Major Drilling Reports Third Quarter Results
MONCTON, NB, March 3 /CNW/ --
MONCTON, NB, March 3 /CNW/ - Major Drilling Group International Inc.
(TSX: MDI) today reported results for its third quarter of fiscal 2011,
ended January 31, 2011.
Highlights
___________________________________________________________________
|In millions of Canadian dollars (except| Q3-11| Q3-10|YTD-11|YTD-10|
|earnings per share) | | | | |
|_______________________________________|______|______|______|______|
|Revenue |$107.7| $72.5|$345.0|$210.5|
|_______________________________________|______|______|______|______|
|Gross profit | 23.9| 12.0| 85.5| 52.0|
| As percentage of sales | 22.2%| 16.5%| 24.8%| 24.7%|
|_______________________________________|______|______|______|______|
|Net earnings (loss) | 1.7| (4.5)| 18.1| (3.7)|
|_______________________________________|______|______|______|______|
|Earnings (loss) per share | 0.07|(0.19)| 0.76|(0.16)|
|_______________________________________|______|______|______|______|
|Cash flow from operations | 11.0| 1.3| 41.7| 21.2|
|(before changes in non-cash working | | | | |
|capital items) | | | | |
|_______________________________________|______|______|______|______|
-- Major Drilling posted quarterly revenue of $107.7 million, up
nearly 50 percent from the $72.5 million recorded for the same
quarter last year.
-- Gross margin percentage for the quarter was 22.2 percent
compared to 16.5 percent for the corresponding period last
year.
-- Net earnings were $1.7 million or $0.07 per share for the
quarter, compared to a net loss of $4.5 million or $0.19 per
share for the prior year quarter.
-- The Company has declared a semi-annual dividend of $0.22
($0.0733 per share post 3:1 stock split, if approved) per share
to be paid on May 2, 2011.
'The quarter ended with a profit despite the usual shutdown of
operations over the holidays and severe weather issues. November was a
particularly good month and continued the progression we experienced in
our second quarter. December had its usual holiday shutdowns, while
January got off to a slow start in many regions. This was compounded
by heavy rains and floods in Australia, which not only reduced
potential revenue and earnings but resulted in extra costs of $1
million in January. The Company also incurred significant training and
setup costs given the strong pickup expected in the fourth quarter,'
said Francis McGuire, President and CEO of Major Drilling.
'Indications are that activity levels in calendar 2011 should be
robust. Intermediate and junior mining companies with advanced
projects have ramped up their already busy drilling programs by adding
rigs. Most senior mining companies have significantly increased their
exploration budgets for 2011, and there have been recent increases in
financings for junior mining companies. Nearly half of the funds from
financings done on the TSX for mining in 2010 were raised in the last 3
months of the year. These financings should add a layer of activity to
an industry where shortages of labour and supplies have already begun
to appear.'
'This pickup of activity has brought labour issues back to the
forefront. To meet the labour availability challenge, we have stepped
up our training efforts around the world, and have re-instated many of
the initiatives that were successful in the last industry upturn.
Extra trainees are being assigned to rigs and retention programs are
being re-instated. In the 4 key areas where the labour shortage is
most problematic (Canada, the USA, Australia and Chile) we are
establishing 4 new training centres. The goals for these centres are
to improve our retention rate for new entrants and to qualify
candidates to enter into our driller-trainee programs within 6 months.
But these initiatives will take time to catch up to the rapid ramp-up
occurring, which could temporarily limit our ability to accept new
work. Wage increases will be required in certain areas to retain and
attract the most experienced drillers, which are key to high-quality
customer service, as competition for drillers heats up,' observed Mr.
McGuire.
'Net capital expenditures for the quarter were $17.7 million as we
purchased 16 rigs. We also retired 22 rigs through our modernization
program. We are stepping up the renewal of our fleet, which will help
improve productivity, safety and speed up training of crews. Also,
through these additions, we hope to further improve rig utilization and
reliability. In this coming fourth quarter, we intend to replace
another 20 rigs through this modernization program.'
