
|
$ |
1,671 |
|
$ |
59,018 |
|
$ |
18,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE (note 13) |
|
|
|
|
|
|
|
|
|
|
|
Basic * |
$ |
0.12 |
|
$ |
0.02 |
|
$ |
0.79 |
|
$ |
0.25 |
Diluted
** |
$ |
0.12 |
|
$ |
0.02 |
|
$ |
0.78 |
|
$ |
0.25 |
|
* Based on 78,948,691 and 71,579,811 daily
weighted average shares
outstanding for the quarter ended January 31, 2012 and 2011,
respectively
and on 75,078,293 and 71,451,882 daily weighted average shares
outstanding
for the fiscal year to date 2012 and 2011, respectively. The total
number
of shares outstanding on January 31, 2012 was 79,086,376.
** Based on 80,067,340 and 72,534,171 daily weighted average
shares
outstanding for the quarter ended January 31, 2012 and 2011,
respectively,
and on 76,046,641 and 72,042,816 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 (Loss) |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine
months ended |
|
January 31 |
|
January 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
EARNINGS |
$ |
9,566 |
|
$ |
1,671 |
|
$ |
59,018 |
|
$ |
18,126 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on
foreign currency translations (net of tax of $0) |
|
2,286 |
|
|
(4,315) |
|
|
9,860 |
|
|
4,280 |
|
Unrealized loss on cash flow hedge
(net of tax of $0) |
|
(119) |
|
|
- |
|
|
(119) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
EARNINGS (LOSS) |
$ |
11,733 |
|
$ |
(2,644) |
|
$ |
68,759 |
|
$ |
22,406 |
Major
Drilling Group International Inc. |
Interim
Condensed Consolidated Statements of Changes
in Equity |
For the nine
months ended January 31, 2011 and
2012 |
(in
thousands of Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
Reserves |
|
Share based
payments reserve |
|
Retained
earnings |
|
Foreign currency
translation reserve |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT
MAY 1, 2010 |
$ |
144,919 |
|
$ |
- |
|
$ |
9,236 |
|
$ |
153,358 |
|
$ |
- |
|
$ |
307,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
2,011 |
|
|
- |
|
|
(599) |
|
|
- |
|
|
- |
|
|
1,412 |
|
Share based payments reserve |
|
- |
|
|
- |
|
|
1,906 |
|
|
- |
|
|
- |
|
|
1,906 |
|
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
(5,243) |
|
|
- |
|
|
(5,243) |
|
|
146,930 |
|
|
- |
|
|
10,543 |
|
|
148,115 |
|
|
- |
|
|
305,588 |
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
- |
|
|
- |
|
|
18,126 |
|
|
- |
|
|
18,126 |
|
Unrealized gains on foreign
currency translations |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,280 |
|
|
4,280 |
|
Total comprehensive earnings |
|
- |
|
|
- |
|
|
- |
|
|
18,126 |
|
|
4,280 |
|
|
22,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT
JANUARY 31, 2011 |
$ |
146,930 |
|
$ |
- |
|
$ |
10,543 |
|
$ |
166,241 |
|
$ |
4,280 |
|
$ |
327,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT
MAY 1, 2011 |
$ |
150,642 |
|
$ |
- |
|
$ |
10,280 |
|
$ |
170,425 |
|
$ |
(3,662) |
|
$ |
327,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
2,022 |
|
|
- |
|
|
(322) |
|
|
- |
|
|
- |
|
|
1,700 |
|
Share issue (net of issue costs)
(note 11) |
|
76,439 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
76,439 |
|
Share based payments reserve |
|
- |
|
|
- |
|
|
1,766 |
|
|
- |
|
|
- |
|
|
1,766 |
|
Dividends |
|
- |
|
|
- |
|
|
- |
|
|
(6,242) |
|
|
- |
|
|
(6,242) |
|
|
229,103 |
|
|
- |
|
|
11,724 |
|
|
164,183 |
|
|
(3,662) |
|
|
401,348 |
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
- |
|
|
- |
|
|
- |
|
|
59,018 |
|
|
- |
|
|
59,018 |
|
Unrealized gains on foreign
currency translations |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
9,860 |
|
|
9,860 |
|
Unrealized loss on cash flow
hedge |
|
- |
|
|
(119) |
|
|
- |
|
|
- |
|
|
- |
|
|
(119) |
Total comprehensive
earnings |
|
- |
|
|
(119) |
|
|
- |
|
|
59,018 |
|
|
9,860 |
|
|
68,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT
JANUARY 31, 2012 |
$ |
229,103 |
|
$ |
(119) |
|
$ |
11,724 |
|
$ |
223,201 |
|
$ |
6,198 |
|
$ |
470,107 |
Major
Drilling Group International
Inc. |
Interim
Condensed Consolidated
Statements of Cash Flows |
(in
thousands of Canadian
dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended |
|
Nine months
ended |
|
January 31 |
|
January 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Earnings before income
tax |
$ |
14,068 |
|
$ |
2,450 |
|
$ |
84,762 |
|
$ |
26,890 |
Operating items not
involving cash |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(note 15) |
|
12,017 |
|
|
8,048 |
|
|
29,963 |
|
|
22,742 |
|
Loss (gain) on disposal of
property, plant and equipment |
|
635 |
|
|
391 |
|
|
1,316 |
|
|
(427) |
|
Share based payments reserve |
|
645 |
|
|
695 |
|
|
1,766 |
|
|
1,906 |
Finance costs
recognized in earnings before income tax |
