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1、Major Drilling Group International Inc.is one of the worlds largest drilling services companies primarily serving the mining industry.To support its customers varied exploration drilling requirements,Major Drilling maintains field operations and offices in Canada,the United States,Mexico,South Ameri
2、ca,Asia and Africa.Major Drilling provides all types of drilling services including surface and underground coring,directional,reverse circulation,sonic,geotechnical,environmental,water-well,coal-bed methane and shallow gas.Over the years,the Company has positioned itself as one of the largest speci
3、alized operators in the world by leveraging its main competitive advantages:specialized equipment,long-standing relationships with the worlds largest mining companies,access to capital,and skilled personnel.This positioning is strengthened by the Companys senior management having experienced several
4、 economic and mining industry cycles.During the last several years,the Company has achieved strong growth while remaining focused on the long-term objective of building a solid company for the future.Our corporate strategy remains to:be the world leader in specialized drilling and expand our special
5、ized capacity;modernize our conventional fleet and expand our footprint in strategic areas;diversify our services within the drilling field;maintain a strong balance sheet and a sustainable dividend;and be the best in class in safety and human resources.Major Drillings common shares trade on the Tor
6、onto Stock Exchange under the symbol MDI and are included in the TSX Composite Index.InDEXHighlights.1Message to Shareholders.2Our Commitment to Safety and the Community.4Managements Discussion and Analysis.6Managements Responsibility.20Independent Auditors Report.21Consolidated Statements of Operat
7、ions.22Consolidated Statements of Comprehensive(Loss)Earnings.22Consolidated Statements of Changes in Equity.23Consolidated Statements of Cash Flows.24Consolidated Balance Sheets.25notes to Consolidated Financial Statements.26Historical Summary.49Shareholder Information.50CORpORATE pROFILERevenue do
8、wn 49%from last year,however:Generated EBITDA*of$44 million;Increased net cash balance by$8 million;Maintained semi-annual dividend of$0.10 per share;Achieved over 4 million hours of work without any lost time injuries(LTI);and Continued to upgrade our rig fleet.*EBITDA is defined as earnings before
9、 interest,taxes,depreciation and amortization,excluding restructuring charges,goodwill and intangible impairment and gain on reversal of contingent consideration.EBITDA is a non-IFRS financial measure.The Company believes this non-IFRS financial measure provides useful information to both management
10、 and investors in measuring the financial performance of the Company.This measure does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies,and should not be construed as an alternative to oth
11、er financial measures determined in accordance with IFRS.HIGHLIGHTSCHALLEnGInG FISCAL 20141In millions of Canadian dollars 2014 2013(except earnings per share)Revenue$354.9$695.9Gross margin 29.4%31.7%net(loss)earnings (55.3)52.1(Loss)earnings per share-basic (0.70)0.66EBITDA*44.4 142.8 net cash pos
12、ition(net of debt)46.5 38.7 MESSAGE TO SHAREHOLDERSFiscal year 2014 was a very difficult year as senior mining companies cut back on their exploration programs and financing for junior exploration companies dried up for all but companies with advanced projects.This situation was made all the more ch
13、allenging by the actions of some governments,which affected the economics of mining exploration and development.In some countries we saw drilling activity reduced by as much as 80%.Revenue went from$108 million in the first quarter to$83 million in the fourth quarter.Total revenue for fiscal year 20
14、14 was$354.9 million versus$695.9 million the prior year.While fiscal year 2014 has ended on a difficult note,over time we expect many of the supply issues that face most commodities to come back into focus.Even with moderate growth in the world economy,the need to explore and develop mines should i
15、ncrease.We believe that the need to develop resources in areas that are increasingly difficult to access will continue and that this should further grow the demand for specialized drilling.The Companys financial strength allows it to continue to invest in safety,to maintain its equipment in excellen
16、t condition,and to retain skilled employees,all of which are essential to reacting quickly when the industry recovers.Our competitive positioning within most of our markets is very strong.Throughout this fiscal year,management focussed on adjusting our costs and ensuring that the Company generated c
17、ash.We started the year with net cash of$38.7 million and closed the year with net cash of$46.5 million.This gives Major Drilling one of the most enviable balance sheets in the industry.We did this while maintaining our dividend and investing$23 million in new equipment.The Company continues to have
18、 a variable cost structure whereby most of its direct costs,including field staff,go up or down with contract revenue.A large part of our other expenses relates to variable incentive compensation,which is based on profitability.During the year,management also adjusted its general overhead levels,and
19、 general and administrative expenses declined from$64 million to$50 million.In addition,a large part of the Companys other expenses is normally related to our profit sharing program.In a cyclical industry,there will be years,like this one,when there are no profits and therefore no profit sharing.Wit
20、h these demanding times,management had to make a number of very difficult decisions.During the last quarter of fiscal 2014,we announced the closure of our operations in Australia,which resulted in a charge of$16.8 million.The Company recorded$9.7 million in a non-cash write-down of assets as well as
21、 net cash charges of$7.1 million in Australia for severance,moving costs and lease termination.Those cash costs should be more than offset by the sale of some Australian assets.During the year,the Company incurred additional restructuring charges of$3.7 million,relating to severance,as it continued
22、to reduce costs across the organization,and$3.5 million in unrecoverable tax losses.The Company recognized a goodwill impairment of$14.3 million related to its operations in Mozambique and Chile,primarily due to reduced cash flow expectations in the near term.The goodwill write-off is non-cash in na
23、ture and does not affect liquidity or cash flows from operating activities.2Left:David Tennant,Chairman of the Board Right:Francis McGuire,President&CEO3All this resulted in a loss for the year of$55 million.nevertheless,with cash fl ow from operations of$40.9 million,we continued to pay our dividen
24、d,invested in our business,and increased our net cash by$7.8 million,as we noted earlier.We did have a number of very positive milestones during the year.On safety,in 2014 we passed the 4 million hours-of-work mark without having any lost-time injuries.Everyone in the Company has worked hard and tak
25、es great pride in this signifi cant achievement.After many months of preparation,our Brazilian branch opened for business.We were also able to carefully and methodically expand our energy business in north America.We remain faithful to our social and environmental responsibilities.We train and hire
26、locally at every opportunity and we strive to ingrain our culture of safety in all those whom we work with.We train employees to conserve and recycle,work with universities to support student activities,and continue to support schools,orphanages and health centres in communities where we work.Major
27、Drilling is intent on making a difference wherever our business touches the world.Despite head winds that continued to increase during the year,the Company held to and executed on the fi ve elements of its business strategy,which are:to be the world leader in specialized drilling and expand our spec
28、ialized capacity;to modernize our conventional fl eet and expand our footprint in strategic areas;to diversify our services within the drilling fi eld;to maintain a strong balance sheet and a sustainable dividend;and to be the best in class in safety and human resources.Finally,we want to take this
29、opportunity to thank you,our customers,employees,and shareholders,for your ongoing support,and we look forward to the time when the mining cycle picks up.We will be ready.David Tennant Francis McGuireChairman of the Board president and Chief Executive Offi cerOUR COMMITMEnT TO SAFETy AnD THE COMMUnI
30、TySAFETYMajor Drilling continues to take a proactive approach to safety at all of our job sites around the world.We conduct risk assessments and safety environment analyses from which appropriate controls are implemented and safe work procedures are developed.We make ongoing upgrades to our safety p
31、rograms.Our supervisor training program aligns with the fundamental requirements outlined in occupational health and safety legislation and directly relates to the application of our safety programs and processes.The training includes:principles of safety and internal responsibility;Incident reporti
32、ng and investigation;Field-level risk management;Hazard recognition,workplace inspections and observations;How to follow and implement safety programs;How to effectively communicate with various workplace parties;How to manage work area activities;and How to manage employees.The inspection and obser
33、vation program is a series of focused inspection forms and checklists that assist in ensuring that the basis for safe equipment and workplace conditions are regularly monitored to ensure that workers adopt and use correct work methods.Communication is fundamental to the successful implementation of
34、our safety programs.Major Drilling has daily talks,toolbox meetings,supervisor conference calls and managers meetings to make sure that there is a continual fl ow of information for the benefi t of its employees.One of the most critical programs for us is the“10 Lifesaving Rules”.The introduction an
35、d standardization of these rules assist in maintaining a strong safety culture.45COMMUNITYWe are always cognizant of protecting the environment at our drill and camp locations.Environment sustainability is a cornerstone of our operations.Every effort is made to keep our environmental footprint to a
36、minimum,while building a better quality of life for our stakeholders and raising standards for the industry as a whole.Through safe work practices,technically advanced equipment and specialized training of our workers,Major Drilling is able to deliver consistently responsible environmental performan
37、ce across the globe.Wherever Major Drilling operates,we carry out business responsibly and we prioritize sustainable development.We seek to build sustainable community relationships all around the world.We value,encourage and celebrate the contribution that our employees make to the communities we s
38、erve.It is important for Major Drilling to tailor our efforts to meet the needs of specifi c communities.We establish and grow business partnerships,like the one we have with Major nuvumiut,working with mining companies in northern Quebec to benefi t the Inuit.We support and sponsor students at vari
39、ous levels of education studying earth sciences,geology,mining and drilling.We sponsor mining groups like the yukon Geoscience forum,the yellowknife Geoscience Forum,Manitoba Mining&Minerals,Saskatchewan Geological Survey and the Canadian Diamond Drilling Association.We have donated heating panels f
40、or classrooms in Chile.We have supported the Dr.Humberto notti Childrens Hospital in Argentina.We have supported education and business development in Mongolia.We have donated funds to the Utah national Guard and Charitable Trust Fund in the United States.We have donated funds to the Martin Bradley
41、Foundation,Crossroads for Women,and the United Way in Canada.Supporting these causes and others around the world are an integral part of doing business for Major Drilling.As we focus on strategically growing our business,we will maintain our commitment to safety,the environment and communities.Major
42、 Drilling is well positioned for the future and will continue to deliver on our promise of .Value equals quality,relationships and results!Christian Boutin,Business Development Manager for West Africa with our soccer team in Ouagadougou,Burkina Faso.We provide sponsorship of uniforms for young peopl
