Enerflex Reports Stronger Fourth Quarter and Year End 2012 Financial Results and Announces Quarterly Dividend
Enerflex Reports Stronger Fourth Quarter and Year End 2012 Financial Results and Announces Quarterly Dividend
CALGARY, ALBERTA -- (Marketwire) -- 02/28/13 -- Enerflex Ltd. (TSX:EFX) ("Enerflex" or "the Company"), a leading supplier of products and services to the global energy industry, today reported its financial and operating results for the three and twelve months ended December 31, 2012.
Financial Highlights ---------------------------------------------------------------------------- Three months ended Twelve months ended (unaudited) December 31 December 31 ($ millions, except per share amounts and Change Change percentages) 2012 2011 ($) 2012 2011(1) ($) ---------------------------------------------------------------------------- Revenue $ 421.6 $ 383.8 $ 37.8 $ 1,501.7 $ 1,227.1 $ 274.6 Gross margin 77.6 68.6 9.0 273.2 225.9 47.3 Gross margin % 18.4% 17.9% 18.2% 18.4% Operating income(2) 36.5 26.5 10.0 114.6 80.1 34.5 EBITDA(2) 47.1 36.6 10.5 156.8 127.0 29.8 Net earnings (loss) Continuing 27.0 17.7 9.3 82.3 56.7 25.6 Discontinued (0.6) (7.0) 6.4 (10.5) (64.0) 53.5 Earnings (loss) per share Continuing 0.35 0.22 0.13 1.06 0.73 0.33 Discontinued (0.01) (0.09) 0.08 (0.14) (0.83) 0.69 (1) Results for the twelve months ended December 31, 2011 were prepared on a carve-out basis. Enerflex became an independently operated and listed company on June 1, 2011. (2) Operating income and Earnings before Interest (Finance Costs), Taxes, Depreciation and Amortization ("EBITDA") are non-GAAP measures that do not have standardized meanings and therefore may not be comparable to similar measures presented by other issuers.
Enerflex reported improved results for the fourth quarter and year-ended December 31, 2012, compared to the same periods in the prior year. The increases in revenue of $37.8 million, and $274.6 million, respectively, were due to higher revenue in the Southern U.S. and South America, and International segments, partially offset by lower revenue in Canada and the Northern U.S. The corresponding increase in gross margin performance, partially offset by higher selling and administrative expenses, resulted in net earnings from continuing operations for the fourth quarter that were higher by $9.3 million (52.5%), and $25.6 million (45.1%) for the 2012 year.
Enerflex exited 2012 with a backlog of $683.2 million, compared to $986.1 million at the end of 2011, a decrease of $302.9 million (30.7%). The decrease was attributable to lower bookings in all segments. Sequentially, backlog decreased by $92.2 million from September 30, 2012. The Company recorded bookings for Engineered Systems of $242.6 million during the fourth quarter, which was $210.7 million lower than the comparable period last year on decreased activity levels in the Canada and Northern U.S. and the International segments. Bookings in the International segment for the fourth quarter of 2011 benefited from a $228.0 million USD contract award for a gas processing plant in the Sultanate of Oman. In the Southern U.S. and South America segment, increased activity in liquids rich resource basins resulted in an increase in bookings during the fourth quarter of 2012 when compared to 2011. The decline in full year bookings was attributable to softness in the Canada and Northern U.S., and Southern U.S. and South America segments due to continuing weak natural gas prices and lower natural gas liquids ("NGL") prices, which produced a corresponding reduction in activity levels by natural gas producers. In comparison to 2011, bookings in the International segment were lower in 2012, particularly in the Middle East and North Africa region, which included the large contract in Oman, received during the fourth quarter of 2011.