|
874 |
|
|
265 |
|
|
2,660 |
|
|
876 |
|
|
28,239 |
|
|
11,849 |
|
|
120,467 |
|
|
51,987 |
Changes in non-cash
operating working capital items |
|
17,672 |
|
|
7,080 |
|
|
(4,629) |
|
|
(4,784) |
Finance costs
paid |
|
(938) |
|
|
(265) |
|
|
(2,724) |
|
|
(876) |
Income taxes (paid)
recovered |
|
(4,915) |
|
|
2,188 |
|
|
(16,240) |
|
|
473 |
Cash flow from
operating activities |
|
40,058 |
|
|
20,852 |
|
|
96,874 |
|
|
46,800 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Repayment of long-term
debt |
|
(11,588) |
|
|
(1,890) |
|
|
(15,817) |
|
|
(7,124) |
Proceeds from
long-term debt |
|
- |
|
|
- |
|
|
25,000 |
|
|
- |
Repayment of
short-term debt |
|
(5,141) |
|
|
- |
|
|
(5,141) |
|
|
- |
Proceeds from
short-term debt |
|
- |
|
|
- |
|
|
- |
|
|
10,400 |
Issuance of common
shares |
|
1,035 |
|
|
132 |
|
|
78,139 |
|
|
1,412 |
Dividends paid |
|
(6,242) |
|
|
(5,243) |
|
|
(11,525) |
|
|
(9,993) |
Cash flow (used in)
from financing activities |
|
(21,936) |
|
|
(7,001) |
|
|
70,656 |
|
|
(5,305) |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions
(net of cash acquired) (note 16) |
|
(7,960) |
|
|
(30) |
|
|
(74,479) |
|
|
(2,567) |
Acquisition of
property, plant and equipment (net of direct financing) |
|
(22,539) |
|
|
(18,310) |
|
|
(60,032) |
|
|
(40,518) |
Proceeds from disposal
of property, plant and equipment |
|
164 |
|
|
572 |
|
|
1,711 |
|
|
3,929 |
Cash flow used in
investing activities |
|
(30,335) |
|
|
(17,768) |
|
|
(132,800) |
|
|
(39,156) |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes |
|
269 |
|
|
237 |
|
|
(828) |
|
|
(404) |
|
|
|
|
|
|
|
|
|
|
|
|
(DECREASE) INCREASE
IN CASH |
|
(11,944) |
|
|
(3,680) |
|
|
33,902 |
|
|
1,935 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF
THE PERIOD |
|
62,061 |
|
|
35,847 |
|
|
16,215 |
|
|
30,232 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF THE
PERIOD |
$ |
50,117 |
|
$ |
32,167 |
|
$ |
50,117 |
|
$ |
32,167 |
|
|
Major Drilling
Group International Inc. |
Interim Condensed
Consolidated Balance Sheets |
As at January 31,
2012 and April 30, 2011 |
(in thousands of
Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
January 31,
2012 |
|
April 30, 2011 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
Cash |
$ |
50,117 |
|
$ |
16,215 |
|
Trade and other receivables |
|
122,722 |
|
|
100,300 |
|
Income tax receivable |
|
4,719 |
|
|
2,720 |
|
Inventories |
|
99,703 |
|
|
69,864 |
|
Prepaid expenses |
|
6,635 |
|
|
8,439 |
|
|
283,896 |
|
|
197,538 |
|
|
|
|
|
|
PROPERTY, PLANT AND
EQUIPMENT (note 7) |
|
315,160 |
|
|
235,473 |
|
|
|
|
|
|
DEFERRED INCOME TAX
ASSETS |
|
4,659 |
|
|
11,575 |
|
|
|
|
|
|
GOODWILL (note
8) |
|
53,421 |
|
|
28,316 |
|
|
|
|
|
|
INTANGIBLE ASSETS
(note 9) |
|
7,370 |
|
|
1,235 |
|
|
|
|
|
|
|
$ |
664,506 |
|
$ |
474,137 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
Trade and other payables |
$ |
100,357 |
|
$ |
88,599 |
|
Income tax payable |
|
4,789 |
|
|
4,297 |
|
Short-term debt |
|
7,893 |
|
|
7,919 |
|
Current portion of long-term debt
(note 10) |
|
8,799 |
|
|
8,402 |
|
|
121,838 |
|
|
109,217 |
|
|
|
|
|
|
CONTINGENT
CONSIDERATIONS |
|
2,760 |
|
|
2,612 |
|
|
|
|
|
|
LONG-TERM DEBT
(note 10) |
|
44,005 |
|
|
16,630 |
|
|
|
|
|
|
DEFERRED INCOME TAX
LIABILITIES |
|
25,344 |
|
|
17,993 |
|
|
|
|
|
|
DEFERRED
REVENUE |
|
452 |
|
|
- |
|
|
194,399 |
|
|
146,452 |
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
Share capital (note 11) |
|
229,103 |
|
|
150,642 |
|
Reserves |
|
(119) |
|
|
- |
|
Share based payments reserve |
|
11,724 |
|
|
10,280 |
|
Retained earnings |
|
223,201 |
|
|
170,425 |
|
Foreign currency translation
reserve |
|
6,198 |
|
|
(3,662) |
|
|
470,107 |
|
|
327,685 |
|
|
|
|
|
|
|
$ |
664,506 |
|
$ |
474,137 |
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2012 AND 2011 (UNAUDITED)
(in thousands of Canadian dollars, except per share
information)
1. NATURE OF ACTIVITIES
Major Drilling Group International Inc. ("the
Company") is incorporated under the Canada Business Corporations
Act and has its head office at 111 St. George Street, Suite 100,
Moncton, NB, Canada. The Company's common shares are listed
on the Toronto Stock Exchange ("TSX"). The principal source of
revenue consists of contract drilling for companies primarily
involved in mining and mineral exploration. The Company maintains
operations on every continent.
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 Interim Condensed Consolidated Financial Statements have been
prepared based on the accounting policies presented in the first
quarter Notes to Interim Condensed Consolidated Financial
Statements for the three months ended July
31, 2011.
