MONCTON, NB, June 12 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) today reported results for its fourth quarter of fiscal year 2007, ended April 30, 2007.
Financial Highlights
-------------------------------------------------------------------------
$ millions Fiscal Fiscal
(except earnings per share) Q4-07 Q4-06 2007 2006
---------- ---------- ---------- ----------
-------------------------------------------------------------------------
Revenue $ 129.0 $ 89.0 $ 415.4 $ 316.5
-------------------------------------------------------------------------
Gross profit 43.5 25.9 133.1 90.4
As percentage of sales 33.7% 29.2% 32.0% 28.6%
-------------------------------------------------------------------------
Earnings from continuing
operations 17.8 9.3 46.5 25.2
-------------------------------------------------------------------------
Earnings per share from
continuing operations 0.77 0.40 2.01 1.11
-------------------------------------------------------------------------
Cash flow from continuing
operations(x) 25.1 14.6 75.6 46.8
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(x) before changes in non-cash working capital items
- Major Drilling posted the highest quarterly revenue in its history at
$129.0 million, up 45 percent from the same period last year. This also
represented an increase of 27 percent from the previous high of
$101.8 million recorded in the second quarter of this fiscal year.
Annual revenue moved to a new record for the fifth consecutive year at
$415.4 million, an increase of 31 percent over the previous record of
$316.5 million set last year.
- The Company posted the highest quarterly earnings in its history with
earnings from continuing operations increasing by over 90 percent to
$17.8 million or $0.77 per share, compared to $9.3 million or $0.40 per
share for the prior year quarter. Earnings from continuing operations
for fiscal 2007 increased over 84 percent, or $21.3 million to
$46.5 million ($2.01 per share), an annual record, from earnings of
$25.2 million ($1.11 per share) in fiscal 2006.
- Gross margin percentage for the quarter was 33.7 percent, compared to
29.2 percent for the corresponding period last year. Annual gross
margins were 32.0 percent for fiscal 2007 compared to 28.6 percent for
fiscal 2006.
- Net earnings for the quarter were $17.8 million or $0.77 per share
compared to net earnings of $11.7 million or $0.51 per share for the
prior year quarter.
- Cash from continuing operations, before changes in non-cash working
capital items, was up 72 percent to $25.1 million for the quarter,
compared to $14.6 million for the same quarter last year. Annual cash
flow from operations, before changes in non-cash working capital items,
was $75.6 million in fiscal 2007, up 62 percent from the $46.8 million
recorded in fiscal 2006.
- Net capital expenditures for fiscal 2008 are projected at some
$65 million, as heavy investments in staff training and safety will
facilitate continuing growth.
"All of the Company's regions contributed to the 45 percent increase in
revenues this quarter as the Company continued to benefit from a favorable
pricing environment and invested in additional equipment, while still being
somewhat constrained by labour availability," said Francis McGuire, President
and CEO of Major Drilling. "This was also the first full quarter for our
recent acquisitions in South Africa, Botswana and Namibia, which accounted for
almost 15 percent of the growth over the same period last year. Despite
continuing pressures on labour and material costs, and increased investments
in training, margins improved to 33.7 percent."
"All three geographic segments grew their revenues by 40 percent or more.
Latin America led all regions in growth with strong contributions from Mexico,
Chile and Venezuela. In North America, operations improved significantly in
the quarter, although we were less active in the coal-bed methane/shallow gas
area in the period," said Mr. McGuire. "The flexibility of our fleet, which is
able to shift between energy drilling and mineral drilling, allowed us to take
advantage of growing opportunities in the mineral sector. Australasia/Africa
also had a good quarter. About half of the revenue growth in the region came
from the new African acquisition, while the Company also had good revenue
performance from Australia, Indonesia and Tanzania. Mongolian revenue was down
22.5 percent as the mining industry in that country continues to struggle with
uncertainty relating to government mining policies."
"Fiscal 2007 was a very rewarding year as the Company benefited from its
ongoing training and recruiting efforts of the last few years, facilitating
additional investments in internal growth. Also, the Company's strong
operational leverage continued in fiscal 2007 as an annual revenue growth of
31 percent translated into an 84 percent increase in earnings from continuing
operations," noted Mr. McGuire.
