Major Drilling Announces Third Quarter Results and Declares Dividend

MONCTON, NB, March 2, 2015 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) (the "Company") today reported results for its third quarter of fiscal year 2015, ended January 31, 2015.

 

Highlights










In millions of Canadian dollars

(except loss per share)

Q3-15

Q3-14

YTD-15

YTD-14

Revenue

$69.8

$71.8

$224.5

$272.3

Gross profit

7.8

17.8

45.2

82.9


As percentage of sales

11.2%

24.7%

20.1%

30.4%

EBITDA(1)

(6.6)

0.6

6.5

35.9


As percentage of revenue

(9.4%)

0.9%

2.9%

13.2%

Net loss

(19.0)

(12.8)

(36.5)

(30.4)

Loss per share

(0.24)

(0.16)

(0.46)

(0.38)

(1)

Earnings before interest, taxes, depreciation and amortization, excluding restructuring charges and goodwill impairment (see "non-GAAP financial measures")

 

  • Cash on hand at quarter-end was $50.7 million while total debt was $18.8 million, for a net cash position of $31.9 million.
  • Quarterly revenue was $69.8 million, down 3% from the $71.8 million recorded for the same quarter last year.
  • Gross margin percentage for the quarter was 11.2%, compared to 24.7% for the corresponding period last year.
  • Net loss was $19.0 million or $0.24 per share for the quarter, compared to a net loss of $12.8 million or $0.16 per share for the prior year quarter.
  • The Company has declared a semi-annual dividend of $0.02 per share to be paid on May 1, 2015. This represents a reduction from the previous semi-annual dividend of $0.10 per share, in order to preserve the Company's ability to promptly respond to an increase in activity or to opportunities should they arise.

"Our third quarter was extremely challenging. Year-over-year revenue was relatively flat. The gains made with the addition of our new percussive drilling division were offset by the loss of revenue in our energy business and the closures of our operations in Australia and the Democratic Republic of Congo ("DRC")," said Francis McGuire, President and CEO of Major Drilling Group International Inc.

"Third quarter margins are typically impacted by a slowdown during the holiday season, but this quarter was hit particularly hard. The three main elements affecting margins were: reduced pricing; extensive mobilizations and repositioning costs; and high repair and purchasing costs in anticipation of the post-Christmas startups. We have seen a significant decrease in higher margin specialized drilling and a much greater focus on production related drilling, which generates lower revenue and has lower margins. Revenue and margins should return to their pre-holiday levels as we move forward."

"As we go through this challenging period, we continue to focus on cash preservation. Major Drilling remains net debt free, with a net cash position of $31.9 million at the end of the quarter, a decrease of $0.4 million during the quarter. The Company spent $2.6 million on net capital expenditures this quarter, adding 2 underground drills while retiring 11 rigs," added Mr. McGuire. 

"Given the current low commodity price environment and the uncertainty over how long it will persist,  the Company's Board of Directors has approved an amended dividend policy, declaring a cash dividend of $0.02 per common share payable on May 1, 2015 to shareholders of record as of April 7, 2015. The Company believes that it is prudent to lower the amount of its semi-annual dividend to ensure that it balances its cash inflows with capital expenditure requirements, preserves its ability to adequately respond to a future upturn in the mining industry and emerge as one of the strongest drilling companies. This dividend is designated as an "eligible dividend" for Canadian tax purposes," said Mr. McGuire.

"Long-term, we believe that most commodities will face an imbalance between supply and demand as mining reserves  continue to decrease due to the lack of exploration, while despite an economic slowdown, worldwide consumption continues to increase. At some point in the near future, the need to develop resources in areas that are increasingly difficult to access will significantly increase, at which time we expect to see a resurgence in demand for specialized drilling."