43、e between the ages of 12-15,and they proudly wear the Major Drilling logo.We also sponsor medical exams for the entire team.This team is part of a program to keep young people involved in sports and off of the streets.MAnAGEMEnTS DISCUSSIOn AnD AnALySISThe following managements discussion and analys
44、is“MD&A”,prepared as of June 5,2014,should be read together with the audited financial statements for the year ended April 30,2014 and related notes attached thereto,which are prepared in accordance with International Financial Reporting Standards.All amounts are stated in Canadian dollars unless ot
45、herwise indicated.FORWARD-LOOKING STATEMENTSThis MD&A contains forward-looking statements about the Companys objectives,strategies,financial condition,results of operations,cash flows and businesses.These statements are“forward-looking”because they are based on current expectations,estimates,assumpt
46、ions,risks and uncertainties.These forward-looking statements are typically identified by future or conditional verbs such as“outlook”,“believe”,“anticipate”,“estimate”,“project”,“expect”,“intend”,“plan”,and terms and expressions of similar import.Such forward-looking statements are subject to a num
47、ber of risks and uncertainties that include,but are not limited to:cyclical downturn,competitive pressures,dealing with business and political systems in a variety of jurisdictions,repatriation of property in other jurisdictions,payment of taxes in various jurisdictions,exposure to currency movement
48、s,inadequate or failed internal processes,people or systems or from external events,dependence on key customers,safety performance,expansion and acquisition strategy,legal and regulatory risk,corruption,bribery and fraud by employees and agents,extreme weather conditions and the impact of natural or
49、 other disasters,specialized skills and cost of labour increases,equipment and parts availability and reputational risk.These factors and other risk factors,as described under“General Risks and Uncertainties”of the Companys Annual Information Form,represent risks the Company believes are material.Ac
50、tual results could be materially different from expectations if known or unknown risks affect the business,or if estimates or assumptions turn out to be inaccurate.The Company does not guarantee that any forward-looking statement will materialize and,accordingly,the reader is cautioned not to place
51、reliance on these forward-looking statements.The Company disclaims any intention and assumes no obligation to update any forward-looking statement,even if new information becomes available,as a result of future events or for any other reasons,except in accordance with applicable securities laws.Risk
52、s that could cause the Companys actual results to materially differ from its current expectations are also discussed in this MD&A.Additional information relating to the Company,including the Companys Annual Information Form for the previous year and the most recently completed financial year,are or
53、will be available on the SEDAR website at .CORPORATE OVERVIEWMajor Drilling Group International Inc.is one of the worlds largest drilling service companies primarily serving the mining industry.To support its customers varied exploration drilling requirements,Major Drilling maintains field operation
54、s and offices in Canada,the United States,South and Central America,Australia,Asia,and Africa.Major Drilling provides all types of drilling services including surface and underground coring,directional,reverse circulation,sonic,geotechnical,environmental,water-well,coal-bed methane and shallow gas.6
55、BUSINESS STRATEGY Major Drilling continues to base its business premise on the following:mining companies continue to deplete the more easily accessible mineral reserves around the world and attractive deposits will be in increasingly remote locations,areas difficult to access and/or deep in the gro
56、und.For this reason,Major Drillings strategy is to focus its services on projects that have these characteristics,calling these services“specialized drilling”.Over the years,the Company has positioned itself as one of the largest specialized operators in the world by leveraging its main competitive
57、advantages:skilled personnel,specialized equipment,long-standing relationships with the worlds largest mining companies and access to capital.Although the Companys main focus remains specialized services,it also intends to continue to modernize its conventional fleet and expand its footprint in stra
58、tegic areas while maintaining prudent debt levels and remaining best in class in safety and human resources.The Company will also seek to diversify by investing in energy and underground drilling services that are complementary to its skill set.The Company categorizes its mineral drilling services i
59、nto three types:specialized drilling,conventional drilling and underground drilling.Specialized drilling can be defined as any drilling project that,by virtue of its scope,technical complexity or location,creates significant barriers to entry for smaller drilling companies.This would include,for exa
60、mple,deep-hole drilling,directional drilling,and mobilizations to remote locations or high altitudes.Because significant ore bodies are getting more difficult to find,the Company expects specialized drilling services to continue to fuel future growth,and over the next two decades,the Company believe
61、s these skills will be in greater and greater demand.Conventional drilling tends to be more affected by the industry cycle as the barriers to entry are not as significant as with specialized drilling.This part of the industry is highly fragmented and has numerous competitors.Because the Company offe
62、rs only limited differentiation in this sector,it is not its priority for investment.Underground drilling takes on greater importance in the latter stages of the mining cycle as clients develop underground mines.INDUSTRY OVERVIEWThe metals and minerals drilling industry is reliant primarily on deman
63、d from two metal groups,gold on the one hand and base metals on the other.Each commodity group is influenced by distinct market forces.Gold has always been a significant driver in the mining industry accounting for 40 to 50%of the exploration spend carried on around the world.Exploration activity ge
64、nerally varies up or down with the trend in gold prices.772%SPECIALIzED17%UNDERGROUND11%CONVENTIONALREVENUE BY TYPE FISCAL 201410%ENERGY40%GOLD20%COPPER3%COAL5%zINC12%OTHER10%NICKELREVENUE BY COMMODITY FISCAL 2014The demand for base metals is dependent on economic activity.In the longer-term,the fun
65、damental drivers of base metals remain positive,with worldwide supply for most metals expected to tighten and higher demand coming from the emergence of the BRIC countries(Brazil,Russia,India and China)over the last 10 years.As these countries continue to urbanize,the requirement for base metals wil
66、l continue to increase at the same time as the easily accessible reserves are being depleted.One of the realities of the mining industry is that future mineral deposits will have to come from areas difficult to access,either in remote or politically sensitive areas,deeper in the ground or at higher
67、altitudes.This should improve demand for specialized services in the future.In terms of customer base,the Company has two categories of customers:senior and intermediate companies with operating mines,and junior exploration companies.The industry is currently in a cyclical downturn.Most senior and i
68、ntermediate mining companies remain committed to the large majority of their projects in order to replace their reserves.For the most part,these mining companies are in a much better financial position than during the financial crisis of 2008 but at the moment are being more cautious with investment
69、s in exploration.Large base metal producers will need to expand existing mines and develop new ones to meet the worlds growth,especially in emerging markets.Activity from senior gold producers is likely to show greater volatility as gold prices vary,which will impact their exploration budgets.Many j
70、unior mining companies continue to experience financing difficulties thus have slowed down their exploration efforts.Junior mining companies can account for some 50%of the market in cyclical upturns.While it is expected that some of the more advanced projects will be able to obtain financing as need
71、ed,it will be necessary for investors to once again support exploration projects in order for drilling activities to regain the momentum that they had at their peak.OVERALL PERFORMANCE Revenue for the fiscal year ended April 30,2014 decreased 49%to$354.9 million from$695.9 million for the correspond
72、ing period last year.The Company continued to see a decline in revenue throughout the year due to a lack of funding for junior exploration companies and a reduction of exploration spending by senior companies.Gross margin for the year was down to 29.4%compared to 31.7%last year due mainly to reduced
73、 pricing as a result of increased competitive pressures and delays,particularly in the second half of the year.During the year,the Company recorded a restructuring charge of$20.5 million consisting primarily of a non-cash write-down of assets in Australia of$9.7 million,close-down costs of$7.1 milli
74、on in Australia relating to severance,lease termination and moving costs,and$3.7 million in additional restructuring charges as it continues to reduce costs across the organization.Goodwill impairments of$14.3 million were recognized during the year attributable to reduced cash flow expectations in
75、Chile and Mozambique.The goodwill write-offs were non-cash in nature and do not affect liquidity or cash flows from operating activities.The combination of reduced revenue along with the restructuring and impairment charges produced a net loss of$55.3 million($0.70 per share)compared to net earnings
76、 of$52.1 million($0.66 per share)for last year.RESULTS OF OPERATIONSFISCAL 2014 COMPARED TO FISCAL 2013Revenue for the fiscal year ended April 30,2014 decreased 49%to$354.9 million from$695.9 million for the corresponding period last year.Due to the uncertainty around economic matters impacting the
77、mining market,some customers delayed or cancelled their exploration drilling plans this year.In a number of jurisdictions,uncertainty as to the policies of host governments or issues of land tenure also had an impact on this years results.MAnAGEMEnTS DISCUSSIOn AnD AnALySIS8REVENUE BY REGION FISCAL
78、2014 50%CANADA-U.S.30%AUSTRALIA,ASIA&AFRICA20%SOUTH&CENTRAL AMERICA9Canada-U.S.Canada-U.S.revenue decreased by 45%to$175.9 million compared to$317.1 million last year with both countries impacted.In the U.S.,mineral revenue was more affected than in Canada but energy revenue was flat year-over-year
79、in that region.Gross margins in Canada-U.S.decreased as competitive pressures affected pricing,particularly in the second half of the year.South and Central AmericaRevenue in South and Central America decreased by 64%to$73.6 million,compared to$203.0 million for the prior year as the Company saw a s
80、ignificant decrease in activity levels due to the cancellation or reduction of projects.This region is particularly more affected by decreased activity in the junior sector.Gross margins in the region decreased year-over-year,affected by reduced pricing as a result of increased competitive pressures
81、,particularly in the second half of the year.Australia,Asia and AfricaRevenue in Australia,Asia and Africa decreased 40%to$105.5 million from$175.6 million in the prior year.Decreases in Australia,Mongolia and the closure of operations in Tanzania were mitigated by a slight increase in activity in I
82、ndonesia.In Australia,projects were cancelled due to high costs being incurred by mining companies and new mining taxes,therefore the Company decided to close down its operations in the fourth quarter.Gross margins in the region were relatively flat year-over-year as a significant decrease in margin
83、s in Australia was offset by improved margins in Indonesia and Southern Africa.Operating ExpensesGeneral and administrative costs were down 22%to$50.1 million compared to$63.8 million in the same period last year.With the decrease in activity,the Company has reduced its general and administrative co