'Looking ahead to our fourth quarter and fiscal 2012, we have a positive
view. We continue to see a noticeable increase in inquiries from all
categories of customers, and if customers move forward with their
stated plans, we should see utilization rates continue to gradually
improve as crews become available. This increase in utilization gives
us considerable leverage to increase revenue and profits as we move
forward.'
'Also, given industry shortages in many of our operating areas, we
expect pricing to continue to recover, which should help margins
improve, although the shortage of experienced drill crews will put some
pressure on labour costs and productivity, especially in our most
active markets.'
'The Company is pleased to announce that today its Board of Directors
declared a cash dividend of $0.22 ($0.0733 per share post 3:1 stock
split, if approved) per common share payable on May 2, 2011 to
shareholders of record as of April 8, 2011. This dividend is designated
as an 'eligible dividend' for Canadian tax purposes,' said Mr. McGuire.
'Finally, the Company will be holding a special meeting of shareholders
on March 9, 2011 at 4:00 pm (EST) to consider and, if thought
advisable, approve the 3 for 1 stock split announced on December 7,
2010.'
Third quarter ended January 31, 2011
Total revenue for the third quarter was $107.7 million compared to $72.5
million recorded for the prior year period. All of the Company's
regions contributed to this growth with Canada-U.S. having the greatest
increase in activity. In Australia, although the Company saw signs of
strong recovery, the ability of that operation to contribute was
hampered by heavy floods in Queensland.
Revenue from Canada-U.S. drilling operations was up 75 percent to $38.2
million for the quarter compared to $21.8 million for the same period
last year. U.S. operations saw a strong recovery particularly from its
senior customers. In Canada, activity levels continue to increase but
startups were somewhat slower than last year.
In South and Central America, revenue for the quarter was $36.8 million,
up 39 percent from $26.5 million recorded in the prior year quarter.
The increase was primarily driven by Argentina and Mexico, where
activity levels picked up substantially compared to last year.
Australian, Asian and African drilling operations reported revenue of
$32.7 million, up 35 percent from $24.2 million reported in the same
period last year. The revenue increase came primarily from Mongolia,
Tanzania and the recent startup of Kazakhstan.
The overall gross margin percentage for the quarter was 22.2 percent
compared to 16.5 percent for the same period last year. Margins were
impacted by costs relating to the ramp-up of operations as the Company
was gearing up for new contracts. Higher mobilization costs, combined
with additional personnel being trained, added a layer of costs this
quarter.
General and administrative costs were $10.1 million for the quarter
compared to $7.9 million in the same period last year. The increase
was due to the addition of the new environmental division and also
increased costs to support the strong growth in activity levels.
Other expenses were flat at $1.8 million for the quarter.
Some of the statements contained in this press release may be
forward-looking statements, such as, but not limited to, those relating
to worldwide demand for gold and base metals and overall commodity
prices, the level of activity in the minerals and metals industry and
the demand for the Company's services, the Canadian and international
economic environments, the Company's ability to attract and retain
customers and to manage its assets and operating costs, sources of
funding for its clients, particularly for junior mining companies,
competitive pressures, currency movements, which can affect the
Company's revenue in Canadian dollars, the geographic distribution of
the Company's operations, the impact of operational changes, changes in
jurisdictions in which the Company operates (including changes in
regulation), failure by counterparties to fulfill contractual
obligations, and other factors as may be set forth, as well as
objectives or goals, and including words to the effect that the Company
or management expects a stated condition to exist or occur. Since
forward-looking statements address future events and conditions, by
their very nature, they involve inherent risks and uncertainties.
Actual results in each case could differ materially from those
currently anticipated in such statements by reason of factors such as,
but not limited to, the factors set out in the discussion starting on
pages 15 to 17 of the 2010 Annual Report entitled 'General Risks and
Uncertainties', and such other documents as available on SEDAR at www.sedar.com. All such factors should be considered carefully when making decisions
with respect to the Company. The Company does not undertake to update
any forward-looking statements, including those statements that are
incorporated by reference herein, whether written or oral, that may be
made from time to time by or on its behalf, except in accordance with
applicable securities laws.
