MONCTON, New Brunswick, Sept. 06, 2017 (GLOBE NEWSWIRE) -- Major Drilling Group International Inc. (TSX:MDI) today reported results for its first quarter of fiscal year 2018, ended July 31, 2017.
Highlights
| In millions of Canadian dollars (except earnings per share) | Q1-18 | Q1-17 | ||||
| Revenue | $84.0 | $69.1 | ||||
| Gross profit | 16.8 | 15.1 | ||||
| As percentage of revenue | 20.0% | 21.9% | ||||
| EBITDA(1) | 5.3 | 3.8 | ||||
| As percentage of revenue | 6.3% | 5.5% | ||||
| Net loss | (6.9) | (9.8) | ||||
| Loss per share | (0.09) | (0.12) | ||||
(1) Earnings before interest, taxes, depreciation and amortization (see “non-GAAP financial measure”)
- Quarterly revenue was $84.0 million, up 22% from the $69.1 million recorded for the same quarter last year.
- Gross margin percentage for the quarter was 20.0%, compared to 21.9% for the corresponding period last year.
- Net cash increased $0.8 million during the quarter to $18.9 million.
- Net loss was $6.9 million or $0.09 per share for the quarter, compared to a net loss of $9.8 million or $0.12 per share for the prior year quarter.
“During the quarter, we continued to see activity levels improve month by month, with growth coming from all regions,” said Denis Larocque, President and CEO of Major Drilling Group International Inc. “Although we are still very early in the cyclical recovery, it has been a steady climb over the last 18 months. Margins continue to be affected by transitional issues such as recruiting, training and repair costs, and due to competitive pressures, we have some low-margin contracts we are still working through.”
“This year, growth has been driven primarily by gold projects as senior gold companies have increased their exploration budgets, on average, by more than 20%. As we proceed through the year, gold activity levels are stabilizing as companies are following their original plans. We are starting to get more inquiries for base metal projects as prices for those commodities continue to recover indicating we could see an increase in exploration budgets from base metal companies for calendar 2018.”
“The Company’s net cash position (net of debt) continues to be strong at $18.9 million. Capital expenditures were $4.3 million this quarter, as we added four rigs to our fleet as part of our specialized and diversification strategies. Two of the additional rigs are suited for surface drill and blast/grade control work, one is a mobile underground rig and one is an ultra-deep diamond rig capable of reaching depths of over 4,000 metres. As resources continue to be discovered in areas difficult to access, we continue to invest to consolidate our position as the leader in specialized drilling,” added Mr. Larocque.
“In anticipation of a recovery in demand for our services, we have made investments in mobile solutions in the field, providing tools to our crews in order to improve safety and productivity. This falls in line with the enhancement of our recruiting and training systems as we bring in a new generation of employees.”
“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. Typically, gold and copper projects represent over 70% of the Company’s activity. Mineral reserves of ten of the top senior gold mining companies have decreased by almost 15% over the last two years. As well, many industry experts expect the copper market will face a deficit position in the next few years, due to the continued production and high grading of mines, combined with the lack of exploration work conducted to replace reserves. Therefore, it is expected that 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,” said Mr. Larocque.
First quarter ended July 31, 2017
Total revenue for the quarter was $84.0 million, up 21.6% from revenue of $69.1 million recorded in the same quarter last year. The favourable foreign exchange translation impact for the quarter, when comparing to the effective rates for the same period last year, is estimated at $1 million on revenue, with a negligible impact on net earnings.
Revenue for the quarter from Canada - U.S. drilling operations increased by 19.2% to $52.2 million, compared to the same period last year. The increase came from all operations as the Company saw increased activity from both seniors and juniors over the same period last year.
South and Central American revenue increased by 40.0% to $18.9 million for the quarter, compared to the same quarter last year. The increase was driven primarily by Chile and Brazil, with all other countries showing slight improvements.
Asian and African operations reported revenue of $12.9 million, up 9.3% from the same period last year. Increased activity in Mongolia was partially offset by a decrease in Indonesia as a result of ongoing political issues in the country.
The overall gross margin percentage for the quarter was 20.0%, down from 21.9% for the same period last year. The decreased margin resulted from transitional issues such as recruiting, training and repair costs, and due to competitive pressures, we have some low-margin contracts we are still working through.
