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Calian reports Q2 results

Revenues for the quarter were $51.2 million, a 13% decrease from the $58.9 million reported in the same quarter of the previous year. Net earnings were $2.4 million or $0.32 per share basic and diluted, compared to $3.4 million or $0.44 per share basic and diluted in the same quarter of the previous year.

"The results released today were disappointing relative to the prior year. Contraction in government spending has definitely taken its toll on both of our divisions. Constraints, delays and cancellations within both DND and US defence primes, have resulted in reduced throughput. This has particularly affected maintenance and training services in our BTS division as well as manufacturing services at our SED division. This in turn has had an impact on profitability, not only in the form of reduced gross margin dollars, but also in the underutilization of certain fixed-cost capabilities. On the positive side, we have experienced year over year growth in our health group at BTS as well as our ancillary communications products segment at SED. Of course, with reduced revenues and margins, we are paying particular attention to discretionary costs in an effort to mitigate some of the impact." stated Ray Basler, President and CEO.

"While we are obviously disappointed with the last quarter results, we are encouraged by recent contract wins. SED backlog was replenished late in the quarter through a number of wins ranging from a significant multi-year satellite ground segment contract to a reappearance of manufacturing related orders from longstanding defence customers. While work has started on all of these new contracts, it will be a few months before significant material and subcontract throughputs are realized Overall, we are anticipating some improvement in the second half of the year" continued Basler.

"We have also seized the opportunity to acquire Amtek Engineering Services Ltd., a longstanding and trusted partner in many defence pursuits. Not only will the Amtek acquisition provide an appropriate return on our investment, it will certainly put Calian in a stronger position when the inevitable upturn in defence spending arrives" stated Basler.

While the company's second quarter performance was certainly below historical standards, it is a direct reflection of constrained government spending and the related increase in competitive pressures. We are anticipating some improvement in the last half of the year, but we still expect that it may take some time to experience any significant rebound in certain market segments. In particular, the continued roll out of the cost cutting initiatives by both the federal government and DND may limit available opportunities thereby negatively impacting short term projections for both revenues and profitability. Fortunately recent contract signings have solidified the SED backlog and provided for added revenue confidence. Ultimately, revenues realized will be dependent on the extent and timing of future contract awards as well as customer utilization of existing contracting vehicles. Based on currently available information and our assessment of the marketplace, we expect revenues for fiscal 2014 to be in the range of $215 million to $235 million and net earnings in the range of $1.45 to $1.70 per share.

(All amounts are in Canadian Dollars)

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