Third quarter ended January 31, 2015

Total revenue for the quarter was $69.8 million, down 3% from revenue of $71.8 million recorded in the same quarter last year. There have been continued delays in the decision making process on the part of many of the Company's senior customers in regards to their 2015 exploration drilling programs, and many junior customers have suspended drilling activities. The favourable foreign exchange translation impact for the quarter, when comparing to the effective rates for the same period last year, is estimated at $2.6 million on revenue but negligible on net earnings.

Revenue for the quarter from Canada-U.S. drilling operations increased by 27% to $41.1 million compared to the same period last year. The increase relates to the Taurus acquisition and is somewhat offset by the slowdown in the energy sector.

South and Central American revenue was down 8% to $17.2 million for the quarter, compared to the same quarter last year. Chile and Argentina were affected by a reduction in work by juniors and the cancellation of certain projects, while Mexico saw a slight increase in demand compared to the same period last year. 

Australian, Asian and African operations reported revenue of $11.5 million, down 45% from the same period last year. Several factors affected the region's revenue this quarter compared to last year. The Company closed its operations in Australia earlier in the year, and also closed its operations in the DRC due to ongoing administrative difficulties associated with operating in that country. Also, Mongolia continues to be affected by political uncertainty around mining laws.

The overall gross margin percentage for the quarter was 11.2%, down from 24.7% for the same period last year. Third quarter margins are typically impacted by a slowdown during the holiday season combined with higher than usual mobilizations, demobilizations and increased repairs during this period. Margins continue to be affected by reduced pricing due to increased competitive pressures. As well, customers are focusing on mine site drilling, especially underground drilling, which tends to have lower margins.

General and administrative costs decreased 3% from last year at $11.7 million for the quarter despite an increase due to foreign exchange translation and the Taurus acquisition. With the decrease in activity, the Company has reduced its general and administrative costs by implementing reductions of salaried employees and restructuring certain branches.

Foreign exchange loss was $0.8 million compared to a loss of $3.3 million last year. Most of last year's quarterly loss was related to the devaluation of the Argentine peso and the Company crystalized currency losses by converting some of its Argentine pesos into U.S. dollar investments, although at a significant discount, to protect against further devaluations.

The income tax provision for the quarter was a recovery of $1.7 million compared to a recovery of $0.5 million for the prior year period. The tax recovery for the quarter was impacted by non-tax affected losses and non-deductible expenses.

Net loss was $19.0 million or $0.24 per share ($0.24 per share diluted) for the quarter, compared to a net loss of $12.8 million or $0.16 per share ($0.16 per share diluted) for the prior year quarter.

Non-GAAP Financial Measures

In this news release, the Company uses the non-GAAP financial measure, EBITDA, excluding restructuring charges and goodwill impairment. The Company believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.

Forward-Looking Statements

Some of the statements contained in this press release may be forward-looking statements, such as, but not limited to, those relating to worldwide demand for gold and base metals and overall commodity prices, the level of activity in the minerals and metals industry and the demand for the Company's services, the Canadian and international economic environments, the Company's ability to attract and retain customers and to manage its assets and operating costs, sources of funding for its clients, particularly for junior mining companies, competitive pressures, currency movements, which can affect the Company's revenue in Canadian dollars, the geographic distribution of the Company's operations, the impact of operational changes, changes in jurisdictions in which the Company operates (including changes in regulation), failure by counterparties to fulfill contractual obligations, and other factors as may be set forth, as well as objectives or goals, and including words to the effect that the Company or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as, but not limited to, the factors set out in the discussion on pages 15 to 18 of the 2014 Annual Report entitled "General Risks and Uncertainties", and such other documents as available on SEDAR at www.sedar.com. All such factors should be considered carefully when making decisions with respect to the Company. The Company does not undertake to update any forward-looking statements, including those statements that are incorporated by reference herein, whether written or oral, that may be made from time to time by or on its behalf, except in accordance with applicable securities laws.