84、sts by implementing reductions of salaried employees,restructuring certain branches,and reducing management salaries.Other expenses were$3.6 million for the year compared to$10.6 million for the same period last year due primarily to lower incentive compensation expenses driven by the Companys decre
85、ased profitability in the current year.SELECTED AnnUAL InFORMATIOn (in millions of Canadian dollars,except per share information)years ended April 30 2014 2013 2012 Revenue by region Canada-U.S.$176$317$322 South and Central America 74 203 252 Australia,Asia and Africa 105 176 223 355 696 797 Gross
86、profit 104 220 251 as a percentage of revenue 29.4%31.7%31.5%Net(loss)earnings (55)52 90 per share(basic)$(0.70)$0.66$1.18 per share(diluted)$(0.70)$0.65$1.16 Total assets 592 686 686 Total long-term financial liabilities 14 34 42 Dividend paid 16 15 12The Company recorded a restructuring charge of$
87、20.5 million consisting primarily of a non-cash write-down of assets in Australia of$9.7 million,close-down costs of$7.1 million in Australia relating to severance,lease termination and moving costs,and$3.7 million in additional restructuring charges as it continues to reduce costs across the organi
88、zation.Goodwill impairments of$14.3 million were recognized during the year.The goodwill write-offs were non-cash and do not affect liquidity or cash flows from operating activities.Although this goodwill impairment is attributable to reduced cash flow expectations in Chile and Mozambique for the ne
89、ar term,this does not reflect a change in the Companys commitment to continue to operate in those countries.Income tax expense for the year was$10.6 million compared to$28.8 million for the prior year,reflecting the decrease in pre-tax earnings.The effective tax rate for the year was significantly i
90、mpacted by several factors.In Australia,losses incurred during the year and the restructuring charges were not tax affected due to the uncertainty to recover these charges.Additionally,previously recognized tax losses in Australia were written off during the year.Also,goodwill impairment in Chile an
91、d Mozambique,and foreign exchange losses in Argentina were non-deductible having an impact on the Companys effective tax loss for the year was$55.3 million or$0.70 per share($0.70 per share diluted)compared to earnings of$52.1 million or$0.66 per share($0.65 per share diluted)in the previous year.SU
92、MMARY ANALYSIS FISCAL 2013 COMPARED TO FISCAL 2012Revenue for the fiscal year ended April 30,2013 decreased 13%to$695.9 million from$797.4 million in the previous year.The year started strong with record revenue and earnings in the first quarter followed by a progressive slowdown in activity due to
93、a lack of funding for junior exploration companies and a reduction of exploration spending by senior companies.Gross margin for 2013 was up slightly to 31.7%compared to 31.5%last year due mainly to an improved pricing environment in the first half of the year mitigated by reduced pricing as a result
94、 of increased competitive pressures and delays in the second half.The Company recorded a restructuring charge of$5.4 million to account for the scale down of the Companys environmental and Tanzanian operations,write-down of assets,as well as retrenchment costs.Also,the Company recorded a non-cash go
95、odwill and intangible impairment charge of$3.3 million.The combination of reduced revenue with the restructuring and impairment charges produced net earnings of$52.1 million($0.66 per share)compared to net earnings of$89.7 million($1.18 per share)for the previous year.MAnAGEMEnTS DISCUSSIOn AnD AnAL
96、ySIS10With the exception of the third quarter,the Company exhibits comparatively less seasonality in quarterly revenue than in the past.The third quarter(november to January)is normally the Companys weakest quarter due to the shutdown of mining and exploration activities,often for extended periods o
97、ver the holiday season,particularly in South and Central America.SUMMARY OF QUARTERLY RESULTS (in thousands of Canadian dollars,except per share information)Fiscal 2013 Fiscal 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Revenue$237,565$199,637$123,189$135,537$108,211$92,268$71,830$82,637 Gross profit 81,278 66,699
98、 29,275 43,087 35,122 30,011 17,770 21,524 Gross margin 34.2%33.4%23.8%31.8%32.5%32.5%24.7%26.0%net earnings(loss)31,875 22,349 (4,288)2,174 1,522 (19,100)(12,797)(24,935)per share-basic 0.40 0.28 (0.05)0.03 0.02 (0.24)(0.16)(0.31)per share-diluted 0.40 0.28 (0.05)0.03 0.02 (0.24)(0.16)(0.31)SUMMARY
99、 ANALYSIS FOURTH QUARTER RESULTS ENDED APRIL 30,2014Total revenue for the quarter was$82.6 million,down 39%from the$135.5 million recorded in the same quarter last year.Due to the uncertainty around economic matters impacting the mining market,some customers delayed or cancelled their exploration dr
100、illing plans,which impacted the quarters 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.Revenue for the quarter from Canada-U.S.drilling operations decreased by 25%to$46.5 mi
101、llion compared to the same period last year.All of the decrease came from Canada as our U.S.operation was able to maintain its activity at the same levels as the corresponding quarter last year.South and Central American revenue was down 64%to$15.7 million for the quarter,compared to the prior year
102、quarter.All of the countries in this region,particularly Mexico,Chile and Argentina,were affected by a reduction in work by juniors due to the cancellation or reduction of projects.Australian,Asian and African operations reported revenue of$20.5 million,down 32%from the same period last year.Mongoli
103、a and Mozambique were the most affected in the region.In Mongolia,mining investment has significantly slowed down due to political uncertainty.In Mozambique,the cancellation of one large project had a significant impact on that operation.In Australia,revenue was down to$2 million during the quarter
104、from$4 million last year.The overall gross margin percentage for the quarter was 26.0%compared to 31.8%for the same period last year.Reduced pricing due to increased competitive pressures and delays impacted margins.General and administrative costs were$12.7 million for the quarter compared to$15.3
105、million in the same period last year.With the decrease in activity,the Company has reduced its general and administrative costs across the operation.The Company recorded a restructuring charge of$17.2 million consisting primarily of a non-cash write-down of assets of$9.7 million in Australia,$7.1 mi
106、llion of close-down costs in Australia relating to severance,lease termination and moving costs,and$0.4 million in additional restructuring charges as it continues to reduce costs across the organization.Also,during the quarter,the Company recognized a goodwill impairment charge of$2.3 million relat
107、ed to its Mozambique operations,primarily due to reduced cash flow expectations in the near term.The goodwill write-off is non-cash in nature and does not affect liquidity or cash flows from operating activities.LIQUIDITY AND CAPITAL RESOURCES Operating ActivitiesCash flow from operations(before cha
108、nges in non-cash operating working capital items,finance costs and income taxes)was$38.0 million for the fiscal year ended April 30,2014 compared to$145.7 million generated last year.The change in non-cash operating working capital items was an inflow of$20.5 million in fiscal 2014 compared to an in
109、flow of$30.5 million for the previous year.The change in non-cash operating working capital in fiscal 2014 was primarily impacted by:A decrease in accounts receivable of$34.9 million due to decreased activity in the fourth quarter as compared to the same period last year;A decrease in inventory of$6
110、.4 million;and A decrease in accounts payable of$21.9 million due to decreased activity as compared to last year.11 SUMMARY OF QUARTERLY RESULTS (in thousands of Canadian dollars,except per share information)Fiscal 2013 Fiscal 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Revenue$237,565$199,637$123,189$135,537$108,
111、211$92,268$71,830$82,637 Gross profit 81,278 66,699 29,275 43,087 35,122 30,011 17,770 21,524 Gross margin 34.2%33.4%23.8%31.8%32.5%32.5%24.7%26.0%net earnings(loss)31,875 22,349 (4,288)2,174 1,522 (19,100)(12,797)(24,935)per share-basic 0.40 0.28 (0.05)0.03 0.02 (0.24)(0.16)(0.31)per share-diluted
112、0.40 0.28 (0.05)0.03 0.02 (0.24)(0.16)(0.31)Financing ActivitiesUnder the terms of certain of the Companys debt agreements,the Company must satisfy certain financial covenants.Such agreements also limit,among other things,the Companys ability to incur additional indebtedness,create liens,engage in m
113、ergers or acquisitions and make dividend and other payments.During the period,the Company was,and continues to be,in compliance with all covenants and other conditions imposed by its debt agreements.Operating Credit FacilitiesThe credit facilities related to operations total$32.8 million($25.0 milli
114、on from a Canadian chartered bank,$3.9 million for a Chilean pesos facility and$3.9 million in various credit facilities)and are primarily secured by corporate guarantees of companies within the group.At April 30,2014,the Company had utilized$9.9 million of these lines mainly for stand-by letters of
115、 credit.The Company also has a credit facility of$4.1 million for credit cards for which interest rates and repayment terms are as per cardholder agreements.Long-Term DebtTotal long-term debt decreased by$19.8 million during the year to$23.8 million at April 30,2014.The decrease is due to debt repay
116、ments of$20.5 million during the year,offset by additional equipment financing of$0.7 million.As of April 30,2014,the Company had the following long-term debt facilities available:non-revolving facility for financing the acquisition of Bradley Group.At April 30,2014,the remaining balance of this fac
117、ility stood at$12.1 million.This facility is amortized over five years ending in September 2016.$50.0 million revolving facility for financing the cost of equipment purchases or acquisition costs of related businesses.At April 30,2014,this facility had not been utilized.non-revolving facility carryi
118、ng a fixed interest rate of 5.9%,amortized over ten years ending in August 2021.At April 30,2014,the remaining balance of this facility stood at$7.3 million.$3.0 million note payable,carrying interest at a fixed rate of 4%due in September 2014.The Company also has various other loans and capital lea
119、se facilities related to equipment purchases that totaled$1.4 million at April 30,2014,which were fully drawn and mature through 2017.MAnAGEMEnTS DISCUSSIOn AnD AnALySIS12The Company believes that it will be able to generate sufficient cash flow to meet its current and future working capital,capital
120、 expenditure,dividend and debt obligations.As at April 30,2014,the Company had unused borrowing capacity under its credit facilities of$72.9 million and cash of$74.2 million,for a total of$147.1 million in available funds.Investing ActivitiesCapital ExpendituresCapital expenditures were$22.6 million
121、(net of$0.7 million of equipment financing)for the year ended April 30,2014 compared to$69.0 million(net of$1.8 million of equipment financing)for the same period last year.(in thousands of Canadian dollars)During the year,the Company added 10 drill rigs through its capital expenditure program while
122、 retiring or disposing of 42 drill rigs through its modernization program,with the Companys total now standing at 708.It is expected that capital expenditures will be between$20 million and$25 million in fiscal 2015 as the Company focuses on cash flow generation.OUTLOOKDue to the uncertainty around
123、economic matters impacting the mining market,it is very difficult to predict customer behavior over the next twelve months.Although the Company has seen a pickup in financing activity for mining related projects,senior customers are still very cautious about investing in future projects.The Company
124、is in a unique position to react quickly when the industry begins to recover as the Companys financial strength has allowed it to invest in safety and to maintain its equipment in excellent condition.However,there is a growing concern that quality people are permanently leaving the industry,and duri
125、ng a recovery,shortages of qualified labour will once again become a critical issue.The Company will continue to focus on cash generation by limiting capital expenditures as necessary,by reducing inventory and by closely managing costs.By focusing on cash management,the Companys goal is to sustain i
