Operating expenses decreased by $7.3 million (21%) to $27.2 million in 2012 from $34.5 million in 2011. Salaries and wages were down $1.1 million (6%) due to lower severance costs. G&A expenses were down $6.2 million (39%) as occupancy costs decreased by $4.8 million (51%) due to the Company surrendering a portion of its office space lease in 2011. Communication expenses were down $182,000 (40%), professional fees decreased by $1.3 million (42%) and direct selling costs decreased by $993,000 (73%), partially offset by an increase in bad debt expense by $918,000. Depreciation and amortization increased by $742,000 (7%) mainly due to the completion of three seismic participation surveys during 2012, partially offset by lower depreciation on property and equipment and deferred development costs.
Divestco ended fiscal 2012 with a working capital deficit of $7.5 million (December 31, 2011: $0.3 million surplus), excluding deferred revenue of $2.4 million (December 31, 2011 - $4.6 million). The decline in working capital from the end of 2011 was primarily due to an unpredictably slow Q3 and Q4 that directly impacted the Services segment and delayed the signing and delivery of several seismic data contracts. While the Company significantly reduced its payables since the end of 2011, receivables fell sharply as well. In addition, $843,000 of the subordinated loan was reclassified from long-term to current liabilities as compared to December 31, 2011 as the loan matures in May 2013. The Company's funded debt to equity ratio remained unchanged at 0.64:1 at December 31, 2012 from December 31, 2011 (0.64:1) as higher equity was offset by higher funded debt levels ($10.6 million at the end of 2012 compared to $9.4 million at the end of 2011).
During 2012, Divestco completed three 3D seismic participation surveys (Brazeau, Big Valley and Ante Creek), covering an area of approximately 389 square kilometers. Total cost for the three seismic surveys was $14.3 million, with $5.1 million incurred in 2011. The Company also commenced another survey in Q4 2012 (Alder Flats) which was completed in Q1 2013.
Mr. Stephen Popadynetz, CEO, President and CFO: "Over the last two years Divestco has made great strides to improve its efficiencies and cut costs. Unfortunately, in the third quarter of 2012, we saw an unexpected slowdown in the industry which resulted in a net loss. This carried over initially into Q4 2012, but by the end of the quarter we were witnessing activity levels returning to normal. As such, we are confident that the Company will return to profitability. As well, Divestco remains committed to strengthening its financial position and balance sheet and we have continued to optimize our all aspects of our G&A (including excess office space). We are also pleased with the progress we have made towards rebuilding our seismic data library. To date, we have added more than 860 square kilometers of seismic to our library. Overall demand for seismic data and general activity levels in the industry is trending positively and Divestco is currently reviewing a number of new seismic programs for the coming year. With the strong cost cutting measures taken over the last two years in place, Divestco is on a well-positioned path for sustained profitability and growth. We look forward to delivering positive earnings and improved results for our shareholders."
The Company's condensed consolidated interim financial statements have been prepared in accordance with IFRS. Certain measures in this document do not have any standardized meaning as prescribed by IFRS and are considered additional GAAP measures. While these measures may not be comparable to similar measures presented by other issuers, they are described and presented in this MD&A to provide shareholders and potential investors with additional information regarding the Company's results, liquidity, and its ability to generate funds to finance its operations. These measures include:
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