"The outlook for metal prices remains encouraging. The fundamental demand
drivers in the global markets show no signs of major changes and most industry
watchers are calling for the supply of metals to remain relatively tight for
the foreseeable future as mineral companies continue to search for significant
discoveries. We continued to see an overall increase in demand for the
Company's services during the quarter," observed Mr. McGuire.
"Looking at fiscal 2008, the Company expects its growth to come from three
main drivers: from additional investments in people and equipment, strong
market conditions and from Africa. The Company also continues to seek
acquisitions that will either enhance its strategy of dominating specialized
drilling or that will expand its geographical footprint," said Mr. McGuire.
"Given the strong demand and the Company's favorable financial position, net
capital expenditures are expected to grow from a record $49.5 million in
fiscal 2007 to some $65 million in the upcoming year. With the additional
rigs, we will be maximizing our ability to train and recruit drilling crews,
and significant investments in training will have some effect, moderating the
rate of growth in margins. We continue to see an overall increase in demand
for the Company's services, creating a favorable pricing environment for the
upcoming year. In Africa, where pricing still lags somewhat behind other
regions, utilization is growing faster than expected as we are having success
in recruiting drillers and in double shifting our rigs. This year, we expect
to reach our objective of doubling revenue from our African acquisitions
compared to pre-acquisition levels, one year earlier than we initially
expected," noted Mr. McGuire.
Fourth quarter ended April 30, 2007
Total revenue for the fourth quarter was $129.0 million, up 45 percent
from the $89.0 million recorded for the prior year period. Year-over-year
revenue and profit comparisons were not materially affected by the variations
of the Canadian dollar against either the U.S. or Australian dollar.
Revenue from Canada-U.S. drilling operations was up $13.4 million or
40 percent to $47.0 million for the quarter compared to $33.6 million for the
same period last year. In Canada, improved winter conditions, as compared to
last year, allowed early startups in most of our contracts. Last year, warm
weather conditions had slowed the development of the winter roads required to
gain access to many project sites, which caused delays or cancellation of a
certain number of projects. In the U.S., the Company had only three of the
five capable rigs working in the energy sector during the quarter as customers
in that sector trimmed their exploration and development programs in light of
lower natural gas prices. While the Company still believes that the potential
of the energy sector remains positive, it was able to take advantage of
growing opportunities in the mineral sector with the remaining energy capable
rigs.
In South and Central America, revenue for the quarter was $41.1 million,
up 57.5 percent from $26.1 million recorded in the prior year quarter. This
strong year-over-year quarterly growth was driven primarily by very strong
demand in Mexico and Chile. Also, operations in Venezuela made a significant
contribution to the region's growth.
Australasian and African drilling operations reported revenue of
$40.9 million, up some 40 percent from $29.2 million reported in the same
period last year. Nearly half of this growth is attributable to the African
acquisition. Australia, Indonesia and Tanzania showed good revenue growth in
the quarter compared to the same period last year. Mongolian revenue was down
more than 20 percent as the mining industry in that country continues to
struggle with uncertainty relating to government mining policies.
The overall gross margin percentage for the quarter was 33.7 percent, up
from 29.2 percent for the same period last year. Gross margin percentages
improved year-over-year in all three regions due to generally improved pricing
and better weather conditions overall compared to the same period last year.
General and administrative costs were $10.2 million for the quarter,
compared to $7.7 million for the prior year period. The increase was primarily
due to the African acquisition, additions to the management team to
accommodate growth and the increased compliance costs relating to Ontario Bill
198.
Other expenses were $2.2 million for the quarter compared to $0.3 million
for the same period last year, due to higher incentive compensation expenses
given the Company's improved profitability in the current year and losses on
disposal of assets. Last year, gains on sale of assets more than offset
increased bonus provisions.
Foreign exchange loss was $0.5 million for the quarter compared to
$0.2 million for the prior year period.
Short-term interest revenue was $0.4 million for the quarter compared to
an expense of $0.3 million last year, while interest on long-term debt was
$0.7 million compared to $0.5 million for the prior year quarter.
Amortization expense increased to $5.9 million for the quarter compared to
$4.3 million for the same quarter last year, as a result of increased
investment in equipment.