126、ts dividend.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 Companys other expenses relates to variable incentive compensation based on the Companys profitability.FOREIGN EXCHAN
127、GE The Companys reporting currency is the Canadian dollar,however a significant portion of the Companys revenue and operating expenses outside of Canada are denominated in U.S.dollars,Chilean pesos and Australian dollars.The year-over-year comparisons in the growth of revenue and operating expenses
128、have been impacted by the falling Canadian dollar against the U.S.dollar.During fiscal 2014,approximately 32%of revenue generated was in Canadian dollars,4%in Chilean pesos and 4%in Australian dollars with most of the balance being in U.S.dollars.Since most of the input costs related to this revenue
129、 is denominated in the same currency as the revenue,the impact on earnings is somewhat muted.The favourable foreign exchange translation impact for the year,when comparing to the effective rates for the same period last year,is estimated at approximately$7 million on earnings however,remained less i
130、mpacted by currency fluctuations during the year as a large proportion of costs are typically incurred in the same currency as revenue.The estimated total favourable FX impact on net earnings for the year was estimated at$1.9 million.FUTURE ACCOUNTING CHANGESThe Company has not applied the following
131、 new and revised IASB standards that have been issued but are not yet effective:IFRS 9 Financial Instruments(as amended in 2010)IAS 32 Financial Instruments:Presentation(amended)IAS 36 Impairment of Assets(amended)IAS 39 Financial Instruments:Recognition and Measurement(amended)IFRIC 21 LeviesThe ad
132、option of the above standards is not expected to have a significant impact on the Companys Consolidated Financial Statements.13KEY SOURCES OF ESTIMATION,UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTS Use of estimatesThe preparation of financial statements in conformity with IFRS requires management t
133、o make judgments,estimates and assumptions that are not readily apparent from other sources,which affect the reported amounts of assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reported periods.The estimates and
134、 associated assumptions are based on historical experience and other factors that are considered to be relevant.Actual results could differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognized in the period in
135、 which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.Significant areas requiring the use of management estimates relate to the useful lives of property,plant and equipment f
136、or depreciation purposes,property,plant and equipment,accounts receivable,and inventory valuation,determination of income and other taxes,assumptions used in compilation of share-based payments,fair value of assets acquired and liabilities assumed in business acquisitions,amounts recorded as provisi
137、ons and accrued liabilities,and impairment testing of goodwill and intangible assets.Management determines the estimated useful lives of its property,plant and equipment based on historical experience of the actual lives of property,plant and equipment of similar nature and functions,and reviews the
138、se estimates at the end of each reporting period.Management reviews the condition of inventories at the end of each reporting period and recognizes a provision for slow-moving and obsolete items of inventory when they are no longer suitable for use.Managements estimate of the net realizable value of
139、 such inventories is based primarily on sales prices and current market conditions.Amounts used for impairment calculations are based on estimates of future cash flows of the Company.By their nature,the estimates of cash flows,including the estimates of future revenue,operating expenses,utilization,
140、discount rates and market pricing are subject to measurement uncertainty.Accordingly,the impact in the Consolidated Financial Statements of future periods could be material.Tax interpretations,regulations and legislation in the various jurisdictions in which the Company operates are subject to chang
141、e.As such,income taxes are subject to measurement uncertainty.Deferred income tax assets are assessed by management at the end of the reporting period to determine the probability that they will be realized from future taxable earnings.Compensation costs accrued for long-term share-based payment pla
142、ns are subject to the estimation of what the ultimate payout will be using the Black-Scholes pricing model,which is based on significant assumptions such as volatility,dividend yield and expected term.The amount recognized as provisions and accrued liabilities,including legal,restructuring,contractu
143、al,constructive and other exposures or obligations,is the best estimate of the consideration required to settle the related liability,including any related interest charges,taking into account the risks and uncertainties surrounding the obligation.In addition,contingencies will only be resolved when
144、 one or more future events occur or fail to occur.Therefore,assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.The Company assesses its liabilities and contingencies based upon the best information available,relevant tax
145、 laws and other appropriate requirements.MAnAGEMEnTS DISCUSSIOn AnD AnALySIS14JudgmentsThe Company applied judgment in determining the functional currency of the Company and its subsidiaries.Functional currency was determined based on the currency that mainly influences revenue,labour,materials and
146、other costs of providing services.property,plant and equipment and goodwill are aggregated into cash generating units(“CGU”s)based on their ability to generate largely independent cash inflows and are used for impairment testing.The determination of the Companys CGUs is subject to managements judgme
147、nt with respect to the lowest level at which independent cash inflows are generated.The Company has applied judgment in determining the degree of componentization of property,plant and equipment.Each part of an item of property,plant and equipment with a cost that is significant in relation to the t
148、otal cost of the item and has a separate useful life has been identified as a separate component and is depreciated separately.The Company has applied judgment in recognizing provisions and accrued liabilities,including judgment as to whether the Company has a present obligation(legal or constructiv
149、e)as a result of a past event;whether it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;and whether a reliable estimate can be made of the amount of the obligation.Deferred income tax assets are assessed by management at the end of the
150、reporting period to determine the probability that they will be realized from future taxable earnings.This determination is subject to management judgment.OFF BALANCE SHEET ARRANGEMENTSExcept for operating leases disclosed in note 23“Commitments”of the notes to Consolidated Financial Statements and
151、presented as contractual obligations in the liquidity and capital resources section herein,the Company does not have any other material off balance sheet arrangements.GENERAL RISKS AND UNCERTAINTIES The risks described below and elsewhere in this MD&A do not include all possible risks,and there may
152、be other risks of which management is currently not aware.Cyclical DownturnThe most significant operating risk affecting the Company is a downturn in demand for its services due to a decrease in activity in the minerals and metals industry.In attempting to mitigate this risk,the Company is exploitin
153、g its competitive advantage in specialized drilling and continues to explore opportunities to diversify and to rationalize its regional infrastructures.In previous cyclical market downturns,the Company realized that specialized services were not as affected by decreases in metal and mineral prices,c
154、ompared to its traditional services.Consequently,the Companys addition of rigs and acquisition of businesses have generally been focused on specialized drilling services.The impact on the Company of a severe and persistent downturn in the minerals and metals industry may not be fully mitigated by th
155、e foregoing measures.While receivables from senior and larger intermediate mining exploration companies consistently remain a significant component of total receivables,accounts receivable from junior mining companies also have a tendency to increase during a cyclical downturn.In many cases,capital
156、markets are the only source of funds available to these juniors and any change in the outlook for the sector or the lack of success of a specific exploration program can quickly impair the ability of these juniors to raise capital to pay for their drilling programs.15Levels of inventory typically in
157、crease as a result of increased activity levels.In addition to direct volume related increases however,inventory levels also increase due to an expansion of activity in remote locations at the end of long supply chains where it is necessary to increase inventory to ensure an acceptable level of cont
158、inuing service,which is part of the Companys competitive advantage.In the event of a sudden downturn of activities related either to a specific project or to the sector as a whole,it is more difficult and costly to redeploy this remote inventory to other regions where it can be consumed.Competitive
159、Pressurespressures from competitors can result in decreased contract prices and negatively impact revenue.There can be no assurance that the Companys competitors will not be successful in capturing a share of the Companys present or potential customer base.Country RiskThe Company is committed to uti
160、lizing its expertise and technology in exploration areas around the world.With this comes the risk of dealing with business and political systems in a variety of jurisdictions.Unanticipated events in a country(precipitated by developments within or external to the country),such as economic,political
161、,tax related,regulatory or legal changes(or changes in interpretation),could,directly or indirectly,have a material negative impact on operations and assets.The risks include,but are not limited to,military repression,extreme fluctuations in currency exchange rates,high rates of inflation,changes in
162、 mining or investment policies,nationalization/expropriation of projects or assets,corruption,delays in obtaining or inability to obtain necessary permits,nullification of existing mining claims or interests therein,hostage takings,labour unrest,opposition to mining from environmental or other non-g
163、overnmental organizations or shifts in political attitude that may adversely affect the business.There has been an emergence of a trend by some governments to increase their participation in the industry and thereby their revenues through increased taxation,expropriation,or otherwise.This could nega
164、tively impact the level of foreign investment in mining and exploration activities and thus drilling demand in these regions.Such events could result in reductions in revenue and transition costs as equipment is shifted to other locations.nationalization/expropriation of mining projects has a direct
165、 impact on suppliers to the mining industry,like the Company.While the Company works to mitigate its exposures to potential country risk events,the impact of any such event is not under the control of the Company,is highly uncertain and unpredictable and will be based on specific facts and circumsta
166、nces.As a result,the Company can give no assurance that it will not be subject to any country risk event,directly or indirectly,in the jurisdictions in which it operates.Repatriation of Funds or PropertyThere is no assurance that any of the countries in which the Company operates or may operate in t
167、he future will not impose restrictions on the repatriation of funds or property to other jurisdictions.TaxesThe Company is subject to many different forms of taxation in various jurisdictions throughout the world,including but not limited to,income tax,withholding tax,commodity tax and social securi
168、ty and other payroll related taxes,which may lead to disagreements with tax authorities regarding the application of tax law.Tax law and administration is extremely complex and often requires the Company to make subjective determinations.The computation of income,payroll and other taxes involves man