General and administrative costs were up 13.2% from the same quarter last year at $12.0 million. Staffing levels and salaries have increased as activity ramped up from low levels. As well, the Company is investing in recruitment and information technology to prepare for the next upturn in the industry.
Foreign exchange gain was $0.8 million compared to a gain of $0.2 million in the same quarter last year, caused by exchange rate variations on monetary working capital items.
The income tax provision for the quarter was a recovery of $0.4 million compared to an expense of $0.9 million for the prior year period. Tax recovery for the quarter was impacted by non-tax affected losses and non-deductible expenses.
Net loss was $6.9 million or $0.09 per share ($0.09 per share diluted) for the quarter, compared to a net loss of $9.8 million or $0.12 per share ($0.12 per share diluted) for the prior year quarter.
The Annual General Meeting of the shareholders of Major Drilling Group International Inc. will be held at the TMX Broadcast Centre, Gallery, The Exchange Tower, 130 King Street West, Toronto, Ontario, on Friday, September 8, 2017 at 3:00pm EDT.
Non-GAAP Financial Measure
In this news release, the Company uses the non-GAAP financial measure, EBITDA. The Company believes this non-GAAP financial measure provides useful information to both management and investors in measuring the financial performance of the Company. This measure does not have a standardized meaning prescribed by GAAP and therefore 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 news 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 mining 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 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 13 to 16 of the 2017 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.
About Major Drilling
Major Drilling Group International Inc. is one of the world’s largest drilling services companies primarily serving the mining industry. Established in 1980, Major Drilling has over 1,000 years of combined experience within its management team alone. The Company maintains field operations and offices in Canada, the United States, Mexico, South America, Asia, Africa and Europe. Major Drilling provides all types of drilling services including surface and underground coring, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane, shallow gas, underground percussive/longhole drilling, surface drill and blast, and a variety of mine services.
Webcast/Conference Call Information
Major Drilling will provide a simultaneous webcast and conference call to discuss its quarterly results on Thursday, September 7, 2017 at 9:00 AM (EDT). To access the webcast, which includes a slide presentation, please go to the investors/webcast section of Major Drilling’s website at www.majordrilling.com and click on the link. Please note that this is listen-only mode.
To participate in the conference call, please dial 416-340-2216 and ask for Major Drilling’s First Quarter Results Conference Call. To ensure your participation, please call in approximately five minutes prior to the scheduled start of the call.
For those unable to participate, a taped rebroadcast will be available approximately one hour after the completion of the call until midnight, Thursday, September 21, 2017. To access the rebroadcast, dial 905-694-9451 and enter the passcode 7151741#. The webcast will also be archived for one year and can be accessed on the Major Drilling website at www.majordrilling.com.
| Major Drilling Group International Inc. | ||||||||
| Interim Condensed Consolidated Statements of Operations | ||||||||
| (in thousands of Canadian dollars, except per share information) | ||||||||
| (unaudited) | ||||||||
| Three months ended | ||||||||
| July 31 | ||||||||
| 2017 | 2016 | |||||||
| TOTAL REVENUE | $ | 83,952 | $ | 69,089 | ||||
| DIRECT COSTS | 67,185 | 53,948 | ||||||
| GROSS PROFIT | 16,767 | 15,141 | ||||||
| OPERATING EXPENSES | ||||||||
| General and administrative | 11,981 | 10,629 | ||||||
