Orbit Garant 2012 annual rep O rt 19 Gross profit and margins see Reconciliation of nonIFRS measures Gross proft for Q4 FY2012 decreased 239 to 77 million from 101 million in Q4 FY2011 Gross margin for Q4 FY2012 decreased to 177 from 247 in the fourth quarter a year ago In accordance with IFRS amortization expenses totalling 21 million are included in cost of contract revenue for Q4 FY2012 compared to 19 million for Q4 FY2011 Adjusted gross margin excluding amortization expenses decreased to 226 in Q4 FY2012 from 292 in Q4 FY2011 Decreased gross proft and gross margin in Q4 FY2012 refect a decline in higher margin international business activity from the Companys junior mining company customers General and administrative expenses General and administrative GA expenses increased to 51 million 117 of revenue in Q4 FY2012 from 34 million 83 of revenue in Q4 FY2011 In accordance with IFRS amortization expenses of 09 million are included in GA expenses for fscal 2012 compared to 06 million for fscal 2011 Adjusted GA expenses excluding amortization expenses totalled 42 million 97 of revenue for fscal 2012 compared to 28 million 68 of revenue for fscal 2011 Higher GA expenses in Q4 FY2012 resulted primarily from increased personnel the Companys new branch offce in Sudbury Ontario the acquisition of Lantech Drilli ng and the amortization expenses related to the Companys new head offce in ValdOr Quebec EBITDA see Reconciliation of nonIFRS measures EBITDA totalled 55 million 129 of revenue in the fourth quarter of fscal 2012 compared to 93 million 227 of revenue in the same period a year ago a decrease of 38 million or 396 The decline is primarily attributable to decreased international drilling activity in the quarter Financial expenses Interest costs related to longterm debt and bank charges were 04 million in Q4 FY2012 comparable to 02 million in Q4 FY2011 Income taxes Income taxes were 08 million for Q4 FY2012 compared to 20 million for the same period last year Net earnings Net earnings for Q4 FY2012 were 13 million or 004 per share basic and diluted compared to 46 million or 014 per share 013 per diluted share for Q4 FY2011 The decline in net earnings resulted from decreased international drilling activity and higher GA expenses E FFECT OF E x C h ANGE RATE Aside from the US dollars referenced below all of the Companys revenue was denominated in Canadian dollars The Companys mai n exposure to exchange rate fuctuations arose from certain purchases denominated in US dollars which were offset in part by revenue of approximately 130 million earned in US dollars related primarily to the international drilling business As at June 30 2012 the Company has cash in US dollars for an amount of 09 million June 30 2011 03 million and accounts receivable in US dollars for an amount of 22 million June 30 2011 04 million As at June 30 2012 the Company has estimated that a 10 increase or decrease of the US exchange rate would have caused a corresponding annual increase or decrease in net earnings and comprehensive earnings of approximately 02 million June 30 2011 negligible LIQUIDITY AND CAPITAL RESOURCES Operating activities Cash fow from operations before noncash operating working capital items was 287 million in fscal 2012 compared to 263 million in fscal 2011 The use of cash and non cash working capital items is mainly due to the increase of receivables and inventories These increas es are attributable to increased drilling activities and the decision to replenish consumable products with larger orders to ensure s uffcient supplies to meet operational requirements