Orbit Garant Drilling reports fiscal 2014 second quarter results

• Revenue was $16.8 million in the second quarter of fiscal 2014 ("Q2 FY2014"), compared to $24.2 million in the second quarter of fiscal 2013 ("Q2 FY2013")
• Adjusted gross margin (excluding depreciation expense) was 20.5%, compared to 22.2% in Q2 FY2013
• EBITDA of $0.9 million compared to $3.1 million in Q2 FY2013
• Net loss of $1.5 million, or $(0.05) per share (diluted) in Q2 FY2014, compared to a net loss of $0.3 million, or $(0.01) per share (diluted) in Q2 FY2013
• 184,040 metres drilled in Q2 FY2014, down from 240,553 metres in Q2 FY2013
• Debt reduction of $2.1 million in Q2 FY2014

VAL-D'OR, QC, Feb. 11, 2014 /CNW/ - Orbit Garant Drilling Inc. (TSX: OGD) ("Orbit Garant" or the "Company") today announced its financial results for the three and six month periods ended December 31, 2013. All dollar amounts are in Canadian currency unless otherwise stated. Percentage calculations are based on numbers in the financial statements and may not correspond to rounded figures presented in this news release.

Q2 FY2014 Summary

¹ In accordance with IFRS, reported gross profit and margin include certain depreciation expenses. For comparative purposes, adjusted gross margin is also shown excluding these depreciation expenses
² EBITDA = Earnings before interest, taxes, depreciation and amortization

"The mineral drilling industry continues to be impacted by challenging market conditions globally, as many senior and intermediate mining companies have scaled back or delayed their drilling programs to control costs, and junior exploration companies have had difficulty advancing early stage exploration activities due to a lack of capital. Our financial results to date in fiscal 2014 reflect these broad market conditions," said Eric Alexandre, President and CEO of Orbit Garant. "In response to these challenging market conditions, we are managing our operations to support operating margins and maintain financial flexibility, while also retaining our key personnel. We have lowered our adjusted G&A expenses, reduced our long-term debt and cut our capital expenditure budget for 2014. Our total workforce is now at approximately 550 employees, down from 800 employees at this time a year ago. Through continued disciplined expense management, we expect to remain cash flow positive in fiscal 2014."

"We remain focused on supporting our core strengths and pursuing market opportunities," continued Mr. Alexandre. "We added one computerized drill rig to our fleet in the quarter, bringing our total number of computerized drill rigs to 19. All of our computerized drill rigs are currently deployed on customer projects and we continue to demonstrate improved productivity compared to conventional rigs. We are exploring opportunities to further diversify our market presence and have recently initiated business development activities in Chile, one of the world's largest mineral drilling markets."

Second Quarter Results

For the three months ended December 31, 2013 ("Q2 FY2014") revenue decreased 30.4% to $16.8 million, from $24.2 million in the three-month period ended December 31, 2012 ("Q2 FY2013"). Domestic drilling revenue decreased to $15.3 million in Q2 FY2014, from $21.6 million in Q2 FY2013. International drilling revenue was $1.5 million in Q2 FY2014, compared to $2.6 million in Q2 FY2013. Decreased revenue resulted primarily from a decline in metres drilled and lower average revenue per metre drilled. The Company's fleet drilled a total of 184,040 metres in Q2 FY2014, down from 240,553 metres in Q2 FY2013. Average revenue per metre drilled was $90.61 in Q2 FY2014, compared to $98.54 in Q2 FY2013. The Company's decline in drilling activity and lower average revenue per metre drilled reflects current market conditions in the contract mineral drilling industry, as many senior and intermediate mining companies have scaled back their drilling programs, and junior mining companies have significantly cut their exploration activities due to a lack of capital.

