Major Drilling reports record annual and quarterly revenue

MONCTON, NB, June 5, 2012 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) today reported results for its fourth quarter of fiscal 2012, ended April 30, 2012.

Highlights

In millions of Canadian dollars (except earnings per share)		Q4-12	Q4-11	Fiscal 2012	Fiscal 2011
Revenue		$237.2	$137.3	$797.4	$482.3
Gross profit		78.5	34.9	251.1	120.4
	As percentage of revenue	33.1%	25.4%	31.5%	25.0%
EBITDA^(1)		57.0	22.9	174.4	73.5
	As percentage of revenue	24.0%	16.7%	21.9%	15.2%
Net earnings		30.7	9.5	89.7	27.6
Earnings per share		$0.39	$0.13	$1.18	$0.39

(1) Earnings before interest, taxes, depreciation and amortization (see "non-gaap measures")

• Major Drilling posted the highest quarterly revenue in its history at $237.2 million, up 73% from the $137.3 million recorded for the same quarter last year.  Record annual revenue of $797.4 million was recorded, an increase of 65% over last year.
• Gross margin percentage for the quarter was 33.1% compared to 25.4% for the corresponding period last year.
• EBITDA increased 149% to $57.0 million for the quarter compared to the corresponding period last year.
• Net earnings for the quarter were at $30.7 million, an increase of 225% over last year.  Net earnings for fiscal 2012 increased 225% to $89.7 million ($1.18 per share), an annual record.

"We are pleased to report record annual and quarterly revenue.  Revenue in the quarter grew year-over-year by 73% to $237 million.  Despite poor weather conditions in Canada, Mongolia and Australia, as well as more shifting between contracts than usual, margins were at 33.1%.  We saw our EBITDA for the quarter increase by two and half times compared to the corresponding period last year to $57 million.  All regions contributed to this growth.  Earnings for the quarter were $30.7 million despite a foreign exchange loss of $1.3 million and depreciation costs increasing by more than 50%," said Francis McGuire, President and CEO of Major Drilling.

"Fiscal 2012 was a very satisfying year as the Company continued to increase its investments in productive equipment and in training and safety.  At year end, we posted record revenue of $797 million and record earnings of $89.7 million.  In September, the Company also completed the largest acquisition in its history with the purchase of the Bradley operations and we will see the full impact of this acquisition in our next fiscal year."

"Looking forward, the demand for drilling services from the senior mining houses continues to be strong.  The demand for specialized drilling from the senior mining houses, particularly in Latin America and Africa, continues to grow as our customers need to replace their reserves.  At the end of April, the utilization rate for our specialized drills stood at 75%, very close to the maximum utilization rate.  We foresee adding several more rigs to our recently established branch in West Africa and in addition, we will continue to make in-roads drilling for coal and iron ore customers.  As junior miners become more cautious in their spending given the difficulty in accessing capital, we anticipate that senior miners will represent a greater proportion of our drilling projects going forward.  Should our senior customers follow through with their current stated plans, we could add up to 75 rigs to our fleet over the coming year as part of our capital expenditures estimated at some $100 million, the highest level in our history.  While we are optimistic that our senior customers will continue with their projects, we are well aware of the present volatility in the financial markets, and the ability of those customers to modify their plans on short notice, at which point we would adjust our capital expenditure plans accordingly."

"Overall, we continue to expect growth for specialized drilling in the year ahead.  While financing difficulties for junior mining ventures will moderate our growth over the short-term, it also provides a strong upside potential when their exploration activities pick up, as they must, if the mining industry is to provide the world with the resources it needs toward the end of the decade."

Fourth quarter ended April 30, 2012

Total revenue for the fourth quarter was $237.2 million compared to $137.3 million recorded for the prior year period.  All of the Company's regions contributed to this growth as did the newly acquired Bradley operations.