169、y factors,including the interpretation of tax legislation in various jurisdictions in which the Company is subject to ongoing tax assessments.The Companys estimate of tax related assets,MAnAGEMEnTS DISCUSSIOn AnD AnALySIS16liabilities,recoveries and expenses incorporates significant assumptions.Thes
170、e assumptions include,but are not limited to,the tax rates in various jurisdictions,the effect of tax treaties between jurisdictions and taxable income projections.To the extent that such assumptions differ from actual results,the Company may have to record additional tax expenses and liabilities,in
171、cluding interest and penalties.Foreign CurrencyThe Company conducts a significant proportion of its business outside of Canada and consequently has exposure to currency movements,principally in U.S.dollars,Chilean pesos and Australian dollars.In order to reduce its exposure to foreign exchange risks
172、 associated with currencies of developing countries,where a substantial portion of the Companys business is conducted,the Company has adopted a policy of contracting in U.S.dollars,where practical and legally permitted.Foreign exchange translations can have a great impact on year-to-year comparisons
173、 because of the geographic distribution of the Companys activities.year-over-year revenue comparisons have been affected by the fluctuation in the Canadian dollar against the U.S.dollar.Margin performance,however,is less affected by currency fluctuations as a large proportion of costs are typically
174、in the same currency as revenue.In future periods,year-to-year comparisons of revenue could be significantly affected by changes in foreign exchange rates.Operational RiskOperational risk is the risk of loss resulting from inadequate or failed internal processes,people and/or systems or from externa
175、l events.Operational risk is present in all of the Companys business activities,and incorporates exposure relating to fiduciary breaches,regulatory compliance failures,legal disputes,business disruption,pandemics,technology failures,processing errors,business integration,theft and fraud,damage to ph
176、ysical assets,employee safety and insurance coverage.Dependence on Key Customers From time to time,the Company may be dependent on a small number of customers for a significant portion of overall revenue and net income.Should one or more such customers terminate contracts with the Company,there can
177、be no guarantee that the Company will obtain sufficient replacement contracts to maintain the existing revenue and income levels.Consequently,the Company continues to work to expand its client base and geographic field of operations to mitigate its exposure to any single client,commodity or mining r
178、egion.SafetyFailure to maintain a record of acceptable safety performance may have an adverse impact on the Companys ability to attract and retain customers.Most of the Companys customers consider safety and reliability two primary attributes when selecting a provider of drilling services.The Compan
179、y continues to invest in training to improve skills,abilities and safety awareness.Expansion and Acquisition StrategyThe Company intends to remain vigilant with regards to potentially strategic future acquisitions and internal expansion.It is not possible to ensure that future acquisition opportunit
180、ies will exist on acceptable terms,or that newly acquired or developed entities will be successfully integrated into the Companys operations.Additionally,the Company cannot give assurances that it will be able to secure the necessary financing on acceptable terms to pursue this strategy.17Regulatory
181、 and Legal RiskRegulatory risk incorporates exposure relating to the risk of non-compliance with applicable legislation and regulatory directives.Legal risk incorporates non-compliance with legal requirements,including the effectiveness of preventing or handling litigation.Local management is respon
182、sible for managing day-to-day regulatory risk.In meeting this responsibility,local management receives advice and assistance from such corporate oversight functions as legal,compliance and internal audit.Compliance and internal audit test the extent to which operations meet regulatory requirements,a
183、s well as the effectiveness of internal controls.Corruption,Bribery,Fraud The Company is required to comply with the Canadian Corruption of Foreign Public Officials Act(“CFpOA”)as well as similar applicable laws in other jurisdictions,which prohibit companies from engaging in bribery or other prohib
184、ited payments or gifts to foreign public officials for the purpose of retaining or obtaining business.The Companys policies mandate compliance with these laws.However,there can be no assurance that the policies and procedures and other safeguards that the Company has implemented in relation to its c
185、ompliance with these laws will be effective or that Company employees,agents,suppliers,or other industry partners have not engaged or will not engage in such illegal conduct for which the Company may be held responsible.Violations of these laws could disrupt the Companys business and result in a mat
186、erial adverse effect on its business and operations.Extreme Weather Conditions and the Impact of Natural or Other DisastersThe Company operates in a variety of locations,some of which are prone to extreme weather conditions.From time to time these conditions,as well as natural or other disasters,cou
187、ld have an adverse financial impact on operations located in the regions where these conditions occur.Specialized Skills and Cost of Labour IncreasesGenerally speaking,drilling activity related to metals and minerals is broadly linked to price trends in the metals and minerals sector.During periods
188、of increased activity,a limiting factor in this industry can be a shortage of qualified drillers.The Company addresses this issue by attempting to become the“employer of choice”for drillers in the industry,as well as hiring and training more locally-based drillers.Historically,most of the Companys d
189、rillers have been Australian or Canadian.Development of local drillers has already had a positive impact in South American,African,Mongolian and Indonesian operations,and is expected to continue to play an important role.The Company also relies on an experienced management team across the Company to
190、 carry on its business.A departure of several members of the management team at one time could have an adverse financial impact on operations.A material increase in the cost of labour can materially affect gross margins and therefore the Companys financial performance.Equipment and Parts Availabilit
191、yThe Companys ability to provide reliable service is dependent upon timely delivery of equipment and replacement parts from fabricators and suppliers.Any factor that substantially increases the order time on equipment and increases uncertainty surrounding final delivery dates may constrain future gr
192、owth,existing operations,and the financial performance of the Company.Reputational Risknegative publicity,whether true or not,regarding practices,actions or inactions,could cause a decline in the Companys value,liquidity,or customer base.MAnAGEMEnTS DISCUSSIOn AnD AnALySIS18DISCLOSURE CONTROLS AND I
193、NTERNAL CONTROLS OVER FINANCIAL REPORTINGDisclosure controls and procedures are designed to provide reasonable assurance that all relevant information required to be disclosed in documents filed with securities regulatory authorities is recorded,processed,summarized and reported on a timely basis,an
194、d is accumulated and communicated to the Companys management,including the Chief Executive Officer(CEO)and the Chief Financial Officer(CFO),as appropriate,to allow timely decisions regarding required disclosure.Management,including the CEO and the CFO,does not expect that the Companys disclosure con
195、trols will prevent or detect all errors and all fraud.The inherent limitations in all control systems are such that they can provide only reasonable,not absolute,assurance that all control issues and instances of fraud or error,if any,within the Company have been detected.The Companys CEO and CFO ha
196、ve evaluated the effectiveness of the Companys disclosure controls and concluded that,subject to the inherent limitations and restrictions noted above,those disclosure controls were effective for the year ended April 30,2014.The Companys CEO and CFO are responsible for designing internal controls ov
197、er financial reporting(“ICFR”)or causing them to be designed under their supervision.The Companys ICFR are designed to provide reasonable assurance regarding the reliability of the Companys financial reporting and its preparation of financial statements for external purposes in accordance with Inter
198、national Financial Reporting Standards.As discussed above,the inherent limitations in all control systems are such that they can provide only reasonable,not absolute,assurance that all control issues and instances of fraud or error,if any,within the Company have been detected.Therefore,no matter how
199、 well designed,ICFR has inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and may not prevent and detect all misstatements.During fiscal 2014,management,including its CEO and CFO,evaluated the existence and design of the Companys ICFR and
200、confirm there were no changes to the ICFR that have occurred during the year that materially affected,or are reasonably likely to materially affect,the Companys ICFR.The Company continues to review and document its disclosure controls and its ICFR,and may from time to time make changes aimed at enha
201、ncing their effectiveness and to ensure that its systems evolve with the business.As of April 30,2014,an evaluation was carried out,under the supervision of the CEO and CFO,of the effectiveness of the Companys ICFR as defined in nI 52-109.Based on this evaluation,the CEO and the CFO concluded that t
202、he design and operation of these ICFR were effective.The evaluations were conducted in accordance with the framework and criteria established in Internal Control-Integrated Framework(1992),issued by the Committee of Sponsoring Organizations of the Treadway Commission(“COSO”),a recognized control mod
203、el,and the requirements of nI 52-109.OUTSTANDING SHARE DATA The authorized capital of the Company consists of an unlimited number of common shares,which is currently the only class of voting equity securities.Holders of common shares are entitled to receive notice of,attend and vote at all meetings
204、of the shareholders of the Company.Each common share carries the right to one vote in person or by proxy at all meetings of the shareholders of the Company.19As at June,the Companys share capital was composed of the following:Francis McGuire Denis LarocquePresident and Chief Executive Offi cer Chief
205、 Financial Offi cer June 5,2014Moncton,New Brunswick,CanadaRight:Francis McGuire,President&CEO Left:Denis Larocque,Chief Financial Offi cerDenis LarocquePresident and Chief Executive Offi cer Chief Financial Offi cerDenis LarocqueChief Financial Offi cerDenis LarocqueFrancis McGuire President and Ch
206、ief Executive Offi cer President and Chief Executive Offi cer Management is responsible for preparation and presentation of the annual consolidated fi nancial statements,managements discussion and analysis(“MD&A”)and all other information in this annual report.In managements opinion,the accompanying
207、 consolidated fi nancial statements have been properly prepared within reasonable limits of materiality in accordance with International Financial Reporting Standards and summarized in the consolidated fi nancial statements.The MD&A has been prepared in accordance with the requirements of Canadian s
208、ecurities regulators.Management has designed and evaluated the effectiveness of its disclosure controls and procedures.Since a precise determination of many assets and liabilities is dependent upon future events,the preparation of periodic fi nancial statements and the MD&A necessarily involves the
209、use of estimates and approximations.These have been made using careful judgment and with all information available up to June 5,2014.The MD&A also includes information regarding the estimated impact of current transactions and events,sources of liquidity,operating trends and risks and uncertainties.