"The Enerflex management team is very pleased with our strong fourth quarter and year-end financial results," said J. Blair Goertzen, Enerflex's President and Chief Executive Officer. "Through improved project execution and higher activity levels, we have successfully delivered strong gross margin performance. The Canada and Northern U.S. market continues to struggle with weak natural gas prices and this trend is expected to continue during the first half of 2013. The Southern U.S. and South America region has experienced a recovery in bookings of late, and we remain cautiously optimistic for 2013 in this region. Finally, there is no shortage of opportunities in our International segment, however we expect that these potential project awards will have long lead times which is consistent with project awards in this segment. With a strong balance sheet, a continuing focus on expanding our capabilities and a focus on controlling our costs, we are right-sized for the challenges of 2013, and well positioned to capitalize on the opportunities that will arise."
Fourth Quarter and Twelve Months Highlights
In the three and twelve months ended December 31, 2012, Enerflex:
-- Generated revenue of $421.6 million compared to $383.8 million in the fourth quarter of 2011, an increase of $37.8 million or 9.8%. Revenue for the twelve months of 2012 was $1,501.7 million compared to $1,227.1 million during the same period of the prior year, an increase of $274.6 million or 22.4%; -- Achieved a gross margin of $77.6 million or 18.4% during the fourth quarter of 2012 compared to $68.6 million or 17.9% during the same period of 2011, an increase of $9.0 million. Gross margin for the year totalled $273.2 million or 18.2%, an increase of $47.3 million or 20.9% over the prior year; -- Produced operating income of $36.5 million or 8.7% of revenue for the quarter compared to $26.5 million or 6.9% during the fourth quarter of 2011. Operating income for 2012 was $114.6 million or 7.6% of revenue compared to $80.1 million or 6.5% of revenue, an increase of $34.5 million from 2011; -- Generated fourth quarter EBITDA of $47.1 million, an increase of $10.5 million over the fourth quarter of 2011. EBITDA for the twelve months of 2012 was $156.8 million, an increase of $29.8 million over 2011; -- Recorded net earnings from continuing operations in the fourth quarter of $27.0 million ($0.35 cents per share), an increase of $9.3 million over the same period last year. For the twelve months ended December 31, 2012, net earnings from continuing operations were $82.2 million ($1.06 cents per share), compared to $56.7 million ($0.73 cents per share) in 2011, an increase of $25.5 million; -- Exited 2012 w ith backlog of $683.2 million compared to $986.1 million at December 31, 2011, a decrease of 30.7%. Backlog at December 31, 2012 decreased by $92.2 million or 11.9% from September 30, 2012; -- Exited the quarter with $145.0 million in cash, resulting in a net cash to EBITDA ratio of 0.26 :1 and a net cash to equity ratio of 0.05:1; -- Completed the reorganization of the Service business in response to lower activity levels in the Canadian market. The Company recorded reorganization costs of $1.5 million during the second quarter of 2012, resulting in a consequential reduction in costs for the remainder of 2012; -- Completed the expansion of the Houston facility during the second quarter of 2012 and is fully operational. This expansion has doubled the capacity at this location, which will be used to serve the Southern U.S., South American and International markets for compression and processing equipment; -- Completed the sale of its 50% joint venture interest in Presson Descon International Limited ("PDIL") to its joint venture partner, Descon Engineering Limited in the third quarter of 2012; -- Increased the annual dividend to shareholders by 16.7%, resulting in a declared quarterly dividend to shareholders of $0.07 per share; and -- Filed a Notice of Intention to enter a normal course issuer bid with the Toronto Stock Exchange ("TSX"), whereby Enerflex is entitled to purchase, from time to time during the 12 months ended December 20, 2013, up to 6,342,990 Common Shares, representing 10% of its public float as of November 30, 2012, determined in accordance with TSX rules.
Subsequent to the end of the fourth quarter of 2012:
-- Enerflex declared the Company's quarterly dividend of $0.07 per share, payable on April 3, 2013, to shareholders of record on March 14, 2013.
Enerflex's $37.8 million period-over-period increase in revenue to $421.6 million in the fourth quarter of 2012 was a result of increased revenue in the Southern U.S. and South America and International segments, partially offset by decreased revenues in the Canada and Northern U.S. segment. The increase was due to higher Engineered Systems revenue and stronger Service revenues in all operating segments. Revenue from the Southern U.S. and South America, and International segments increased by $44.8 million and $27.4 million, respectively, compared to the same quarter of last year, while Canada and Northern U.S. revenue decreased by $34.4 million as a result of lower Engineered Systems and Rental revenues.