| Other expenses | 430 | 723 | ||||||
| (Gain) loss on disposal of property, plant and equipment | (172 | ) | 158 | |||||
| Foreign exchange gain | (796 | ) | (174 | ) | ||||
| Finance costs | 181 | 47 | ||||||
| Depreciation of property, plant and equipment | 11,798 | 11,956 | ||||||
| Amortization of intangible assets | 657 | 650 | ||||||
| 24,079 | 23,989 | |||||||
| LOSS BEFORE INCOME TAX | (7,312 | ) | (8,848 | ) | ||||
| INCOME TAX - PROVISION (RECOVERY) (note 7) | ||||||||
| Current | 2,484 | 3,685 | ||||||
| Deferred | (2,906 | ) | (2,751 | ) | ||||
| (422 | ) | 934 | ||||||
| NET LOSS | $ | (6,890 | ) | $ | (9,782 | ) | ||
| LOSS PER SHARE (note 8) | ||||||||
| Basic | $ | (0.09 | ) | $ | (0.12 | ) | ||
| Diluted | $ | (0.09 | ) | $ | (0.12 | ) | ||
| Major Drilling Group International Inc. | ||||||||
| Interim Condensed Consolidated Statements of Comprehensive (Loss) Earnings | ||||||||
| (in thousands of Canadian dollars) | ||||||||
| (unaudited) | ||||||||
| Three months ended | ||||||||
| July 31 | ||||||||
| 2017 | 2016 | |||||||
| NET LOSS | $ | (6,890 | ) | $ | (9,782 | ) | ||
| OTHER COMPREHENSIVE (LOSS) EARNINGS | ||||||||
| Items that may be reclassified subsequently to profit or loss | ||||||||
| Unrealized (loss) gain on foreign currency translations (net of tax) | (24,885 | ) | 11,368 | |||||
| Unrealized gain (loss) on derivatives (net of tax) | 104 | (137 | ) | |||||
| COMPREHENSIVE (LOSS) EARNINGS | $ | (31,671 | ) | $ | 1,449 | |||
| Major Drilling Group International Inc. | ||||||||||||||||||||||||
| Interim Condensed Consolidated Statements of Changes in Equity | ||||||||||||||||||||||||
| For the three months ended July 31, 2017 and 2016 | ||||||||||||||||||||||||
| (in thousands of Canadian dollars) | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| Share-based | Retained | Foreign currency | ||||||||||||||||||||||
| Share capital | Reserves | payments reserve | earnings | translation reserve | Total | |||||||||||||||||||
| BALANCE AS AT MAY 1, 2016 | $ | 239,726 | $ | 326 | $ | 18,317 | $ | 105,876 | $ | 61,896 | $ | 426,141 | ||||||||||||
| Share-based payments reserve | - | - | 290 | - | - | 290 | ||||||||||||||||||
| 239,726 | 326 | 18,607 | 105,876 | 61,896 | 426,431 | |||||||||||||||||||
| Comprehensive earnings: | ||||||||||||||||||||||||
| Net loss | - | - | - | (9,782 | ) | - | (9,782 | ) | ||||||||||||||||
| Unrealized gain on foreign currency | ||||||||||||||||||||||||
| translations | - | - | - | - | 11,368 | 11,368 | ||||||||||||||||||
| Unrealized loss on derivatives | - | (137 | ) | - | - | - | (137 | ) | ||||||||||||||||
| Total comprehensive earnings | - | (137 | ) | - | (9,782 | ) | 11,368 | 1,449 | ||||||||||||||||
| BALANCE AS AT JULY 31, 2016 | $ | 239,726 | $ | 189 | $ | 18,607 | $ | 96,094 | $ | 73,264 | $ | 427,880 | ||||||||||||
| BALANCE AS AT MAY 1, 2017 | $ | 239,751 | $ | 163 | $ | 19,250 | $ | 63,812 | $ | 86,787 | $ | 409,763 | ||||||||||||
| Exercise of stock options | 1,003 | - | (310 | ) | - | - | 693 | |||||||||||||||||
| Share-based payments reserve | - | - | 239 | - | - | 239 | ||||||||||||||||||
| 240,754 | 163 | 19,179 | 63,812 | 86,787 | 410,695 | |||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||
| Net loss | - | - | - | (6,890 | ) | - | (6,890 | ) | ||||||||||||||||
| Unrealized loss on foreign currency | ||||||||||||||||||||||||
| translations | - | - | - | - | (24,885 | ) | (24,885 | ) | ||||||||||||||||
| Unrealized gain on derivatives | - | 104 | - | - | - | 104 | ||||||||||||||||||
| Total comprehensive loss | - | 104 | - | (6,890 | ) | (24,885 | ) | (31,671 | ) | |||||||||||||||
| BALANCE AS AT JULY 31, 2017 | $ | 240,754 | $ | 267 | $ | 19,179 | $ | 56,922 | $ | 61,902 | $ | 379,024 | ||||||||||||
| Major Drilling Group International Inc. | ||||||||
| Interim Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands of Canadian dollars) | ||||||||
| (unaudited) | ||||||||
| Three months ended | ||||||||
| July 31 | ||||||||
