Enerflex Reports Fourth Quarter and Year End 2013 Financial Results and Announces Quarterly Dividend

Enerflex Reports Fourth Quarter and Year End 2013 Financial Results and 
Announces Quarterly Dividend 
CALGARY, ALBERTA -- (Marketwired) -- 02/27/14 -- 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 months and year
ended December 31, 2013.  
Enerflex reported net earnings from continuing operations for the
fourth quarter of 2013 of $10.8 million, or $0.14 per share, which
were $16.2 million lower than the same period in 2012. Net earnings
for the 2013 year were $57.7 million, or $0.74 per share, a decrease
of $24.6 million compared to the 2012 year. The decreases in net
earnings for the quarter and for the 2013 year were primarily a
result of lower revenue and gross margins.  
"We have seen positive market developments of late with improving
opportunities in liquids-rich plays in Canada and the U.S., in the
Alberta oil sands, and relating to liquefied natural gas development
in Canada, the U.S. and AustralAsia. Coupled with a significant
increase in bookings in 2013, and the strength of our balance sheet,
the Company is well positioned to capitalize on opportunities that
should benefit results near-term," said J. Blair Goertzen, Enerflex's
President and Chief Executive Officer. "Nonetheless, our 2013
financial results overall were disappointing, as we continued to
experience cost increases without corresponding revenue on projects
in the International region, which adversely impacted margin
performance for the fourth quarter and for the full year. Where the
cost increases have been customer driven, variation claims are being
vigorously pursued."     


 
                             Three months ended         Twelve months ended 
(unaudited)                        December 31,                December 31, 
($ millions, except                                                         
 per share amounts and                   Change                      Change 
 percentages)             2013     2012     ($)      2013      2012     ($) 
----------------------------------------------------------------------------
Financial Highlights                                                        
Revenue                $ 350.1 
 $ 421.6  $(71.5) $1,405.0  $1,501.7  $(96.7)
Gross margin              59.1     77.6   (18.4)    245.9     273.2   (27.3)
Gross margin %            16.9%    18.4%             17.5%     18.2%        
EBIT (1)                  16.5     36.8   (20.3)     87.3     117.3   (30.0)
EBIT %                     4.7%     8.7%              6.2%      7.8%        
Net earnings (loss)                                                         
  Continuing              10.8     27.0   (16.2)     57.7      82.3   (24.6)
  Discontinued            (0.1)    (0.6)    0.5      (1.9)    (10.5)    8.6 
Earnings (loss) per                                                         
 share                                                                      
  Continuing              0.14     0.35   (0.21)     0.74      1.06   (0.32)
  Discontinued               -    (0.01)   0.01     (0.02)    (0.14)   0.12 
                                                                            
(1) Earnings before Interest (Finance Costs) and Taxes ("EBIT") is          
    considered an additional GAAP measure, which may not be comparable with 
    similar additional GAAP measures used by other entities.                

 
For the 2013 year, gross margin was negatively impacted by $20.0
million as a result of these increased project costs, which were
substantially customer driven. 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, which are
common for engineering, procurement and construction ("EPC")
contracts. To the extent that these cost increases are subsequently
recovered through approved variation claims from customers, revenue
will be recognized in the corresponding period. This results in
volatility in gross margins for the International segment as
additional costs are recognized as incurred on these projects, while
revenue resulting from variation claims is recognized in the period
that claims are approved. 
During the early part of 2014, two international projects in
AustralAsia, which had experienced margin erosion in 2013, were
substantially completed. Accordingly, additional material cost
increases in respect of these projects are not expected. Effective
February 1, 2014, Enerflex made a leadership change with the
appointment of Mr. James K. Rodgers as Managing Director for
AustralAsia. Mr. Rodgers brings extensive EPC and construction
experience through his executive and leadership roles with
multi-national oil and gas companies. He is addressing the challenges
faced in the region with respect to customer contract and project
timing issues, and will take the lead in returning the region to
acceptable profitability. 
Work on a project in Oman continues to experience substantial
customer driven scope and schedule challenges, which is expected to
result in further cost increases of $14.0 million to $17.0 million in
2014, and a corresponding impact on gross margin. The Company intends
to pursue further variation claims for such increases, but does not
expect resolution before the second half of 2014. 
Key Performance Indicators 