During the year ended December 31, 2012, the Company generated $1,501.7 million in revenue as compared to $1,227.1 million in 2011. The increase was a result of higher opening backlog for the Engineered Systems product line and stronger Service revenue, partially offset by a reduction in Rental revenue. Canada and Northern U.S. revenues decreased by $14.9 million, International revenue increased by $119.6 million, and Southern U.S. and South America revenue increased by $169.8 million in the year ended December 31, 2012, compared to 2011.
Gross margin for the quarter ended December 31, 2012 was $77.6 million or 18.4% of revenue as compared to $68.6 million or 17.9% of revenue for the same period of 2011. The increase in gross margin of $8.9 million (13.1%) was primarily due to strong gross margin performance in the Southern U.S. and South America, and International segments, partially offset by lower gross margin in the Canada and Northern U.S. segment as a result of the decrease in Engineered Systems and Rental revenues. Gross margin for the year ended December 31, 2012 was $273.2 million or 18.2% of revenue as compared to $225.9 million or 18.4% of revenue for 2011. The increase in gross margin of $47.3 million (20.9%) during 2012 was a result of strong gross margin performance in the Southern U.S. and South America, and International segments, partially offset by lower gross margin in the Canada and Northern U.S. segment compared to 2011. In addition, during 2011, gross margin included $16.5 million with respect to approved variation claims and the completion of a project on more favourable terms than originally anticipated in the MENA region.
The stronger gross margin in 2012 in the Southern U.S. and South America segment was attributable to higher revenues and excellent project execution. In the International segment, stronger plant utilization and project execution in 2012, coupled with increased revenues, drove an increase in gross margin. In Canada and the Northern U.S., gross margin was lower in 2012 due to lower revenues, lower plant utilization and project execution challenges in Casper, Wyoming in the first half of 2012.
Backlog at December 31, 2012 was $683.2 million compared to $986.1 million at December 31, 2011, a 30.7% decrease over the comparable period. As compared to September 30, 2012, backlog at December 31, 2012 decreased by $92.2 million or 11.9%. In Canada and the Northern U.S., the decrease was a result of low natural gas prices and a corresponding drop in customer activity levels. In the Southern U.S. and South America, bookings relating to the liquids-rich shale resources in the Eagle Ford, Marcellus, Permian, and Woodford resource basins temporarily slowed in the third quarter of 2012, before recovering in the fourth quarter of 2012. The decrease in International backlog was attributable to the Company's partial fulfillment of the equipment orders destined for Australia (project awarded in 2010) and the gas processing plant contract in the Sultanate of Oman (awarded in 2011).
Update on Discontinued Operations
As noted in previous public disclosures, Enerflex would consider a sale, partial sale, exit or combination thereof of the European Service and Combined Heat and Power ("CHP") business. Enerflex conducted a process to sell this business as a 'turn-key' operation to third parties. This process was unsuccessful as offers received were not considered fair and reasonable, resulting in the termination of the sale process. Enerflex is now pursuing alternatives involving a partial sale and wind up of the Service and CHP business. Enerflex recorded additional reorganization costs during the second quarter of 2012 totaling $5.9 million to reflect anticipated termination payments to employees, lessors and vendors under the applicable laws in the Netherlands, in the event that part of the operations are wound up. The partial sale and wind up process is ongoing and is subject to and shall be conducted in accordance with, Dutch information and consultation rules.
Quarterly Results Material
Enerflex's Consolidated Financial Statements as at and for the year ended December 31, 2012, and the accompanying Management's Discussion and Analysis, will be available on the Enerflex website at www.enerflex.com under the Investors section or on SEDAR at www.sedar.com.
Conference Call and Webcast Details
Enerflex will host a conference call for analysts and investors on Friday, March 1, 2013 at 9:00 a.m. MST (11:00 a.m. EST) to discuss the Company's 2012 year-end results. The call will be hosted by Mr. J. Blair Goertzen, President and Chief Executive Officer and Mr. D. James Harbilas, Vice President and Chief Financial Officer of Enerflex Ltd.
