Enerflex Reports Third Quarter 2013 Financial Results and Announces Quarterly Dividend Increase

Enerflex Reports Third Quarter 2013 Financial Results and Announces Quarterly 
Dividend Increase 
CALGARY, ALBERTA -- (Marketwired) -- 11/07/13 -- 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 nine months
ended September 30, 2013.  
Enerflex reported net earnings from continuing operations for the
third quarter of 2013 of $13.2 million, or $0.16 per share, which
were $7.7 million lower than the same period in 2012. Net earnings
for the first nine months of 2013 were $47.0 million, or $0.60 per
share, a decrease of $8.2 million from the same period in 2012. The
decreases in net earnings for the quarter and for the first nine
months of 2013 were a result of lower gross margins and higher SG&A
expenses, which were partially offset by lower income tax expense.
The lower gross margin for the third quarter of 2013 was driven
primarily by cost increases on three international projects due to
scope and design variations, and to a lesser degree due to project
execution challenges. The cost increases resulted in an $11.5 million
deterioration in gross margin during the quarter. Variation claims,
where appropriate, have either been submitted, or are in the process
of being submitted. There could be additional cost increases on these
international projects, in which case further variation claims will
be assessed at that point. Variation claims are filed once forecast
costs on a fixed price project exceed budgeted costs, as a result of
increased scope or design changes to the project. To the extent that
these cost increases are subsequently recovered through approved
variation claims from customers, revenue will be recognized in the
corresponding period. Variation claims are typically approved at the
completion of the project. This results in volatility in gross
margins for the International segment as costs are recognized as
incurred on these projects, while revenue resulting from variation
claims is recognized in the period that these claims are approved. 
The Company recorded bookings of $247.6 million and $754.4 million,
respectively, during the third quarter and first nine months of 2013,
which were $104.2 million and $121.5 million higher, respectively,
than the comparable periods in 2012. These increases were due to
increased booking activity in the Canada and Northern U.S., and
Southern U.S. and Latin America segments, which were partially offset
by lower activity in the International segment. Enerflex had a
backlog of $652.3 million at the end of the third quarter of 2013,
compared to $775.4 million at the end of the same period last year, a
decrease of $123.1 million or 15.9%. Sequentially, backlog has
decreased by $45.4 million or 6.5% from June 30, 2013 and by $30.9
million or 4.5% from December 31, 2012. 
During the third quarter, Enerflex continued to achieve or exceed
most of its 2013 strategic objectives, progressing towards the goal
of generating 35%-40% recurring revenue on a trailing 12 month basis.
Recurring revenue, which is defined as revenue from the Service and
Rental product lines, has increased for the third consecutive quarter
from 20.6% for the year ended December 31, 2012 to 24.1% of revenue
for the trailing 12 month period ending September 30, 2013. In terms
of safety management objectives, Enerflex surpassed its strategic
objective of reducing its Company-wide total recordable injury rate
by 13% with a 38% improvement over its 2012 rate. The Company
continues to work towards its strategic objective of a 10% EBIT
margin, but has seen EBIT as a percentage of revenue, also calculated
on a trailing 12 month basis, comparable between the period ended
September 30, 2013 and 2012. Lastly, Enerflex has become increasingly
active in the Alberta oil sands with bookings of $19.5 million in the
first nine months of 2013, and $28.6 million in the month of October
2013.  
"Higher revenue levels for the third quarter of 2013 did not
translate into improved gross margin as a result of the cost
increases that we faced in the International segment during the
quarter. Management has determined and is executing on a plan to
address the challenges identified, and is pursuing variation claims
where appropriate. Bookings on the other hand were significantly
improved in the third quarter and on a year-to-date basis, with
increased activity in the Canada and Northern U.S., and Southern U.S.
and Latin America segments despite weak natural gas and natural gas
liquids, or NGL, prices. Service revenues in both segments also
improved in 2013, contributing to the increase in recurring revenue
as a percentage of total revenue. We remain cautiously optimistic for
both segments for the remainder of 2013 and into early 2014. In
aggregate, improved bookings for the quarter, and a strong backlog,
coupled with growth in Service revenue, position us well for the
remainder of 2013 and into 2014 as we intend to remain diligent and
focused on improving project performance to address the issues
experienced in the International segment," said J. Blair Goertzen,
Enerflex's President and Chief Executive Officer. "Our continuing
healthy balance sheet leaves the Company right-sized and well
positioned to capitalize on opportunities that may arise." 
Financial Highlights and Key Performance Indicators 


 
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(unaudited)               Three months ended         Nine months ended     
                            September 30,              September 30,       
($ millions, except                                                        
 per share amounts and                  Change                       Change
 percentages)            2013    2012      ($)      2013      2012      ($)
---------------------------------------------------------------------------
Financial Highlights                                                       
Revenue               $ 390.7 $ 369.7 $   21.0 $ 1,055.0 $ 1,080.1 $ (25.1)
Gross margin             61.4    67.3    (5.9)     186.8     195.6    (8.8)
Gross margin %          15.7%   18.2%              17.7%     18.1%         
EBIT(1)                  21.0    30.4    (9.4)      70.8      80.6    (9.8)
EBIT %                   5.4%    8.2%               6.7%      7.5%         
Net earnings (loss)                                                        
 Continuing              13.2    20.9    (7.7)      47.0      55.2    (8.2)
 Discontinued           (0.0)   (1.4)      1.4     (1.8)     (9.8)      8.0
Earnings (loss) per                                                        
 share                                                                     
 Continuing              0.16    0.27   (0.11)      0.60      0.71   (0.11)
 Discontinued               -  (0.02)     0.02    (0.02)    (0.13)     0.11
Key Performance                                                            
 Indicators(2)                                                             
Recurring revenue as a                                                     
 % of revenue(3)        24.1%   21.8%              24.1%     21.8%         
EBITDA                $  31.1 $  40.2 $  (9.1) $   100.7 $   109.8 $  (9.1)
Bookings                247.6   143.4    104.2     754.4     632.9    121.5
Backlog                 652.3   775.4  (123.1)     652.3     775.4  (123.1)
Return on Capital                                                          
 Employed ("ROCE")      11.9%   12.0%              11.9%     12.0%         
 