Revenue from Canada-U.S. drilling operations was up 105% to $106.7 million for the quarter compared to the same period last year.  In Canada, the Bradley acquisition accounted for more than half of the increase but the existing Canadian operations also saw increased activity levels although mitigated by mild weather.  U.S. operations continued its strong growth, particularly with its senior mining customers.

In South and Central America, revenue for the quarter was $73.3 million, up 45% from the prior year quarter.  This increase was driven by stronger activity levels in Mexico, Chile and Argentina, combined with additional contracts in Colombia and Suriname from the Bradley acquisition.

Australian, Asian and African drilling operations reported revenue of $57.3 million, up 65% from the same period last year.  The revenue increase came primarily from Australia and new operations in Mozambique, Burkina Faso and Democratic Republic of the Congo ("DRC").

The overall gross margin percentage for the quarter was 33.1% compared to 25.4% for the same period last year. New pricing on contracts that were signed or renewed for this calendar year reflected the current stronger pricing environment.  Also, our training and recruitment efforts allowed the Company to increase the number of shifts in the field during the quarter. Margins were somewhat impacted by weather issues and more shifting between jobs than usual.

General and administrative costs were $16.0 million for the quarter compared to $11.3 million in the same period last year.  The increase was due to the acquisition of Bradley, the addition of new operations in Burkina Faso, Mozambique and the DRC and also increased costs to support the strong growth in activity levels.

Other expenses were $4.0 million, up from $1.6 million in the prior year quarter, due primarily to higher incentive compensation expenses given the Company's increased profitability.

Foreign exchange loss was $1.3 million compared to a gain of $0.7 million in the prior year period. The loss was due to the effect of exchange rate variations on monetary working capital items.

Depreciation and amortization expense increased to $12.6 million for the quarter compared to $8.2 million for the same quarter last year. A significant portion 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 Wednesday, June 6, 2012 at 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 webcast.  Please note that this is listen only mode.

Major Drilling Group International Inc.
Interim Condensed Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share information)
(unaudited)
		Three months ended April 30						Twelve months ended April 30
		2012			2011			2012			2011
TOTAL REVENUE		$	237,238		$	137,258		$	797,432		$	482,276
DIRECT COSTS			158,786			102,345			546,306			361,857
GROSS PROFIT			78,452			34,913			251,126			120,419
OPERATING EXPENSES
	General and administrative		16,024			11,323			57,980			40,963
	Other expenses		4,019			1,577			16,055			7,582
	Loss (gain) on disposal of property, plant and equipment		54			50			1,370			(377)
	Gain on sale of investment		-			(313)			-			(313)
	Foreign exchange loss (gain)		1,338			(672)			1,319			(892)
	Finance costs		707			399			3,367			1,275
	Depreciation and amortization		12,641			8,177			42,604			30,919
			34,783			20,541			122,695			79,157
EARNINGS BEFORE INCOME TAX			43,669			14,372			128,431			41,262
INCOME TAX - PROVISION
	Current		11,215			4,101			24,592			13,548
	Deferred		1,723			805			14,090			122
			12,938			4,906			38,682			13,670
NET EARNINGS		$	30,731		$	9,466		$	89,749		$	27,592
EARNINGS PER SHARE
Basic  *		$	0.39		$	0.13		$	1.18		$	0.39
Diluted  **		$	0.38		$	0.13		$	1.16		$	0.38
*Based on 79,129,765 and 71,794,149 daily weighted average shares outstanding for the quarter ended April 30, 2012 and 2011, respectively and on 76,074,556 and 71,530,882 daily weighted average shares outstanding for the fiscal year to date 2012 and 2011, respectively.  The total number of shares outstanding on April 30, 2012 was 79,147,378.
** Based on 80,326,601 and 72,984,266 daily weighted average shares outstanding for the quarter ended April 30, 2012 and 2011, respectively, and on 77,102,194 and 72,253,591 daily weighted average shares outstanding for the fiscal year to date 2012 and 2011, respectively.
Major Drilling Group International Inc.
Interim Condensed Consolidated Statements of Comprehensive Earnings
(in thousands of Canadian dollars)
(unaudited)
		Three months ended    April 30						Twelve months ended April 30
		2012			2011			2012			2011
NET EARNINGS		$	30,731		$	9,466		$	89,749		$	27,592
OTHER COMPREHENSIVE EARNINGS
	Unrealized (losses) gains on foreign currency translations (net of tax)		(7,989)			(7,942)			1,871			(3,662)
	Unrealized gain on interest swap (net of tax)		240			-			121			-
COMPREHENSIVE EARNINGS		$	22,982		$	1,524		$	91,741		$	23,930