Based in Moncton, New Brunswick, Major Drilling Group International Inc. is one of the world's largest metals and minerals contract drilling services companies. To support its customers' mining operations, mineral exploration and environmental activities, Major Drilling maintains field operations and offices in Canada, the United States, Mexico,  South America, Asia, and Africa.

Financial statements are attached.

Webcast/Conference Call Information

Major Drilling will provide a simultaneous webcast and conference call of its quarterly results on Tuesday, March 3, 2015 at 9:00 AM (EST)To access the webcast please go to the investors/webcast section of Major Drilling's website at www.majordrilling.com and click the attached link, or go directly to the CNW Group website at www.newswire.ca  for directions. Participants will require Windows MediaPlayer, which can be downloaded prior to accessing the call. Please note that this is listen only mode.

To access the conference call, please dial 647-427-7450 and ask for Major Drilling's Third Quarter Conference Call. To ensure your participation, please call in approximately five minutes prior to the scheduled call.

For those unable to participate, a taped rebroadcast will be available approximately two hours after the completion of the call until midnight, Tuesday March 10, 2015. To access the rebroadcast, dial 416-849-0833, 514-807-9274, 403-451-9481 or 902-455-3955 and enter the passcode 81564254. The webcast will also be archived for 90 days and can be accessed on the Major Drilling website at www.majordrilling.com or on the CNW Group website at www.newswire.ca.

 

Major Drilling Group International Inc.

Interim Condensed Consolidated Statements of Operations

(in thousands of Canadian dollars, except per share information)

(unaudited)



























Three months ended



Nine months ended



January 31



January 31

























2015



2014



2015



2014

























TOTAL REVENUE

$

69,784


$

71,830


$

224,527


$

272,309













DIRECT COSTS


61,998



54,060



179,338



189,406













GROSS PROFIT


7,786



17,770



45,189



82,903













OPERATING EXPENSES













General and administrative


11,667



12,070



33,907



37,386


Other expenses


1,436



636



3,980



2,719


Loss (gain) on disposal of property, plant and equipment


469



826



(1,561)



1,259


Loss on short-term investments


-



307



-



307


Foreign exchange loss


804



3,291



2,322



5,295


Finance costs


178



198



572



736


Depreciation of property, plant and equipment


12,145



12,886



38,107



38,862


Amortization of intangible assets


1,351



343



2,199



1,027


Impairment of goodwill


-



-



-



12,057


Restructuring charge


405



508



3,826



3,220



28,455



31,065



83,352



102,868













LOSS BEFORE INCOME TAX 


(20,669)



(13,295)



(38,163)



(19,965)













INCOME TAX - (RECOVERY) PROVISION (note 7)













Current


(195)



886



4,320



9,361


Deferred


(1,475)



(1,384)



(6,005)



1,049



(1,670)



(498)



(1,685)



10,410













NET LOSS

$

(18,999)


$

(12,797)


$

(36,478)


$

(30,375)

























LOSS PER SHARE (note 8)












Basic 

$

(0.24)


$

(0.16)


$

(0.46)


$

(0.38)

Diluted 

$

(0.24)


$

(0.16)


$

(0.46)


$

(0.38)













 

Major Drilling Group International Inc.

Interim Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(in thousands of Canadian dollars)

(unaudited)


















Three months ended


Nine months ended


January 31


January 31
















2015


2014


2015


2014









NET LOSS

$

(18,999)


$

(12,797)


$

(36,478)


$

(30,375)









OTHER COMPREHENSIVE EARNINGS
















Items that may be reclassified subsequently to profit or loss









Unrealized gains on foreign currency translations (net of tax)

37,277


17,078


43,623


21,658









COMPREHENSIVE EARNINGS (LOSS)

$

18,278


$

4,281


$

7,145


$

(8,717)

 

Major Drilling Group International Inc.

