Major Drilling Group International Inc. press release
Major Drilling Announces Annual and Fourth Quarter Results for Fiscal 2013
TSX - Toronto Stock Exchange · Copper · Gold · Nickel · Zinc · Lithium · Silver · Uranium · Rare Earth Elements · Canada
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MONCTON, NB, June 5, 2013/CNW/ - Major DrillingGroup International Inc. (TSX: MDI) today reported results for the year and fourth quarter ended April 30, 2013.
Highlights
| | | | | | | | In millions of Canadian dollars (except earnings per share) | Q4-13 | Q4-12 | Fiscal 2013 | Fiscal 2012 | | | Revenue | $135.5 | $237.2 | $695.9 | $797.4 | | | Gross profit | 43.1 | 78.5 | 220.3 | 251.1 | | | | As percentage of revenue | 31.8% | 33.1% | 31.7% | 31.5% | | EBITDA(1) | 23.5 | 57.0 | 142.8 | 174.4 | | | | As percentage of revenue | 17.3% | 24.0% | 20.5% | 21.9% | | Net earnings | 2.2 | 30.7 | 52.1 | 89.7 | | | Earnings per share - Basic | $0.03 | $0.39 | $0.66 | $1.18 | | | (1) | Earnings before interest, taxes, depreciation and amortization, excluding restructuring charges, goodwill and intangible impairment and gain on reversal of contingent consideration (see "non-GAAP financial measures") | | | | |
Excluding restructuring charges, impairment charges and gain on reversal of contingent consideration, earnings before taxes for the quarter were $10.1 million.
Major Drillingposted quarterly revenue of $135.5 million, down 43% from the $237.2 millionrecord for the same quarter last year.
Gross margin percentage for the quarter was 31.8%, compared to 33.1% for the corresponding period last year.
The Company posted a restructuring charge of $5.4 millionaccounting for retrenchment costs, scale down of operations, and write down of assets, and also posted a goodwill and intangible impairment charge of $3.3 millionduring the quarter, offset by a gain on reversal of contingent consideration of $2.0 million. Combined, these charges represent a negative impact to fourth quarter 2013 earnings before taxes of $6.8 million.
Net earnings (including restructuring and impairment charge) were $2.2 millionor $0.03per share for the quarter, compared to earnings of $30.7 millionor 0.39 per share for the prior year quarter.
Our total net cash position (net of debt) improved by $8.6 millionin the quarter to $38.7 million. For the year, the Company improved its net cash position by $52 millionas compared to last year.
"In February, due to the uncertainty around economic matters impacting the mining market, some customers delayed or cancelled their exploration drilling plans. In a number of jurisdictions, uncertainty as to the policies of host governments or issues of land tenure also had an impact on this quarter's results. These factors, combined with the fact that sources of funding for junior mining companies remain limited, have led to significantly decreased activity in certain regions. As a result, fourth quarter revenue was significantly impacted as compared to the record revenue that the Company realized in the same period last year. Lower levels of demand have significantly increased competitive pressures and will likely continue to have an impact for the rest of calendar 2013. Despite lower pricing levels, we maintained good margin performance thanks to the improved productivity of our crews, and despite current conditions, we are pleased that Major Drillingwas able to improve its net cash position by $8.6 millionas well as show a profit before tax of $10.1 millionfor the quarter, excluding restructuring charges, impairment charges and gain on reversal of contingent consideration," said Francis McGuire, President and CEO of Major Drilling.
"In light of the slowdown in activity, we have undertaken a review and restructuring of certain operations. During the quarter, we implemented reductions of salaried employees as we target a reduction of 20% in our general and administrative costs from our peak level incurred in the first quarter of this year. As part of this, we decided to significantly scale down our Tanzanian operation and our U.S. environmental division. The costs relating to these initiatives have been recorded as part of the $5.4 millionrestructuring charge. Due to the continuing governmental budgetary constraints in the U.S. affecting its environmental division, we also recorded a goodwill and intangible impairment charge of $3.3 million, but also recorded a gain from reversal of contingent consideration of $2.0 million, related to the acquisition costs of the environmental business, which will no longer be paid. Finally, as part of these actions, senior management's salaries and directors' fees are being reduced."