Based in Moncton, New Brunswick, Major Drilling Group International Inc.
is one of the world's largest metals and minerals contract drilling
service companies. To support its customers' mining operations, mineral
exploration and environmental activities, Major Drilling maintains
operations in Canada, the United States, South and Central America,
Australia, Asia, and Africa.
Financial statements are attached.
Major Drilling will provide a simultaneous webcast of its quarterly
conference call on Friday, March 4, 2011 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.
Major Drilling Group International Inc.
Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share information)
(unaudited)
Nine months ended Three months ended
January 31 January 31
2011 2010 2011 2010
TOTAL REVENUE $ 345,018 $ 210,488 $ 107,720 $ 72,471
DIRECT COSTS 259,512 158,487 83,847 60,492
GROSS PROFIT 85,506 23,873 11,979
52,001
OPERATING
EXPENSES
General and 29,614 10,112 7,932
administrative 24,930
Other 5,135 1,825 1,796
expenses 3,828
Foreign
exchange (220) (663) 1,028 166
(gain) loss
Interest
expense 331 (128) 100 (33)
(revenue)
Interest
expense on 545 813 165 239
long-term debt
Amortization 23,371 8,257 7,343
22,783
Restructuring
charge - 1,220 - -
Goodwill
impairment - 2,032 - -
58,776 21,487 17,443
54,815
EARNINGS (LOSS)
BEFORE INCOME 26,730 (2,814) 2,386 (5,464)
TAX
INCOME TAX -
PROVISION
(RECOVERY)
Current 9,447 597 1,912
3,214
Future (854) 125 (2,923)
(2,339)
8,593 722 (1,011)
875
NET EARNINGS $ 18,137 $ (3,689) $ 1,664 $ (4,453)
(LOSS)
EARNINGS (LOSS)
PER SHARE
Basic * $ 0.76 $ (0.16) $ 0.07 $ (0.19)
Diluted ** $ 0.76 $ (0.15) $ 0.07 $ (0.19)
*Based on 23,817,294 and 23,719,622 daily weighted average shares
outstanding for the fiscal year to date 2011 and 2010, respectively,
and on 23,859,937 and 23,723,932 daily weighted average shares
outstanding for the third quarter ended January 31, 2011 and 2010,
respectively. The total number of shares outstanding on January 31,
2011 was 23,866,375.
**Based on 24,014,272 and 23,874,652 daily weighted average shares
outstanding for the fiscal year to date 2011 and 2010, respectively,
and on 24,178,057 and 23,938,688 daily weighted average shares
outstanding for the third quarter ended January 31, 2011 and 2010,
respectively.
Major Drilling Group International Inc.
Consolidated Statements of Comprehensive Earnings (Loss)
(in thousands of Canadian dollars)
(unaudited)
Nine months ended Three months ended
January 31 January 31
2011 2010 2011 2010
NET EARNINGS $ 18,137 $ $ 1,664 $ (4,453)
(LOSS) (3,689)
OTHER
COMPREHENSIVE
EARNINGS (LOSS)
Unrealized gain
(loss) on 4,280 (24,975) (4,315) (959)
translating
financial
statements of
self-sustaining
foreign
operations
COMPREHENSIVE $ 22,417 $ $ $ (5,412)
EARNINGS (LOSS) (28,664) (2,651)
Consolidated Statements of Retained Earnings
(in thousands of Canadian dollars)
(unaudited)
Nine months ended
January 31
2011 2010
RETAINED EARNINGS, $ 209,025 $ 218,983
BEGINNING OF THE PERIOD
Net earnings (loss) 18,137 (3,689)
Dividend (5,243) (4,745)
RETAINED EARNINGS, END OF $ 221,919 $ 210,549
THE PERIOD
Consolidated Statements of Accumulated Other
Comprehensive Loss
(in thousands of Canadian dollars)
(unaudited)
Nine months ended
January 31
2011 2010
ACCUMULATED OTHER
COMPREHENSIVE LOSS,
BEGINNING OF THE PERIOD $ (44,333) $ (5,079)
Unrealized gains (losses)
on translating financial
statements
of self-sustaining foreign
operations 4,280 (24,975)
ACCUMULATED OTHER
COMPREHENSIVE LOSS,
END OF THE PERIOD $ (40,053) $ (30,054)
