Orbit Garant Drilling Reports Fiscal 2013 Fourth Quarter and Year-End Financial Results

• Revenue was $104.2 million in fiscal 2013, compared to $154.8 million in fiscal 2012
• Adjusted gross margin (excluding depreciation expense) was 24.4%, compared to 27.3% in fiscal 2012
• A non-cash impairment charge of $28.2 million related to goodwill and intangible assets was recorded in the fourth quarter due to ongoing market weakness
• EBITDA decreased to $15.4 million from $27.9 million in fiscal 2012
• 1.0 million metres drilled in fiscal 2013, down from 1.5 million metres in fiscal 2012
• Adjusted net earnings, excluding impairment charges, were $1.7 million, or $0.05 per share (diluted) in fiscal 2013, compared to net earnings of $10.4 million, or $0.30 per share (diluted) in fiscal 2012
• Debt reduction of $11.7 million in fiscal 2013

VAL-D'OR, QC, Sept. 26, 2013 /CNW/ - Orbit Garant Drilling Inc. (TSX: OGD) ("Orbit Garant" or the "Company") today announced its financial results for the fourth quarter and fiscal year end ended June 30, 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.

Summary

($ amounts in millions, except earnings per share)	3 months ended June 30, 2013	3 months ended June 30, 2012	Year ended June 30, 2013	Year ended June 30, 2012
Revenue	$21.4	$43.6	$104.2	$154.8
Gross Profit¹	$2.3	$7.7	$15.5	$33.7
Gross Margin (%)¹	10.6	17.7	14.9	21.8
Adjusted Gross Margin (%)¹	21.9	22.6	24.4	27.3
EBITDA^2	$3.1	$5.5	$15.4	$27.9
Net (loss) earnings	$(27.6)	$1.3	$(26.5)	$10.4
Net (loss) earnings per common share
- Basic	$(0.83)	$0.04	$(0.80)	$0.31
- Diluted	$(0.83)	$0.04	$(0.80)	$0.30
Adjusted net earnings^3	$0.6	$1.3	$1.7	$10.4
Adjusted net earnings per common share
-  Basic^4	$0.02	$0.04	$0.05	$0.31
-  Diluted^4	$0.02	$0.04	$0.05	$0.30
Total metres drilled	211,457	402,126	996,803	1,489,658

¹In 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

³ Reflects Net (loss) earnings, excluding impairment of goodwill and intangible assets.

⁴ Reflects Net (loss) earnings per common share, excluding impairment of goodwill and intangible assets.

"The contract drilling industry continues to experience difficult market conditions, 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. Our customers' current level of drilling activity reflects these broader market trends," said Eric Alexandre, President and CEO of Orbit Garant. "We have experienced extended periods of soft industry conditions before and we know how to actively manage our operations to support margins, protect our core capabilities and ensure financial flexibility.  We have reduced our workforce by 33% to approximately 650 employees at fiscal 2013 year end, compared to approximately 950 employees at this time a year ago. We have also cut our general and administrative expenses and paid down debt. In consideration of current market conditions, we recognized a $28.2 million non-cash impairment charge related to goodwill and some intangible assets in the fourth quarter. Looking ahead to fiscal 2014, we will reduce our planned capital expenditures to $3.4, from $9.3 million in fiscal 2013."

"While exercising disciplined expense management, we are retaining our most skilled employees, so we can respond quickly to changing customer requirements when market conditions improve, and are reducing our overall leverage, so we can take advantage of opportunities to strengthen Orbit Garant's competitive position through strategic acquisitions or other initiatives," continued Mr. Alexandre.

"Through disciplined expense management and our balance sheet initiatives, we expect Orbit Garant's operations to be cash flow positive in fiscal 2014. Our computerized drilling rigs continue to perform well on customer projects, and we look forward to increasing their deployment when market demand picks up," added Mr. Alexandre.

Fourth Quarter Results

For the three months ended June 30, 2013 ("Q4 FY2013") the Company's revenue decreased 50.9% to $21.4 million, from $43.6 million in the three-month period ended June 30, 2012 ("Q4 FY2012"). Decreased revenue resulted primarily from a decline in metres drilled, as some of the Company's customers suspended or scaled back drilling activities, and lower average revenue per metre drilled. The Company's fleet drilled a total of 211,457 metres in Q4 FY2013, compared to 402,126 metres in Q4 FY2012. Average revenue per metre drilled was $99.22 in Q4 FY2013, compared to $105.83 in Q4 FY2012.

Orbit Garant's domestic drilling revenue decreased 47.5% to $20.4 million in Q4 FY2013, compared to $38.7 million in Q4 FY2012, reflecting a decline in metres drilled and lower average revenue per metre drilled during the quarter. International drilling revenue declined to $1.0 million in Q4 FY2013, compared to $4.7 million in Q4 FY2012, primarily due to lower demand for drilling services.

Gross profit for Q4 FY2013 decreased to $2.3 million from $7.7 million in Q4 FY2012. Gross margin was 10.6% in Q4 FY2013, down from 17.7% in Q4 FY2012. In accordance with IFRS, depreciation expenses totalling $2.4 million are included in cost of contract revenue for Q4 FY2013, compared to $2.1 million in depreciation expenses in Q4 FY2012. Adjusted gross margin, excluding depreciation expenses, was 21.9% in Q4 FY2013 compared to 22.6% in Q4 FY2012.  Decreased gross profit and gross margin in Q4 FY2013 was attributable to reduced metres drilled for both domestic and higher-margin international projects, lower average revenue per metre drilled, as well as to labour and equipment relocation costs related to completed contracts that were not renewed or replaced as had previously been expected.