3. FUTURE ACCOUNTING CHANGES
The Company has not applied the following new and revised IFRSs
that have been issued but are not yet effective:
|
IFRS 7 (as amended in 2011) Financial Instruments:
Disclosures |
|
IFRS 9 (as amended in 2010) Financial
Instruments |
|
IFRS 10 Consolidated Financial Statements |
|
IFRS 11 Joint Arrangements |
|
IFRS 12 Disclosure of Interests in Other Entities |
|
IFRS 13 Fair Value Measurement |
|
IAS 1 Presentation of Financial Statements |
|
IAS 12 (amended) Income Taxes - recovery of underlying
assets |
|
IAS 19 Employee Benefits |
|
IAS 27 (reissued) Separate Financial Statements |
|
IAS 28 (reissued) Investments in Associates and Joint
Ventures |
|
IAS 32 (amended) Financial Instruments:
Presentation |
The Company is currently evaluating the impact of applying these
standards to its Consolidated Financial Statements.
4. SIGNIFICANT NEW ACCOUNTING POLICIES
Derivative financial
instruments
The Company has entered into a derivative financial instrument, in
the form of an interest rate swap, to manage its exposure to
interest rate risk. The derivative is initially recognized at fair
value at the date the derivative contract is executed and is
subsequently re-measured to fair value at each reporting date. The
resulting gain or loss is recognized in comprehensive earnings
unless the derivative is considered to be ineffective, in which
event it is recognized in profit or loss.
Hedge accounting
The Company designates the derivative as a cash flow hedge. At the
inception of the hedge, and on an ongoing basis, the Company
documents whether the hedging instrument used in the hedging
relationship is highly effective in offsetting changes in cash
flows of the hedged item.
Cash flow hedge
The effective portion of changes in the fair value of the
derivative is deferred in equity. The gain or loss relating to the
ineffective portion is recognized immediately in profit or
loss.
Hedge accounting is discontinued when the
Company revokes the hedging relationship, the hedging instrument
expires or is terminated, or no longer qualifies for hedge
accounting. Any cumulative gain or loss deferred in equity at that
time is recognized immediately in profit or loss.
5. KEY SOURCES OF ESTIMATION
UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTS
The preparation of financial statements in
conformity with IFRSs requires management to make judgments,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future
periods. Significant areas requiring the use of management
estimates relate to the useful lives of property, plant and
equipment for amortization purposes, property, plant and equipment
and inventory valuation, determination of income and other taxes,
assumptions used in compilation of share based payments, fair value
of assets acquired and liabilities assumed in business
acquisitions, amounts recorded as accrued liabilities, and
impairment testing of goodwill and intangible assets.
The Company applied judgment in determining the
functional currency of the Company and its subsidiaries,
determination of cash generating units ("CGUs"), the degree of
componentization of property, plant and equipment, and the
recognition of provisions and accrued liabilities.
6. FIRST TIME ADOPTION OF IFRS
For the overall impact of IFRS on the opening
balance sheet as at transition date, including a discussion of the
optional exemptions taken and the applicable mandatory exceptions,
refer to Note 6 in the first quarter Notes to Interim Condensed
Consolidated Financial Statements for the three months ended
July 31, 2011.
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
First-time Adoption of International Financial Reporting
Standards ("IFRS 1"). A discussion of transitional adjustments
follows the reconciliations.
IFRS Consolidated
Balance Sheet |
As at January 31,
2011 |
|
|
|
|
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
|
ASSETS |
|
|
Opening |
|
|
|
Share based |
|
|
|
|
|
|
|
|
|
|
|
Previous |
|
IFRS |
|
|
|
payments |
|
Deferred |
|
Contingent |
|
Fair
value as |
|
Building |
|
|
|
GAAP |
|
restatements
* |
|
Adjustments |
|
reserve |
|
share
units |
|
consideration |
|
deemed
cost |
|
componentization |
|
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
32,167 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
32,167 |
|
Trade and other receivables |
|
70,999 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
70,999 |
|
Income tax receivable |
|
4,784 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,784 |
|
Inventories |
|
67,155 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
67,155 |
|
Prepaid expenses |
|
5,345 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5,345 |
|
|
180,450 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
180,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT
AND EQUIPMENT |
|
229,995 |
|
|
(11,877) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
544 |
|
|
85 |
|
|
218,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME
TAX ASSETS |
|
10,643 |
|
|
469 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(116) |
|
|
(12) |
|
|
10,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
25,559 |
|
|
2,011 |
|
|
- |
|
|
- |
|
|
- |
|
|
741 |
|
|
- |
|
|
- |
|
|
28,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE
ASSETS |
|
1,499 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
448,146 |
|
$ |
(9,397) |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
741 |
|
$ |
428 |
|
$ |
73 |
|
$ |
439,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
$ |
57,898 |
|
$ |
(35) |
|
$ |
- |
|
$ |
- |
|
$ |
26 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
57,889 |
|
Income tax payable |
|
7,481 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,481 |
|
Short-term debt |
|
11,129 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
11,129 |