| 2017 | 2016 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Loss before income tax | $ | (7,312 | ) | $ | (8,848 | ) | ||
| Operating items not involving cash | ||||||||
| Depreciation and amortization | 12,455 | 12,606 | ||||||
| (Gain) loss on disposal of property, plant and equipment | (172 | ) | 158 | |||||
| Share-based payments reserve | 239 | 290 | ||||||
| Finance costs recognized in loss before income tax | 181 | 47 | ||||||
| 5,391 | 4,253 | |||||||
| Changes in non-cash operating working capital items | 2,217 | (7,624 | ) | |||||
| Finance costs paid | (181 | ) | (47 | ) | ||||
| Income taxes paid | (683 | ) | (635 | ) | ||||
| Cash flow from (used in) operating activities | 6,744 | (4,053 | ) | |||||
| FINANCING ACTIVITIES | ||||||||
| Repayment of long-term debt | (841 | ) | (2,072 | ) | ||||
| Proceeds from draw on long-term debt | 15,000 | - | ||||||
| Issuance of common shares due to exercise of stock options | 693 | - | ||||||
| Cash flow from (used in) financing activities | 14,852 | (2,072 | ) | |||||
| INVESTING ACTIVITIES | ||||||||
| Acquisition of property, plant and equipment | ||||||||
| (net of direct financing) (note 6) | (4,256 | ) | (2,777 | ) | ||||
| Proceeds from disposal of property, plant and equipment | 776 | 1,172 | ||||||
| Cash flow used in investing activities | (3,480 | ) | (1,605 | ) | ||||
| Effect of exchange rate changes | (3,414 | ) | 1,122 | |||||
| INCREASE (DECREASE) IN CASH | 14,702 | (6,608 | ) | |||||
| CASH, BEGINNING OF THE PERIOD | 25,975 | 50,228 | ||||||
| CASH, END OF THE PERIOD | $ | 40,677 | $ | 43,620 | ||||
| Major Drilling Group International Inc. | ||||||||
| Interim Condensed Consolidated Balance Sheets | ||||||||
| As at July 31, 2017 and April 30, 2017 | ||||||||
| (in thousands of Canadian dollars) | ||||||||
| (unaudited) | ||||||||
| July 31, 2017 | April 30, 2017 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 40,677 | $ | 25,975 | ||||
| Trade and other receivables | 64,819 | 72,385 | ||||||
| Note receivable | 481 | 476 | ||||||
| Income tax receivable | 3,788 | 5,771 | ||||||
| Inventories | 82,390 | 88,047 | ||||||
| Prepaid expenses | 5,648 | 3,210 | ||||||
| 197,803 | 195,864 | |||||||
| NOTE RECEIVABLE | 933 | 1,055 | ||||||
| PROPERTY, PLANT AND EQUIPMENT | 200,165 | 221,524 | ||||||
| DEFERRED INCOME TAX ASSETS | 18,637 | 17,026 | ||||||
| GOODWILL | 57,587 | 58,432 | ||||||
| INTANGIBLE ASSETS | - | 669 | ||||||
| $ | 475,125 | $ | 494,570 | |||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES | ||||||||
| Trade and other payables | $ | 48,309 | $ | 48,359 | ||||
| Income tax payable | 3,027 | 3,036 | ||||||
| Contingent consideration | 5,135 | 5,135 | ||||||
| Current portion of long-term debt | 3,057 | 3,291 | ||||||
| 59,528 | 59,821 | |||||||
| LONG-TERM DEBT | 18,764 | 4,544 | ||||||
| DEFERRED INCOME TAX LIABILITIES | 17,809 | 20,442 | ||||||
| 96,101 | 84,807 | |||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Share capital | 240,754 | 239,751 | ||||||
| Reserves | 267 | 163 | ||||||
| Share-based payments reserve | 19,179 | 19,250 | ||||||
| Retained earnings | 56,922 | 63,812 | ||||||
| Foreign currency translation reserve | 61,902 | 86,787 | ||||||
| 379,024 | 409,763 | |||||||
| $ | 475,125 | $ | 494,570 | |||||
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2017 AND 2016 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)
1. NATURE OF ACTIVITIES
Major Drilling Group International Inc. (the “Company”) is incorporated under the Canada Business Corporations Act and has its head office at 111 St. George Street, Suite 100, Moncton, NB, Canada. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”). The principal source of revenue consists of contract drilling for companies primarily involved in mining and mineral exploration. The Company has operations in Canada, the United States, Mexico, South America, Asia, Africa and Europe.
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, 2017.
On September 6, 2017, 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, 2017.