The Company's tax expense was $6.6 million for the quarter, reflecting the
Company's profitability, compared to $3.3 million for the same period last
year.
Earnings from continuing operations for the quarter were $17.8 million or
$0.77 per share ($0.75 per share diluted) compared to $9.3 million or $0.40
per share ($0.39 per share diluted) in the prior year period.
Gain from discontinued operations was nil compared to $2.4 million or
$0.11 per share for the same period last year. Discontinued operations include
the sale of the manufacturing division and the termination of operations in
China. The loss from discontinued operations in the fourth quarter of 2007
reflects ongoing costs as the Company was closing down its Chinese operations.
Gain from discontinued operations for the fourth quarter of 2006 represents
operating results from the discontinued operations that have been reclassified
from continuing operations.
Net earnings were $17.8 million or $0.77 per share ($0.75 per share
diluted) compared to $11.7 million or $0.51 per share ($0.50 per share
diluted) for the same period last year.
Year ended April 30, 2007
Revenue for the fiscal year ending April 30, 2007 increased 31.2 percent
to $415.4 million from $316.5 million for the corresponding period last year.
Almost half of this increase in revenue was related to South and Central
America.
Canada-U.S. revenue increased by 27.0 percent to $151.2 million compared
to $119.1 million last year with both countries contributing, as the industry
continues to experience difficulty in meeting the growing demand for drilling
services.
Revenue in South and Central America increased by 56.3 percent or
$45.9 million to $127.4 million, compared to $81.5 million in fiscal 2006.
Mexico accounted for almost half of this growth while Chile, Argentina and
Venezuela also made strong contributions.
Revenue in Australasia and Africa increased 18.1 percent to $136.8 million
from $115.8 million in fiscal 2006. With Tanzanian revenue up 88 percent,
combined with the recent African acquisition, African operations accounted for
over 80 percent of the growth in this segment. Australian and Indonesian
revenue was up slightly while Mongolian revenue showed no growth due to
uncertainty relating to government mining policies.
Gross margins for the year were 32.0 percent compared to 28.6 percent last
year, due mainly to an improving pricing environment and improvements in
drillers' productivity. With the increase in revenue and improving gross
margins, gross profit for the year increased by 47.2 percent to $133.1 million
compared to $90.4 million for the prior year.
General and administrative expenses increased to $33.8 million compared to
$28.6 million for the same period last year. This increase is primarily due to
additions to the management team to accommodate growth, administrative salary
increases and the African acquisition.
Other expenses were $9.3 million for the year compared to $5.6 million for
the same period last year due in part to an increase in incentive provisions
as a result of improved profitability and increased provision for bad debt and
legal matters.
Foreign exchange loss was $0.8 million compared to $1.0 million in the
prior year period.
Short-term interest revenue was $0.7 million for the year compared to an
expense of $0.9 million last year, while interest on long-term debt was
$2.6 million in fiscal 2007 compared to $2.7 million last year.
Amortization expense increased to $20.5 million compared to $17.2 million
last year, as a result of increased investment in equipment.
The provision for income tax for the year was $20.2 million compared to
$9.1 million for the prior year reflecting the increase in pre-tax earnings.
The effective tax rate for the year increased compared to the prior year as
the Company was still utilizing non-tax effected losses during fiscal 2006,
which have now been fully utilized.
Earnings from continuing operations were $46.5 million or $2.01 per share
($1.98 per share diluted) compared to $25.2 million or $1.11 per share ($1.09
per share diluted) last year.
Gain from discontinued operations was $12.3 million or $0.53 per share
compared to a gain of $3.4 million or $0.15 per share last year. Gain from
discontinued operations of fiscal 2007 largely reflects the gain from the sale
of the manufacturing division, partially offset by a loss in the Chinese
operations after close down costs. Gain from discontinued operations for
fiscal 2006 represents operating results from the discontinued operations that
have been reclassified from continuing operations.
Net earnings were $58.8 million or $2.54 per share ($2.50 per share
diluted) compared to $28.6 million or $1.26 per share ($1.23 per share
diluted) for last year.