|
Current portion of long-term
debt |
|
6,701 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
6,701 |
|
|
83,209 |
|
|
(35) |
|
|
- |
|
|
- |
|
|
26 |
|
|
- |
|
|
- |
|
|
- |
|
|
83,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTINGENT
CONSIDERATION |
|
- |
|
|
2,011 |
|
|
- |
|
|
- |
|
|
- |
|
|
741 |
|
|
- |
|
|
- |
|
|
2,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
DEBT |
|
10,178 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
10,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME
TAX LIABILITIES |
|
16,441 |
|
|
(617) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
25 |
|
|
18 |
|
|
15,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,828 |
|
|
1,359 |
|
|
- |
|
|
- |
|
|
26 |
|
|
741 |
|
|
25 |
|
|
18 |
|
|
111,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
143,847 |
|
|
2,484 |
|
|
599 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
146,930 |
|
Share based payments reserve |
|
12,605 |
|
|
(1,906) |
|
|
(599) |
|
|
443 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
10,543 |
|
Retained earnings |
|
221,919 |
|
|
(55,667) |
|
|
- |
|
|
(443) |
|
|
(26) |
|
|
- |
|
|
403 |
|
|
55 |
|
|
166,241 |
|
Foreign currency translation
reserve |
|
(40,053) |
|
|
44,333 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,280 |
|
|
338,318 |
|
|
(10,756) |
|
|
- |
|
|
- |
|
|
(26) |
|
|
- |
|
|
403 |
|
|
55 |
|
|
327,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
448,146 |
|
$ |
(9,397) |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
741 |
|
$ |
428 |
|
$ |
73 |
|
$ |
439,991 |
* total of May 1,
2010 transitional adjustments to re-state previous GAAP to
IFRS |
IFRS Consolidated Statement of
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended January
31, 2011 |
|
|
|
(c) |
|
(d) |
|
(f) |
|
(g) |
|
|
|
|
|
|
Share based |
|
Deferred |
|
Fair value |
|
Building |
|
|
|
Previous
GAAP |
|
payments |
|
share
units |
|
as deemed
cost |
|
componentization |
|
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
$ |
107,720 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
107,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT COSTS |
|
83,847 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
83,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
23,873 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
23,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
10,112 |
|
|
- |
|
|
6 |
|
|
- |
|
|
- |
|
|
10,118 |
|
Other expenses |
|
1,434 |
|
|
139 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,573 |
|
Loss on disposal of property, plant and
equipment |
|
391 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
391 |
|
Foreign exchange loss |
|
1,028 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,028 |
|
Finance costs |
|
265 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
265 |
|
Depreciation and amortization |
|
8,257 |
|
|
- |
|
|
- |
|
|
(181) |
|
|
(28) |
|
|
8,048 |
|
|
21,487 |
|
|
139 |
|
|
6 |
|
|
(181) |
|
|
(28) |
|
|
21,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE
INCOME TAX |
|
2,386 |
|
|
(139) |
|
|
(6) |
|
|
181 |
|
|
28 |
|
|
2,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX - PROVISION
(RECOVERY) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
597 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
597 |
|
Deferred |
|
125 |
|
|
- |
|
|
- |
|
|
47 |
|
|
10 |
|
|
182 |
|
|
722 |
|
|
- |
|
|
- |
|
|
47 |
|
|
10 |
|
|
779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
(LOSS) |
$ |
1,664 |
|
$ |
(139) |
|
$ |
(6) |
|
$ |
134 |
|
$ |
18 |
|
$ |
1,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS Consolidated Statement of
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended January
31, 2011 |
|
|
|
(c) |
|
(d) |
|
(f) |
|
(g) |
|
|
|
|
|
|
Share
based |
|
Deferred |
|
Fair
value |
|
Building |
|
|
|
Previous GAAP |
|
payments |
|
share
units |
|
as deemed
cost |
|
componentization |
|
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
$ |
345,018 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
345,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT COSTS |
|
259,512 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
259,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
85,506 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
85,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
29,614 |
|
|
- |
|
|
26 |
|
|
- |
|
|
- |
|
|
29,640 |
|
Other expenses |
|
5,562 |
|
|
443 |
|
|
- |
|
|
- |
|
|
- |
|
|
6,005 |
|
Gain on disposal of property, plant and
equipment |
|
(427) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(427) |
|
Foreign exchange gain |
|
(220) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(220) |
|
Finance costs |
|
876 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
876 |
|
Depreciation and amortization |
|
23,371 |
|
|
- |
|
|
- |
|
|
(544) |
|
|
(85) |
|
|
22,742 |
|
|
58,776 |
|
|
443 |
|
|
26 |
|
|
(544) |
|
|
(85) |
|
|
58,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE
INCOME TAX |
|
26,730 |
|
|
(443) |
|
|
(26) |
|
|
544 |
|
|
85 |
|
|
26,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX - PROVISION
(RECOVERY) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
9,447 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
9,447 |
|
Deferred |
|
(854) |
|
|
- |
|
|
- |
|
|
141 |
|
|
30 |
|
|
(683) |
|
|
8,593 |
|
|
- |
|
|
- |
|
|
141 |
|
|
30 |
|
|
8,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
(LOSS) |
$ |
18,137 |
|
$ |
(443) |
|
$ |
(26) |
|
$ |
403 |
|
$ |
55 |
|
$ |
18,126 |
|
|
IFRS Consolidated Statement
of Comprehensive Earnings (Loss) |
For the three months ended January
31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
(c) |
|
(e) |
|
(f) |
|
|
|
|
|
|
Share based |
|
Deferred |
|
Fair
value |
|
Building |
|
|
|
Previous GAAP |
|
payments reserve |
|
share units |
|
as deemed