Major Drilling Group International Inc.
Interim Condensed Consolidated Statements of Changes in Equity
For the twelve months ended April 30, 2011 and 2012
(in thousands of Canadian dollars)
(unaudited)
			Share capital		Reserves		Share-based payments reserve		Retained earnings		Foreign currency translation reserve		Total
BALANCE AS AT MAY 1, 2010			$ 144,919		$ -		$ 9,236		$ 153,358		$ -		$ 307,513
	Exercise of stock options		5,723		-		(1,558)		-		-		4,165
	Share-based payments reserve		-		-		2,602		-		-		2,602
	Dividends		-		-		-		(10,525)		-		(10,525)
			150,642		-		10,280		142,833		-		303,755
Comprehensive earnings:
	Net earnings		-		-		-		27,592		-		27,592
	Unrealized losses on foreign currency translations		-		-		-		-		(3,662)		(3,662)
	Total comprehensive earnings		-		-		-		27,592		(3,662)		23,930
BALANCE AS AT APRIL 30, 2011			$ 150,642		$ -		$ 10,280		$ 170,425		$ (3,662)		$ 327,685
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 rate 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

Major Drilling Group International Inc.
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
		Three months ended April 30						Twelve months ended April 30
		2012			2011			2012			2011
OPERATING ACTIVITIES
Earnings before income tax		$	43,669		$	14,372		$	128,431		$	41,262
Operating items not involving cash
	Depreciation and amortization		12,641			8,177			42,604			30,919
	Loss (gain) on disposal of property, plant and equipment		54			50			1,370			(377)
	Share-based payments reserve		660			696			2,426			2,602
Finance costs recognized in earnings before income tax			707			399			3,367			1,275
			57,731			23,694			178,198			75,681
Changes in non-cash operating working capital items			(28,158)			(17,769)			(32,787)			(22,553)
Finance costs paid			(708)			(399)			(3,432)			(1,275)
Income taxes paid			(11,262)			(5,221)			(27,502)			(4,748)
Cash flow from operating activities			17,603			305			114,477			47,105
FINANCING ACTIVITIES
Repayment of long-term debt			(1,573)			(1,815)			(17,390)			(8,939)
Proceeds from long-term debt			-			10,000			25,000			10,000
Repayment of short-term debt			(7,847)			(3,131)			(12,988)			(3,131)
Proceeds from short-term debt			-			-			-			10,400
Issuance of common shares			1,073			2,753			79,212			4,165
Dividends paid			-			-			(11,525)			(9,993)
Cash flow (used in) from financing activities			(8,347)			7,807			62,309			2,502
INVESTING ACTIVITIES
Business acquisitions (net of cash acquired)			(1,825)			(1,209)			(76,304)			(3,776)
Acquisition of property, plant and equipment (net of direct financing)			(21,097)			(22,053)			(81,129)			(62,571)
Proceeds from disposal of property, plant and equipment			517			569			2,228			4,498
Cash flow used in investing activities			(22,405)			(22,693)			(155,205)			(61,849)
Effect of exchange rate changes			269			(1,371)			(559)			(1,775)
(DECREASE) INCREASE IN CASH			(12,880)			(15,952)			21,022			(14,017)
CASH, BEGINNING OF THE PERIOD			50,117			32,167			16,215			30,232
CASH, END OF THE PERIOD		$	37,237		$	16,215		$	37,237		$	16,215