Major Drilling Group International Inc.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
Nine months ended Three months ended
January 31 January 31
2011 2010 2011 2010
OPERATING
ACTIVITIES
Net earnings $ 18,137 $ (3,689) $ 1,664 $ (4,453)
(loss)
Operating items
not involving
cash
Amortization 23,371 22,783 8,257 7,343
(Gain) loss
on disposal
of property, (426) 934 391 933
plant and
equipment
Future income
tax (854) (2,339) 125 (2,923)
(recovery)
Stock-based 1,463 1,485 556 441
compensation
Goodwill 2,032
impairment - - -
41,691 21,206 10,993 1,341
Changes in
non-cash
operating 5,736 11,562 9,914 11,887
working capital
items
Cash flow from
operating 47,427 32,768 20,907 13,228
activities
FINANCING
ACTIVITIES
Repayment of (7,124) (9,026) (1,890) (2,557)
long-term debt
Proceeds from
short-term debt 10,400 - - -
(note 8)
Issuance of 1,412 28 132
common shares -
Dividend paid (9,993) (9,488) (5,243) (4,745)
Cash flow used
in financing (5,305) (18,486) (7,001) (7,302)
activities
INVESTING
ACTIVITIES
Business
acquisition (2,567) - (30) -
(note 5)
Acquisition of
property, plant (40,515) (17,282) (18,307) (10,074)
and equipment
Proceeds from
disposal of 3,929 1,610 572 113
property, plant
and equipment
Cash flow used
in investing (39,153) (15,672) (17,765) (9,961)
activities
OTHER
ACTIVITIES
Foreign
exchange (1,034) (2,954) 179 203
translation
adjustment
INCREASE
(DECREASE) IN 1,935 (4,344) (3,680) (3,832)
CASH
CASH POSITION,
BEGINNING OF 30,232 58,035 35,847 57,523
THE PERIOD
CASH POSITION,
END OF THE $ 32,167 $ 53,691 $ 32,167 $ 53,691
PERIOD
Major Drilling Group International Inc.
Consolidated Balance Sheets
As at January 31, 2011 and April 30, 2010
(in thousands of Canadian dollars)
(unaudited)
ASSETS January April
2011 2010
CURRENT ASSETS
Cash $ 32,167 $ 30,232
Accounts 70,999 62,128
receivable
Income tax 10,053
receivable 4,784
Inventories 67,155 63,170
Prepaid expenses 4,813
5,345
Future income tax 793
assets 247
180,697 171,189
PROPERTY, PLANT AND 229,995 210,812
EQUIPMENT
FUTURE INCOME TAX 10,396 8,117
ASSETS
GOODWILL AND
INTANGIBLE ASSETS 27,058 25,538
(note 7)
$ 448,146 $ 415,656
LIABILITIES
CURRENT LIABILITIES
Accounts payable
and accrued $ 57,898 $ 54,027
charges
Income tax payable 2,830
7,481
Short-term debt 11,129
(note 8) -
Current portion of 8,887
long-term debt 6,701
Future income tax 819
liabilities 23
83,232 66,563
LONG-TERM DEBT 10,178 15,041
FUTURE INCOME TAX 16,418 15,783
LIABILITIES
109,828 97,387
SHAREHOLDERS' EQUITY
Share capital 143,847 142,435
Contributed 12,605 11,142
surplus
Retained earnings 221,919 209,025
Accumulated other (40,053) (44,333)
comprehensive loss
338,318 318,269
$ 448,146 $ 415,656
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIODS ENDED JANUARY 31, 2011 AND 2010
(in thousands of Canadian dollars)
1. BASIS OF PRESENTATION
These interim consolidated financial statements were prepared using
accounting policies and methods consistent with those used in the
preparation of the Company's audited consolidated financial statements
for the year ended April 30, 2010. These interim consolidated
financial statements conform in all respects to the requirements of
Canadian generally accepted accounting principles for annual financial
statements, with the exception of certain note disclosures. As a
result, these interim consolidated financial statements should be read
in conjunction with the Company's audited consolidated financial
statements and notes for the year ended April 30, 2010 contained in the
Company's 2010 annual report.
