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Selling and administrative expenses
-- Selling and administrative expenses for the Corporation decreased by $0.1 million from $14.4 million in 2011 to $14.3 million in 2012, despite the additional expenses associated with the acquisition of DGL and Vertex.-- Selling and administrative expenses for the Service Bureau Operations decreased by $0.5 million compared to 2011, which is primarily attributable to reduced sales and marketing activities, reduced administrative and human resources salaries, and reduced office rent in Winnipeg.-- Selling and administrative expenses for the Canadian Energy Services business increased by $0.7 million compared to 2011, primarily related to increased sales and marketing activities, increased facility costs and amortization of intangibles in relation to the acquisitions of DGL and Vertex, and increased salaries in relation to strategic hires.-- Selling and administrative expenses for the US Energy Services business increased by $0.4 million compared to 2011, primarily due to increased staffing to position the business for growth, increased employee benefit costs, some of which were included in cost of revenue for 2011, and certain costs moving from Corporate to US Energy Services.-- Selling and administrative expenses for Corporate decreased by $0.6 million compared to 2011, which is primarily attributable to non- recurring costs in 2011, reduced staffing, reduced reliance on consultants, and certain costs moving from Corporate to US Energy Services.
Other operating expenses
-- Other operating expenses increased by $0.5 million compared to 2011. Termination costs declined from 2011 to 2012, but this was more than offset by the 2012 loss on disposal of leasehold improvements resulting from moving locations in Winnipeg, and favorable onerous lease and contingent consideration provision estimate changes netted with the 2011 expenses that did not recur in 2012. For the Corporation as a whole, the impact of leasehold improvements charged to loss on disposal in Winnipeg was offset by the impact of the reversal of related deferred lease inducements. The reversal of deferred lease inducements, however, was charged to cost of revenue and selling and administrative expenses, not other operating expenses.
Net earnings
-- Earnings before tax decreased by $1.2 million from $1.5 million in 2011 to $0.3 million in 2012. When the impact of changes in estimates, unrealized foreign exchange, 2011 unexpected Edmonton rent adjustments included in 2012, and increased research and development costs in 2012 are excluded, the decline in earnings before tax is only $358 thousand, of which $319 thousand represents increased depreciation and amortization.
Cash flow, working capital (1) and debt
-- Working capital decreased by $2.2 million from $4.4 million in 2011 to $2.3 million in 2012. The 2012 number is impacted by US$1.5 million coming due in November 2013 on a promissory note that management plans to refinance over 12 months with its bank.-- In spite of decreased earnings, net cash from operating activities increased by $1.9 million, from $1.5 million in 2011 to $3.4 million in 2012.-- Total loans and borrowings, net of cash, decreased by $1.7 million from 2011 to 2012, despite an additional $1.0 million of debt incurred related to the DGL acquisition.