210、Actual results in the future may differ materially from managements present assessment of this information because future events may not occur as expected.Financial operating data in the report are consistent,where applicable,with the consolidated fi nancial statements.To meet its responsibility for
211、 reliable and accurate fi nancial statements,management has established systems of internal control,which are designed to provide reasonable assurance that fi nancial information is relevant,reliable and accurate,and that assets are safeguarded and transactions are executed in accordance with manage
212、ments authorization.The consolidated fi nancial statements have been examined by Deloitte LLp,independent chartered accountants.The independent auditors responsibility is to express a professional opinion on the fairness of managements consolidated fi nancial statements.The auditors report outlines
213、the scope of their examination and sets forth their opinion.The Audit Committee of the Board of Directors is comprised of independent directors.The Audit Committee meets regularly with management and the independent auditors to satisfy itself that each is properly discharging its responsibilities,an
214、d to review the consolidated fi nancial statements and the MD&A.The Audit Committee reports its fi ndings to the Board of Directors for consideration when approving the consolidated fi nancial statements and the MD&A for issuance to the shareholders.The Audit Committee also recommends,for review by
215、the Board of Directors and approval of shareholders,the appointment of the independent auditors.The independent auditors have full and free access to the Audit Committee.Major Drilling Group International Inc.s Chief Executive Offi cer and Chief Financial Offi cer have certifi ed Major Drilling Grou
216、p International Inc.s annual disclosure documents as required in Canada by the Canadian securities regulators.MAnAGEMEnTS RESpOnSIBILITy20Chartered AccountantsJune 5,2014 Saint John,New Brunswick,CanadaInDEpEnDEnT AUDITORS REpORTTo the Shareholders of Major Drilling Group International Inc.We have a
217、udited the accompanying consolidated fi nancial statements of Major Drilling Group International Inc.,which comprise the consolidated balance sheets as at April 30,2014 and April 30,2013,and the consolidated statements of operations,consolidated statements of comprehensive(loss)earnings,consolidated
218、 statements of changes in equity and consolidated statements of cash fl ows for the years then ended,and a summary of signifi cant accounting policies and other explanatory information.Managements Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation a
219、nd fair presentation of these consolidated fi nancial statements in accordance with International Financial Reporting Standards,and for such internal control as management determines is necessary to enable the preparation of consolidated fi nancial statements that are free from material misstatement
220、,whether due to fraud or error.Auditors ResponsibilityOur responsibility is to express an opinion on these consolidated fi nancial statements based on our audits.We conducted our audits in accordance with Canadian generally accepted auditing standards.Those standards require that we comply with ethi
221、cal requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial st
222、atements.The procedures selected depend on the auditors judgment,including the assessment of the risks of material misstatement of the consolidated fi nancial statements,whether due to fraud or error.In making those risk assessments,the auditor considers internal control relevant to the entitys prep
223、aration and fair presentation of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control.An audit also includes evaluating the appropriat
224、eness of accounting policies used and the reasonableness of accounting estimates made by management,as well as evaluating the overall presentation of the consolidated fi nancial statements.We believe that the audit evidence we have obtained in our audits is suffi cient and appropriate to provide a b
225、asis for our audit opinion.OpinionIn our opinion,the consolidated fi nancial statements present fairly,in all material respects,the fi nancial position of Major Drilling Group International Inc.as at April 30,2014 and April 30,2013,and its fi nancial performance and its cash fl ows for the years the
226、n ended in accordance with International Financial Reporting Standards.2121Consolidated Statements of OperationsConsolidated Statements of Comprehensive(Loss)Earnings22 For the years ended April 30,2014 and 2013 (in thousands of Canadian dollars,except per share information)2014 2013 TOTAL REVENUE$3
227、54,946$695,928 DIRECT COSTS 250,519 475,589 GROSS PROFIT 104,427 220,339 OPERATING EXPENSES General and administrative 50,087 63,827 Other expenses 3,624 10,585 Loss on disposal of property,plant and equipment 1,617 2,452 Loss on short-term investments 368 -Foreign exchange loss(gain)4,377 (1,311)Fi
228、nance costs 1,002 2,316 Depreciation of property,plant and equipment(note 7)51,947 49,997 Amortization of intangible assets(note 9)1,359 2,840 Impairment of goodwill and intangible assets(note 19)14,326 3,324 Restructuring charge(note 20)20,454 5,440 149,161 139,470 (LOSS)EARNINGS BEFORE INCOME TAX
229、(44,734)80,869 INCOME TAX-PROVISION(RECOVERY)(note 13)Current 12,849 32,077 Deferred (2,273)(3,318)10,576 28,759 NET(LOSS)EARNINGS$(55,310)$52,110 (LOSS)EARNINGS PER SHARE(note 15)Basic$(0.70)$0.66 Diluted$(0.70)$0.65 For the years ended April 30,2014 and 2013 (in thousands of Canadian dollars)2014
230、2013 NET(LOSS)EARNINGS$(55,310)$52,110 OTHER COMPREHENSIVE(LOSS)EARNINGS Items that may be reclassified subsequently to profit or loss Unrealized gains on foreign currency translations(net of tax)15,428 11,722 COMPREHENSIVE(LOSS)EARNINGS$(39,882)$63,832 23 For the years ended April 30,2014 and 2013
231、(in thousands of Canadian dollars)Share-based Retained Foreign currency Share capital payments reserve earnings translation reserve TotalBALANCE AS AT MAY 1,2012$230,763$11,797$246,809$(1,670)$487,699 Exercise of stock options(note 14)222 (114)-108 Share-based payments reserve -2,521 -2,521 Dividend
232、s(note 25)-(15,831)-(15,831)230,985 14,204 230,978 (1,670)474,497 Comprehensive earnings:net earnings -52,110 -52,110 Unrealized gains on foreign currency translations -11,722 11,722 Total comprehensive earnings -52,110 11,722 63,832 BALANCE AS AT APRIL 30,2013$230,985$14,204$283,088$10,052$538,329
233、Share-based payments reserve -1,733 -1,733 Dividends(note 25)-(15,833)-(15,833)230,985 15,937 267,255 10,052 524,229 Comprehensive loss:net loss -(55,310)-(55,310)Unrealized gains on foreign currency translations -15,428 15,428 Total comprehensive loss -(55,310)15,428 (39,882)BALANCE AS AT APRIL 30,
234、2014$230,985$15,937$211,945$25,480$484,347 Consolidated Statements of Changes in EquityConsolidated Statements of Cash Flows24 For the years ended April 30,2014 and 2013 (in thousands of Canadian dollars)2014 2013 OPERATING ACTIVITIES(Loss)earnings before income tax$(44,734)$80,869 Operating items n
235、ot involving cash Depreciation and amortization 53,306 52,837 Loss on disposal of property,plant and equipment 1,617 2,452 Loss on short-term investments 368 -Share-based payments reserve 1,733 2,521 Impairment of goodwill and intangible assets(note 19)14,326 3,324 Restructuring charge(note 20)10,38
236、1 1,425 Finance costs recognized in(loss)earnings before income tax 1,002 2,316 37,999 145,744 Changes in non-cash operating working capital items(note 17)20,532 30,456 Finance costs paid (983)(2,306)Income taxes paid (16,624)(36,962)Cash flow from operating activities 40,924 136,932 FINANCING ACTIV
237、ITIES Increase in demand loan(note 10)4,066 -Repayment of long-term debt (20,457)(9,296)Issuance of common shares -108 Dividends paid(note 25)(15,832)(15,038)Cash flow used in financing activities (32,223)(24,226)INVESTING ACTIVITIES payment of consideration for previous business acquisition (205)(1
238、,698)Acquisition of short-term investments (3,587)-proceeds from disposal of short-term investments 3,074 -Acquisition of property,plant and equipment(net of direct financing)(note 7)(22,626)(69,005)proceeds from disposal of property,plant and equipment 5,375 3,409 Cash flow used in investing activi
239、ties (17,969)(67,294)Effect of exchange rate changes 1,201 (338)(DECREASE)INCREASE IN CASH (8,067)45,074 CASH,BEGINNING OF THE YEAR 82,311 37,237 CASH,END OF THE YEAR$74,244$82,311 Contingencies and commitments(notes 22 and 23)Approved by the Board of DirectorsDavid Tennant Jo Mark ZurelChairman of
240、the Board Chairman of the Audit CommitteeApproved by the Board of DirectorsDavid Tennant Jo Mark ZurelDavid Tennant Jo Mark ZurelDavid Tennant Jo Mark ZurelConsolidated Balance Sheets25 As at April 30,2014 and 2013 (in thousands of Canadian dollars)20142013 ASSETSCURRENT ASSETS Cash$74,244$82,311 Tr
241、ade and other receivables 66,211 98,079 Income tax receivable 12,179 10,013 Inventories(note 6)81,308 88,118 prepaid expenses 4,690 6,119 238,632 284,640 PROPERTY,PLANT AND EQUIPMENT(note 7)307,288 339,971 DEFERRED INCOME TAX ASSETS(note 13)5,825 5,601 GOODWILL(note 8)38,056 52,736 INTANGIBLE ASSETS
242、(note 9)1,923 3,279$591,724$686,227 LIABILITIES CURRENT LIABILITIES Demand loan(note 10)$3,909$-Trade and other payables 52,155 73,546 Income tax payable 3,416 5,020 Current portion of long-term debt(note 12)9,655 9,097 69,135 87,663 LONG-TERM DEBT(note 12)14,187 34,497 DEFERRED INCOME TAX LIABILITI
243、ES(note 13)24,055 25,738 107,377 147,898 SHAREHOLDERS EQUITY Share capital(note 14)230,985 230,985 Share-based payments reserve 15,937 14,204 Retained earnings 211,945 283,088 Foreign currency translation reserve 25,480 10,052 484,347 538,329$591,724$686,227 1.NATURE OF ACTIVITIESMajor Drilling Grou
244、p International Inc.(the“Company”)is incorporated under the Canada Business Corporations Act and has its head office at 111 St.George Street,Suite 100,Moncton,nB,Canada.The Companys common shares are listed on the Toronto Stock Exchange(“TSX”).The principal source of revenue consists of contract dri
245、lling for companies primarily involved in mining and mineral exploration.The Company has operations in Canada,the United States,South and Central America,Australia,Asia and Africa.2.BASIS OF PRESENTATIONStatement of complianceThese Consolidated Financial Statements present the Companys and its subsi
246、diaries financial results of operations and financial position in accordance with International Financial Reporting Standards(“IFRS”)as issued by the International Accounting Standards Board(“IASB”)and using the accounting policies described herein.These Consolidated Financial Statements were author
247、ized for issue on June 5,2014 by the Board of Directors.Basis of consolidationThe Consolidated Financial Statements incorporate the financial statements of the Company and entities controlled by the Company.Control is achieved when the Company is exposed,or has rights to,variable returns from its in
248、volvement with the investee and has the ability to affect those returns through its power over the investee.The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Statements of Operations from the effective date of acquisition or up to the effective da