2. FUTURE ACCOUNTING CHANGES
International Financial Reporting Standards ('IFRS')
In February 2008, the Accounting Standards Board ('AcSB') confirmed that
the use of IFRS will be required in 2011 for publicly accountable
enterprises in Canada. In April 2008, the AcSB issued an IFRS Omnibus
Exposure draft proposing that publicly accountable enterprises be
required to apply IFRS, in full and without modification, on January 1,
2011 for companies with a calendar year end, therefore the transition
date for the Company is May 1, 2011. This will require the restatement,
for comparative purposes, of amounts reported by the Company for its
year ended April 30, 2011, and of the opening balance sheet as at May
1, 2010. The Company is currently in the process of developing a
conversion and implementation plan and assessing the impacts of the
conversion on the consolidated financial statements and disclosures of
the Company.
3. SEASONALITY OF OPERATIONS
The Company's operations tended to exhibit a seasonal pattern whereby
its fourth quarter (February to April) was its strongest. With the
exception of the third quarter, the Company has, over the past several
years, exhibited comparatively less seasonality in quarterly revenue.
The third quarter (November to January) is normally the Company's
weakest quarter due to the shutdown of mining and exploration
activities, often for extended periods over the holiday season,
particularly in South and Central America. Coming out of the recent
economic and industry downturn, it is not yet clear whether or not the
Company's revenue will return to more historical seasonal patterns, or
whether a recent lack of seasonality will continue.
4. FUNCTIONAL CURRENCY
Effective May 1, 2010, the Company's operation in Chile changed its
functional currency from the U.S. dollar to the Chilean peso. Factors
considered when changing the functional currency included contract
revenue being determined in local currency, the currency of operating
costs and local regulations requiring invoicing and settlement of these
being performed in the local currency. This change has been done in
accordance with CICA Handbook Section 1651, Foreign Currency
Translation, and consequently applied prospectively. All items were
translated to the new functional currency using the exchange rate at
the date of the change.
5. BUSINESS ACQUISITIONS
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 USA, and
operates from its head office in Little Falls, Minnesota, as well as
from satellite offices in Brainerd and Bemidji, Minnesota. The
acquired business includes drilling equipment, contracts and
employees. The purchase price for the transaction was USD $2,449 (CAD
$2,567), including customary working capital adjustments, financed with
cash. There is also a contingent consideration of USD $750 to the
purchase price, based on future earnings.
The net assets acquired at fair market value at acquisition are as
follows:
Assets acquired and liabilities assumed
Accounts receivable $ 776
Inventories 382
Prepaid expenses 18
Property, plant and equipment 1,078
Goodwill 329
Intangible assets 763
Accounts payable (779)
Net assets $ 2,567
Consideration
Cash $ 2,567
SMD Services
Effective February 26, 2010, the Company acquired SMD Services based in
Huntsville, Alabama. Through this purchase, Major Drilling entered the
environmental drilling sector and acquired a small fleet of sonic,
probe and auger drill rigs, as well as a skilled management team and
personnel. The purchase price for the transaction was USD $1,953 (CAD
$2,064), including customary working capital adjustments, financed with
cash. There is also a contingent consideration of USD $2,000 to the
purchase price, based on future earnings.
The net assets acquired at fair market value at acquisition are as
follows:
Assets acquired and liabilities assumed
Cash $ 90
Accounts receivable 234
Prepaid expenses 46
Property, plant and equipment 1,605
Intangible assets 249
Accounts payable (160)
Net assets $ 2,064
Consideration
Cash $ 2,064
6. INVENTORY
The cost of inventory recognized as an expense and included in direct
costs for the nine and three months ended January 31, 2011 was $57,708
and $15,544 respectively. During the period, there were no significant
write-downs of inventory as a result of net realizable value being
lower than cost and no inventory write-downs recognized in previous
years were reversed.