Interim Condensed Consolidated Statements of Changes in Equity

For the nine months ended January 31, 2014 and 2015

(in thousands of Canadian dollars)

(unaudited)



























Share-based


Retained


Foreign currency





Share capital


payments reserve


earnings


translation reserve


Total












BALANCE AS AT MAY 1, 2013


$

230,985


$

14,204


$

283,088


$

10,052


$

538,329













Share-based payments reserve


-


1,372


-


-


1,372


Dividends


-


-


(7,916)


-


(7,916)



230,985


15,576


275,172


10,052


531,785

Comprehensive loss:












Net loss


-


-


(30,375)


-


(30,375)


Unrealized gains on foreign currency translations


-


-


-


21,658


21,658

Total comprehensive loss


-


-


(30,375)


21,658


(8,717)












BALANCE AS AT JANUARY 31, 2014


$

230,985


$

15,576


$

244,797


$

31,710


$

523,068























BALANCE AS AT MAY 1, 2014


$

230,985


$

15,937


$

211,945


$

25,480


$

484,347













Exercise of stock options


46


(12)


-


-


34


Share issue (note 10)


8,689


-


-


-


8,689


Share-based payments reserve


-


1,015


-


-


1,015


Dividends


-


-


(8,014)


-


(8,014)



239,720


16,940


203,931


25,480


486,071

Comprehensive earnings:












Net loss


-


-


(36,478)


-


(36,478)


Unrealized gains on foreign currency translations


-


-


-


43,623


43,623

Total comprehensive earnings


-


-


(36,478)


43,623


7,145












BALANCE AS AT JANUARY 31, 2015


$

239,720


$

16,940


$

167,453


$

69,103


$

493,216












 

Major Drilling Group International Inc.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

(unaudited)


















Three months ended


Nine months ended


January 31


January 31
















2015


2014


2015


2014









OPERATING ACTIVITIES








Loss before income tax

$

(20,669)


$

(13,295)


$

(38,163)


$

(19,965)

Operating items not involving cash









Depreciation and amortization

13,496


13,229


40,306


39,889


Loss (gain) on disposal of property, plant and equipment

469


826


(1,561)


1,259


Loss on short-term investments

-


307


-


307


Share-based payments reserve

313


391


1,015


1,372


Impairment of goodwill

-


-


-


12,057


Restructuring charge

-


-


1,953


665

Finance costs recognized in loss before income tax

178


198


572


736


(6,213)


1,656


4,122


36,320

Changes in non-cash operating working capital items

16,014


1,890


18,415


1,997

Finance costs paid

(161)


(195)


(549)


(722)

Income taxes paid

(2,730)


(2,422)


(6,939)


(11,882)

Cash flow from operating activities

6,910


929


15,049


25,713









FINANCING ACTIVITIES








Increase (decrease) in demand loan

1,372


4,066


(1,324)


4,066

Repayment of long-term debt

(1,655)


(1,683)


(8,154)


(18,717)

Issuance of common shares

-


-


34


-

Dividends paid 

(8,014)


(7,916)


(15,930)


(15,832)

Cash flow used in financing activities

(8,297)


(5,533)


(25,374)


(30,483)









INVESTING ACTIVITIES








Business acquisition (note 10)

57


-


(20,834)


(205)

Acquisition of short-term investments

-


(3,587)


-


(3,587)

Acquisition of property, plant and equipment (net of direct financing) (note 6)

(3,536)


(6,227)


(13,593)


(17,436)

Proceeds from disposal of property, plant and equipment

962


502


16,842


3,385

Cash flow used in investing activities

(2,517)


(9,312)


(17,585)


(17,843)









Effect of exchange rate changes

3,597


1,203


4,412


2,713









DECREASE IN CASH 

(307)


(12,713)


(23,498)


(19,900)









CASH, BEGINNING OF THE PERIOD

51,053


75,124


74,244


82,311









CASH, END OF THE PERIOD

$

50,746


$

62,411


$

50,746


$

62,411

 

Major Drilling Group International Inc.

