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Press release from CNW Group

Orbit Garant Drilling Inc. Reports Fiscal 2012 Second Quarter Financial Results

Monday, February 13, 2012

Orbit Garant Drilling Inc. Reports Fiscal 2012 Second Quarter Financial Results07:30 EST Monday, February 13, 2012Acquisition of New-Brunswick-based Lantech Drilling Services Inc., adding 141 employees and 32 drillsRevenue increased 25.4% to $32.4 million from $25.9 million in Q2 FY2011Record second quarter meters drilled at 323,760, up from 297,704 meters in Q2 last yearAdjusted gross margin (excluding amortization expense) declined slightly to 28.3% from 29.1% in Q2 FY2011EBITDA increased 6.0% to $5.8 million, compared to $5.4 million in Q2 last yearEarnings per share totaled $0.06 (basic), compared to $0.07 (basic) in Q2 FY2011Expanded drill fleet to 222 drill rigs, up from 180 drill rigs at the end of fiscal 2011Capital expenditures of $5.0 million to sustain growing business activityVAL-D'OR, QC, Feb. 13, 2012 /CNW/ - Orbit Garant Drilling Inc. (TSX: OGD) ("Orbit Garant" or the "Company") today announced its financial results for the three and six-month periods ended December 31, 2011. Orbit Garant's fiscal 2012 second quarter ("Q2 FY2012") and first six-month financial results reflect the Company's transition from Canadian Generally Accepted Accounting Principles (Canadian "GAAP") to International Financial Reporting Standards ("IFRS"), effective July 1, 2011. The Company's fiscal 2011 second quarter ("Q2 FY2011") and first six-month financial results have been restated accordingly. All dollar amounts are in Canadian currency unless otherwise stated. Percentage calculations are based on numbers in the financial statements and may not correspond to rounded figures presented in this news release.Highlights($ amounts in millions, except earnings per share)3 months ended Dec. 31, 20113 months ended Dec. 31, 20106 months ended Dec. 31, 20116 months ended Dec. 31, 2010Revenue$32.4$25.9$69.5$53.3Gross Profit¹$7.1$5.9$16.0$11.5Gross Margin (%)¹21.722.923.021.7Adjusted Gross Margin (%)¹28.329.128.927.6EBITDA$5.8$5.4$14.1$10.7Net Earnings$1.9$2.3$5.5$4.5Net earnings per common share    - Basic$0.06$0.07$0.17$0.14- Diluted$0.05$0.07$0.16$0.13Total Meters Drilled323,760297,704691,007618,663¹ In accordance with IFRS, reported gross profit and margin include certain amortization expenses. For comparative purposes, adjusted gross margin is also shown excluding these amortization expenses. "We achieved solid revenue growth in our second quarter, driven by a record number of meters drilled for the quarter and higher realized prices. As expected, our adjusted gross margins over the last two quarters have been near level with our fiscal 2011 fourth quarter adjusted gross margins, as we continue to strive to improve the productivity levels of our less experienced drillers, while managing a higher volume of business. We continue to expect margin improvement in the second half of fiscal 2012, through improved productivity rates and new or renewed contracts that reflect higher pricing," said Eric Alexandre, President and CEO."We made strong progress with our growth strategy in the quarter. The acquisition of Lantech Drilling establishes a new strategic hub for Orbit Garant in Eastern Canada, adds 141 employees and 32 drill rigs to our fleet and new expertise in iron ore drilling and geotechnical services. Lantech Drilling also provides us with an entry point to the higher margin mineral drilling market in West Africa," added Mr. Alexandre. "We look forward to leveraging the combined operations and expertise of Orbit Garant and Lantech Drilling to further strengthen our existing customer relationships, and pursue new business opportunities both in Canada and internationally."On December 16, 2011, Orbit Garant acquired all issued and outstanding shares of New Brunswick-based Lantech Drilling Services Inc. ("Lantech Drilling"), which specializes in exploration and geotechnical services to mining or mineral exploration companies, and engineering and environmental consultant firms. Orbit Garant's fiscal 2012 second quarter and six-month results include results of operations from Lantech Drilling for the two-week period ended December 31, 2011.Second Quarter ResultsOrbit Garant added 35 drill rigs to its fleet in the second quarter of fiscal 2012, including 32 drills rigs through the acquisition of Lantech Drilling, and the manufacture of three new drill rigs, bringing its fleet count to 222 drills at quarter end. The Company's fleet drilled a total of 323,760meters in Q2 FY2012, compared to 297,704 meters in Q2 FY2011. The average revenue per meter drilled increased to $95.92 in Q2 FY2012, up from $83.69 in Q2 FY2011.The Company's fiscal 2012 second quarter revenue increased 25.4% to $32.4 million from $25.9 million in the second quarter a year ago.Domestic surface drilling revenue increased 58.8% to $16.2 million in Q2 FY2012 from $10.2 million in Q2 FY2011, primarily as a result of new contracts. Underground drilling revenue decreased 9.4% to $10.0 million in Q2 FY2012, compared to $11.1 million in the comparable period a year ago, reflecting decreased meters drilled. International drilling revenue increased to $4.8 million in Q2 FY2012 from $3.6 million in the second quarter a year ago, primarily as a result of new contracts and price increases.The Manufacturing division (Soudure Royale) generated revenue of $1.4 million in Q2 FY2012, compared to $1.0 million in Q2 FY2011. Soudure Royale manufactured drills, equipment, and performed maintenance services for the Company during the second quarter of 2012.Gross profit for the second quarter of fiscal 2012 increased 18.9% to $7.1 million from $5.9 million in Q2 FY2011. Gross margin for Q2 FY2012 decreased to 21.7% from 22.9% in the second quarter a year ago. In accordance with IFRS, amortization expenses totalling $2.1 million are included in cost of contract revenue. Adjusted gross margin, excluding amortization expenses, declined slightly to 28.3% in Q2 FY2012 compared to 29.1% in Q2 FY2011.  Increased gross profit in Q2 FY2012 reflects higher volumes of business and increasing revenue per meter drilled.  The decline in gross margin is attributable to higher training, wage and supplies costs.General and administrative (G&A) expenses increased to $3.8 million (11.8% of revenue) in Q2 FY2012 from $2.5 million (9.5% of revenue) in Q2 FY2011. Higher G&A expenses in Q2 FY2012 resulted primarily from increased personnel, the Company's new branch office in Sudbury, Ontario, the acquisition of Lantech Drilling, and the amortization of the Company's new head office and base of operations in Val-d'Or, Quebec.G&A expenses, excluding amortization expenses of $0.5 million and professional fees for Lantech Drilling of $0.2 million, totalled $3.1 million (9.4% of revenue) in Q2 FY2012, compared to $2.2 million (8.4% of revenue) in Q2 FY2011.Earnings before interest, taxes, depreciation, and amortization ("EBITDA")² for Q2 FY2012 increased 6.0% to $5.8 million, compared to EBITDA of $5.4 million in Q2 FY2011. EBITDA margin in Q2 FY2012 was 17.8% compared to 21.0% in the second quarter of fiscal 2011.Net earnings for Q2 FY2012 totaled $1.9 million, or $0.06 per common share ($0.05 per share diluted), compared to net earnings of $2.3 million, or $0.07 per common share (basic and diluted) in Q2 FY2011.Six Month ResultsFor the six months ended December 31, 2011, Orbit Garant generated revenue of $69.5 million, an increase of $16.2 million, or 30.6%, from $53.3 million in the first six months of fiscal 2011.Gross profit for the first half of fiscal 2012 was $16.0 million, compared to $11.5 million in the comparable period a year ago. Gross margin for the first half of FY2012 was 23.0%, compared to 21.7% in the first half of FY2011. Adjusted gross margin, excluding amortization expense, in the first half of FY2012 increased to 28.9% from 27.6% in the comparable period a year ago. The increase in gross profit and gross margin is attributable to international drilling activity.Net earnings for the first half of fiscal 2012 totalled $5.5 million, or $0.17 per common share ($0.16 per share diluted), compared to $4.5 million, or $0.14 per common share ($0.13 per share diluted) in the first six months of fiscal 2011. Increased net earnings resulted primarily from greater business activity and higher revenue per meter drilled.EBITDA for the first six months of FY2012 increased 31.8% to $14.1 million from $10.7 million in the same period a year ago. EBITDA margin for the first six months of FY2012 was 20.2%, compared to 20.0% in the first half of FY2011.As at December 31, 2011, the Company had working capital of $58.0 million and 33,276,519 common shares issued and outstanding.Conference callEric Alexandre, President and CEO, and Alain Laplante, Vice President and CFO, will host a conference call for analysts and investors on Monday, February 13, 2012 at 10:00 a.m. (ET). The dial-in numbers for the conference call are 888-231-8191 or 647-427-7450. A live audio feed of the call will webcast at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3827560To access a replay of the conference call dial 416-849-0833 or 1-855-859-2056, passcode: 48093077. The replay will be available until February 20, 2012. The replay can also be accessed via the Internet at the above URL address.About Orbit GarantHeadquartered 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 222 drills and more than 1,100 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 and income taxes. 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 informationThis 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.  For further information: Alain Laplante Vice President and Chief Financial Officer (819) 824-2707 Ext. 122 Bruce Wigle Investor Relations (416) 447-4740 Ext. 232