7. GOODWILL AND INTANGIBLE ASSETS
January 2011 April 2010
Goodwill $ 25,559 $ 24,464
Intangible assets 1,499 1,074
$ 27,058 $ 25,538
Intangible assets include the carrying value of customer relationships
and a non-compete agreement, which are amortized on a straight-line
basis between a three and five year period.
Changes in the goodwill and intangible assets balance were as follows
for the nine and three months ending January 31, 2011 and 2010:
2011 YTD 2010 YTD 2011 Q3 2010 Q3
Balance at $ 25,538 $ 32,072 $ 27,373 $ 26,297
beginning of
the period
Goodwill and 1,092 - 30 -
intangible
assets acquired
Amortization of (572) (396) (275) (132)
intangible
assets
Goodwill - (1,690) - -
adjustment
Goodwill - (2,032) - -
impairment
Effect of (1,817) (70) (28)
foreign 1,000
currency
exchange rate
changes
$ 27,058 $ 26,137 $ 27,058 $ 26,137
8. SHORT-TERM DEBT
In the first quarter of the current fiscal year, the Company borrowed
5,375 million Chilean pesos (CAD $10.4 million), initially secured by
a USD $10 million stand-by letter of credit drawn from the Company's
demand credit facility, carrying interest at an annual rate of 5.18
percent and maturing in May 2011. In the third quarter, the stand-by
letter of credit was increased to USD $11 million due to the weakening
of the US dollar.
9. CAPITAL MANAGEMENT
The Company includes shareholders' equity (excluding accumulated other
comprehensive loss), short and long-term borrowings and demand credit
facility net of cash in the definition of capital.
Total managed capital was as follows:
January 2010 April 2010
Short-term debt $ 11,129 $ -
Long-term debt 16,879 23,928
Share capital 143,847 142,435
Contributed surplus 12,605 11,142
Retained earnings 221,919 209,025
Cash (32,167) (30,232)
$ 374,212 $ 356,298
The Company's objective when managing its capital structure is to
maintain financial flexibility in order to: i) preserve access to
capital markets; ii) meet financial obligations; and iii) finance
internally generated growth and potential new acquisitions. To manage
its capital structure, the Company may adjust spending, issue new
shares, issue new debt or repay existing debt.
Under the terms of certain of the Company's debt agreements, the Company
must satisfy certain financial covenants. Such agreements also limit,
among other things, the Company's ability to incur additional
indebtedness, create liens, engage in mergers or acquisitions and make
dividend and other payments. During the period, the Company was, and
continues to be, in compliance with all covenants and other conditions
imposed by its debt agreements.
In order to facilitate the management of its capital requirements, the
Company prepares annual budgets that are updated as necessary,
dependent on various factors.
The Company's objectives with regards to capital management remain
unchanged from fiscal 2010.
10. FINANCIAL INSTRUMENTS
Fair value
The carrying values of cash, accounts receivable and accounts payable
and accrued charges approximate their fair value due to the relatively
short period to maturity of the instruments. Long-term debt has a
carrying value of $16,879 as at January 31, 2011 (April 30, 2010 -
$23,928), which also approximates its fair value.
Risk management
The Company is exposed to various risks related to its financial assets
and liabilities. There have been no substantive changes in the
Company's exposure to financial instrument risks, its objectives,
policies and processes for managing those risks, or the methods used to
measure them, from previous periods, unless otherwise stated in this
note.
Credit risk
The Company is exposed to credit risk from its accounts receivable. The
Company has adopted a policy of dealing only with creditworthy
counterparties and obtaining sufficient collateral where appropriate,
as a means of mitigating the risk of financial loss from defaults. It
carries out, on a continuing basis, credit checks on its customers and
maintains provisions for contingent credit losses. The Company also
diversifies its credit risk by dealing with a large number of customers
in various countries. Demand for the Company's drilling services
depends upon the level of mineral exploration and development
activities conducted by mining companies, particularly with respect to
gold, nickel and copper. The Company's five largest customers account
for 26 percent (22 percent in 2010) of total quarterly revenue, with no
one customer representing more than 10 percent of its revenue for 2011
or 2010.
The carrying amounts for accounts receivable are net of allowances for
doubtful accounts, which are estimated based on aged analyses of
receivables, past experience, specific risks associated with the
customer and other relevant information. The maximum exposure to credit
risk is the carrying value of the financial assets.
