Major Drilling Reports Record Third Quarter Revenue and Profits and Increases Dividend
MONCTON, NB, March 5, 2012 /CNW/ - Major Drilling Group International Inc.
today reported results for its third quarter of fiscal 2012, ended January 31, 2012.
Highlights
In millions of Canadian dollars Q3-12 Q3-11 YTD-12 YTD-11
(except earnings per share)
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 InternationalInc.
Interim Condensed Consolidated StatementsofOperations
(in thousands ofCanadian dollars, except per shareinformation)
(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 INCOMETAX 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 CondensedConsolidated 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
MajorDrilling Group International Inc.
Interim Condensed Consolidated Statements of Changes inEquity
For the nine months ended January 31, 2011 and2012
(in thousands of Canadian dollars)
(unaudited)
Share
based
payments Retained Foreigncurrency
Sharecapital Reserves reserve earnings translationreserve 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
ATJANUARY 31,
2012 $ 229,103 $ (119) $ 11,724 $ 223,201 $ 6,198 $ 470,107
MajorDrilling GroupInternational Inc.
Interim CondensedConsolidatedStatements of Cash Flows
(inthousands of Canadiandollars)
(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 INCASH (11,944) (3,680) 33,902 1,935
CASH, BEGINNING
OF THEPERIOD 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 BalanceSheets
As at January 31, 2012 and April 30, 2011
(in thousands of Canadian dollars)
(unaudited)
January 31,
2012 April 30, 2011
ASSETS
CURRENTASSETS
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
(note8) 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 Building
as
GAAP restatements* Adjustments reserve shareunits consideration deemedcost componentization IFRS
CURRENTASSETS
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
ANDEQUIPMENT 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
INTANGIBLEASSETS 1,499 - - - - - - - 1,499
$ 448,146 $ (9,397) $ - $ - $ - $ 741 $ 428 $ 73 $ 439,991
LIABILITIES
CURRENTLIABILITIES
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)
Sharebased Deferred Fairvalue Building
PreviousGAAP payments shareunits asdeemedcost componentization IFRS
TOTAL REVENUE $ 107,720 $ - $ - $ - $ - $ 107,720
DIRECT COSTS 83,847 - - - - 83,847
GROSS PROFIT 23,873 - - - - 23,873
OPERATINGEXPENSES
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
ofOperations
For the nine
months ended
January 31,2011 (c) (d) (f) (g)
Share
based Deferred Fair value Building
share as
PreviousGAAP payments units deemedcost 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)
Sharebased Deferred Fair value Building
Previous payments as
GAAP reserve shareunits deemedcost componentization IFRS
NET EARNINGS $ 1,664 $ (139)
(LOSS) $ (6) $ 134 $ 18 $ 1,671
OTHER
COMPREHENSIVE
EARNINGS
Unrealized loss
on foreign
currency
translation
(net of tax of
$0) (4,315) - - - - (4,315)
COMPREHENSIVE $ (2,651) $ (139)
EARNINGS (LOSS) $ (6) $ 134 $ 18 $ (2,644)
IFRS Consolidated Statement of ComprehensiveEarnings(Loss)
For the nine
months ended
January 31, 2011
(b) (c) (e) (f)
Share
based Deferred Fair value Building
Previous payments share as
GAAP reserve units deemedcost componentization IFRS
NET EARNINGS $ 18,137 $ (443)
(LOSS) $ (26) $ 403 $ 55 $ 18,126
OTHERCOMPREHENSIVE
EARNINGS
Unrealized gain
on foreign
currency 4,280 - - - - 4,280
translation (net
of tax of $0)
COMPREHENSIVE $ 22,417 $ (443)
EARNINGS (LOSS) $ (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
January31,2012 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:
2012Q3 2011Q3 2012YTD 2011 YTD
Earnings before income tax $ 14,068 $ 2,450 $ 84,762 $ 26,890
Statutory Canadian corporate 29% 30% 29% 30%
income tax rate
Expected income tax expense
based on statutory
rate $ 4,080 $ 735 $ 24,581 $ 8,067
Non-recognition of tax 47 352 360 605
benefits related to losses
Other foreign taxes paid 273 62 560 271
Rate variances in foreign (137) (441) (625) (1,389)
jurisdictions
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.
2012Q3 2011 Q3 2012 YTD 2011 YTD
Net earnings for the period $ 9,566 $ 1,671 $ 59,018 $ 18,126
Weighted average shares 78,949 71,580 75,078 71,452
outstanding - basic (000's)
Net effect of dilutive
securities:
Stock options 1,118 954 969 591
Weighted average number of 80,067 72,534 76,047 72,043
shares - diluted (000's)
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:
2012Q3 2011Q3 2012 YTD 2011YTD
Revenue
Canada - U.S. $ 69,805 $ 38,191 $ 215,394 $ 129,211
South and
Central 59,168 36,836 178,522 118,896
America
Australia,
Asia and 53,215 32,693 166,278 96,911
Africa
$ 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 9,560 1,400 36,750 10,535
America
Australia,
Asia and 5,405 2,996 30,274 10,608
Africa
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 5,504 2,949 13,915 9,326
expenses *
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 2,716 2,227 7,471 6,261
America
Australia,
Asia and 3,189 2,668 8,244 7,948
Africa
Unallocated and
corporate 1,142 338 1,883 1,152
assets
$ 12,017 $ 8,048 $ 29,963 $ 22,742
January31,2012 April 30, 2011
Identifiable
assets
Canada - U.S. $ 239,730 $ 134,666
South and
Central 202,127 189,083
America
Australia,
Asia and 175,914 130,071
Afirca
617,771 453,820
Eliminations (1,606) 439
Unallocated and
corporate 48,341 19,878
assets
$ 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.
2012Q3 2011Q3 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 2012YTD 2011 YTD
Depreciation of property, $ 10,921 $ 7,910 $ 28,388 $ 22,340
plant and equipment
Amortization of intangible 1,096 138 1,575 402
assets
$ 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.
Notional
Remainingterm principal amount Fairvalue
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:
January31,2012 April30, 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 $ 100,357 $ - $ - $ - $ 100,357
payables
Short-term debt 7,893 - - - 7,893
Contingent 1,004 1,756 - - 2,760
considerations
Long-term debt 8,799 17,760 21,662 4,583 52,804
$ 118,053 $ 19,516 $ 21,662 $ 4,583 $ 163,814
MAJOR DRILLING GROUP INTERNATIONAL INC.
CONTACT: Denis Larocque, Chief Financial Officer
Tel: (506) 857-8636
Fax: (506) 857-9211
ir@majordrilling.com