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 7 (amended) Statement of Cash Flows
IAS 12 (amended) Income Taxes
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2017 AND 2016 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)
3. APPLICATION OF NEW AND REVISED IFRS (Continued)
The Company has not applied the following new and revised IASB standards that have been issued, but are not yet effective:
IFRS 2 (as amended in 2016) Share-based Payment*
IFRS 9 (as amended in 2014) Financial Instruments*
IFRS 15 Revenue from Contracts with Customers*
IFRS 16 Leases**
*Effective for annual periods beginning on or after January 1, 2018, with earlier application permitted.
**Effective for annual periods beginning on or after January 1, 2019, with earlier application permitted.
The Company is currently in the process of assessing the impact of the adoption of the above standards, however, they are not expected to have a significant impact on the Consolidated Financial Statements, with the exception of IFRS 16 Leases. The Company is in the process of quantifying the impact IFRS 16 will have 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 are not readily apparent from other sources, which 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 depreciation purposes, property, plant and equipment and inventory valuation, determination of income and other taxes, assumptions used in the compilation of share-based payments, fair value of assets acquired and liabilities assumed in business acquisitions, amounts recorded as accrued liabilities, contingent consideration and allowance for doubtful accounts, 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, the recognition of provisions and accrued liabilities, and the determination of the probability that deferred income tax assets will be realized from future taxable earnings.
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 July 31, 2017 were $4,307 (2016 - $2,777). The Company obtained direct financing of $51 in the current quarter (2016 – nil).
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2017 AND 2016 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)
7. INCOME TAXES
The income tax (recovery) provision for the period can be reconciled to accounting loss before income tax as follows:
| Q1 2018 | Q1 2017 | |||||||
| Loss before income tax | $ | (7,312 | ) | $ | (8,848 | ) | ||
| Statutory Canadian corporate income tax rate | 27 | % | 27 | % | ||||
| Expected income tax recovery based on statutory rate | (1,974 | ) | (2,389 | ) | ||||
| Non-recognition of tax benefits related to losses | 1,117 | 1,207 | ||||||
| Other foreign taxes paid | 135 | 291 | ||||||
| Rate variances in foreign jurisdictions | 52 | 137 | ||||||
| Permanent differences | 213 | 1,170 | ||||||
| Other | 35 | 518 | ||||||
| Income tax (recovery) provision recognized in net loss | $ | (422 | ) | $ | 934 | |||
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 loss is used in determining loss per share.
| Q1 2018 | Q1 2017 | |||||||
| Net loss | $ | (6,890 | ) | $ | (9,782 | ) | ||
| Weighted average number of shares: | ||||||||
| Basic and diluted (000s) | 80,153 | 80,137 | ||||||
| Loss per share | ||||||||
| Basic | $ | (0.09 | ) | $ | (0.12 | ) | ||
| Diluted | $ | (0.09 | ) | $ | (0.12 | ) | ||
The calculation of diluted loss per share for the three months ended July 31, 2017 excludes the effect of 2,449,780 options
(2016 ‐ 3,710,913) as they were anti‐dilutive.
The total number of shares outstanding on July 31, 2017 was 80,229,984 (2016 - 80,136,884).
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2017 AND 2016 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)
9. SEGMENTED INFORMATION
The Company’s operations are divided into the following three geographic segments, corresponding to its management structure: Canada - U.S.; South and Central America; and 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, 2017. Management evaluates performance based on 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:
| Q1 2018 | Q1 2017 | |||||||
| Revenue | ||||||||
| Canada - U.S.* | $ | 52,182 | $ | 43,797 | ||||
| South and Central America | 18,874 | 13,496 | ||||||
| Asia and Africa | 12,896 | 11,796 | ||||||
| $ | 83,952 | $ | 69,089 | |||||
| Loss from operations | ||||||||
| Canada - U.S. | $ | (1,266 | ) | $ | (3,318 | ) | ||
| South and Central America | (3,088 | ) | (1,900 | ) | ||||
| Asia and Africa | (2,166 | ) | (1,625 | ) | ||||
| (6,520 | ) | (6,843 | ) | |||||
| Finance costs | 181 | 47 | ||||||
| General corporate expenses** | 611 | 1,958 | ||||||
| Income tax (recovery) provision | (422 | ) | 934 | |||||
| Net loss | $ | (6,890 | ) | $ | (9,782 | ) | ||
*Canada - U.S. includes revenue of $25,027 and $19,941 for Canadian operations for the three months ended July 31, 2017 and 2016, respectively.
