Enerflex Reports Second Quarter 2013 Financial Results and Announces Quarterly Dividend

Enerflex Reports Second Quarter 2013 Financial Results and Announces Quarterly 
Dividend 
CALGARY, ALBERTA -- (Marketwired) -- 08/14/13 -- 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 six months
ended June 30, 2013.  
Financial Highlights 


 
(unaudited)         Three months ended June 30,  Six months ended June 30,  
($ millions, except                                                         
 per share amounts                       Change                      Change 
 and percentages)        2013      2012     ($)      2013      2012     ($) 
----------------------------------------------------------------------------
Revenue              $  311.0  $  354.6   (43.6) $  664.3  $  710.4   (46.1)
Gross margin             64.4      66.0    (1.6)    125.4     128.3    (2.9)
Gross margin %           20.7%     18.6%             18.9%     18.1%        
EBIT (1)                 27.1      28.5    (1.4)     49.9      50.1    (0.2)
EBITDA(2)                37.1      38.2    (1.1)     69.7      69.5     0.2 
Net earnings (loss)                                                         
  Continuing             18.4      19.4    (1.0)     33.8      34.3    (0.5)
  Discontinued           (1.2)     (7.6)    6.4      (1.7)     (8.4)    6.7 
Earnings (loss) per                                                         
 share                                                                      
  Continuing             0.24      0.25   (0.01)     0.44      0.44       - 
  Discontinued          (0.02)    (0.10)   0.08     (0.02)    (0.11)   0.09 

 
(1) Earnings before Interest (Finance Costs) and Taxes ("EBIT").  
(2) Earnings before Interest (Finance Costs), Taxes, Depreciation and
Amortization ("EBITDA") is a non-GAAP measure that does not have a
standardized meaning and therefore may not be comparable to similar
measures presented by other issuers.  
Enerflex reported net earnings from continuing operations for the
second quarter of 2013 of $18.4 million, $1.0 million lower than the
same period of 2012. For the first six months of 2013, net earnings
from continuing operations were $33.8 million, which was $0.5 million
lower than the same period of 2012. Net earnings were negatively
impacted by warranty expenses incurred primarily at the Casper,
Wyoming manufacturing facility, and restructuring costs related to
its closure, totalling $5.2 million for the second quarter and $8.7
million for the first six months of 2013.  
Revenues for the second quarter and the first six months of 2013 were
$311.0 million and $664.3 million, which were $43.6 million and $46.1
million lower, respectively, compared to the same periods in 2012.
The decreases were due to lower revenue in the Canada and Northern
U.S., and Southern U.S. and Latin America segments, while revenue for
the International segment was lower for the second quarter but higher
for the first six months of 2013, compared to the same periods of
2012. 
During the second quarter of 2013, Enerflex closed its Casper,
Wyoming compression and process manufacturing facility. Sales,
Service, Rentals and Retrofit operations in the area will continue as
before. The Casper new unit packaging facility opened in 2006 for the
primary purpose of serving the Wyoming Powder River Basin. This
region is no longer an active area for new compression. In addition,
Enerflex has experienced manufacturing performance challenges at the
facility, which have resulted in warranty expenses of $9.6 million
over the last 24 months. Equipment scheduled to be packaged in Casper
will now be completed at the Calgary facility or at the expanded
Houston facility. Enerflex intends to sell or lease the Casper
facility and has recorded $1.1 million in restructuring expenses
related to the closure during the second quarter of 2013. Should the
Powder River Basin again become active, it will be served through the
Denver and Houston operations. 
The Company recorded bookings of $317.5 million during the second
quarter, which was $50.7 million higher than the comparable period
last year. This increase was primarily due to increased booking
activity in the Canada and Northern U.S., and International segments,
partially offset by lower activity in the Southern U.S. and Latin
America segment. Although natural gas prices weakened during the
second quarter, the Canada and Northern U.S. segment recorded
bookings that were $53.8 million higher in 2013 compared to 2012,
primarily driven by customer orders destined for international
markets. Bookings in the Southern U.S. and Latin America segment
remained steady over the first six months of the year as a result of
strong activity levels in liquids-rich resource basins despite a
recent weakening in natural gas liquids ("NGL") prices. The
International segment recorded bookings of $75.7 million in the
second quarter of 2013 compared to $72.8 million recorded in the same
period of 2012. These projects have long lead times associated with
tendering, bid evaluation and contract award as they tend to be
larger in scale and scope. It is important to highlight that $82.2
million and $119.8 million in bookings recorded in the second quarter
and first six months of 2013 in the Canada and Northern U.S., and
Southern U.S. and Latin America segments were related to compression
and processing equipment that will be manufactured in these segments
but are destined for international markets, compared to $36.2 million
and $86.9 million, respectively, in the same periods of 2012.  
Enerflex had a backlog of $697.8 million at the end of the second
quarter of 2013, compared to $921.2 million at the end of the same
period last year, a decrease of $223.4 million or 24.2%.
Sequentially, backlog has increased by $94.6 million or 15.6% from
March 31, 2013. 
"Despite lower revenue levels, gross margin and net earnings from
continuing operations were comparable to the prior year. Although the
Canada and Northern U.S. market continues to struggle with weak
natural gas prices, bookings destined for both domestic and
international markets increased over 2012 levels. Bookings were
stable for the Southern U.S. and Latin America region, and we remain
cautiously optimistic for the remainder of 2013 in this region.
Finally, the International segment continued to demonstrate long-term
opportunities through strong bookings for the quarter and the award
of a significant long-term maintenance agreement in the AustralAsia
region. In aggregate, strong bookings for the quarter, and an
improved backlog, position us well for the remainder of 2013," said
J. Blair Goertzen, Enerflex's President and Chief Executive Officer.
Mr. Goertzen added that "during the quarter, we have exited the
European business, which has been reported as a discontinued
operation since the third quarter of 2011. Overall, management
remains cautiously optimistic at the end of the second quarter given
the improvement shown in backlog levels, and the opportunities
currently being pursued. Our healthy balance sheet leaves the Company
right-sized for challenges over the remainder of 2013, and well
positioned to capitalize on opportunities that may arise." 
Second Quarter Highlights 
In the three and six months ended June 30, 2013, Enerflex: 