Some of the statements contained in this press release may be
forward-looking statements, such as estimates and statements that describe or
are with respect to the future price of minerals and metals, the Company's
future plans, 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 starting on pages 20 to 23 of the 2006 Annual Report
entitled "General Risks and Uncertainties", as augmented by the section
entitled "General Risks and Uncertainties" in the discussion of the Company's
second and third quarter MD&A, each as filed with the Canadian Securities
Commission (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 and mineral exploration
activities, Major Drilling maintains operations in Canada, the United States,
Mexico, South and Central America, Australia, Indonesia, Africa and Mongolia.
Financial statements are attached.
Major Drilling will provide a simultaneous webcast of its quarterly
conference call on Tuesday, June 12, 2007 at 9:00 AM (EDT). To access the
webcast please go to the Major Drilling 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 Drilling Group International Inc.
Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share information)
(unaudited)
For the years ended Three months ended
April 30 April 30
2007 2006 2007 2006
---------- ---------- ---------- ----------
(reclassi- (reclassi-
fied- fied-
note 4) note 4)
TOTAL REVENUE $ 415,437 $ 316,477 $ 129,049 $ 88,956
DIRECT COSTS 282,367 226,061 85,529 63,018
---------- ---------- ---------- ----------
GROSS PROFIT 133,070 90,416 43,520 25,938
---------- ---------- ---------- ----------
32.0% 28.6% 33.7% 29.2%
OPERATING EXPENSES
General and
administrative 33,821 28,634 10,205 7,747
Other expenses 9,252 5,604 2,176 296
Foreign exchange loss 828 1,001 461 199
Interest (revenue)
expense on short
term debt (729) 916 (388) 349
Interest expense on
long-term debt 2,615 2,671 684 524
Amortization 20,526 17,207 5,942 4,268
---------- ---------- ---------- ----------
66,313 56,033 19,080 13,383
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME
TAX AND DISCONTINUED
OPERATIONS 66,757 34,383 24,440 12,555
---------- ---------- ---------- ----------
INCOME TAX - PROVISION
Current 13,932 5,165 6,460 1,391
Future 6,279 3,979 180 1,871
---------- ---------- ---------- ----------
20,211 9,144 6,640 3,262
---------- ---------- ---------- ----------
EARNINGS FROM CONTINUING
OPERATIONS 46,546 25,239 17,800 9,293
GAIN FROM DISCONTINUED
OPERATIONS 12,257 3,403 9 2,396
---------- ---------- ---------- ----------
NET EARNINGS $ 58,803 $ 28,642 $ 17,809 $ 11,689
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER SHARE FROM
-----------------------
CONTINUING OPERATIONS
----------------------
Basic(x) $ 2.01 $ 1.11 $ 0.77 $ 0.40
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted(xx) $ 1.98 $ 1.09 $ 0.75 $ 0.39
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER SHARE
------------------
Basic(x) $ 2.54 $ 1.26 $ 0.77 $ 0.51
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted(xx) $ 2.50 $ 1.23 $ 0.75 $ 0.50
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(x) Based on 23,135,889 and 22,782,485 daily weighted average shares
outstanding for the fiscal year to date 2007 and 2006, respectively,
and on 23,253,058 and 23,032,283 daily weighted average shares for
the quarter ended April 30, 2007 and 2006, respectively. The total
number of shares outstanding on April 30, 2007 was 23,386,278
(xx) Based on 23,490,195 and 23,228,108 daily weighted average shares
outstanding for the fiscal year to date 2007 and 2006, respectively,
and on 23,686,734 and 23,610,691 daily weighted average shares
outstanding for the fourth quarter ended 2007 and 2006,
respectively.
Major Drilling Group International Inc.
