12 ANNUAL REPORT 2012 MANAGEMENTS DISCUSSION AND ANAL YSIS OF OPERA TING RESUL TS AND FINANCIAL CONDITION DECEMBER 31 2012 A reconciliation of the changes in operating proft loss by segment comparing the results for the three months and year ended December 31 2012 is set out in the table below Three months ended Year ended millions December 31 December 31 Consolidated operating proft 2011 568 1005 Transportation 04 128 Heavy Civil 121 165 Utilities 24 32 Mining Ongoing operations 98 361 Gain on sale of equipment 11 43 Social Infrastructure 134 47 Decrease in Infrastructure operating proft 148 54 Heavy Industrial Construction and Fabrication 75 313 IST 09 36 Increase in Industrial operating proft 84 277 Quito Airport Concessionaire 82 75 Cross Israel Highway Operator sold in Q3 2011 68 Gain on sale of investment in operator of CIH in 2011 115 Increasedecrease in Concessions operating proft 82 108 Increasedecrease in Other costs and eliminations 17 22 Consolidated operating proft 2012 603 1098 Financing charges net of interest income of 271 million in 2012 were 41 million lower than in 2011 The decline in fnancing costs results primarily from the reversal of 57 million in accrued interest penalties following the settlement of a long outstanding income tax matter with Canada Revenue Agency The settlement also resulted in the reversal in 2012 of previously expensed income taxes amounting to 29 million Partly offsetting this decrease in fnancing charges was a decrease in notional interest income reported in Build Finance Special Purpose Vehicles as a number of these projects have now been completed and from higher debt levels mostly equipment loans The terms of the Companys convertible debentures include an option for holders to convert prior to the maturity date and allow the Company the option to settle the conversion in cash or a combination of cash and common shares unless a holder expressly indicates in the conversion notice that they do not wish to receive cash The holders option to convert is treated as a derivative liability which must be measured at fair value at each reporting period with gains and losses fowing through proft or loss In each of 2012 and 2011 the gain from fair valuing the embedded derivatives within Aecons convertible debentures was 43 million For more information refer to Note 19 of the 2012 consolidated fnancial statements Set out in Note 21 of the 2012 consolidated fnancial statements is a reconciliation between the expected income tax expense in 2012 and 2011 based on statutory income tax rates and the actual income tax expense reported for both these periods As noted above included in the 2012 income tax expense is a 29 million reduction of previously accrued income taxes as a result of the settlement of a tax matter with Canada Revenue Agency Also included in the 2012 income tax expense is a 137 million reduction of previously accrued income taxes related to the operation of the old Quito airport which management now believes are unlikely to be payable Similarly included in the prior year income tax expense was a 3 million reversal of previously accrued income taxes Aecons noncontrolling interests represents the share of proft or loss attributable to minority shareholders of non whollyowned Aecon subsidiaries and joint ventures primarily the Quito Airport concessionaire and prior to its sale in the third quarter of 2011 the operator of the Cross Israel Highway Further details for each of the segments are included in the discussion below under Reporting Segments Backlog As at December 31 millions 2012 2011 Infrastructure 1677 1516 Industrial 751 874 Consolidated 2428 2390