 
--  Generated revenue of $311.0 million compared to $354.6 million in the
    second quarter of 2012. Revenue for the first six months was $664.3
    million compared to $710.4 million during the same period of the prior
    year. This represented decreases in revenue of $43.6 million and $46.1
    million for the second quarter and first six months, respectively; 
    
--  Recorded $317.5 million in bookings for the second quarter of 2013
    compared to $266.8 million in the same period in 2012, an increase of
    $50.7 million or 19.0%. Bookings for the six months ended June 30, 2013
    were $506.8 million compared to $489.6 million during the same period in
    2012, an increase of $17.2 million; 
    
--  Was awarded a long-term maintenance agreement in the AustralAsia region,
    valued at over $70.0 million for an initial eight year term. This
    contract is related to all compression equipment currently deployed by
    British Gas in Australia; 
    
--  Achieved a gross margin of $64.4 million or 20.7% during the second
    quarter compared to $66.0 million or 18.6% during the same period of
    2012, a decrease of $1.6 million. Gross margin for the first six months
    decreased by $2.9 million to $125.4 million in 2013, however when
    expressed as a percentage of revenue, gross margin increased from 18.1%
    to 18.9%; 
    
--  Produced EBIT of $27.1 million or 8.7% of revenue for the second quarter
    compared to $28.5 million or 8.0% during the second quarter of 2012.
    EBIT for the first six months was $49.9 million or 7.5% compared to
    $50.1 million or 7.1% during the same period of 2012; EBIT as a
    percentage of revenue for the trailing 12-months ended June 30, 2013 was
    8.0% compared to 7.4% for the same period of 2012; 
    
--  Generated second quarter EBITDA of $37.1 million, a decrease of $1.1
    million over the second quarter of 2012. EBITDA for the first six months
    was $69.7 million, an increase of $0.2 million over the same period of
    2012; 
    
--  Recorded net earnings from continuing operations in the second quarter
    of $18.4 million ($0.24 cents per share), a decrease of $1.0 million
    over the same period last year; 
    
--  Completed the sale of the discontinued European operations to a company
    specializing in Combined Heat and Power ("CHP") fabrication and service,
    through the transfer of specified maintenance contracts, and certain
    obligations associated with the contracts and employees to the
    purchaser; 
    
--  Registered a return on capital employed from continuing operations,
    based on trailing 12-month EBIT, of 13.0% during the first six months
    compared to 11.1% for the same period in 2012; 
    
--  Ended the quarter with a backlog of $697.8 million, an increase of $14.6
    million or 2.1% from December 31, 2012. Sequentially, backlog has
    increased by $94.6 million or 15.6% from March 31, 2013; and 
    
--  Finalized an amendment to the existing Bank Facilities to extend the
    term of the facilities by one year to June 1, 2017. 

 
Subsequent to the end of the second quarter of 2013: 


 
--  Enerflex declared a quarterly dividend of $0.07 per share, payable on
    October 3, 2013, to shareholders of record on August 27, 2013; and  
    
--  Enerflex announced the appointment of Ms. Helen Wesley, Executive Vice
    President for Talisman Energy, as a director and member of the Audit
    Committee. Ms. Wesley has extensive knowledge of the international oil
    and gas industry, and holds a Chartered Financial Analyst designation
    and a Masters of Business Administration. Ms. Wesley replaces Mr.
    Kenneth R. Bruce as a director and member of the Audit Committee. The
    Board accepted Mr. Bruce's resignation effective June 30, 2013.