As at January 31, 2011, 80 percent of the Company's trade receivables
were aged as current and 2.7 percent of the trade receivables were
impaired.
Credit risk also arises from cash and cash equivalents and deposits with
banks and financial institutions. This risk is limited because the
counterparties are banks with high credit ratings assigned by
international credit-rating agencies.
Interest rate risk
The demand loan and long-term debt of the Company bear a floating rate
of interest, which exposes the Company to interest rate fluctuations.
As at January 31, 2011, the Company has estimated that a one percentage
point increase in interest rates would have caused a quarterly decrease
in net income of approximately $42 and a one percentage decrease in
interest rates would have caused a quarterly increase in net income of
$42.
Foreign currency risk
Foreign currency risk arises as the Company has operations located
internationally where local operational currency is not the same as the
functional currency of the Company.
A significant portion of the Company's operations are located outside of
Canada. The accounting impact of foreign currency exposure is minimized
since the operations are classified as self-sustaining operations. In
certain developing countries, the Company mitigates its risk of large
exchange rate fluctuations by conducting business primarily in U.S.
dollars. U.S. dollar revenue exposure is partially mitigated by
offsetting U.S. dollar labour and material expenses. Monetary assets
denominated in foreign currencies are exposed to foreign currency
fluctuations.
Based on the Company's foreign currency net monetary exposures and net
assets as at January 31, 2011, and assuming that all other variables
remain constant, a 10 percent rise or fall in the Canadian dollar
against the other foreign currencies would have resulted in increases
(decreases) in the net earnings and comprehensive earnings as follows:
Increase (decrease) in net earnings
Canadian dollar Canadian dollar
appreciates 10% depreciates 10%
U.S. Dollar $(1,501) $1,501
Increase (decrease) in comprehensive earnings
Canadian dollar Canadian dollar
appreciates 10% depreciates 10%
U.S. Dollar $(23,531) $23,531
Chilean Peso (3,664) 3,664
Australian Dollar (901) 901
Liquidity risk
Liquidity risk, the risk that the Company would not be able to meet its
financial obligations as they become due, arises from the Company's
management of working capital, finance charges and principal repayments
on its debt instruments.
The Company manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
Total financial liabilities, by due date, as at January 31, 2011 are as
follows:
Total 1 year 2-3 years 4-5 years
Accounts payable & $ 57,898 $ 57,898 $- $-
accrued charges
Short-term debt 11,129 11,129 - -
Long-term debt 16,879 6,701 9,982 196
$ 85,906 $ 75,728 $9,982 $ 196
11. SEGMENTED INFORMATION
2011 YTD 2010 YTD 2011 Q3 2010 Q3
Revenue
Canada - U.S. $ 129,211 $ 66,081 $ 38,191 $ 21,802
South and Central America 118,896 68,889 36,836 26,486
Australia, Asia and Africa 96,911 75,518 32,693 24,183
$ 345,018 $ 210,488 $ 107,720 $ 72,471
Earnings (loss) from operations
Canada - U.S. $ 16,571 $ 5,394 $ 1,648 $ 13
South and Central America 10,565 5,400 1,561 132
Australia, Asia and Africa 10,098 (2,317) 2,979 (2,883)
37,234 8,477 6,188 (2,738)
Eliminations (699) (1,024) (234) (367)
36,535 7,453 5,954 (3,105)
Interest expense, net 876 685 265 206
General corporate expenses 8,929 6,330 3,303 2,153
Restructuring charge - 1,220 - -
Goodwill impairment - 2,032 - -
Income tax 8,593 875 722 (1,011)
Net earnings (loss) $ 18,137 $ (3,689) $ 1,664 $ (4,453)
Goodwill impairment relates to the South and Central American segment
for the fiscal year 2010.
To view this news release in HTML formatting, please use the following URL: http://www.cnw.ca/en/releases/archive/March2011/03/c7839.html
Denis Larocque, Chief Financial Officer
Tel: (506) 857-8636
Fax: (506) 857-9211
ir@majordrilling.com