1.  Earnings before Interest (Finance Costs) and Taxes ("EBIT"). 
2.  Recurring Revenue, Earnings before Interest (Finance Costs), Taxes,
    Depreciation and Amortization ("EBITDA"), Bookings, Backlog and ROCE are
    non-GAAP measures that do not have standardized meanings and therefore
    may not be comparable to similar measures presented by other issuers. 
3.  Determined by taking a 12-month trailing average.

 
Financial Results 
Revenue for the third quarter and the first nine months of 2013 was
$390.7 million and $1,055.0 million, respectively, representing a
$21.0 million increase for the quarter, but a $25.1 million decrease
in revenues on a year-to-date basis compared to the same periods in
2012. For the quarter, revenue was higher in the Canada and Northern
U.S., and Southern U.S. and Latin America segments, partially offset
by lower revenue from the International segment. When comparing the
first nine months of 2013 to 2012, a decrease in revenue in the
Canada and Northern U.S. segment was partially offset by increases in
revenue for the Southern U.S. and Latin America, and International
segments.  
Canada and Northern U.S. segment revenue increased by $4.6 million
during the third quarter of 2013 as a result of an increase in
Service and Rental revenue, partially offset by lower Engineered
Systems revenue. Segment revenue decreased by $80.1 million for the
nine months ended September 30, 2013, as a result of lower Engineered
Systems revenue, partially offset by higher Service and Rental
revenue. 
Southern U.S. and Latin America segment revenue increased by $21.9
million in the third quarter of 2013, and by $20.9 million for the
nine months ended September 30, 2013, as a result of higher revenues
from both Engineered Systems and Service product lines. 
International segment revenue decreased by $5.7 million in the third
quarter of 2013 on account of lower Engineered Systems revenue
resulting from lower opening backlog, which was partially offset by
higher Service revenue. Revenue for the International segment
increased by $34.1 million for the nine months ended September 30,
2013 due to higher Engineered Systems and Service revenue. 
Gross margin for the quarter ended September 30, 2013 was $61.4
million or 15.7% of revenue compared to $67.3 million or 18.2% of
revenue for the same period in 2012. Gross margin for the first nine
months of 2013 was $186.8 million or 17.7% of revenue as compared to
$195.6 million or 18.1% of revenue for the same period of 2012.  
The decrease in gross margin during the third quarter of 2013 was a
result of lower margin in the International segment partially offset
by higher margin in the Southern U.S. and Latin America segment. For
the first nine months of 2013, the gross margin decrease was driven
by lower margins in the Canada and Northern U.S. segment, partially
offset by higher margin in the Southern U.S. and Latin America
segment. The decrease in gross margin in Canada and the Northern U.S.
for the first nine months of 2013 was primarily due to lower revenues
and warranty costs incurred on Engineered Systems jobs in Casper,
Wyoming, partially offset by improved project performance. The higher
gross margin in the Southern U.S. and Latin America segment in the
2013 periods was attributable to higher revenue and improved margin
performance, partially offset by weaker plant utilization during the
first nine months of 2013. In the International segment, gross margin
decreased due to weaker margin performance as a result of the cost
increases on various projects, largely offset for the nine months
ended September 30, 2013 by the impact of higher revenues. 
Bookings in the third quarter of 2013 increased over the same period
in 2012 by $104.2 million to $247.6 million, and were $121.5 million
higher at $754.4 million for the first nine months of 2013. In Canada
and the Northern U.S., despite continued weak natural gas prices,
bookings for the quarter and the first nine months of 2013 were $26.7
million and $51.5 million higher, respectively, at $75.0 million and
$267.8 million, respectively. The increases came primarily from
increases in bookings destined for domestic destinations. In the
Southern U.S. and Latin America segment, bookings for the quarter
were $151.2 million, which was $97.8 million higher than 2012, and
for the first nine months of 2013, $95.0 million higher at $389.0
million. The bookings increased as a result of higher domestic
bookings despite the continued weakness in NGL and gas prices, and
higher bookings destined for international markets. Bookings for the
International segment were $20.3 million and $25.0 million lower,
respectively, at $21.4 million and $97.6 million, respectively, in
the third quarter and first nine months of 2013 when compared to the
same periods in 2012. The decreases were primarily due to lower
booking levels in Australia related to coal seam gas exploration and
gas storage projects when compared to 2012. 
Subsequent to the end of the third quarter of 2013, Enerflex declared
an increase in the quarterly dividend to $0.075 per share, payable on
January 7, 2014, to shareholders of record on November 21, 2013. 
Quarterly Results Material 
Enerflex's interim condensed financial statements for the three and
nine months ended September 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 Friday, November 8, 2013
at 9:00 a.m. MST (11:00 a.m. EST) to discuss the third 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
1.800.406.5162. 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 November 8, 2013 at
9:00 a.m. MST (11:00 a.m. EST). Appr
oximately 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, November 15, 2013.
Please call 1.800.558.5253 or 1.416.626.4100 and enter passcode
21676207. 
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 2,900
employees worldwide. Enerflex, its subsidiaries, interests in
associates and joint-ventures operate in Canada, the United States,
Colombia, Australia, the United Kingdom, Russia, the United Arab
Emirates, Oman, 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 press 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
challenges and 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 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:
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