cost |
|
componentization |
|
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS) |
$ |
1,664 |
|
$ |
(139) |
|
$ |
(6) |
|
$ |
134 |
|
$ |
18 |
|
$ |
1,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on foreign currency
translation
(net of tax of $0) |
|
(4,315) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,315) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE EARNINGS
(LOSS) |
$ |
(2,651) |
|
$ |
(139) |
|
$ |
(6) |
|
$ |
134 |
|
$ |
18 |
|
$ |
(2,644) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS Consolidated Statement
of Comprehensive Earnings
(Loss) |
For the nine months ended January
31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
(c) |
|
(e) |
|
(f) |
|
|
|
|
|
|
Share
based |
|
Deferred |
|
Fair
value |
|
Building |
|
|
|
Previous GAAP |
|
payments reserve |
|
share units |
|
as deemed cost |
|
componentization |
|
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
(LOSS) |
$ |
18,137 |
|
$ |
(443) |
|
$ |
(26) |
|
$ |
403 |
|
$ |
55 |
|
$ |
18,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on foreign currency translation
(net of tax of $0) |
|
4,280 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE EARNINGS
(LOSS) |
$ |
22,417 |
|
$ |
(443) |
|
$ |
(26) |
|
$ |
403 |
|
$ |
55 |
|
$ |
22,406 |
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
Company's April 30, 2010, July 31, 2010 and April 30, 2011
historical annual and interim consolidated financial
statements. |
|
|
|
|
b) |
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. |
|
|
|
|
c) |
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. |
|
|
|
|
d) |
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. |
|
|
|
|
e) |
Fair value as deemed cost - The Company has applied the IFRS 1
exemption as described in the "exceptions and exemptions applied"
section presented in the first quarter Notes to Interim Condensed
Consolidated Financial Statements for the three months ended July
31, 2011. |
|
|
|
|
f) |
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 April 30, 2011 |
$ |
1,375 |
|
$ |
11,201 |
|
$ |
257,838 |
|
$ |
91,977 |
|
$ |
25,501 |
|
$ |
387,892 |
Additions |
|
- |
|
|
127 |
|
|
45,397 |
|
|
11,811 |
|
|
3,138 |
|
|
60,473 |
Disposals |
|
- |
|
|
- |
|
|
(6,085) |
|
|
(2,582) |
|
|
(47) |
|
|
(8,714) |
Business acquisitions |
|
367 |
|
|
9,382 |
|
|
28,727 |
|
|
4,474 |
|
|
401 |
|
|
43,351 |
Effect of exchange rate changes and other |
|
36 |
|
|
89 |
|
|
2,016 |
|
|
4,691 |
|
|
(141) |
|
|
6,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 31, 2012 |
$ |
1,778 |
|
$ |
20,799 |
|
$ |
327,893 |
|
$ |
110,371 |
|
$ |
28,852 |
|
$ |
489,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation |
Land |
|
Buildings |
|
Drills |
|
Auto |
|
Other |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at April 30, 2011 |
$ |
- |
|
$ |
(2,791) |
|
$ |
(84,421) |
|
$ |
(48,095) |
|
$ |
(17,112) |
|
$ |
(152,419) |
Disposals |
|
- |
|
|
- |
|
|
3,725 |
|
|
1,923 |
|
|
39 |
|
|
5,687 |
Depreciation |
|
- |
|
|
(594) |
|
|
(16,438) |
|
|
(9,968) |
|
|
(1,388) |
|
|
(28,388) |
Effect of exchange rate changes and other |
|
- |
|
|
5 |
|
|
753 |
|
|
564 |
|
|
(735) |
|
|
587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 31, 2012 |
$ |
- |
|
$ |
(3,380) |
|
$ |
(96,381) |
|
$ |
(55,576) |
|
$ |
(19,196) |
|
$ |
(174,533) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value April 30, 2011 |
$ |
1,375 |
|
$ |
8,410 |
|
$ |
173,417 |
|
$ |
43,882 |
|
$ |
8,389 |
|
$ |
235,473 |
Net book value January 31, 2012 |
$ |
1,778 |
|
$ |
17,419 |
|
$ |
231,512 |
|
$ |
54,795 |
|
$ |
9,656 |
|
$ |
315,160 |
There were no impairments recorded as at January 31, 2012, April
30, 2011 or January 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 January
31, 2012, April 30, 2011 or
January 31, 2011.
Capital expenditures were $22,833 and $18,310
for the three months ended January 31,
2012 and 2011 respectively, and $60,473 and $40,568
for the nine months ended January 31,
2012 and 2011, respectively. The Company obtained direct
financing of $294 and $441 for the three and nine months ended
January 31, 2012, respectively (three
months ended January 31, 2011 - nil;
nine months ended January 31, 2011 -
$50).
8. GOODWILL
Changes in the goodwill balance were as
follows:
Balance as at April 30,
2011 |
$ |
28,316 |
Goodwill on acquisition (note 17) |
|
25,088 |
Effect of movement in exchange rates |
|
17 |
Balance as at January 31, 2012 |
$ |
53,421 |
For a full discussion on allocation of goodwill to cash generating
units ("CGUs"), refer to Note 8 in the first quarter Notes to
Interim Condensed Consolidated Financial Statements for the three
months ended July 31, 2011.
Goodwill from the acquisition of Bradley Group
Limited, as disclosed in Note 16, has not been allocated to a CGU
since the value is preliminary.
9. INTANGIBLE ASSETS
Changes in the intangible assets balance were as
follows:
Balance as at April 30, 2011 |
$ |
1,235 |
Intangible assets on acquisition (note 17) |
|
7,666 |
Amortization |
|
(1,575) |
Effect of movement in exchange rates |
|
44 |
Balance as at January 31, 2012 |
$ |
7,370 |
10. LONG-TERM DEBT
|
|
January 31,
2012 |
|
April 30,
2011 |
Revolving equipment and
acquisition loan (authorized
$50,000), bearing interest at either the bank's prime rate
plus 0.75% or the bankers' acceptance rate plus 2.25% for
Canadian dollar draws, and either the bank's U.S. dollar base
rate in Canada plus 0.75% or the bank's LIBOR plus 2.25%
for U.S. dollar draws, interest only payments required until
maturity, maturing in September 2016, secured by corporate
guarantees of companies within the group. |
|
$ |
11,223 |
|
$ |
-
|
Non-revolving term loan, bearing
interest at either the bank's
prime rate plus 0.75% or the bankers' acceptance rate plus
2.25% for Canadian dollar draws, and either the bank's U.S.