Gross profit for Q2 FY2014 decreased to $1.1 million from $2.9 million in Q2 FY2013. Gross margin was 6.8%, down from 11.9% in Q2 FY2013. In accordance with IFRS, depreciation expenses totalling $2.3 million are included in cost of contract revenue for Q2 FY2014, compared to $2.5 million in Q2 FY2013. Adjusted gross margin, excluding depreciation expenses, was 20.5% in Q2 FY2014 compared to 22.2% in Q2 FY2013. Decreased gross profit and gross margin was attributable to reduced metres drilled for both domestic and international projects, and lower average revenue per metre drilled.

General and administrative ("G&A") expenses were $3.1 million in Q2 FY2014 compared to $3.0 million in Q2 FY2013. A reversal of a portion of a contingent earn-out consideration reduced G&A expenses by $0.8 million in Q2 FY2013. In accordance with IFRS, depreciation and amortization expenses of $0.4 million are included in G&A expenses for Q2 FY2014, compared to $0.7 million in Q2 FY2013. Adjusted G&A expenses, excluding depreciation and amortization expenses, were $2.6 million for Q2 FY2014, compared to adjusted G&A expenses, excluding depreciation and amortization expenses, and the $0.8 million gain from a reversal of a portion of a contingent earn-out consideration, were $3.0 million in Q2 FY2013.

Earnings before interest, taxes, depreciation and amortization. ("EBITDA")² totalled $0.9 million in Q2 FY2014, compared to EBITDA of $3.1 million in Q2 FY2013, reflecting decreased domestic and international drilling revenue.

The Company reported a net loss in Q2 FY2014 of $1.5 million, or $(0.05) per common share (basic and diluted), compared to a net loss of $0.3 million, or $(0.01) per common share (basic and diluted), in Q2 FY2013. The decline in metres drilled and lower rig utilization due to weakened demand, and lower average revenue per metre drilled contributed to the increased net loss.

As at December 31, 2013, the Company's long-term debt, including the current portion, was $10.4 million, compared to $14.8 million as at June 30, 2013. The Company had working capital of $47.9 million and 33,276,519 common shares issued and outstanding.

Orbit Garant's interim unaudited financial statements and management's discussion and analysis for the second quarter and six month period ended December 31, 2013 are available via the Company's website at www.orbitgarant.com or SEDAR at www.sedar.com.

Conference call

Eric Alexandre, President and CEO, and Alain Laplante, Vice President and CFO, will host a conference call for analysts and investors on Wednesday, February 12, 2014 at 10:00 a.m. (ET). The dial-in numbers for the conference call are 647-427-7450 or 1-888-231-8191. The call will be webcast at: http://www.orbitgarant.com/en/sites/fog/investors.aspx.

To access a replay of the conference call dial 416-849-0833 or 1-855-859-2056, passcode: 41669170. The replay will be available until February 19, 2014. A webcast archive of the call will also be available via Orbit Garant's website.

About Orbit Garant
Headquartered in Val-d'Or, Quebec, Orbit Garant is one of the largest Canadian-based mineral drilling companies, providing both underground and surface drilling services in Canada and internationally through its 214 drill rigs and approximately 550 employees. Orbit Garant provides services to major, intermediate and junior mining companies, through each stage of mining exploration, development and production. The Company also provides geotechnical drilling services to mining or mineral exploration companies, engineering and environmental consultant firms, and government agencies. For more information please visit the Company's website at www.orbitgarant.com.

(2) Management believes that EBITDA is a useful supplemental measure of operating performance before interest, taxes, depreciation and amortization. However, EBITDA is not a recognized earnings measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss (which is determined in accordance with IFRS) as an indicator of the performance of the Company or as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ materially from the methods used by other public companies and, accordingly, may not be comparable to similarly named measures used by other public companies.

Forward-looking information
This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to business of Orbit Garant Drilling Inc. (the "Company") and the environment in which it operates. Forward-looking statements are identified by words such as "believe", "anticipate", "expect", "intend", "plan", "will", "may" and other similar expressions. These statements are based on the Company's expectations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. These risks and uncertainties are discussed in the Company's regulatory filings available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances.

SOURCE Orbit Garant Drilling Inc.