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 
NEWS RELEASE TRANSMITTED BY Marketwired 
FOR: Enerflex Ltd. 
TSX SYMBOL:  EFX 
FEBRUARY 27, 2014 
Enerflex Reports Fourth Quarter and Year End 2013 Financial Results and
Announces Quarterly Dividend 
CALGARY, ALBERTA--(Marketwired - Feb. 27, 2014) - 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 $24.6 million compared to the 2012
year. The decreases in net earnings for the quarter and for the 2013 year were
primarily a result of lower revenue and gross margins.  
"We have seen positive market developments of late with improving
opportunities in liquids-rich plays in Canada and the U.S., in the Alberta oil
sands, and relating to liquefied natural gas development in Canada, the U.S.
and AustralAsia. Coupled with a significant increase in bookings in 2013, and
the strength of our balance sheet, the Company is well positioned to capitalize
on opportunities that should benefit results near-term," said J. Blair
Goertzen, Enerflex's President and Chief Executive Officer.
"Nonetheless, our 2013 financial results overall were disappointing, as we
continued to experience cost increases without corresponding revenue on
projects in the International region, which adversely impacted margin
performance for the fourth quarter and for the full year. Where the cost
increases have been customer driven, variation claims are being vigorously
pursued."     
/T/ 
Three months ended         Twelve months ended 
(unaudited)                        December 31,                December 31, 
($ 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.                 
/T/ 
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 $17.0 million in 2014, and a corresponding impact
on gross margin. The Company intends to pursue further variation claims for
such increases, but does not expect resolution before the second half of 2014. 
Key Performance Indicators 
/T/ 
Three months ended         Twelve months ended 
(unaudited)                        December 31,                December 31, 
($ 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.                 
/T/ 
During the fourth quarter, Enerflex completed or exceeded most of its 2013
strategic objectives. Firstly, 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 the 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 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. 
-30-
FOR FURTHER INFORMATION PLEASE CONTACT: 
Enerflex Ltd.
J. Blair Goertzen
President & Chief Executive Officer
403.236.6852
or
Enerflex Ltd.
D. James Harbilas
Vice President & Chief Financial Officer
403.236.6857 
INDUSTRY:  Energy and Utilities - Equipment, Energy and Utilities - Oil and Gas 
SUBJECT:  ERN 
-0-
-0- Feb/27/2014 22:14 GMT
 
 
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