249、te of disposal,as appropriate.Intra-group transactions,balances,income and expenses are eliminated on consolidation,where appropriate.Basis of preparationThe Consolidated Financial Statements have been prepared based on the historical cost basis except for certain financial instruments that are meas
250、ured at fair value,as explained in the related accounting policies presented in note 4.3.APPLICATION OF NEW AND REVISED IFRSThe following IASB standards,now in effect,have had no significant impact on the Companys Consolidated Financial Statements:IFRS 7 Financial instruments:disclosures(amended)IFR
251、S 10 Consolidated financial statements IFRS 11 Joint arrangements IFRS 12 Disclosure of interests in other entities IFRS 13 Fair value measurement IAS 1 Presentation of financial statements(amendments)IAS 16 Property,plant and equipment(amendments Annual improvements to IFRS)IAS 19R Employee benefit
252、s(amended)IAS 27 Separate financial statements(amended)IAS 28 Investments in associates and joint ventures(amended)notes to Consolidated Financial Statements For the years ended April 30,2014 and 2013 (in thousands of Canadian dollars,except per share information)263.APPLICATION OF NEW AND REVISED I
253、FRS(Continued)The Company has not applied the following new and revised IASB standards that have been issued but are not yet effective:IFRS 9 Financial Instruments(as amended in 2010)IAS 32 Financial Instruments:Presentation(amended)IAS 36 Impairment of Assets(amended)IAS 39 Financial Instruments:Re
254、cognition and Measurement(amended)IFRIC 21 LeviesThe adoption of the above standards is not expected to have a significant impact on the Companys Consolidated Financial Statements.4.SIGNIFICANT ACCOUNTING POLICIESCash Cash is comprised of cash on hand and demand deposits in banks,cashable at any tim
255、e.Financial instrumentsFinancial assets and financial liabilities are initially recognized at fair value and their subsequent measurement is dependent on their classification as described below.Their classification depends on the purpose for which the financial instruments were acquired or issued,th
256、eir characteristics and the Companys designation of such instruments.Settlement date accounting is used.Asset/Liability Classification MeasurementCash Loans and receivables Amortized costTrade and other receivables Loans and receivables Amortized costTrade and other payables Other financial liabilit
257、ies Amortized costLong-term debt Other financial liabilities Amortized costTransaction costs are included in the initial carrying value of financial instruments,except those classified as fair value through profit or loss,and are amortized into income using the effective interest method.Loans and re
258、ceivables-Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.Loans and receivables are initially recorded at fair value and are subsequently measured at amortized cost using the effective interest method,less any impa
259、irment.Interest income is recognized by applying the effective interest rate,except for trade and other receivables when the recognition of interest would be immaterial.Other financial liabilities-Other financial liabilities are initially recorded at fair value and are subsequently measured at amort
260、ized cost using the effective interest method.The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period.The effective interest rate is the rate that exactly discounts estimated future cash payments
261、(including all fees and points paid or received that form an integral part of the effective interest rate,transaction costs and other premiums or discounts)through the expected life of the financial liability,or where appropriate,a shorter period,to the net carrying amount on initial recognition.Emb
262、edded derivatives-Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of IAS 39 Financial Instruments:Recognition and Measurement(“IAS 39”)(e.g.financial liabilities)are treated as separate derivatives when their risks and characteristics are not clos
263、ely related to those of the host contracts and the host contracts are not measured at fair value.274.SIGNIFICANT ACCOUNTING POLICIES(Continued)Revenue recognitionRevenue from drilling contracts is recognized based on the terms of customer contracts that generally provide for revenue recognition on t
264、he basis of actual meters drilled at contract rates or fixed monthly charges or a combination of both.Revenue from ancillary services,primarily relating to extra services to the customer,is recorded when the services are rendered.Revenue is recognized when collection is reasonably assured.Earnings p
265、er shareBasic earnings per share are calculated by dividing net(loss)earnings by the weighted average number of common shares outstanding during the year.Diluted earnings per share are determined as net(loss)earnings divided by the weighted average number of diluted common shares for the year.Dilute
266、d common shares reflect the potential dilutive effect of exercising stock options.InventoriesThe Company maintains an inventory of operating supplies,drill rods and drill bits.Inventories are valued at the lower of cost and net realizable value,determined on a first in,first out(“FIFO”)basis.The val
267、ue of used inventory items is considered minimal therefore they are not valued,except for drill rods,which,if still considered usable,are valued at 50%of cost.Property,plant and equipmentproperty,plant and equipment(“pp&E”)are measured at cost,less accumulated depreciation and impairment losses.Depr
268、eciation,calculated using the straight-line method,is charged to operations at rates based upon the estimated useful life of each depreciable asset.When significant components of an item of pp&E have different useful lives,they are accounted for as separate assets.The following rates apply to those
269、assets being depreciated using the straight-line method:Residual value(%)Useful life(years)Buildings 0-15 15-20 Drilling equipment 0-15 5-15 Automotive and off-road equipment 0-10 5-10 Other(office,computer and shop equipment)0 5-15Land and assets under construction not available for use are not dep
270、reciated.Costs for repairs and maintenance are charged to operations as incurred.Subsequent costs are included in the assets carrying value when it is probable that future economic benefits associated with it will flow to the Company and when they are ready for their intended use.Subsequent costs ar
271、e depreciated over the useful life of the asset and replaced components are de-recognized.Depreciation methods,residual values and useful lives are re-assessed,at minimum,on an annual basis.LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the r
272、isks and rewards of ownership to the lessee.All other leases are classified as operating leases.Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or,if lower,at the present value of the minimum lease payments.The corr
273、esponding liability to the lessor is included in the Consolidated Balance Sheet as trade and other payables.Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.Finance exp
274、enses are recognized immediately in profit or loss,unless they are directly attributable to qualifying assets,in which case they are capitalized as borrowing costs.Contingent rentals are recognized as expenses in the periods in which they are incurred.notes to Consolidated Financial Statements For t
275、he years ended April 30,2014 and 2013 (in thousands of Canadian dollars,except per share information)284.SIGNIFICANT ACCOUNTING POLICIES(Continued)Operating lease payments are recognized as an expense on a straight-line basis over the lease term,except where another systematic basis is more represen
276、tative of the time pattern in which economic benefits from the leased asset are consumed.Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.In the event that lease incentives are received to enter into operating leases,such incenti
277、ves are recognized as a liability.The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis,except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.Business combin
278、ationsAcquisitions of businesses are accounted for using the acquisition method.The consideration transferred in a business combination is measured at fair value,which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company,liabilities incurred by the Co
279、mpany to the former owners of the acquiree and any equity interests issued by the Company in exchange for control of the acquiree.Acquisition-related costs are generally recognized in profit or loss as incurred.At acquisition date,the identifiable assets acquired and the liabilities assumed are reco
280、gnized at their fair value.Goodwill is measured as the excess of the sum of the consideration transferred,the amount of any non-controlling interests in the acquiree,and the fair value of the acquirers previously held equity interest in the acquiree(if any)over the net of the acquisition-date amount
281、s of the identifiable assets acquired and the liabilities assumed.If,after reassessment,the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred,the amount of any non-controlling interests in the acquiree and
282、 the fair value of the acquirers previously held interest in the acquiree(if any),then the excess is recognized immediately in profit or loss as a bargain purchase gain.When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a conting
283、ent consideration arrangement,the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination.Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjus
284、ted retrospectively,with corresponding adjustments against goodwill.Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period(which cannot exceed one year from the acquisition date)about facts and circumstances that existed at the ac
285、quisition date.The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified.Contingent consideration that is classified as equity is not re-measured at subsequen
286、t reporting dates and its subsequent settlement is accounted for within equity.Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with IAS 39,or IAS 37 Provisions,Contingent Liabilities and Contingent Assets(“IAS 37”),as
287、appropriate,with the corresponding gain or loss being recognized in profit or loss.If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,the Company reports provisional amounts for the items for which the accounting is i
288、ncomplete.Those provisional amounts are adjusted during the measurement period(see above),or additional assets or liabilities are recognized,to reflect new information obtained about facts and circumstances that existed at the acquisition date that,if known,would have affected the amounts recognized
289、 at that date.Contingent liabilities acquired in a business combination-Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date.At the end of subsequent reporting periods,such contingent liabilities are measured at the higher of the amou
290、nt that would be recognized in accordance with IAS 37 and the amount initially recognized less,if appropriate,cumulative amortization recognized in accordance with IAS 18 Revenue(“IAS 18”),unless IAS 39 is applicable.294.SIGNIFICANT ACCOUNTING POLICIES(Continued)Goodwill Goodwill represents the exce