 
                             Three months ended         Twelve months ended 
(unaudited)                        December 31,                December 31, 
($ millions, except                                                         
 per share amounts and                   Change                      Change 
 percentages)             2013     2012     ($)      2013      2012     ($) 
----------------------------------------------------------------------------
Key Performance                                                             
 Indicators(1)                                                              
Recurring revenue as a                                                      
 % of revenue(2)          26.7%    21.5%             26.7%     21.5%        
EBIT (3)               $  16.5  $  36.8  $(20.3) $   87.3  $  117.3  $(30.0)
EBIT %                     4.7%     8.7%              6.2%      7.8%        
EBITDA                    26.2     47.1   (20.9)    126.9     156.8   (29.9)
Bookings                 386.4    242.6   143.8   1,140.8     875.5   265.3 
Backlog                  794.0    683.2   110.8     794.0     683.2   110.8 
Return on Capital                                                           
 Employed ("ROCE") (2)     9.7%    13.3%              9.7%     13.3%        
                                                                            
(1) Non-GAAP measures that do not have standardized meanings and therefore  
    may not be comparable to similar measures presented by other issuers.   
                                                                            
(2) Determined by taking a 12-month trailing average.                       
                                                                            
(3) Earnings before Interest (Finance Costs) and Taxes ("EBIT") is          
    considered an additional GAAP measure, which may not be comparable with 
    similar additional GAAP measures used by other entities.                

