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Press release from CNW Group

Major Drilling reports record annual and quarterly revenue

Tuesday, June 05, 2012

Major Drilling reports record annual and quarterly revenue16:00 EDT Tuesday, June 05, 2012MONCTON, 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)Q4-12Q4-11Fiscal 2012Fiscal 2011Revenue$237.2$137.3$797.4$482.3Gross profit78.534.9251.1120.4 As percentage of revenue33.1%25.4%31.5%25.0%EBITDA(1)57.022.9174.473.5 As percentage of revenue24.0%16.7%21.9%15.2%Net earnings30.79.589.727.6Earnings 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, 2012Total 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 MeasuresIn 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 endedApril 30 Twelve months endedApril 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 $0.39Diluted  **$0.38 $0.13 $1.16 $0.38            *Based on 79,129,765 and 71,794,149 daily weighted average sharesoutstanding for the quarter ended April 30, 2012 and 2011, respectivelyand on 76,074,556 and 71,530,882 daily weighted average sharesoutstanding 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 sharesoutstanding for the quarter ended April 30, 2012 and 2011, respectively,and on 77,102,194 and 72,253,591 daily weighted average sharesoutstanding 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 endedApril 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 $23,930Major Drilling Group International Inc.Interim Condensed Consolidated Statements of Changes in EquityFor the twelve months ended April 30, 2011 and 2012(in thousands of Canadian dollars)(unaudited)                  Share capital   Reserves  Share-basedpayments reserve  Retainedearnings  Foreign currencytranslation 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 - 303,755Comprehensive 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) 395,958Comprehensive earnings:             Net earnings  - - - 89,749 - 89,749 Unrealized gains on foreign currency translations - - - - 1,871 1,871 Unrealized gain on interest rate swap - 121 - - - 121Total comprehensive earnings - 121 - 89,749 1,871 91,741             BALANCE AS AT APRIL 30, 2012 $ 230,763 $ 121 $ 11,797 $ 246,809 $ (1,791) $ 487,699Major Drilling Group International Inc.Interim Condensed Consolidated Statements of Cash Flows(in thousands of Canadian dollars)(unaudited)              Three months endedApril 30 Twelve months endedApril 30             2012 2011 2012 2011            OPERATING ACTIVITIES           Earnings before income tax$ 43,669 $14,372 $128,431 $41,262Operating 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  2,602Finance costs recognized in earnings before income tax 707  399  3,367  1,275  57,731  23,694  178,198  75,681Changes 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  10,000Repayment of short-term debt (7,847)  (3,131)  (12,988)  (3,131)Proceeds from short-term debt -  -  -  10,400Issuance of common shares 1,073  2,753  79,212  4,165Dividends 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  4,498Cash 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 $16,215Major Drilling Group International Inc.Interim Condensed Consolidated Balance SheetsAs at April 30, 2012 and 2011 and May 1, 2010(in thousands of Canadian dollars)(unaudited)                   April 30, 2012 April 30, 2011 May 1, 2010ASSETS                 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 $406,259MAJOR 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 INFORMATIONThe 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  56,471Eliminations (235)  (221)  (939)  (921)  48,754  18,458  148,845  55,550Finance costs 707  399  3,367  1,275General corporate expenses * 4,378  3,687  17,047  13,013Income tax 12,938  4,906  38,682  13,670Net 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  10,593Unallocated and corporate assets 1,359  271  3,242  1,423 $12,641 $8,177 $42,604 $30,919 For further information: Denis Larocque, Chief Financial Officer   Tel: (506) 857-8636 Fax: (506) 857-9211 ir@majordrilling.com