Consolidated Statements of Retained Earnings
(in thousands of Canadian dollars)
(unaudited)
For the years ended
April 30
2007 2006
---------- ----------
(reclassi-
fied-
note 4)
RETAINED EARNINGS, BEGINNING OF THE YEAR $ 49,635 $ 20,993
Net earnings 58,803 28,642
---------- ----------
RETAINED EARNINGS, END OF THE YEAR $ 108,438 $ 49,635
---------- ----------
---------- ----------
Major Drilling Group International Inc.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
For the years ended Three months ended
April 30 April 30
2007 2006 2007 2006
---------- ---------- ---------- ----------
(reclassi- (reclassi-
fied- fied-
note 4) note 4)
OPERATING ACTIVITIES
Earnings from continuing
operations $ 46,546 $ 25,239 $ 17,800 $ 9,293
Operating items not
involving cash
Amortization 20,526 17,207 5,942 4,268
Loss (Gain) on disposal
of capital assets 977 (725) 622 (981)
Future income tax 6,279 3,979 180 1,871
Stock-based compensation 1,265 1,141 602 174
---------- ---------- ---------- ----------
75,593 46,841 25,146 14,625
Changes in non-cash
operating working
capital items (14,509) (8,711) (12,257) (14,254)
---------- ---------- ---------- ----------
61,084 38,130 12,889 371
(Loss) earnings from
discontinued operations,
adjusted for non-cash
items (1,271) 3,403 (55) 2,396
Changes in non-cash
operating working capital
items from discontinued
operations 3,154 (4,156) (79) 471
---------- ---------- ---------- ----------
Cash flow from operating
activities 62,967 37,377 12,755 3,238
---------- ---------- ---------- ----------
FINANCING ACTIVITIES
Repayment of long-term debt (16,863) (14,733) (5,355) (3,216)
Additional long-term debt 459 2,052 - -
(Repayment of) increase
in demand loans (16,721) (1,230) - 10,821
Issuance of common shares 2,653 2,627 1,740 380
---------- ---------- ---------- ----------
Cash flow (used in) from
financing activities (30,472) (11,284) (3,615) 7,985
---------- ---------- ---------- ----------
INVESTING ACTIVITIES
Net proceeds from sale of
discontinued operations 28,717 - (43) -
Business acquisitions
(note 3) (13,058) - - -
Acquisition of capital
assets, net of direct
financing (36,803) (27,379) (12,474) (7,815)
Proceeds from disposal
of capital assets 3,040 5,504 452 2,962
Discontinued operations 687 (89) - (750)
---------- ---------- ---------- ----------
Cash flow used in
investing activities (17,417) (21,964) (12,065) (5,603)
---------- ---------- ---------- ----------
OTHER ACTIVITIES
Foreign exchange
translation adjustment (2,043) 1,335 (658) 234
---------- ---------- ---------- ----------
INCREASE (DECREASE) IN CASH 13,035 5,464 (3,583) 5,854
CASH POSITION,
BEGINNING OF THE PERIOD 11,987 6,523 28,605 6,133
---------- ---------- ---------- ----------
CASH POSITION,
END OF THE PERIOD $ 25,022 $ 11,987 $ 25,022 $ 11,987
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Major Drilling Group International Inc.
Consolidated Balance Sheets
As at April 30, 2007 and 2006
(in thousands of Canadian dollars)
(unaudited)
2007 2006
---------- ----------
(reclassi-
fied-
note 4)
ASSETS
CURRENT ASSETS
Cash $ 25,022 $ 11,987
Accounts receivable 78,613 56,328
Income tax receivable 1,610 3,947
Inventories 50,976 45,054
Prepaid expenses 6,545 3,746
Future income tax assets 1,730 3,647
Assets of discontinued operations (note 4) 3,253 20,923
---------- ----------
167,749 145,632
CAPITAL ASSETS 158,771 117,887
FUTURE INCOME TAX ASSETS 619 3,810
OTHER ASSETS 1,240 1,049
ASSETS OF DISCONTINUED OPERATIONS (note 4) - 1,898
---------- ----------
$ 328,379 $ 270,276
---------- ----------
---------- ----------
LIABILITIES
CURRENT LIABILITIES
Demand loans $ - $ 16,721
Accounts payable and accrued charges 54,484 39,510
Income tax payable 4,121 2,953
Current portion of long-term debt 13,649 12,220
Liabilities of discontinued operations (note 4) 9,463 10,396
---------- ----------
81,717 81,800
LONG-TERM DEBT 18,136 22,651
FUTURE INCOME TAX LIABILITIES 7,020 6,354
DEFERRED GAIN 519 619
LIABILITIES OF DISCONTINUED OPERATIONS (note 4) - 18
NON-CONTROLLING INTEREST OF
DISCONTINUED OPERATIONS (note 4) - 434
---------- ----------
107,392 111,876
---------- ----------
SHAREHOLDERS' EQUITY
Share capital 137,703 135,050
Contributed surplus 5,229 3,964
Retained earnings 108,438 49,635
Cumulative translation adjustments (30,383) (30,249)
---------- ----------
220,987 158,400
---------- ----------
$ 328,379 $ 270,276
---------- ----------
---------- ----------
MAJOR DRILLING GROUP INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE YEARS AND QUARTERS ENDED APRIL 30, 2007 AND 2006
(in thousands of Canadian dollars)
1. BASIS OF PRESENTATION
---------------------
These interim financial statements were prepared using accounting policies
and methods consistent with those used in the preparation of the Company's
audited financial statements for the year ended April 30, 2006. These interim
financial statements conform in all respects to the requirements of Canadian
generally accepted accounting principles for annual financial statements, with
the exception of certain note disclosures. As a result, these interim
financial statements should be read in conjunction with the Company's audited
financial statements and notes for the year ended April 30, 2006 contained in
the Company's 2006 annual report.