**General corporate expenses include expenses for corporate offices and stock options.
| Q1 2018 | Q1 2017 | |||||||
| Capital expenditures | ||||||||
| Canada - U.S. | $ | 3,024 | $ | 1,359 | ||||
| South and Central America | 632 | 970 | ||||||
| Asia and Africa | 651 | 448 | ||||||
| Total capital expenditures | $ | 4,307 | $ | 2,777 | ||||
| Depreciation and amortization | ||||||||
| Canada - U.S. | $ | 6,446 | $ | 7,133 | ||||
| South and Central America | 3,202 | 3,109 | ||||||
| Asia and Africa | 2,704 | 2,011 | ||||||
| Unallocated and corporate assets | 103 | 353 | ||||||
| Total depreciation and amortization | $ | 12,455 | $ | 12,606 | ||||
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2017 AND 2016 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)
9. SEGMENTED INFORMATION (Continued)
| July 31, 2017 | April 30, 2017 | |||||||
| Identifiable assets | ||||||||
| Canada - U.S.* | $ | 204,454 | $ | 216,391 | ||||
| South and Central America | 138,607 | 151,894 | ||||||
| Asia and Africa | 89,657 | 99,850 | ||||||
| Unallocated and corporate assets | 42,407 | 26,435 | ||||||
| Total identifiable assets | $ | 475,125 | $ | 494,570 | ||||
*Canada - U.S. includes property, plant and equipment at July 31, 2017 of $54,052 (April 30, 2017 - $57,689) for Canadian operations.
10. FINANCIAL INSTRUMENTS
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 carrying value of long-term debt approximates its 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. Contingent consideration is recorded at fair value and is classified as level 2 in accordance with the fair value hierarchy.
- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2 - inputs other than quoted prices included in level 1 that are observable for the assets or liabilities, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
- Level 3 - inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
There were no transfers of amounts between level 1, level 2 and level 3 financial instruments for the quarter ended July 31, 2017. Additionally, there are no financial instruments classified as level 3.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.
Credit risk
As at July 31, 2017, 90.0% (April 30, 2017 - 87.3%) of the Company’s trade receivables were aged as current and 1.7% (April 30, 2017 - 1.4%) of the trade receivables were impaired.
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2017 AND 2016 (UNAUDITED)
(in thousands of Canadian dollars, except per share information)
10. FINANCIAL INSTRUMENTS (Continued)
The movements in the allowance for impairment of trade receivables during the three and twelve month periods were as follows:
| July 31, 2017 | April 30, 2017 | |||||||
| Opening balance | $ | 847 | $ | 3,554 | ||||
| Increase in impairment allowance | 164 | 668 | ||||||
| Recovery of amounts previously impaired | - | (92 | ) | |||||
| Write-off charged against allowance | - | (3,374 | ) | |||||
| Foreign exchange translation differences | (72 | ) | 91 | |||||
| Ending balance | $ | 939 | $ | 847 | ||||
Foreign currency risk
As at July 31, 2017, the most significant carrying amounts of net monetary assets that: (i) are denominated in currencies other than the functional currency of the respective Company subsidiary; (ii) cause foreign exchange rate exposure; and (iii) may include intercompany balances with other subsidiaries, including the impact on earnings before income taxes (“EBIT”), if the corresponding rate changes by 10%, are as follows:
| Rate Variance | CFA/USD | MNT/USD | PES/USD | USD/CAD | Other | |||||||||||||||||
| Net exposure on | ||||||||||||||||||||||
| monetary assets | $ | 4,005 | $ | 2,072 | $ | 1,877 | $ | (11,497 | ) | $ | (733 | ) | ||||||||||
| EBIT impact | +/-10% | 445 | 230 | 209 | 1,277 | 82 | ||||||||||||||||
Liquidity risk
The following table details contractual maturities for the Company’s financial liabilities:
| 1 year | 2-3 years | 4-5 years | Total | |||||||||||||
| Trade and other payables | $ | 48,309 | $ | - | $ | - | $ | 48,309 | ||||||||
| Contingent consideration | 5,135 | - | - | 5,135 | ||||||||||||
| Long-term debt (interest included) | 3,734 | 18,966 | 1,191 | 23,891 | ||||||||||||
| $ | 57,178 | $ | 18,966 | $ | 1,191 | $ | 77,335 | |||||||||