General and administrative (G&A) expenses were reduced to $2.3 million (10.9 % of revenue) in Q4 FY2013 compared to $5.1 million (11.7% of revenue) in Q4 FY2012. In accordance with IFRS, depreciation and amortization expenses of $0.7 million are included in G&A expenses for Q4 FY2013, compared to $0.9 million in Q4 FY2012.

Adjusted G&A expenses, excluding depreciation and amortization expenses were reduced to $1.6 million (7.6% of revenue) for Q4 FY2013, compared to $4.2 million (9.7% of revenue) for Q4 FY2012. The decline in G&A expenses is primarily attributable to a reversal of a contingent consideration of 2.4 million associated with the Company's acquisition of Advantage Control Technologies in November 2010, and the acquisition of Lantech Drilling Services in December 2011. The Company has also taken actions to reduce its total G&A expenses due to the decline in drilling activity. The decline in G&A expenses in Q4 FY2013 was partially offset by a $0.7 million increase in bad debt provision over Q4 FY2012.

An impairment charge of $28.2 million was recognized in Q4 FY2013.  This non-cash item was a write-down of goodwill and some intangible assets resulting from the current ongoing weakness of domestic and international drilling markets.

Earnings before interest, taxes, depreciation, amortization, impairment of goodwill and intangible assets ("EBITDA")² totalled $3.1 million in Q4 FY2013, compared to EBITDA of $5.5 million in Q4 FY2012. The decline is primarily attributable to decreased domestic and international drilling revenue. EBITDA margin in Q4 FY2013 was 14.7% compared to 12.9% in Q4 FY2012.

The Company reported a net loss in Q4 FY2013 of $27.6 million, or $(0.83) per common share (basic and diluted) compared to net earnings of $1.3 million, or $0.04 per common share (basic and diluted) in Q4 FY2012. The Company's net loss for the quarter reflects a non-cash impairment charge of $28.2 million, related to a write-down of goodwill and intangible assets.  Adjusted net earnings for Q4 FY2013, excluding impairment charges, were $0.6 million, or $0.02 per common share (basic and diluted).  The decline in metres drilled and lower average revenue per metre drilled contributed to the decline in adjusted net earnings in the fourth quarter of fiscal 2013.

Fiscal 2013 Results

For the twelve months ended June 30, 2013 ("fiscal 2013"), Orbit Garant generated revenue of $104.2 million, a decrease of $50.6 million, or 32.7%, from $154.8 million in the twelve months ended June 30, 2012 ("fiscal 2012"). The decline in revenue resulted primarily from a decline in drilling activity due to weakened overall market demand.

Gross profit for fiscal 2013 was $15.5 million, compared to $33.7 million in fiscal 2012. Gross margin for fiscal 2013 was 14.9%, compared to 21.8% in fiscal 2012. Adjusted gross margin, excluding depreciation expense, decreased to 24.4% in fiscal 2013, from 27.3% in fiscal 2012. The decline in gross profit and gross margin is primarily attributable to a decline in both domestic and international drilling activity. The Company also experienced labour and equipment relocation costs related to completed contracts that were not renewed or replaced.

General and administrative (G&A) expenses were $12.9 million (12.4% of revenue) for fiscal 2013, compared to $17.1 million (11.1% of revenue) in fiscal 2012. In accordance with IFRS, depreciation and amortization expenses of $2.9 million are included in G&A expenses for fiscal 2013, in line with fiscal 2012. Adjusted G&A expenses, excluding depreciation and amortization expenses, totalled $10.0 million (9.6% of revenue) for fiscal 2013, compared to $14.2 million (9.2% of revenue) in fiscal 2012.  The decline in G&A expenses is primarily attributable to a reversal of a contingent consideration of $3.2 million associated with the Company's acquisition of Advantage Control Technologies (1085820 Ontario Limited) in November 2010, and the acquisition of Lantech Drilling Services Inc. in December 2011. The Company has also taken actions to reduce its total G&A expenses due to the decline in drilling activity. The decline in total G&A expenses in fiscal 2013 was partially offset by a $0.9 million increase in bad debt provision.

The Company reported a net loss in fiscal 2013 of $26.5 million, or $(0.80) per common share (basic and diluted) compared to net earnings of $10.4 million, or $0.31 per share ($0.30 per share diluted) for fiscal 2012.  The net loss for the year reflects an impairment charge of $28.2 million related to a write-down of goodwill and intangible assets, which was recorded in the fourth quarter. Adjusted net earnings, excluding impairment of goodwill and intangible assets, were $1.7 million, or $0.05 per common share (basic and diluted).  The decline in metres drilled and lower rig utilization due to weakened demand, contributed to the decline in adjusted net earnings.

EBITDA for fiscal 2013 was $15.4 million, down from $27.9 million in fiscal 2012. EBITDA margin for fiscal 2013 was 14.8%, compared to 18.0% in fiscal 2012.

As at June 30, 2013, the Company's long-term debt, including the current portion, was $14.8 million, compared to $26.4 million as at June 30, 2012. As at June 30, 2013, the Company had working capital of $51.2 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 Friday, September 27, 2013 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.newswire.ca/en/webcast/detail/1224229/1348231

To access a replay of the conference call dial 416-849-0833 or 1-855-859-2056, passcode: 64011990. The replay will be available until October 4, 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 drills with approximately 650 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.

Alain Laplante 
Vice-President and Chief Financial Officer
[phone] ext. 122 

Bruce Wigle
Investor Relations
[phone] ext. 232