2. SEASONALITY OF OPERATIONS
-------------------------
The geographic distribution of our growth is having an impact on our
historical seasonal patterns. With the exception of the third quarter, the
Company exhibits comparatively less seasonality in quarterly revenues than in
the past since a relatively higher proportion of revenue is coming from
regions with more temperate or tropical climates that are not impacted by
winter weather conditions, and strong cyclical growth tends to mute normal
seasonal patterns. Historically, the Company's operations tended to exhibit a
seasonal pattern whereby its fourth quarter (February to April) was its
strongest. The third quarter (November to January) is normally the Company's
weakest quarter due to the shutdown of mining and exploration activities for
extended periods over the holiday season, particularly in South and Central
America.
3. BUSINESS ACQUISITIONS
---------------------
Effective December 1, 2006, the Company acquired 55 conventional drill
rigs, together with related support equipment, inventory, and contracts owned
by the Longstaff group's drilling operations in southern Africa. These include
the operations of Raldril (Pty) Limited in South Africa, RA Longstaff
(Botswana) (Pty) Ltd in Botswana, and R.A. Longstaff Namibia (Pty) Limited in
Namibia. The total purchase price including post closing adjustments was
$15,417.
Net assets acquired at fair market value at acquisition are as follows:
Assets acquired
Inventories $ 637
Capital assets 14,311
Goodwill 469
---------
Net assets $ 15,417
---------
---------
Consideration
Cash $ 13,058
Accounts payable 2,359
---------
$ 15,417
---------
---------
4. DISCONTINUED OPERATIONS
-----------------------
On June 7, 2006, the Company sold its manufacturing subsidiary ("UDR") for
A$46.8 million (C$39.2 million). The consideration for the sale was
A$43.3 million (C$36.2 million) cash and a holdback due in 18 months in the
amount of A$3.5 million (C$3.0 million). The net gain before income taxes is
C$22.2 million, being the proceeds of C$39.2 million less the book value of
the assets of C$13.3 million and expenses relating to the sale of C$3.7
million. UDR previously constituted the Company's entire manufacturing
segment. The Company made the strategic decision to focus its corporate
resources on the mineral drilling business, where it competes as one of the
world's largest contract drillers. The gain from discontinued operations of
UDR is summarized as follows:
2007 YTD 2006 YTD 2007 Q4 2006 Q4
---------- ---------- ---------- ----------
Revenue $ 4,291 $ 31,800 $ - $ 8,283
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) before
income tax 42 4,896 (189) 1,568
Gain (loss) from disposal
of discontinued
operations
before income tax 22,229 - (33) -
Income tax (expense)
recovery (6,635) (1,037) 354 1,028
---------- ---------- ---------- ----------
Gain from discontinued
operations $ 15,636 $ 3,859 $ 132 $ 2,596
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The Company made the strategic decision to close its operations in China
in July, 2006. The Company opened a branch in China with the goal of quickly
developing a large pool of Chinese drillers. Having shown little progress to
date in building a pool of local drillers in China, the Company decided to
close the operation. Chinese operations were previously reported within the
Australasian and African segment.