dollar base rate in Canada plus 0.75% or the bank's LIBOR
plus 2.25% for U.S. dollar draws, payable in monthly
installments of $417, maturing in September 2016, secured by
corporate guarantees of companies within the group. |
|
|
23,333 |
|
|
-
|
Revolving/non-revolving equipment
and acquisition loan
(authorized $45,000), bearing interest at either the bank's
prime rate plus 1.0% or the bankers' acceptance rate plus 2.5%
for Canadian dollar draws, and either the bank's U.S. dollar
base rate in Canada plus 1.0% or the bank's LIBOR plus 2.5%
for U.S. dollar draws, secured by corporate guarantees of
companies within the group. This facility was refinanced in
September 2011. |
|
|
- |
|
|
24,552 |
Term loan bearing interest at
5.9%, payable in monthly
installments of $84, unsecured, maturing in August 2021. |
|
|
9,584 |
|
|
- |
Term loans bearing interest at
rates ranging from 0% to 6.99%,
payable in monthly installments of $25, secured by certain
equipment, maturing through 2016. |
|
|
545 |
|
|
480 |
|
|
|
|
|
|
|
Note payable bearing interest at
4%, repayable over three
years, maturing in September 2014. |
|
|
8,000 |
|
|
- |
Derivative financial instrument
with a notional principal
amount of $23,333, swapping Canadian-Bankers' Acceptance-
Canadian Dealer Offered Rate for
an annual fixed rate of 3.665%, maturing in September 2016. |
|
|
119 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
52,804 |
|
|
25,032 |
Current portion |
|
|
8,799 |
|
|
8,402 |
|
|
$ |
44,005 |
|
$ |
16,630 |
The required annual principal repayments per remaining fiscal
years on long-term debt are as follows:
2012 |
|
$ |
1,584 |
2013 |
|
|
8,809 |
2014 |
|
|
8,598 |
2015 |
|
|
9,088 |
2016 |
|
|
4,402 |
2017 and beyond |
|
|
20,323 |
|
|
$ |
52,804 |
The Company hedges its exposure to floating
rates under the non-revolving term loan via an interest rate swap,
exchanging a variable rate interest payment for a fixed rate
interest payment. The interest swap contract was entered into early
in the current quarter. As at January 31,
2012 the swap is deemed effective and is recognized as a
cash flow hedge.
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. The
Company, at all times, was in compliance with all covenants and
other conditions imposed by its debt agreements.
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.
On September 28,
2011, the Company issued a total of 5,900,000 Subscription
Receipts at a price of $11.90 per
Subscription Receipt for aggregate gross proceeds of $70,210. These Subscription Receipts were
subsequently converted to 5,900,000 common shares in the Company
upon the closing of the acquisition by the Company of Bradley Group
Limited on September 30, 2011. The
Company used the net proceeds of the offering to fund a
portion of the purchase price in connection with
the acquisition. On October 25,
2011, the Company issued a further 885,000 common shares for
further aggregate gross proceeds of $10,531 as a result of the exercise by the
underwriters of an over allotment option to purchase an additional
885,000 common shares of the Company for $11.90 per share. The Company is using the
net proceeds from the over allotment exercise for general corporate
purposes.
Authorized
Unlimited number of fully paid common shares, without nominal or
par value, with each share carrying one vote and a right to
dividends when declared.
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 April 30, 2011 |
72,040 |
|
$ |
150,642 |
Exercise of stock options |
261 |
|
|
2,022 |
Share issue (net of issue costs)* |
6,785 |
|
|
76,439 |
Balance as at January 31, 2012 |
79,086 |
|
$ |
229,103 |
|
|
|
|
|
*share issue costs total $4,302
|
12. INCOME TAXES
The income tax expense for the period can be reconciled to
accounting profit as follows:
|
2012 Q3 |
|
2011 Q3 |
|
2012 YTD |
|
2011 YTD |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax |
$ |
14,068 |
|
$ |
2,450 |
|
$ |
84,762 |
|
$ |
26,890 |
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Canadian corporate income tax rate |
|
29% |
|
|
30% |
|
|
29% |
|
|
30% |
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense based on
statutory |
|
|
|
|
|
|
|
|
|
|
|
rate |
$ |
4,080 |
|
$ |
735 |
|
$ |
24,581 |
|
$ |
8,067 |
Non-recognition of tax benefits related to
losses |
|
47 |
|
|
352 |
|
|
360 |
|
|
605 |
Other foreign taxes paid |
|
273 |
|
|
62 |
|
|
560 |
|
|
271 |
Rate variances in foreign jurisdictions |
|
(137) |
|
|
(441) |
|
|
(625) |
|
|
(1,389) |
Other |
|
239 |
|
|
71 |
|
|
868 |
|
|
1,210 |
|
$ |
4,502 |
|
$ |
779 |
|
$ |
25,744 |
|
$ |
8,764 |
The Company periodically assesses its liabilities and contingencies
for all tax years open to audit based upon the latest information
available. For those matters where it is probable that an
adjustment will be made, the Company recorded its best estimate of
these tax liabilities, including related interest charges. Inherent
uncertainties exist in estimates of tax contingencies due to
changes in tax laws. While management believes they have adequately
provided for the probable outcome of these matters, future results
may include favorable or unfavorable adjustments to these estimated
tax liabilities in the period the assessments are made, or
resolved, or when the statute of limitation lapses.