291、ss of the purchase price of business acquisitions,including acquisition costs,over the fair value of the identifiable net assets acquired.The value of goodwill is tested for impairment at least annually.Any impairment loss identified by this test would be reported in earnings(loss)for the period dur
292、ing which the loss occurred.Intangible assetsIntangible assets that are acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date(which is regarded as their cost).Subsequent to initial recognition,intangible as
293、sets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses.Intangible assets include customer relationships and non-compete agreements,which are amortized on a straight-line basis over a three and five-year period,respectively.Impairm
294、ent of long-lived assetsAt the end of each reporting period,the Company assesses whether there are any indicators that the carrying values of its long-lived assets are impaired.If any such indication exists,the recoverable amount of the asset is estimated in order to determine the extent of the impa
295、irment loss(if any).Where it is not possible to estimate the recoverable amount of an individual asset,the Company estimates the recoverable amount of the cash generating unit(“CGU”)to which the asset belongs.A CGU is the smallest identifiable group of assets that generate cash inflows that are larg
296、ely independent of the cash inflows from other assets or group of assets.Where a reasonable and consistent basis of allocation can be identified,corporate assets are also allocated to individual CGUs,or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent
297、allocation basis can be identified.The recoverable amount is the higher of the fair value less costs to sell and the value-in-use.In assessing value-in-use,the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
298、the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.If the recoverable amount of an asset(or CGU)is estimated to be less than its carrying amount,the carrying amount of the asset(or CGU)is reduced to its recoverable amount.A
299、n impairment loss is recognized immediately in profit or loss.At the end of each reporting period,the Company assesses whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased.If any such indication
300、 exists,the Company estimates the recoverable amount of that asset.Where an impairment loss subsequently reverses,the carrying amount of the asset(or CGU)is increased to the revised estimate of its recoverable amount,but so that the increased carrying amount does not exceed the carrying amount that
301、would have been determined had no impairment loss been recognized for the asset(or CGU)in prior years.A reversal of an impairment loss is recognized immediately in profit or loss.Income taxesCurrent-The tax currently receivable or payable is based on taxable profit for the year and any adjustments r
302、esulting from prior years.Taxable profit differs from profit as reported in the Consolidated Statements of Operations because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.The Companys liability for current tax is calculate
303、d using tax rates that have been enacted or substantively enacted by the end of the reporting period.Deferred-The Company follows the asset and liability method of accounting for deferred taxes.This method takes a balance sheet approach and focuses on the amount of income taxes payable or receivable
304、 that will arise if an asset is realized or a liability is settled for its carrying amount.These resulting assets and liabilities,referred to as“deferred income tax assets and liabilities”,are computed and recognized based on carry forwards of unused tax losses,unused tax credits and the differences
305、 between the carrying amount of balance sheet items and their corresponding tax values using the enacted,or substantively enacted,income tax rates in effect when the assets are expected to be realized or the liabilities are expected to be settled.notes to Consolidated Financial Statements For the ye
306、ars ended April 30,2014 and 2013 (in thousands of Canadian dollars,except per share information)304.SIGNIFICANT ACCOUNTING POLICIES(Continued)The Companys primary temporary differences arise between the tax carrying value and net book value of property,plant and equipment.The carrying amount of defe
307、rred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.Translation of foreign currenciesThe Consolidated Financial Statements are prese
308、nted in Canadian dollars,which is the Companys presentation currency,and the functional currency of the parent company.Items included in the financial statements of each of the Companys subsidiaries are measured using the functional currency.The majority of the Companys subsidiaries have a functiona
309、l currency of U.S.dollars,Canadian dollars,Chilean pesos or Australian dollars.Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction.Foreign exchange gains and losses resulting from the settlement of such transac
310、tions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognized in the Consolidated Statements of Operations.non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.For the p
311、urposes of the Consolidated Financial Statements,the assets and liabilities of the Companys foreign operations(with functional currencies other than Canadian dollars)are translated into Canadian dollars using exchange rates at the end of the period.Income and expense items are translated at the aver
312、age rates of exchange for the period.The resulting translation adjustments are recognized in other comprehensive earnings within the foreign currency translation reserve.Additionally,foreign exchange gains and losses related to certain intercompany loans that are permanent in nature are included in
313、other comprehensive earnings and foreign currency translation reserve.Share-based paymentsThe Company uses the fair value method to measure compensation expense at the date of grant of stock options to employees and Directors.The fair value of each tranche for all option grants is determined using t
314、he Black-Scholes option-pricing model,which considers estimated forfeitures at time of grant,and each tranche is amortized separately to earnings over the vesting period of the tranche with an offset to the share-based payments reserve.When options are exercised,the corresponding share-based payment
315、s reserve and the proceeds received by the Company are credited to share capital.The Company records the fair value of deferred share units as compensation expense,with offset to accrued liabilities.Provisionsprovisions are recognized when the Company has a present obligation(legal or constructive)a
316、s a result of a past event,it is probable that the Company will be required to settle the obligation,and a reliable estimate can be made of the amount of the obligation.The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end
317、 of the reporting period,taking into account the risks and uncertainties surrounding the obligation.When a provision is measured using the cash flows estimated to settle the present obligation,its carrying amount is the present value of those cash flows(where the effect of the time value of money is
318、 material).When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.Onerous
319、contracts-present obligations arising under onerous contracts are recognized and measured as provisions.An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to
320、 be received from the contract.Restructurings-A restructuring provision is recognized when the Company has developed a detailed formal plan for restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing
321、its main features to those affected by it.The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring,which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.314
322、.SIGNIFICANT ACCOUNTING POLICIES(Continued)Derivative financial instrumentsThe Company has entered into a derivative financial instrument,in the form of an interest rate swap,to manage its exposure to interest rate risk.The derivative is initially recognized at fair value at the date the derivative
323、contract is executed and is subsequently re-measured to fair value at each reporting date.The resulting gain or loss is recognized in other comprehensive earnings unless the derivative is considered to be ineffective,in which event it is recognized in profit or loss.Hedge accountingThe Company desig
324、nated the derivative as a cash flow hedge.At the inception of the hedge,and on an ongoing basis,the Company documents whether the hedging instrument used in the hedging relationship is highly effective in offsetting changes in cash flows of the hedged item.Cash flow hedgeThe effective portion of cha
325、nges in the fair value of the derivative is recognized in other comprehensive earnings and accumulated in shareholders equity.The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.Hedge accounting is discontinued when the Company revokes the hedging relatio
326、nship,the hedging instrument expires or is terminated,or no longer qualifies for hedge accounting.Any cumulative gain or loss accumulated in shareholders equity at that time is recognized immediately in profit or loss.5.KEY SOURCES OF ESTIMATION,UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTSUse of es
327、timatesThe preparation of financial statements in conformity with IFRS requires management to make judgments,estimates and assumptions that are not readily apparent from other sources,which affect the reported amounts of assets and liabilities at the dates of the Consolidated Financial Statements an
328、d the reported amounts of revenue and expenses during the reported periods.The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.Actual results could differ from these estimates.The estimates and underlying assumptions are re
329、viewed on an ongoing basis.Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.Significant areas requiring
330、the use of management estimates relate to the useful lives of property,plant and equipment for depreciation purposes,property,plant and equipment,accounts receivable,and inventory valuation,determination of income and other taxes,assumptions used in compilation of share-based payments,fair value of
331、assets acquired and liabilities assumed in business acquisitions,amounts recorded as provisions and accrued liabilities,and impairment testing of goodwill and intangible assets.Management determines the estimated useful lives of its property,plant and equipment based on historical experience of the
332、actual lives of property,plant and equipment of similar nature and functions,and reviews these estimates at the end of each reporting period.Management reviews the condition of inventories at the end of each reporting period and recognizes a provision for slow-moving and obsolete items of inventory
333、when they are no longer suitable for use.Managements estimate of the net realizable value of such inventories is based primarily on sales prices and current market conditions.notes to Consolidated Financial Statements For the years ended April 30,2014 and 2013 (in thousands of Canadian dollars,except per share information)325.KEY SOURCES OF ESTIMATION,UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTS(
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