Interim Condensed Consolidated Balance Sheets

As at January 31, 2015 and April 30, 2014

(in thousands of Canadian dollars)

(unaudited)










January 31, 2015


April 30, 2014

ASSETS








CURRENT ASSETS





Cash

$

50,746


$

74,244


Trade and other receivables

56,639


66,211


Income tax receivable

14,263


12,179


 Inventories

85,262


81,308


Prepaid expenses

4,253


4,690


211,163


238,632





PROPERTY, PLANT AND EQUIPMENT 

300,319


307,288





DEFERRED INCOME TAX ASSETS

8,782


5,825





GOODWILL 

57,764


38,056





INTANGIBLE ASSETS

7,394


1,923






$

585,422


$

591,724









LIABILITIES








CURRENT LIABILITIES





Demand loan

$

2,735


$

3,909


Trade and other payables

38,026


52,155


Income tax payable

1,772


3,416


Current portion of long-term debt

6,502


9,655


49,035


69,135





CONTINGENT CONSIDERATION (note 10)

10,130


-





LONG-TERM DEBT 

9,612


14,187





DEFERRED INCOME TAX LIABILITIES 

23,429


24,055


92,206


107,377





SHAREHOLDERS' EQUITY





Share capital

239,720


230,985


Share-based payments reserve

16,940


15,937


Retained earnings

167,453


211,945


Foreign currency translation reserve

69,103


25,480


493,216


484,347






$

585,422


$

591,724

 

MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2015 AND 2014 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)

1. NATURE OF ACTIVITIES

Major Drilling Group International Inc. (the "Company" or "Major Drilling") is incorporated under the Canada Business Corporations Act and has its head office at 111 St. George Street, Suite 100, Moncton, NB, Canada. The Company's common shares are listed on the Toronto Stock Exchange ("TSX"). The principal source of revenue consists of contract drilling for companies primarily involved in mining and mineral exploration. The Company has operations in Canada, the United States, Mexico, South America, Asia and Africa. 

2. BASIS OF PRESENTATION

Statement of compliance
These Interim Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB") and using the accounting policies as outlined in the Company's annual Consolidated Financial Statements for the year ended April 30, 2014, with the exception of the impact of certain amendments to accounting standards or new interpretations issued by the IASB, which were applicable for fiscal years beginning on or after January 1, 2014.

On March 2, 2015 the Board of Directors authorized the financial statements for issue.

Basis of consolidation
These Interim Condensed Consolidated Financial Statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Statements of Operations from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Intra-group transactions, balances, income and expenses are eliminated on consolidation, where appropriate.

Basis of preparation
These Interim Condensed Consolidated Financial Statements have been prepared based on the historical cost basis except for certain financial instruments that are measured at fair value, using the same accounting policies and methods of computation as presented in the Company's annual Consolidated Financial Statements for the year ended April 30, 2014.

3. APPLICATION OF NEW AND REVISED IFRS

The following IASB standards, now in effect, have had no significant impact on the Company's Consolidated Financial Statements:

IAS 32 (amended) Financial Instruments: Presentation
IAS 36 (amended) Impairment of Assets
IAS 39 (amended) Financial Instruments: Recognition and Measurement
IFRIC 21 Levies

The Company has not applied the following revised IASB standards that have been issued, but are not yet effective:

IFRS 9 (as amended in 2014) Financial Instruments
IFRS 10 (amended) Consolidated Financial Statements
IFRS 11 (amended) Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations
IFRS 15 Revenue from Contracts with Customers
IAS 1 (amended) Presentation of Financial Statements
IAS 16 (amended) Property, Plant and Equipment
IAS 27 (amended) Separate Financial Statements
IAS 28 (amended) Investments in Associates and Joint Ventures
IAS 38 (amended) Intangible Assets

The Company is currently in the process of assessing the impact of the adoption of these standards on the Consolidated Financial Statements.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTS

The preparation of financial statements in conformity with International Financial Reporting Standards ("IFRS") requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Significant areas requiring the use of management estimates relate to the useful lives of property, plant and equipment for amortization purposes, property, plant and equipment and inventory valuation, determination of income and other taxes, assumptions used in compilation of share-based payments, fair value of assets acquired and liabilities assumed in business acquisitions, amounts recorded as accrued liabilities and contingent considerations, and impairment testing of goodwill and intangible assets.