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.
|
2012 Q3 |
|
2011 Q3 |
|
2012 YTD |
|
2011 YTD
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings for the period |
$ |
9,566 |
|
$ |
1,671 |
|
$ |
59,018 |
|
$ |
18,126 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
(000's) |
|
78,949 |
|
|
71,580 |
|
|
75,078 |
|
|
71,452 |
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
1,118 |
|
|
954 |
|
|
969 |
|
|
591 |
Weighted average number of shares - diluted
(000's) |
|
80,067 |
|
|
72,534 |
|
|
76,047 |
|
|
72,043 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.12 |
|
$ |
0.02 |
|
$ |
0.79 |
|
$ |
0.25 |
Diluted |
$ |
0.12 |
|
$ |
0.02 |
|
$ |
0.78 |
|
$ |
0.25 |
There were no anti-dilutive options for the
three months ended January 31, 2012
and 2011 and the nine months ended January
31, 2012 while the calculation of diluted earnings per share
for the nine months ended January 31,
2011 exclude the effect of 30,543 options as they were
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 presented in the first quarter Notes to Interim Condensed
Consolidated Financial Statements for the three months ended
July 31, 2011. Management evaluates
performance based on earnings from operations in these three
geographic segments before finance costs and income tax. Data
relating to each of the Company's reportable segments is presented
as follows:
|
|
2012 Q3 |
|
2011 Q3 |
|
2012 YTD |
|
2011 YTD |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
$ |
69,805 |
|
$ |
38,191 |
|
$ |
215,394 |
|
$ |
129,211 |
|
South and Central America |
|
59,168 |
|
|
36,836 |
|
|
178,522 |
|
|
118,896 |
|
Australia, Asia and Africa |
|
53,215 |
|
|
32,693 |
|
|
166,278 |
|
|
96,911 |
|
$ |
182,188 |
|
$ |
107,720 |
|
$ |
560,194 |
|
$ |
345,018 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
$ |
5,491 |
|
$ |
1,503 |
|
$ |
34,406 |
|
$ |
16,649 |
|
South and Central America |
|
9,560 |
|
|
1,400 |
|
|
36,750 |
|
|
10,535 |
|
Australia, Asia and Africa |
|
5,405 |
|
|
2,996 |
|
|
30,274 |
|
|
10,608 |
|
|
20,456 |
|
|
5,899 |
|
|
101,430 |
|
|
37,792 |
Eliminations |
|
(10) |
|
|
(235) |
|
|
(93) |
|
|
(700) |
|
|
20,446 |
|
|
5,664 |
|
|
101,337 |
|
|
37,092 |
Finance costs |
|
874 |
|
|
265 |
|
|
2,660 |
|
|
876 |
General corporate expenses * |
|
5,504 |
|
|
2,949 |
|
|
13,915 |
|
|
9,326 |
Income tax |
|
4,502 |
|
|
779 |
|
|
25,744 |
|
|
8,764 |
Net earnings |
$ |
9,566 |
|
$ |
1,671 |
|
$ |
59,018 |
|
$ |
18,126 |
|
|
|
|
|
|
|
|
|
|
|
|
*General corporate expenses include
expenses for corporate offices, stock options and certain
un-allocated costs |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
$ |
4,970 |
|
$ |
2,815 |
|
$ |
12,365 |
|
$ |
7,381 |
|
South and Central America |
|
2,716 |
|
|
2,227 |
|
|
7,471 |
|
|
6,261 |
|
Australia, Asia and Africa |
|
3,189 |
|
|
2,668 |
|
|
8,244 |
|
|
7,948 |
Unallocated and corporate assets |
|
1,142
|
|
|
338 |
|
|
1,883 |
|
|
1,152 |
|
$ |
12,017 |
|
$ |
8,048 |
|
$ |
29,963 |
|
$ |
22,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2012 |
|
April 30, 2011 |
|
|
|
Identifiable assets |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
|
|
|
$ |
239,730 |
|
$ |
134,666 |
|
|
|
|
South and Central America |
|
|
|
|
202,127 |
|
|
189,083 |
|
|
|
|
Australia, Asia and Afirca |
|
|
|
|
175,914 |
|
|
130,071 |
|
|
|
|
|
|
|
|
617,771 |
|
|
453,820 |
|
|
|
Eliminations |
|
|
|
|
(1,606) |
|
|
439 |
|
|
|
Unallocated and corporate assets |
|
|
|
|
48,341 |
|
|
19,878 |
|
|
|
|
|
|
|
$ |
664,506 |
|
$ |
474,137 |
|
|
|
15. NET EARNINGS FOR THE YEAR
Net earnings for the year have been arrived at
after charging various employee benefit expenses as follows.
|
2012 Q3 |
|
2011 Q3 |
|
2012 YTD |
|
2011 YTD |
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages |
$ |
47,750 |
|
$ |
31,383 |
|
$ |
87,080 |
|
$ |
91,376 |
|
Other employee benefits |
|
9,314 |
|
|
5,712 |
|
|
16,842 |
|
|
16,948 |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages |
|
5,524 |
|
|
4,249 |
|
|
10,705 |
|
|
12,499 |
|
Other employee benefits |
|
890 |
|
|
642 |
|
|
1,801 |
|
|
2,024 |
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Share based payments |
|
439 |
|
|
619 |
|
|
862 |
|
|
1,711 |
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:
|
2012 Q3 |
|
2011 Q3 |
|
2012 YTD |
|
2011 YTD |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
$ |
10,921 |
|
$ |
7,910 |
|
$ |
28,388 |
|
$ |
22,340 |
Amortization of intangible assets |
|
1,096 |
|
|
138 |
|
|
1,575 |
|
|
402 |
|
$ |
12,017 |
|
$ |
8,048 |
|
$ |
29,963 |
|
$ |
22,742 |
16. BUSINESS ACQUISITIONS
Bradley Group Limited
Effective September 30, 2011, the Company acquired all the issued
and outstanding shares of Bradley Group Limited ("Bradley"), which
provides a unique opportunity to further the Company's corporate
strategy of focusing on specialized drilling, expanding its
geographic footprint in areas of high growth and of maintaining a
balance in the mix of drilling services. 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 the assets acquired
(indicated below), contracts and personnel. The purchase price for
the transaction was CAD $78,060,
including customary working capital adjustments and net of cash
acquired, financed with cash and debt.
