Orbit Garant 2012 annual rep O rt 17 RESULTS OF OPERATIONS Fiscal 2012 compared to fiscal 2011 Contract revenue For the fscal year ended June 30 2012 the Company recorded contract revenue of 1548 million compared to 1277 million in fscal 2011 representing an increase of 271 million or 212 The increase is attributable to new drilling contracts higher revenue per meter drilled and the acquisition of Lantech Drilling in the second quarter of fscal 2012 The Company increased its total metres drilled by 54 to 149 million metres in fscal 2012 primarily due to the acquisition of Lantech Drilling Domestic drilling contract revenue increased to 1330 million in fscal 2012 compared to 1087 million in fscal 2011 representing an increase of 243 million or 223 The increase refects additional metres drilled from new and existing contracts and the contribution from Lantech Drillings operations in Canada International drilling contract revenue increased 148 to 218 million in fscal 2012 compared to 190 million in fscal 2011 The increase of 28 million is attributable to higher revenue per meter drilled and the contribution from Lantech Drillings operations in West Africa Gross profit and margins see Reconciliation of nonIFRS measures Gross proft for fscal 2012 increased 182 to 337 million compared to 285 million in fscal 2011 Increased gross proft was primarily attributable to price increases and higher overall business volumes including increased higher margin international drilling a ctivity in the frst half of fscal 2012 Gross margin for fscal 2012 decreased to 218 from 223 in fscal 2011 In accordance with IFRS amortization expenses totalling 85 million are included in cost of contract revenue for fscal 2012 compared to 68 million for fscal 2011 Adjusted gross margin excluding amortization expenses decreased slightly to 273 in fscal 2012 compared to 276 in fscal 2011 The decline in gross margins for fscal 2012 primarily resulted from unseasonably warm weather in Quebec and Ontario in March 2012 which resulted in an early spring breakup and the premature suspension of drilling activities on certain project sites lower overall productivity rates due to the introduction of new drillers and decreased business activity in the second half of the year from the Companys junior minin g company customers General and administrative expenses General and administrative GA expenses were 171 million for fscal 2012 compared to 116 million in fscal 2011 GA expenses represented 111 of sales during fscal 2012 compared to 91 in fscal 2011 In accordance with IFRS amortization expenses of 29 million are included in GA expenses for fscal 2012 compared to 19 million for fscal 2011 Adjusted GA expenses excluding amortization expenses and 04 million in acquisition costs related to the acquisition of Lantech Drilling totalled 138 million 89 of revenue for fscal 2012 compared to 97 million 76 of revenue for fscal 2011 Higher GA expenses resulted primarily from increased personnel the Companys acquisition of Advantage Control Technologies and Morris Drilling Inc in the sec ond quarter of fscal 2011 the acquisition of Lantech Drilling in the second quarter of fscal 2012 and the amortization expenses rel ated to the Companys new head offce in ValdOr Quebec EBITDA see Reconciliation of nonIFRS measures EBITDA was 279 million for fscal 2012 compared to 260 million in fscal 2011 an increase of 19 million or 74 EBITDA represented 180 of sales in fscal 2012 compared to 203 of sales in fscal 2011 Financial expenses Interest costs related to longterm debt and bank charges for fscal 2012 were 13 million compared to 06 million in fscal 2011 Increased interest costs resulted from business acquisitions and working capital increases Income taxes Income taxes were 47 million in fscal 2012 compared to 53 million in fscal 2011 Net earnings Net earnings in fscal 2012 totalled 104 million or 031 per common share 0 30 per share diluted compared to 114 million or 035 per common share 034 per share diluted in fscal 2011 This decrease is primarily attributable to increased GA expenses and fnance costs