The Company applied judgment in determining the functional currency of the Company and its subsidiaries, the determination of cash generating units ("CGUs"), the degree of componentization of property, plant and equipment, and the recognition of provisions and accrued liabilities.

5. SEASONALITY OF OPERATIONS

The third quarter (November to January) is normally the Company's weakest quarter due to the shutdown of mining and exploration activities, often for extended periods over the holiday season.

6. PROPERTY, PLANT AND EQUIPMENT

Capital expenditures for the three months ended January 31, 2015 were $3,759 (2014 - $6,227) and for the nine months ended January 31, 2015 were $14,028 (2014 - $17,436). The Company obtained direct financing of $223 for the three months ended January 31, 2015 (2014 - nil) and of $435 for the nine months ended January 31, 2015 (2014 - nil). 

7. INCOME TAXES

The income tax expense for the period can be reconciled to accounting loss as follows:

 



Q3 2015


Q3 2014


YTD 2015


YTD 2014









Loss before income tax

$

(20,669)


$

(13,295)


$

(38,163)


$

(19,965)









Statutory Canadian corporate income tax rate

27%


 

28%


27%


 

28%









Expected income tax recovery based on statutory rate

(5,581)


(3,723)


(10,304)


(5,590)

Non-recognition of tax benefits related to losses

1,994


1,275


5,558


2,356

Other foreign taxes paid

408


71


579


273

Rate variances in foreign jurisdictions

(351)


(854)


(627)


990

Permanent differences

876


1,726


1,310


5,394

De-recognition of previously recognized tax losses

-


-


-


4,536

Other

984


1,007


1,799


2,451

Income tax (recovery) expense recognized in net loss

$

(1,670)


$

(498)


$

(1,685)


$

10,410

 

The Company periodically assesses its liabilities and contingencies for all tax years open to audit based upon the latest information available. For those matters where it is probable that an adjustment will be made, the Company records its best estimate of these tax liabilities, including related interest charges. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax laws. While management believes they have adequately provided for the probable outcome of these matters, future results may include favorable or unfavorable adjustments to these estimated tax liabilities in the period the assessments are made, or resolved, or when the statutes of limitations lapse.

8. LOSS PER SHARE

All of the Company's earnings are attributable to common shares therefore net earnings are used in determining earnings per share.

 


Q3 2015


Q3 2014


YTD 2015


YTD 2014









Net loss

$

(18,999)


$

(12,797)


$

(36,478)


$

(30,375)









Weighted average shares outstanding – basic (000's)

80,136


 

79,161


79,807


 

79,161









Net effect of dilutive securities:








Stock options (000's)

-


-


-


-

Weighted average number of shares – diluted (000's)

80,136


 

79,161


79,807


 

79,161









Loss per share:








Basic

$

(0.24)


$

(0.16)


$

(0.46)


$

(0.38)

Diluted

$

(0.24)


$

(0.16)


$

(0.46)


$

(0.38)









 

There were no anti-dilutive options for the three and nine months ended January 31, 2015 and 2014.

The total number of shares outstanding on January 31, 2015 was 80,135,883 (2014 - 79,161,378).