The Company is in the process of finalizing the
valuation of assets. As at January 31,
2012, the values allocated to net tangible and intangible
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 |
|
|
|
Trade and other receivables (net) |
|
$ |
23,978 |
Inventories |
|
|
15,330 |
Prepaid expenses |
|
|
540 |
Property, plant and equipment |
|
|
45,884 |
Deferred income tax assets |
|
|
350 |
Goodwill (not tax deductible) |
|
|
23,064 |
Intangible assets |
|
|
7,324 |
Trade and other payables |
|
|
(19,057) |
Income tax payable |
|
|
(1,751) |
Short-term debt |
|
|
(5,101) |
Current portion of long-term debt |
|
|
(113) |
Long-term debt |
|
|
(10,352) |
Deferred income tax liability |
|
|
(2,036) |
Total assets |
|
$ |
78,060 |
|
|
|
|
Consideration |
|
|
|
Cash |
|
$ |
72,000 |
Long-term debt (holdback) |
|
|
8,000 |
Less: Cash acquired |
|
|
(1,940)
|
|
|
$ |
78,060 |
The Corporation incurred acquisition-related
costs of $857 relating to external
legal fees and due diligence costs. The legal fees and due
diligence costs have been included in the other expenses line of
the Interim Condensed Consolidated Statements of Operations.
It is impracticable to estimate the revenue and
net income attributed to the additional business generated by
Bradley for the three months ended January
31, 2012, or of the combined entity for the year as though
the acquisition date was May 1,
2011.
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
$9,563 (CAD $9,345), including customary working capital
adjustments, financed with cash.
The net assets acquired at fair market value at
acquisition are as follows:
Assets acquired |
|
|
Inventories |
$ |
946 |
Prepaid expenses |
|
23 |
Property, plant and equipment |
|
6,010 |
Goodwill (not tax deductible) |
|
2,024 |
Intangible assets |
|
342 |
Total assets |
$ |
9,345 |
|
|
|
Consideration |
|
|
Cash |
$ |
5,628 |
Trade and other payables |
|
3,717 |
|
$ |
9,345 |
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
working capital, drilling equipment, contracts and personnel. The
purchase price for the transaction, excluding contingent
consideration, was USD $2,449 (CAD
$2,567), including customary working
capital adjustments of CAD $215,
financed with cash. The contingent consideration of USD
$750 to the purchase price is 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 declared two dividends during the
year, $0.08 per common share paid on
November 1, 2011 to shareholders of
record as of October 10, 2011, and
$0.09 per common share to be paid on
May 2, 2012 to shareholders of record
as of April 6, 2012.
The Company declared two 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.
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:
Risk management objectives
The Company's corporate treasury function monitors and manages the
financial risks relating to the operations of the Company through
analysis of the various exposures. When deemed appropriate, the
Company uses financial instruments to hedge these risk
exposures.
Interest rate risk management
The Company is exposed to interest rate risk as it borrows funds at
both fixed and floating interest rates. The risk is managed by the
Company by use of interest rate swap contracts when deemed
appropriate.
Interest rate swap contract
Under the interest rate swap contract, the Company agrees to
exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. This
contract enables the Company to mitigate the risk of changing
interest rates on the cash flow exposures on the issued variable
rate debt held.
The following table details the notional
principal amount and the remaining term of the interest rate swap
contract outstanding at the reporting date.
Remaining term |
|
Notional
principal amount |
|
Fair value |
|
|
|
|
|
|
|
56 months |
|
$ |
23,333 |
|
$ |
(119) |
The interest rate swap settles on a monthly basis swapping
Canadian-Bankers' Acceptance-Canadian Dealer Offered Rate for an
annual fixed rate of 3.665%.
Fair value
The carrying values of cash, trade and other receivables, demand
credit facility and trade and other payables approximate their fair
value due to the relatively short period to maturity of the
instruments. The following table shows carrying values of short and
long-term debt and contingent considerations and approximates their
fair value, as most debts carry variable interest rates and the
remaining fixed rate debts have been acquired recently and their
carrying value continues to reflect fair value. The fair value of
the interest rate swap included in long-term debt is measured using
quoted interest rates.
|
January
31, 2012 |
|
April 30, 2011 |
|
|
|
|
|
|
Short-term debt |
$ |
7,893 |
|
$ |
7,919 |
Contingent considerations |
|
2,760 |
|
|
2,612 |
Long-term debt |
|
52,804 |
|
|
25,032 |
Credit risk
As at January 31, 2012, 76.3% of the
Company's trade receivables were aged as current and 1.3% 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 April 30, 2011 |
$ |
982 |
Increase in impairment allowance |
|
1,443 |
Write-off charged against allowance |
|
(518) |
Recovery of amounts previously written off |
|
(406) |
Foreign exchange translation differences |
|
48 |
Balance as at January 31, 2012 |
$ |
1,549 |
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:
|
January
31, 2012 |
|
April 30, 2011 |
U.S. Dollars |
$ |
37,021 |
|
$ |
14,605 |
If the Canadian dollar moved by plus or minus
10% at January 31, 2012, the
unrealized foreign exchange gain or loss would move by
approximately $3,702 (April 30, 2011 - $1,460).
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 other payables |
$ |
100,357 |
$ |
- |
$ |
- |
$ |
- |
$ |
100,357 |
Short-term debt |
|
7,893 |
|
- |
|
- |
|
- |
|
7,893 |
Contingent considerations |
|
1,004 |
|
1,756 |
|
- |
|
- |
|
2,760 |
Long-term debt |
|
8,799 |
|
17,760 |
|
21,662 |
|
4,583 |
|
52,804 |
|
$ |
118,053 |
$ |
19,516 |
$ |
21,662 |
$ |
4,583 |
$ |
163,814 |
SOURCE MAJOR DRILLING GROUP INTERNATIONAL INC.