"The Company continues to have a variable cost structure whereby most of its direct costs, including field staff, go up or down with contract revenue and a large part of the Company's other expenses relates to variable incentive compensation based on the Company's profitability. Despite the difficult environment, we expect operations to generate positive cash flow in fiscal 2014. The Company will continue to focus on cash management by limiting capital expenditures, by reducing inventory and by closely monitoring costs."
"At the same time, the Company's financial strength allows it to continue to invest in safety, to maintain its equipment in excellent condition, and to retain skilled employees, all of which are essential to react quickly when the industry recovers. The Company remains in an excellent financial position, remaining debt-free, net of cash, during the quarter. Total cash level, net of long-term debt, stood at $38.7 millionat quarter-end. Capital expenditures for the quarter were $9.5 millionas we purchased 14 rigs, while retiring 39 rigs through our modernization program. At this point, we anticipate continuing to invest at this pace as we see opportunities to expand our capacity in specialized drilling and to expand in other parts of the world, such as Brazil. This will also allow us to continue our strategy of maintaining a sustainable dividend policy."
"The current economic environment will continue to significantly impact drilling in the short to medium-term, particularly on gold projects where the Company has a significant presence, and the Company is experiencing further delays and cancellations as compared to the quarter just completed. Also, lower levels of demand have increased competitive pressures, which may impact pricing going forward. The impact of lower pricing should be partially offset by the increased productivity of our experienced drilling crews."
"Over time, we expect many of the supply issues that face most commodities to come back into focus and that even with moderate growth in the world economy, the need to explore and develop mines will increase. We believe that the need to develop resources in areas that are increasingly difficult to access will continue to increase over time, which should increase demand for specialized drilling," said Mr. McGuire.
Fourth quarter ended April 30, 2013
Total revenue for the quarter was $135.5 million, down 43% from the $237.2 millionrecord in the same quarter last year. Due to the uncertainty around economic matters impacting the mining market, some customers delayed or cancelled their exploration drilling plans, which impacted the quarter's results compared to last year. In a number of jurisdictions, uncertainty as to the policies of host governments or issues of land tenure also had an impact on quarter results. Also, many junior customers have scaled back or suspended drilling activities as compared to last year.
Revenue for the quarter from Canada-U.S. drilling operations decreased by 42% to $61.8 millioncompared to the same period last year. Both countries were affected by delays and the cancellation of projects.
South and Central American revenue was down 41% to $43.5 millionfor the quarter, compared to the prior year quarter. All of the countries in this region, particularly Mexico, Chileand Argentina, were affected by a reduction in work by juniors and the cancellation or reduction of projects.
Australian, Asian and African operations reported revenue of $30.2 million, down 47% from the same period last year. Australia, where projects have been cancelled due to high costs being incurred by mining companies and new mining taxes, was impacted the most. The Company also saw decreases in other regions including Mongolia, which is affected by political uncertainty.
The overall gross margin percentage for the quarter was 31.8% compared to 33.1% for the same period last year. Reduced pricing due to increased competitive pressures and delays impacted margins, however the Company has been able to recapture some of this loss through productivity gains and cost cutting.
General and administrative costs were $15.3 millionfor the quarter compared to $16.0 millionin the same period last year. With the decrease in activity, the Company has reduced its general and administrative costs, in part related to the integration of the Bradley operations. At the same time, the Company is opening new branches in Braziland Calgary. During the quarter, the Company implemented reductions of salaried employees and restructured certain branches as it targets a reduction of 20% in general and administrative costs from the peak levels incurred in the first quarter of this year.
Other expenses for the quarter were $0.4 million, down from the $4.0 millionreported in the prior year quarter. This quarter's amount consists of incentive compensation expenses and bad debt provisions, offset by a gain on reversal of contingent consideration of $2.0 million, whereas other expenses for the same quarter last year were mainly composed of incentive compensation expenses given the Company's profitability in that quarter.
The Company recorded a restructuring charge of $5.4 millionconsisting primarily of scale down costs of its U.S. environmental division and its Tanzanian operations, as well as retrenchment costs following staff reduction initiatives implemented during the quarter across the Company.
