Orbit Garant Drilling Reports Fiscal 2014 First Quarter Results

• Revenue was $18.5 million in the first quarter of fiscal 2014 ("Q1 FY2014"), compared to $34.9 million in the first quarter of fiscal 2013 ("Q1 FY2013")
• Adjusted gross margin (excluding depreciation expense) was 23.5%, compared to 26.8% in Q1 FY2013
• EBITDA of $1.7 million compared to $6.3 million in Q1 FY2013
• Net loss of $1.1 million, or $(0.03) per share (diluted) in Q1 FY2014, compared to net earnings of $2.0 million, or $0.06 per share (diluted), in Q1 FY2013
• 201,503 metres drilled in Q1 FY2014, down from 304,832 metres in Q1 FY2013
• Debt reduction of $2.2 million in Q1 FY2014

VAL-D'OR, QC, Nov. 12, 2013 /CNW/ - Orbit Garant Drilling Inc. (TSX: OGD) ("Orbit Garant" or the "Company") today announced its financial results for the three-month period ended September 30, 2013 ("Q1 FY2014"). 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.

Q1 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, amortization, impairment of goodwill and intangible assets

"Our fiscal 2014 first quarter financial results reflect the continued challenging market conditions within the contract mineral drilling industry, as many senior and intermediate mining companies have scaled back or delayed their drilling programs, both in Canada and abroad, and junior exploration companies continue to experience difficulties in accessing capital to advance early stage projects. With the broad decline in demand for drilling services, pricing has also come under pressure," said Eric Alexandre, President and CEO of Orbit Garant. "We have experienced weak market conditions in the past and we know that market conditions can change rapidly. We remain focused on what we can control, including disciplined expense management, retaining skilled employees and maintaining our focus on driller productivity, health and safety, innovation and market opportunities. Our workforce has been reduced 25% from the first quarter a year ago, we have reduced G&A expenses and inventories, and paid down debt. Our capital expenditure budget for fiscal 2014 has been reduced to $3.4 million. We are maintaining close contact with our customers, and monitoring market conditions closely, so that we are well prepared to ramp up as market conditions improve."

First Quarter Results

For the three months ended September 30, 2013 ("Q1 FY2014") the Company's revenue decreased 47.1% to $18.5 million, from $34.9 million in the three-month period ended September 30, 2012 ("Q1 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 201,503 metres in Q1 FY2014, compared to 304,832 metres in Q1 FY2013. Average revenue per metre drilled was $89.31 in Q1 FY2014, compared to $112.90 in Q1 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.

Orbit Garant's domestic drilling revenue decreased 45.3% to $17.7 million in Q1 FY2014, compared to $32.3 million in Q1 FY2013, reflecting a decline in metres drilled and lower average revenue per metre drilled during the quarter. International drilling revenue declined to $0.8 million in Q1 FY2014, compared to $2.6 million in Q1 FY2013, due to lower demand for drilling services.

Gross profit for Q1 FY2014 decreased to $2.0 million from $6.9 million in Q1 FY2013. Gross margin was 10.7% in Q1 FY2014, down from 19.8% in Q1 FY2013. In accordance with IFRS, depreciation expenses totalling $2.4 million are included in cost of contract revenue for Q1 FY2014, as in Q1 FY2013. Adjusted gross margin, excluding depreciation expenses, was 23.5% in Q1 FY2014 compared to 26.8% in Q1 FY2013.  Decreased gross profit and gross margin in Q1 FY2014 was attributable to reduced metres drilled for both domestic and international projects as well as lower average revenue per metre drilled.

General and administrative ("G&A") expenses were reduced to $3.1 million (16.8 % of revenue) in Q1 FY2014 compared to $3.8 million (10.8% of revenue) in Q1 FY2013. In accordance with IFRS, depreciation and amortization expenses of $0.5 million are included in G&A expenses for Q1 FY2014, compared to $0.7 million in Q1 FY2013. Adjusted G&A expenses, excluding depreciation and amortization expenses, were reduced to $2.6 million (14.3% of revenue) for Q1 FY2014, compared to $3.0 million (8.7% of revenue) for Q1 FY2013.

Earnings before interest, taxes, depreciation, amortization, impairment of goodwill and intangible assets ("EBITDA")² totalled $1.7 million in Q1 FY2014, compared to EBITDA of $6.3 million in Q1 FY2013. The decline is primarily attributable to decreased domestic and international drilling revenue. EBITDA margin in Q1 FY2014 was 9.1% compared to 17.9% in Q1 FY2013.

The Company reported a net loss in Q1 FY2014 of $1.1 million, or $(0.03) per common share (basic and diluted), compared to net earnings of $2.0 million, or $0.06 per common share (basic and diluted), in Q1 FY2013. The decline in metres drilled and lower rig utilization due to weakened demand, and lower average revenue per metre drilled contributed to the net loss in Q1 FY2014.

As at September 30, 2013, the Company's long-term debt, including the current portion, was $12.6 million, compared to $14.8 million as at June 30, 2013. As at September 30, 2013, the Company had working capital of $50.2 million and 33,276,519 common shares issued and outstanding.

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, November 13, 2013 at 9:00 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.newswire.ca/en/webcast/detail/1246781/1373677

To access a replay of the conference call dial 416-849-0833 or 1-855-859-2056, passcode: 91127977. The replay will be available until November 20, 2013. The replay can also be accessed via the Internet at the above URL address.

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 600 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 prior to debt service, capital expenditures, income taxes, impairment of goodwill and intangible assets. 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.