If you wish to participate in this conference call, please call, 1.866.226.1792 or 1.416.340.2216. Please dial in 10 minutes prior to the start of the call. No passcode is required. The live audio webcast of the conference call will be available on the Enerflex website at www.enerflex.com under the Investors section on March 1, 2013 at 9:00 a.m. MST (11:00 a.m. EST). Approximately one hour after the call, a recording of the event will be available on the Company's website.
A replay of the teleconference will be available one hour after the conclusion of the call until midnight, March 8, 2013. Please call 1.800.408.3053 or 1.905.694.9451 and enter passcode 3903899.
Enerflex Ltd. is a single source supplier of products and services to the global oil and gas production industry. Enerflex provides natural gas compression and oil and gas processing equipment for sale or lease, refrigeration systems and power generation equipment, and a comprehensive package of field maintenance and contracting capabilities. Through the Company's ability to provide these products and services in an integrated manner, or as stand-alone offerings, Enerflex offers its customers a unique value proposition.
Headquartered in Calgary, Canada, Enerflex has approximately 3,300 employees worldwide. Enerflex, its subsidiaries, interests in affiliates and joint-ventures operate in Canada, the United States, Argentina, Colombia, Australia, the United Kingdom, Russia, the United Arab Emirates, Oman, Egypt, Bahrain, Indonesia and Singapore. Enerflex's shares trade on the Toronto Stock Exchange under the symbol "EFX". For more information about Enerflex, go to www.enerflex.com.
Advisory Regarding Forward-Looking Statements
To provide Enerflex shareholders and potential investors with information regarding Enerflex, including management's assessment of future plans, Enerflex has included in this news release certain statements and information that are forward-looking statements or information within the meaning of applicable securities legislation, and which are collectively referred to in this advisory as "forward-looking statements." Information included in this news release that is not a statement of historical fact may be forward-looking information. When used in this document, words such as "plans", "expects", "will", "may" and similar expressions are intended to identify statements containing forward-looking information. In developing the forward-looking information in this news release, the Company has made certain assumptions with respect to general economic and industry growth rates, commodity prices, currency exchange and interest rates, competitive intensity and shareholder, regulatory and TSX approvals. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated in or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur.
Forward-looking information involves known and unknown risks and uncertainties and other factors, which may cause or contribute to Enerflex achieving actual results that are materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such risks and uncertainties include, among other things, the impact of general economic conditions; industry conditions, including the adoption of new environmental, taxation and other laws and regulations and changes in how they are interpreted and enforced; volatility of oil and gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations, including future dividends to shareholders of the Company; increased competition; the lack of availability of qualified personnel or management; labour unrest; political unrest; fluctuations in foreign exchange or interest rates; stock market volatility; opportunities available to or pursued by the Company; the reliability of Toromont's historical financial information as an indicator of Enerflex's historical or future results; potential tax liabilities if the requirements of the tax-deferred spinoff rules are not met; the effect of Enerflex's rights plan on any potential change of control transaction; obtaining financing; and other factors, many of which are beyond its control.
The foregoing list of factors and risks is not exhaustive. For an augmented discussion of the risk factors and uncertainties that affect or may affect Enerflex, the reader is directed to the section entitled "Risk Factors" in Enerflex's most recently filed Annual Information Form, as well as Enerflex's other publicly filed disclosure documents, available on www.sedar.com. The reader is cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Readers are cautioned that the actual results achieved will vary from the information provided in this press release and that such variation may be material. Consequently, Enerflex does not represent that actual results achieved will be the same in whole, or in part, as those set out in the forward-looking information.
Furthermore, the statements containing forward-looking information that are included in this news release are made as of the date of this news release, and Enerflex does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained in this news release is expressly qualified by this cautionary statement. Contacts: Enerflex Ltd. J. Blair Goertzen President & Chief Executive Officer 403.236.6852
Enerflex Ltd. D. James Harbilas Vice President & Chief Financial Officer 403.236.6857 www.enerflex.com