Due to the continuing governmental budgetary constraints in the U.S. affecting its environmental division, the Company recorded a goodwill and intangible impairment charge of $3.3 million.
Non-GAAP Financial Measures
In this news release, the Company uses the following non-GAAP financial measures: EBITDA and EBITDA as a percentage of revenue. The Company believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.
Forward-Looking Statements
Some of the statements contained in this press release may be forward-looking statements, such as, but not limited to, those relating to worldwide demand for gold and base metals and overall commodity prices, the level of activity in the minerals and metals industry and the demand for the Company's services, the Canadian and international economic environments, the Company's ability to attract and retain customers and to manage its assets and operating costs, sources of funding for its clients, particularly for junior mining companies, competitive pressures, currency movements, which can affect the Company's revenue in Canadian dollars, the geographic distribution of the Company's operations, the impact of operational changes, changes in jurisdictions in which the Company operates (including changes in regulation), failure by counterparties to fulfill contractual obligations, and other factors as may be set forth, as well as objectives or goals, and including words to the effect that the Company or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as, but not limited to, the factors set out in the discussion on pages 16 to 18 of the 2012 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 DrillingGroup 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 Drillingmaintains operations on every continent.
Financial statements are attached.
_Major Drillingwill provide a simultaneous webcast of its quarterly conference call on Thursday, June 6, 2013at 9:00 AM (EDT). 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 DrillingGroup International Inc. | | | | | | | | | | | | | | | Condensed Consolidated Statements of Operations | | | | | | | | | | | | | | | (in thousands of Canadian dollars, except per share information) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended | | Twelve months ended | | | | | | | | | | | | | April 30 | | April 30 | | | | | | | | | | | | | (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL REVENUE | | $ | 135,537 | | $ | 237,238 | | $ | 695,928 | | $ | 797,432 | | | | | | | | | | | | | | | | | | DIRECT COSTS | | | 92,450 | | | 158,786 | | | 475,589 | | | 546,306 | | | | | | | | | | | | | | | | | | GROSS PROFIT | | | 43,087 | | | 78,452 | | | 220,339 | | | 251,126 | | | | | | | | | | | | | | | | | | OPERATING EXPENSES | | | | | | | | | | | | | | | | General and administrative | | | 15,318 | | | 16,024 | | | 63,827 | | | 57,980 | | | Other expenses | | | 411 | | | 4,019 | | | 10,585 | | | 16,055 | | | Loss on disposal of property, plant and equipment | | | 1,232 | | | 54 | | | 2,452 | | | 1,370 | | | Foreign exchange loss (gain) | | | 699 | | | 1,338 | | | (1,311) | | | 1,319 | | | Finance costs | | | 346 | | | 707 | | | 2,316 | | | 3,367 | | | Depreciation of property, plant and equipment | | | 12,575 | | | 11,587 | | | 49,997 | | | 39,975 | | | Amortization of intangible assets | | | 412 | | | 1,054 | | | 2,840 | | | 2,629 | | | Impairment of goodwill and intangible assets | | | 3,324 | | | - | | | 3,324 | | | - | | | Restructuring charge | | | 5,440 | | | - | | | 5,440 | | | - | | | | | 39,757 | | | 34,783 | | | 139,470 | | | 122,695 | | | | | | | | | | | | | | | | | | EARNINGS BEFORE INCOME TAX | | | 3,330 | | | 43,669 | | | 80,869 | | | 128,431 | | | | | | | | | | | | | | | | | | INCOME TAX - PROVISION (RECOVERY) | | | | | | | | | | | | | | | | Current | | | 3,590 | | | 11,215 | | | 32,077 | | | 24,592 | | | Deferred | | | (2,434) | | | 1,723 | | | (3,318) | | | 14,090 | | | | | 1,156 | | | 12,938 | | | 28,759 | | | 38,682 | | | | | | | | | | | | | | | | | | NET EARNINGS | | $ | 2,174 | | $ | 30,731 | | $ | 52,110 | | $ | 89,749 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | EARNINGS PER SHARE | | | | | | | | | | | | | | | Basic | | $ | 0.03 | | $ | 0.39 | | $ | 0.66 | | $ | 1.18 | | | Diluted | | $ | 0.03 | | $ | 0.38 | | $ | 0.65 | | $ | 1.16 | |
| Major DrillingGroup International Inc. | | | | | | | | | | | | | | | Condensed Consolidated Statements of Comprehensive Earnings | | | | | | | | | | | | | | | (in thousands of Canadian dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended | | Twelve months ended | | | | | | | | | | | | | April 30 | | April 30 | | | | | | | | | | | | | (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | | NET EARNINGS | | $ | 2,174 | | $ | 30,731 | | $ | 52,110 | | $ | 89,749 | | | | | | | | | | | | | | | | | | OTHER COMPREHENSIVE EARNINGS | | | | | | | | | | | | | | | | Unrealized gains (losses) on foreign currency translations (net of tax) | | | 4,362 | | | (7,989) | | | 11,803 | | | 1,871 | | | Unrealized gain (loss) on interest swap (net of tax) | | | 47 | | | 240 | | | (81) | | | 121 | | | | | | | | | | | | | | | | | COMPREHENSIVE EARNINGS | | $ | 6,583 | | $ | 22,982 | | $ | 63,832 | | $ | 91,741 | |
| Major DrillingGroup International Inc. | | | | | | | | | | | | | | | | | | | Condensed Consolidated Statements of Changes in Equity | | | | | | | | | | | | | | | | | | | For the twelve months ended April 30, 2012and 2013 | | | | | | | | | | | | | | | | | | | (in thousands of Canadian dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share capital | | Reserves | | Share-based payments reserve | | Retained earnings | | Foreign currency translation reserve | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AS AT MAY 1, 2011 | | $ | 150,642 | | $ | - | | $ | 10,280 | | $170,425 | | $ | (3,662) | | $327,685 | | | | | | | | | | | | | | | | | | | | | | | Exercise of stock options | | | 2,932 | | | - | | | (909) | | - | | | - | | 2,023 | | | Share issue (net of issue costs) | | | 77,189 | | | - | | | - | | - | | | - | | 77,189 | | | Share-based payments reserve | | | - | | | - | | | 2,426 | | - | | | - | | 2,426 | | | Dividends | | | - | | | - | | | - | | (13,365) | | | - | | (13,365) | | | | | 230,763 | | | - | | | 11,797 | | 157,060 | | | (3,662) | | 395,958 | | | Comprehensive earnings: | | | | | | | | | | | | | | | | | | | | Net earnings | | | - | | | - | | | - | | 89,749 | | | - | | 89,749 | | | Unrealized gains on foreign currency translations | | | - | | | - | | | - | | - | | | 1,871 | | 1,871 | | | Unrealized gain on interest swap | | | - | | | 121 | | | - | | - | | | - | | 121 | | Total comprehensive earnings | | | - | | | 121 | | | - | | 89,749 | | | 1,871 | | 91,741 | | | | | | | | | | | | | | | | | | | | | | BALANCE AS AT APRIL 30, 2012 | | $ | 230,763 | | $ | 121 | | $ | 11,797 | | $246,809 | | $ | (1,791) | | $487,699 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AS AT MAY 1, 2012 | | $ | 230,763 | | $ | 121 | | $ | 11,797 | | $246,809 | | $ | (1,791) | | $487,699 | | | | | | | | | | | | | | | | | | | | | | | Exercise of stock options | | | 222 | | | - | | | (114) | | - | | | - | | 108 | | | Share-based payments reserve | | | - | | | - | | | 2,521 | | - | | | - | | 2,521 | | | Dividends | | | - | | | - | | | - | | (15,831) | | | - | | (15,831) | | | | | 230,985 | | | 121 | | | 14,204 | | 230,978 | | | (1,791) | | 474,497 | | | Comprehensive earnings: | | | | | | | | | | | | | | | | | | | | Net earnings | | | - | | | - | | | - | | 52,110 | | | - | | 52,110 | | | Unrealized gains on foreign currency translations | | | - | | | - | | | - | | - | | | 11,803 | | 11,803 | | | Unrealized loss on interest swap | | | - | | | (81) | | | - | | - | | | - | | (81) | | Total comprehensive earnings | | | - | | | (81) | | | - | | 52,110 | | | 11,803 | | 63,832 | | | | | | | | | | | | | | | | | | | | | | BALANCE AS AT APRIL 30, 2013 | | $ | 230,985 | | $ | 40 | | $ | 14,204 | | $283,088 | | $ | 10,012 | | $538,329 | |
| Major DrillingGroup International Inc. | | | | | | | | | | | | | | | Condensed Consolidated Statements of Cash Flows | | | | | | | | | | | | | | | (in thousands of Canadian dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended | | Twelve months ended | | | | | | | | | | | | | April 30 | | April 30 | | | | | | | | | | | | | (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | OPERATING ACTIVITIES | | | | | | | | | | | | | | | Earnings before income tax | | $ | 3,330 | | $ | 43,669 | | $ | 80,869 | | $ | 128,431 | | | Operating items not involving cash | | | | | | | | | | | | | | | | Depreciation and amortization | | | 12,987 | | | 12,641 | | | 52,837 | | | 42,604 | | | Loss on disposal of property, plant and equipment | | | 1,232 | | | 54 | | | 2,452 | | | 1,370 | | | Share-based payments reserve | | | 444 | | | 660 | | | 2,521 | | | 2,426 | | | Impairment of goodwill and intangible assets | | | 3,324 | | | - | | | 3,324 | | | - | | | Restructuring charge | | | 1,425 | | | - | | | 1,425 | | | - | | Finance costs recognized in earnings before income tax | | | 346 | | | 707 | | | 2,316 | | | 3,367 | | | | | | 23,088 | | | 57,731 | | | 145,744 | | | 178,198 | | | Changes in non-cash operating working capital items | | | 5,305 | | | (28,158) | | | 30,456 | | | (32,787) | | | Finance costs paid | | | (345) | | | (708) | | | (2,306) | | | (3,432) | | | Income taxes paid | | | (11,081) | | | (11,262) | | | (36,962) | | | (27,502) | | | Cash flow from operating activities | | | 16,967 | | | 17,603 | | | 136,932 | | | 114,477 | | | | | | | | | | | | | | | | | | FINANCING ACTIVITIES | | | | | | | | | | | | | | | Repayment of long-term debt | | | (1,716) | | | (1,573) | | | (9,296) | | | (17,390) | | | Proceeds from long-term debt | | | - | | | - | | | - | | | 25,000 | | | Repayment of short-term debt | | | - | | | (7,847) | | | - | | | (12,988) | | | Issuance of common shares | | | 108 | | | 1,073 | | | 108 | | | 79,212 | | | Dividends paid | | | - | | | - | | | (15,038) | | | (11,525) | | | Cash flow (used in) from financing activities | | | (1,608) | | | (8,347) | | | (24,226) | | | 62,309 | | | | | | | | | | | | | | | | | | INVESTING ACTIVITIES | | | | | | | | | | | | | | | Business acquisitions (net of cash acquired) | | | - | | | (1,825) | | | (1,698) | | | (76,304) | | | Acquisition of property, plant and equipment (net of direct financing) | | | (9,487) | | | (21,097) | | | (69,005) | | | (81,129) | | | Proceeds from disposal of property, plant and equipment | | | 884 | | | 517 | | | 3,409 | | | 2,228 | | | Cash flow used in investing activities | | | (8,603) | | | (22,405) | | | (67,294) | | | (155,205) | | | | | | | | | | | | | | | | | | Effect of exchange rate changes | | | 72 | | | 269 | | | (338) | | | (559) | | | | | | | | | | | | | | | | | | INCREASE (DECREASE) IN CASH | | | 6,828 | | | (12,880) | | | 45,074 | | | 21,022 | | | | | | | | | | | | | | | | | | CASH, BEGINNING OF THE PERIOD | | | 75,483 | | | 50,117 | | | 37,237 | | | 16,215 | | | | | | | | | | | | | | | | | | CASH, END OF THE PERIOD | | $ | 82,311 | | $ | 37,237 | | $ | 82,311 | | $ | 37,237 | |