Major Drilling Group International Inc.
Interim Condensed Consolidated Balance Sheets
As at April 30, 2012 and 2011 and May 1, 2010
(in thousands of Canadian dollars)
(unaudited)
		April 30, 2012			April 30, 2011			May 1, 2010
ASSETS
CURRENT ASSETS
	Cash	$	37,237		$	16,215		$	30,232
	Trade and other receivables		159,770			100,300			62,128
	Income tax receivable		3,314			2,720			10,053
	Inventories		95,905			69,864			63,170
	Prepaid expenses		7,476			8,439			4,813
			303,702			197,538			170,396
PROPERTY, PLANT AND EQUIPMENT			318,171			235,473			198,935
DEFERRED INCOME TAX ASSETS			2,859			11,575			9,379
GOODWILL			54,946			28,316			26,475
INTANGIBLE ASSETS			6,295			1,235			1,074
		$	685,973		$	474,137		$	406,259
LIABILITIES
CURRENT LIABILITIES
	Trade and other payables	$	115,805		$	88,599		$	53,992
	Income tax payable		3,142			4,297			2,830
	Short-term debt		-			7,919			-
	Current portion of long-term debt		8,712			8,402			8,887
			127,659			109,217			65,709
CONTINGENT CONSIDERATIONS			2,760			2,612			2,011
LONG-TERM DEBT			42,274			16,630			15,041
DEFERRED INCOME TAX LIABILITIES			25,581			17,993			15,985
			198,274			146,452			98,746
SHAREHOLDERS' EQUITY
	Share capital		230,763			150,642			144,919
	Reserves		121			-			-
	Share-based payments reserve		11,797			10,280			9,236
	Retained earnings		246,809			170,425			153,358
	Foreign currency translation reserve		(1,791)			(3,662)			-
			487,699			327,685			307,513
		$	685,973		$	474,137		$	406,259

MAJOR DRILLING GROUP INTERNATIONAL INC.
SELECTED FINANCIAL INFORMATION
FOR THE THREE AND TWELVE MONTHS ENDED APRIL 30, 2012 AND 2011 (UNAUDITED)
(in thousands of Canadian dollars)

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:

 

		2012 Q4			2011 Q4			2012 YTD			2011 YTD
Revenue
	Canada - U.S.	$	106,653		$	52,069		$	322,047		$	181,280
	South and Central America		73,311			50,485			251,833			169,381
	Australia, Asia and Africa		57,274			34,704			223,552			131,615
		$	237,238		$	137,258		$	797,432		$	482,276
Earnings from operations
	Canada - U.S.	$	23,375		$	4,918		$	57,629		$	21,567
	South and Central America		19,061			9,653			55,790			20,188
	Australia, Asia and Africa		6,553			4,108			36,365			14,716
			48,989			18,679			149,784			56,471
Eliminations			(235)			(221)			(939)			(921)
			48,754			18,458			148,845			55,550
Finance costs			707			399			3,367			1,275
General corporate expenses *			4,378			3,687			17,047			13,013
Income tax			12,938			4,906			38,682			13,670
Net earnings		$	30,731		$	9,466		$	89,749		$	27,592
*General corporate expenses include expenses for corporate offices, stock options and certain un-allocated costs
Depreciation and amortization
	Canada - U.S.	$	5,448		$	2,814		$	17,813		$	10,195
	South and Central America		2,406			2,447			9,877			8,708
	Australia, Asia and Africa		3,428			2,645			11,672			10,593
Unallocated and corporate assets			1,359			271			3,242			1,423
		$	12,641		$	8,177		$	42,604		$	30,919

 

Denis Larocque, Chief Financial Officer  
Tel: [phone]
Fax: [phone]
[email protected]