The loss from discontinued operations of the branch in China is summarized
as follows:
2007 YTD 2006 YTD 2007 Q4 2006 Q4
---------- ---------- ---------- ----------
Revenue $ 818 $ 2,051 $ (2) $ 1,020
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Loss (2,580) (456) (114) (200)
Loss on disposition
including write-down
of assets (799) - (9) -
---------- ---------- ---------- ----------
Loss from discontinued
operations $ (3,379) $ (456) $ (123) $ (200)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The assets and liabilities of discontinued operations of UDR and China are
summarized as follows:
April April
UDR China 2007 UDR China 2006
------- -------- -------- -------- -------- ---------
Current Assets
Accounts
receivable $ - $ - $ - $ 3,462 $ 1,144 $ 4,606
Other
receivables 3,236 - 3,236 2,586 23 2,609
Inventories - - - 13,587 - 13,587
Other assets - 17 17 113 8 121
------- -------- -------- -------- -------- ---------
$ 3,236 $ 17 $ 3,253 $19,748 $ 1,175 $20,923
------- -------- -------- -------- -------- ---------
------- -------- -------- -------- -------- ---------
Long-Term
Assets
Capital
assets $ - $ - $ - $ 1,167 $ 731 $ 1,898
------- -------- -------- -------- -------- ---------
------- -------- -------- -------- -------- ---------
Current
Liabilities
Accounts
payable $ 3,907 $ 43 $ 3,950 $ 9,161 $ 329 $ 9,490
Income tax
payable 5,513 - 5,513 895 11 906
------- -------- -------- -------- -------- ---------
$ 9,420 $ 43 $ 9,463 $10,056 $ 340 $10,396
------- -------- -------- -------- -------- ---------
------- -------- -------- -------- -------- ---------
Long-Term
Liabilities $ - $ - $ - $ 18 $ - $ 18
------- -------- -------- -------- -------- ---------
------- -------- -------- -------- -------- ---------
Non-
Controlling
Interest $ - $ - $ - $ 434 $ - $ 434
------- -------- -------- -------- -------- ---------
------- -------- -------- -------- -------- ---------
The comparative figures have been reclassified to reflect the
discontinuation of these components.
5. COMMITMENTS
-----------
The Company, as part of the sale of its manufacturing division, UDR,
entered into a Strategic Cooperation and Supply Agreement with Sandvik AB.
Pursuant to this Agreement and subject to certain carry-over rights, the
Company is required to make minimum purchases from Sandvik of certain products
and services totaling at least A$10.5 million during the first year of the
Agreement, A$9.2 million during the second year, and A$7.9 million during the
third year. The third year commitment will be increased by A$1.0 million
should certain products be available. Additionally, the minimum purchase
amounts are subject to downward adjustments if certain products are not
available, and/or if there are significant decreases in annual worldwide
exploration expenditures.
The Company also has various commitments, primarily for rental of
premises, with arms-length parties as follows: 2008 - $2,070, 2009 - $1,748,
2010 - $1,133, 2011 - $770, 2012 - $746, thereafter - $379.
6. SEGMENTED INFORMATION
---------------------
2007 YTD 2006 YTD 2007 Q4 2006 Q4
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(reclassi- (reclassi-
fied- fied-
note 4) note 4)
Revenue
Canada - U.S. $ 151,226 $ 119,127 $ 47,045 $ 33,606
South and Central America 127,402 81,501 41,127 26,135
Australasia and Africa 136,809 115,849 40,877 29,215
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$ 415,437 $ 316,477 $ 129,049 $ 88,956
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Earnings from continuing
operations
Canada - U.S. $ 29,658 $ 17,530 $ 9,902 $ 4,629
South and Central
America 31,741 12,205 12,309 7,232
Australasia and Africa 19,706 15,631 5,429 2,650
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81,105 45,366 27,640 14,511
Eliminations (1,231) 1,004 (325) 1,325
---------- ---------- ---------- ----------
79,874 46,370 27,315 15,836
Interest expense, net 1,886 3,587 296 873
General corporate expenses 11,231 8,400 2,579 2,408
Income tax 20,211 9,144 6,640 3,262
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Earnings from continuing
operations 46,546 25,239 17,800 9,293
Gain from discontinued
operations 12,257 3,403 9 2,396
---------- ---------- ---------- ----------
Net earnings $ 58,803 $ 28,642 $ 17,809 $ 11,689
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