9. SEGMENTED INFORMATION

The Company's operations are divided into three geographic segments corresponding to its management structure, Canada - U.S., South and Central America, and Australia, Asia and Africa. The services provided in each of the reportable segments are essentially the same. The accounting policies of the segments are the same as those described in the Company's annual Consolidated Financial Statements for the year ended April 30, 2014. Management evaluates performance based on (loss) earnings from operations in these three geographic segments before finance costs, general corporate expenses and income taxes.  Data relating to each of the Company's reportable segments is presented as follows:

 


Q3 2015


Q3 2014


YTD 2015


YTD 2014

Revenue









Canada – U.S.

$

41,115


$

32,389


$

127,347


$

129,421


South and Central America

17,179


18,633


54,615


57,895


Australia, Asia and Africa

11,490


20,808


42,565


84,993










$

69,784


$

71,830


$

224,527


$

272,309









(Loss) earnings from operations









Canada – U.S.

$

(7,533)


$

(4,278)


$

(5,566)


$

7,246


South and Central America*

(5,288)


(5,731)


(10,800)


(22,304)


Australia, Asia and Africa

(5,211)


(1,934)


(14,021)


1,763


(18,032)


(11,943)


(30,387)


(13,295)

Eliminations

-


(135)


-


(419)


(18,032)


(12,078)


(30,387)


(13,714)

Finance costs

178


198


572


736

General corporate expenses**

2,459


1,019


7,204


5,515

Income tax

(1,670)


(498)


(1,685)


10,410

Net loss  

$

(18,999)


$

(12,797)


$

(36,478)


$

(30,375)









*  

  Loss from South and Central American operations includes an impairment of goodwill totaling $12,057 for the nine-month period ended January 31, 2014.

**

 General corporate expenses include expenses for corporate offices and stock options.

 

Canada – U.S. includes revenue of $22,423 and $18,627 for Canadian operations for the three months ended January 31, 2015 and 2014, respectively, and $74,060 and $81,413 for the nine months ended January 31, 2015 and 2014, respectively.

 




Q3 2015



Q3 2014



YTD 2015



YTD 2014















Depreciation and amortization














Canada – U.S.


$

7,213



$

5,727



$

19,697



$

17,199



South and Central America


3,027



2,929



9,611



8,923



Australia, Asia and Africa


2,861



4,053



9,856



12,146



Unallocated corporate assets


395



520



1,142



1,621


Total depreciation and amortization


$

13,496



$

13,229



$

40,306



$

39,889


 












January 31, 2015



April 30, 2014


Identifiable assets









Canada – U.S.



$

232,498



$

197,673



South and Central America



175,716



178,026



Australia, Asia and Africa



126,338



148,806





534,552



524,505


Unallocated and corporate assets



50,870



67,219





$

585,422



$

591,724

 

Canada – U.S. includes property, plant and equipment at January 31, 2015 of $86,293 (April 30, 2014 - $88,347) for Canadian operations.

10. BUSINESS ACQUISITION

Taurus Drilling Services
Effective August 1, 2014, the Company entered into the underground percussive/longhole drilling sector with its purchase of the operations of Taurus Drilling Services ("Taurus"), based in Canada and the United States.

The acquisition has been accounted for using the acquisition method and the results of this operation have been included in the Interim Condensed Consolidated Statements of Operations from the closing date. Through this purchase, which fits with the Company's strategic focus on specialized drilling, the Company acquired 39 underground drill rigs, support equipment and inventory, existing contracts and receivables, the operation's management team, and other employees, including experienced drillers. 

The purchase price for the transaction was $29.5 million (consisting of $20.7 million in cash, $8.7 million in Major Drilling shares, and $0.1 million in assumption of debt), and an additional maximum amount of $11.5 million (undiscounted) tied to performance. The estimated fair value of the contingent consideration was $10.1 million at January 31, 2015. The additional payout period extends for three years, commencing on August 1, 2014, and payments are contingent on growing EBITDA (earnings before interest, taxes, depreciation and amortization) run rates above levels at the date of acquisition.

The Company is in the process of finalizing the valuation of assets. As at January 31, 2015, the values allocated to net tangible and intangible assets are preliminary and are subject to adjustments as additional information is obtained. Changes during the current quarter relate to fair value assessments of goodwill and intangible assets.