 
Financial Results 
The financial results by segment, for the three and six months ended
June 30, 2013 compared to the same period in 2012:  


 
--  Canada and Northern U.S. segment revenue decreased by $21.0 million
    during the second quarter of 2013, and by $84.7 million for the six
    months ended June 30, 2013, as a result of lower Engineered Systems
    revenue due to lower 2013 opening backlog. For the six months ended June
    30, 2013, Rental revenue was higher as result of increased rental unit
    sales; 
 
--  Southern U.S. and Latin America segment revenue decreased by $3.6
    million in the second quarter of 2013, and by $1.1 million for the six
    months ended June 30, 2013, with slightly lower Engineered Systems
    revenue partially offset by increased Service revenue. Despite lower
    opening backlog to start 2013, Engineered Systems revenue for 2013 was
    only slightly lower as a result of the additional capacity provided by
    the expansion of the Houston manufacturing facility, which led to an
    increase in backlog conversion; and 
 
--  International segment revenue decreased by $18.9 million in the second
    quarter of 2013 on account of lower Engineered Systems revenue due to
    lower opening backlog. For the six months ended June 30, 2013,
    International segment revenue increased by $39.7 million due to higher
    Engineered Systems revenue as a result of higher activity levels in the
    AustralAsia and MENA regions. 

 
Gross margin for the quarter ended June 30, 2013 was $64.4 million or
20.7% of revenue compared to $66.0 million or 18.6% of revenue for
the same period of 2012. Gross margin for the first six months of
2013 was $125.4 million or 18.9% of revenue as compared to $128.3
million or 18.1% of revenue for the same period of 2012. The decrease
in gross margin was primarily due to lower gross margin in the Canada
and Northern U.S. segment, and for the second quarter of 2013, lower
gross margin in the Southern U.S. and Latin America segment, due to
lower Engineered Systems revenue. This was partially offset by strong
gross margin performance by the International segment both for the
quarter and first six months. Gross margin for the three and six
months ended June 30, 2013, was negatively impacted by warranty
expenses and the margin impact of the closure of the Casper, Wyoming
facility, in the amount of $4.3 million and $7.8 million,
respectively. Approved variation claims of $5.4 million in the second
quarter and first six months of 2013 positively impacted gross
margin. 
Bookings in the second quarter of 2013 increased by $50.7 million
over the same period of the prior year, and were $17.2 million higher
for the first six months of 2013. In Canada and the Northern U.S.,
despite continued weak natural gas prices, bookings for the quarter
and the first six months of 2013 were $53.8 million and $24.8 million
higher, respectively, coming primarily from increases in bookings
destined for international destinations, but also for domestic
locations, particularly during the second quarter. In the Southern
U.S. and Latin America segment, bookings for the quarter were $6.1
million lower than 2012, but remained comparable with 2012 for the
first six months of 2013, despite weakening NGL prices as decreases
in domestic bookings were replaced by bookings destined for
international markets. Bookings for the International segment were
$3.0 million higher in the second quarter of 2013, but lower by $4.7
million for the first six months of 2013 when compared to the same
periods in 2012.  
As a result of these higher bookings levels, the backlog has
increased to $697.8 million as at June 30, 2013, which represents a
$14.6 million or 2.1% increase from December 31, 2012, and a $94.6
million or 15.6% increase from March 31, 2013.  
Update on Discontinued Operations 
The European Service and CHP business, within the International
segment, has been reported as a discontinued operation since the
third quarter of 2011. In June 2013, Enerflex completed the disposal
of the European business to a company specializing in CHP fabrication
and service. As part of the arrangement, Enerflex transferred certain
maintenance contracts and employees to the purchasing company, as
well as all obligations associated with these contracts and
employees. The disposal was conducted in accordance with Dutch
information and consultation rules.  
Quarterly Results Material 
Enerflex's interim condensed financial statements for the three and
six months ended June 30, 2013, and the accompanying Management's
Discussion and Analysis, will be available on the Enerflex website at
www.enerflex.com under the Investors section and on SEDAR at
www.sedar.com.  
Conference Call and Webcast Details 
Enerflex will host a conference call for analysts, investors, members
of the media and other interested parties on Thursday, August 15,
2013 at 9:00 a.m. MDT (11:00 a.m. EDT) to discuss the second quarter
2013 financial results and operating highlights. 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
1.800.734.8507. 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 August 15, 2013 at
9:00 a.m. MDT (11:00 a.m. EDT). 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, August 22, 2013. Please call
1.800.558.5253 or 1.416.626.4100 and enter passcode 21668532. 
About Enerflex  
Enerflex Ltd. is a single source supplier for natural gas
compression, oil and gas processing, refrigeration systems and power
generation equipment - plus in-house engineering and mechanical
service expertise. The Company's broad in-house resources provide the
capability to engineer, design, manufacture, construct, commission
and service hydrocarbon handling systems. Enerflex's expertise
encompasses field production facilities, compression and natural gas
processing plants, CO2 processing plants, refrigeration systems and
power generators servicing the natural gas production industry.  
Headquartered in Calgary, Canada, Enerflex has approximately 3,000
employees worldwide. Enerflex, its subsidiaries, interests in
associates 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. Forward-looking statements and information contained in
this news release include, but are not limited to: (i) the
anticipated duration of weak natural gas prices and the effect
thereof in Canada and Northern U.S. markets; (ii) expected bookings
in Southern U.S. and Latin America; and (iii) the nature and scope of
opportunities in the International segment. 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 and regulatory
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; 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:
For investor and media inquiries, please contact:
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