 
During the fourth quarter, Enerflex completed or exceeded most of its
2013 strategic objectives. Firstl
y, the Company progressed towards
its 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 from 21.5% for the
year ended December 31, 2012 to 26.7% of revenue for the year ended
December 31, 2013. This represents the fifth consecutive quarter of
improvement. Enerflex also reduced its Company-wide total recordable
injury rate by 42% over its 2012 rate, which considerably exceeded
its strategic objective of a 13% improvement in this rate. The
Company continues to work towards its objective of a 10% EBIT margin,
however EBIT as a percentage of revenue decreased from 7.8% for the
year ended December 31, 2012 to 6.2% in 2013, largely due to the
aforementioned project cost increases. Lastly, Enerflex has become
increasingly active in the Alberta oil sands with bookings of $74.5
million during the 2013 year.  
The Company recorded bookings of $386.4 million and $1,140.8 million,
respectively, during the fourth quarter of 2013 and the 2013 year,
which were $143.8 million and $265.3 million higher, respectively,
than the comparable periods in 2012. Bookings for the fourth quarter
and the 2013 year were higher in the Canada and Northern U.S. and
Southern U.S. and Latin America segments, partially offset by lower
booking activity in the International region. Enerflex finished 2013
with a backlog of $794.0 million, compared to $683.2 million at the
end of the same period last year, an increase of $110.8 million or
16.2%. Sequentially, backlog has increased by $141.6 million or 21.7%
from September 30, 2013. 
Segmented Financial Results 
Revenue for the fourth quarter of 2013 and the 2013 year was $350.1
million and $1,405.0 million, respectively, representing decreases of
$71.5 million and $96.7 million compared to the same periods in 2012.
For the quarter, revenue was higher in the Canada and Northern U.S.
segment, partially offset by lower revenue from the Southern U.S. and
Latin America and International segments. When comparing 2013 to
2012, revenues were lower in all segments.  
Canada and Northern U.S. segment revenue increased by $12.9 million
during the fourth quarter of 2013 on increased Service revenue from
increased parts and engine sales, and higher Rental revenue as a
result of an increase in rental unit sales. Segment revenue decreased
by $67.2 million for the year ended December 31, 2013, as a result of
lower Engineered Systems revenue caused by lower backlog to start
2013, and the closure of the Casper, Wyoming facility. The lower
Engineered Systems revenue for the year was partially offset by
higher Service revenue on increased parts and engine sales, and
higher Rental revenue due to an increase in rental unit sales,
compared to the 2012 year. 
Southern U.S. and Latin America segment revenue decreased by $29.3
million in the fourth quarter of 2013, and by $8.4 million for the
year ended December 31, 2013, due to lower Engineered Systems
revenue, partially offset by higher Service revenue on increased
service calls and parts sales, compared to the same periods in 2012.
Engineered Systems revenue was lower due to the impact of lower
opening backlog to start 2013. 
International segment revenue decreased by $55.1 million in the
fourth quarter of 2013 compared to 2012 on account of lower
Engineered Systems revenue resulting from lower opening backlog.
Revenue for the International segment decreased by $21.1 million for
the year ended December 31, 2013 due to lower Engineered Systems
revenue resulting from lower opening backlog, partially offset by
higher Service revenue on increased activity in AustralAsia. 
Gross margin for the quarter ended December 31, 2013 was $59.1
million or 16.9% of revenue compared to $77.6 million or 18.4% of
revenue for the same period in 2012. Gross margin for the 2013 year
was $245.9 million or 17.5% of revenue as compared to $273.2 million
or 18.2% of revenue for the same period of 2012.  
The decrease in gross margin during the fourth quarter of 2013 was
attributable to lower margin in the Southern U.S. and Latin America
and International segments. For the 2013 year, the gross margin
decrease reflected lower margins in the Canada and Northern U.S. and
International segments, 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. in 2013 was primarily due to lower
revenues, weaker manufacturing utilization, and warranty costs
incurred on Engineered Systems jobs in Casper, Wyoming, partially
offset by improved project margin in backlog and more favourable
project pick ups as a result of improved project execution. The lower
gross margin in the Southern U.S. and Latin America segment in the
fourth quarter of 2013 was due to lower revenue and less favourable
job pick ups, partially offset by improved project margin in backlog.
For the 2013 year, gross margin in this segment was higher as a
result of improved project margin performance, partially offset by
weaker manufacturing utilization, less favourable but still strong
project pick ups as a result of good project execution, and the
impact of lower revenue. In the International segment, gross margin
decreased due to significant cost increases on three projects due to
scope and design variations, and to a lesser degree due to project
execution challenges, and due to lower revenues.  
Bookings in the fourth quarter of 2013 increased over the same period
in 2012 by $143.8 million to $386.4 million, and were $265.3 million
higher at $1,140.8 million for the 2013 year. The increases were due
to higher bookings in the Southern U.S. and Latin America, and Canada
and Northern U.S. segments, primarily driven by customer orders
destined for both domestic and international markets. Bookings in the
Canada and the Northern U.S. segment for the quarter and the 2013
year were $81.6 million and $133.2 million higher than 2012,
respectively, at $167.0 million and $434.8 million. In the Southern
U.S. and Latin America segment, bookings for the quarter were $185.8
million, which was $67.8 million higher than 2012, and for the 2013
year, $162.8 million higher at $574.8 million. Bookings for the
International segment were $5.6 million and $30.6 million lower,
respectively, at $33.6 million and $131.2 million, in the fourth
quarter and 2013 year 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 and due to backlog conversion exceeding new bookings
in 2013. 
Subsequent to the end of 2013, Enerflex declared a quarterly dividend
of $0.075 per share, payable on April 3, 2014, to shareholders of
record on March 13, 2014. 
Advance Notice By-Law 
Enerflex's Board of Directors has adopted By-Law No. 3, which
requires advance notice to the Company in circumstances where
nominations of persons for election as a director of the Company are
made by shareholders. The terms of the by-law are consistent with
those advance notice by-laws adopted by a majority of the S&P/TSX
Composite Index companies in the past year, which have been endorsed
by proxy advisory firms and overwhelmingly approved by their
shareholders. The by-law is currently in effect.  
At t
he next meeting of shareholders, shareholders will be asked to
confirm and ratify the by-law. If the by-law is not confirmed at the
shareholders' meeting by an ordinary resolution of the shareholders,
it will be of no further force and terminate. A copy of the by-law
has been filed and is available under the Company's profile at
www.sedar.com. 
Quarterly Results Material 
Enerflex's Consolidated Financial Statements as at and for the year
ended December 31, 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, February 28,
2014 at 9:00 a.m. MST (11:00 a.m. EST) to discuss the fourth 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
1.800.269.0310. 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 February 28, 2014 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 7, 2014.
Please call 1.800.558.5253 or 1.416.626.4100 and enter passcode
21705882. 
About Enerflex 
Enerflex Ltd. is a single source supplier of natural gas compression,
oil and gas processing, refrigeration systems and electric power
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
electric power equipment 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, Malaysia 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, including
the nature and magnitude of cost estimates and variation claims. 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 pub
licly 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
 
 
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