Trade and other receivables are recorded at fair value. Goodwill arising from this acquisition will represent the excess of the total consideration paid over the fair value of the net assets acquired and the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Taurus and Major Drilling.

The estimated net assets acquired at fair value at acquisition are as follows:

 

Assets acquired:



Trade and other receivables

$

5,500

Inventories


606

Prepaid expenses


40

Property, plant and equipment


9,268

Goodwill


18,367

Intangible assets


7,095

Trade and other payables


(1,223)

Total assets

$

39,653




Consideration:



Cash

$

20,683

Trade and other payable


151

Contingent consideration


10,130

Shares of Major Drilling


8,689


$

39,653

 

The above consideration includes non-cash investing activities, which are not reflected in the Interim Condensed Consolidated Statements of Cash Flows, including the issuance of 966,495 shares of Major Drilling at $8.99 for a total of $8,689 and contingent consideration of $10,130.

The Company incurred acquisition-related costs of $343 relating to external legal fees and due diligence costs. These acquisition costs have been included in the other expenses line of the Interim Condensed Consolidated Statements of Operations.

Revenue since the date of acquisition attributable to the additional business generated by Taurus was $22,090.  Due to the integration of the Taurus acquisition with existing operations, it is impracticable to estimate the revenue and net income of the combined entity for the year as though the acquisition date was May 1, 2014.

11. FINANCIAL INSTRUMENTS

Fair value
The carrying values of cash, trade and other receivables, demand credit facility, demand loan and trade and other payables approximate their fair value due to the relatively short period to maturity of the instruments.  The following table shows the carrying value of long-term debt, which approximates its fair value, as most debts carry variable interest rates and the remaining fixed rate debts continue to reflect fair value.  The fair value of the interest rate swap included in long-term debt is measured using quoted interest rates.

 


January 31, 2015


April 30, 2014





Long-term debt

$

16,114



23,842

 

During the quarter, the Company was in compliance with all covenants and other conditions imposed by its debt agreements.

Credit risk
As at January 31, 2015, 76.4% of the Company's trade receivables were aged as current (April 30, 2014 - 79.8%) and 7.7% of the trade receivables were impaired (April 30, 2014 - 5.1%).


The movement in the allowance for impairment of trade receivables during the nine-month periods were as follows:

 


January 31, 2015


January 31, 2014





Opening balance

$

3,016


$

2,790

Increase in impairment allowance

1,769


744

Recovery of amounts previously impaired

(186)


-

Write-off charged against allowance

(811)


(844)

Foreign exchange translation differences

(144)


10

Ending balance

$

3,644


$

2,700

 

Foreign currency risk
The carrying amounts of net monetary assets in Canadian subsidiaries, which are denominated in United States dollars and that may include intercompany balances with other subsidiaries, is US $298 as of January 31, 2015.

If the Canadian dollar moved by plus or minus 10% against the United States dollar at January 31, 2015, the unrealized foreign exchange gain or loss recognized in net loss would move by approximately US $30.

Liquidity risk
The following table details contractual maturities for the Company's financial liabilities.

 


1 year

2-3 years

4-5 years

thereafter

Total







Demand loan

$

2,735

$

-

$

-

$

-

$

2,735

Trade and other payables

38,026

-

-

-

38,026

Long-term debt

6,807

6,066

2,244

1,790

16,907


$

47,568

$

6,066

$

2,244

$

1,790

$

57,668

 

SOURCE MAJOR DRILLING GROUP INTERNATIONAL INC.

For further information: Denis Larocque, Chief Financial Officer, Tel: (506) 857-8636, Fax: (506) 857-9211, ir@majordrilling.com

RELATED LINKS
http://www.majordrilling.com

Organization Profile

MAJOR DRILLING GROUP INTERNATIONAL INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890