20 ANNUAL REPORT 2012 MANAGEMENTS DISCUSSION AND ANAL YSIS OF OPERA TING RESUL TS AND FINANCIAL CONDITION DECEMBER 31 2012 On March 14 2011 Aecon announced a normal course issuer bid the NCIB commencing on March 16 2011 and expiring March 15 2012 During this period Aecon was permitted to acquire up to 5527277 common shares being approximately 10 of the issued and outstanding common shares at the time of announcement of the NCIB The actual number of common shares acquired by Aecon under the NCIB was 1424900 for a total cost of 120 million all of which were subsequently cancelled No common shares were acquired in 2012 under the NCIB which has now expired In the frst quarter of 2012 Aecons Board of Directors approved an increase in the dividend to be paid to all holders of Aecon common shares Annual dividends increased to 028 per share to be paid in four quarterly payments of 007 per share Previously Aecon paid an annual dividend of 020 per share 005 each quarter The frst quarterly dividend payment under the new policy was paid on April 2 2012 As of December 31 2012 Aecons total investment in Quiport JV was approximately US159 million Of this amount US64 million was invested through direct equity contributions and the balance of US95 million through the reinvestment of Aecons share of the earnings of the existing airport No further additional direct equity contributions are required Aecon has also deposited US4 million with EDC to support letters of credit issued by EDC on the Quito Airport project These EDC deposits are included in restricted cash on the Consolidated Balance Sheet at December 31 2012 SUMMARY OF CASH FLOWS Consolidated cash fows Year ended millions December 31 2012 2011 Cash provided by used in Operating activities 689 1970 Investing activities 1054 978 Financing activities 716 1747 Decrease in cash and cash equivalents 1081 755 Effects of foreign exchange on cash balances 02 02 Cash and cash equivalents beginning of year 1752 2509 Cash and cash equivalents end of year 669 1752 The construction industry in Canada is seasonal in nature for companies like Aecon who perform a signifcant portion of their work outdoors particularly road construction and utilities work As a result a larger portion of this work is performed in the summer and fall months than in the winter and early spring months Accordingly Aecon has historically experienced a seasonal pattern in its operating cash fow with cash balances typically being at their lowest levels in the middle of the year as investments in working capital increase These seasonal impacts typically result in cash balances usually peaking near year end or in the frst quarter of the year Operating Activities Cash provided by operating activities of 69 million in 2012 compares with cash provided by operating activities of 197 million in the same period last year Most of the 128 million yearoveryear decrease in cash from operating activities resulted from changes in working capital balances related to build fnance projects for Infrastructure Ontario and also from higher working capital investments in the Industrial segment During 2011 signifcant cash proceeds were generated as a result of large unbilled balances at the beginning of 2011 related to build fnance projects being billed and converted to cash during that period whereas similar amounts billed and converted to cash in 2012 dropped signifcantly refecting the substantial reduction in build fnance projects In addition an increase in income taxes paid of 34 million contributed to the decrease in cash provided by operating activities yearoveryear Lower cash taxes were paid in 2011 primarily as a result of refunds of prior period overpayments and refunds resulting from income tax loss carrybacks to prior periods Investing Activities In 2012 investing activities resulted in a use of cash of 105 million which compares with cash used of 98 million in the same period of 2011 Of the cash used in 2012 66 million represented Aecons proportionate share of the investment made by Quiport JV in the construction of the new Quito Airport ie increase in concession rights Also 46 million of cash was used for capital expenditures net of disposals on property plant and equipment Of the cash used in 2011 83 million represented Aecons proportionate share of the investment made by Quiport JV in the construction of the new Quito Airport and 36 million represented capital expenditures net of disposals on property plant and equipment In 2012 Aecon acquired either through purchases or fnance leases property plant and equipment totalling 87 million Most of this investment in property plant and equipment occurred in the Infrastructure segment In 2011 investment in property plant and equipment totalled 111 million again with most of the spending occurring in the Infrastructure segment Financing Activities In 2012 cash used by fnancing activities amounted to 72 million compared to cash used of 175 million in the same period of the previous year During 2012 issuances of longterm debt amounted to 82 million while repayments totalled 141 million for a net outfow related to debt movements of 59 million The majority of the debt repayments related to nonrecourse project fnancing for Build Finance SPVs associated with Infrastructure Ontario build fnance projects and repayments on equipment fnancing arrangements This compares to net repayments of longterm debt totalling 142 million in 2011 In addition drawdowns from the revolving credit facility in 2012 provided 10 million of cash and 8 million of cash was used in 2012 to purchase Aecon common shares for the Companys LongTerm Incentive Plan In 2011 8 million was used to purchase common shares for the Companys LongTerm Incentive Plan and 12 million for share purchases under the Companys normal course issuer bid Dividends of 15 million were paid in 2012 compared to 11 million in 2011