Enerflex Reports Second Quarter 2014 Financial Results and Announces Quarterly Dividend

Enerflex Reports Second Quarter 2014 Financial Results and Announces Quarterly 
Dividend 
NEWS RELEASE TRANSMITTED BY Marketwired 
FOR: Enerflex Ltd. 
TSX SYMBOL:  EFX 
AUGUST 7, 2014 
Enerflex Reports Second Quarter 2014 Financial Results and Announces Quarterly
Dividend 
CALGARY, ALBERTA--(Marketwired - Aug. 7, 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 and six months ended June 30,
2014.  
During the second quarter of 2014, there have been continuing positive market
developments in liquids-rich plays in Canada and the United States; in the
Alberta oil sands; and electric power opportunities. We have also seen
encouraging signs relative to liquefied natural gas projects in Canada, the
United States and AustralAsia regions. Enerflex has successfully converted
these positive market developments into increased bookings in the second
quarter of 2014 compared to 2013, building on momentum established in the first
quarter of 2014. Sequentially, bookings have increased by $176.4 million in the
second quarter of 2014 when compared to the first quarter of 2014, resulting in
an increased backlog of $867.9 million at June 30, 2014.  
On June 30, 2014, Enerflex completed the acquisition of the international
contract compression and processing, as well as the after-market services
business of Axip Energy Services, LP ("Axip") for approximately
US$430 million in cash, including closing purchase price adjustments.
Axip's international contract compression and processing business and
after-market service is a leading provider of global energy services.
Headquartered in Houston, Texas, Axip has 173 employees with operations in
Argentina, Brazil, Colombia, Mexico, Peru, Indonesia, Malaysia, Thailand and
Bahrain. Axip's energy infrastructure assets include a 448 unit
compression fleet totaling approximately 285,000 hp and gas treating facilities
in Mexico, Argentina and Peru. All members of the current Axip international
senior management team have stayed with the business. The acquisition did not
include Axip's U.S. assets. 
The Company's results from operations will include the results of the Axip
business beginning July 1, 2014 because of the closing date of June 30, 2014
for the acquisition. Only the statement of financial position for the acquired
business has therefore been included at June 30, 2014, including the
determination of any asset and liability adjustments required as a result of
the allocation of the purchase price.  
Enerflex reported earnings, normalized for one time transaction costs expensed
as part of the acquisition, and the related tax impacts of $24.9 million, or
$0.33 per share for the second quarter of 2014, and $30.0 million, or $0.38 per
share for the first six months of 2014, compared to net earnings of $18.4
million, or $0.24 per share, and $33.8 million, or $0.44 per share,
respectively, for the same periods in 2013. Normalized net earnings were higher
in the second quarter of 2014 on higher gross margin and higher earnings from
associates and joint ventures, partially offset by higher SG&A and income
tax expenses. For the six months ended June 30, 2014, normalized net earnings
were lower due to higher SG&A and income tax expenses, partially offset by
higher gross margin and earnings from associates and joint ventures.  
The Company's financial results for the quarter were in line with
expectations, and improved on the same period last year. The results on a
year-to-date basis are below expectations, largely as a result of previously
disclosed cost increases in the International segment during the first quarter
of 2014, and the related impact on gross margin. Where the cost increases have
been customer driven, variation claims have been submitted, and are being
vigorously pursued. For the six months ended June 30, 2014, results for the
Canada and Northern U.S., and Southern U.S. and Latin America segments have
improved. Overall results normalized for one time transaction expenses
associated with the acquisition, which are included in SG&A and income tax
expense, further improved for the second quarter and were in line with the
prior year when looking at the first six months of 2014. 
In July 2014, Enerflex was provided with the Letter of Intent for one new
project in the MENA region, and one in the Latin American region. The project
in MENA is for the rental of compression trains and for the provision of
on-site operations, maintenance and services for a period of 48 months. The
project in Latin America is for the rental of compressor units, and the
associated operations and maintenance services for a period of 48 months.
Coupled with a rental contract won earlier in the year in the MENA region for
the rental of compressors and the associated operations and maintenance for a
period of 24 months, the total horsepower that will be deployed to these three
projects is approximately 60,000 hp. Lastly, Enerflex was successful in
renewing a large service contract in the AustralAsia region for an initial
contract term of 36-48 months, providing parts, service and technical support.  
During the second quarter, Enerflex continued to achieve or exceed most of its
2014 strategic objectives, progressing towards the goal of generating 35%-40%
recurring revenue on a trailing 12-month basis. The Axip acquisition will drive
acceleration in the achievement of this goal. In terms of safety management
objectives, Enerflex is ahead of its strategic objective of reducing its
Company-wide total recordable injury rate to 1.8 with a rate of 1.6 at the end
of June, 41% below the rate at June 30, 2013. 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, fall
compared to the same periods last year, largely as a result of the cost
increases in the International segment, and increases in SG&A. Successful
variation claims, coupled with the EBIT benefit of the acquisition, should
drive an increase in EBIT margin percentage over the remainder of 2014. The
EBIT percentage normalized for one time transaction expenses associated with
the acquisition was 8.7% for the second quarter of 2014, and 5.7% when
calculated on a trailing 12-month basis. The EBIT percentages for the
comparable periods in 2013 were 8.7% for the quarter and 8.0% on a trailing
12-month basis, respectively. 
"The Company exited 2013 with strong backlog levels, and continued to see
excellent booking activity through the second quarter of 2014, with second
quarter booking levels almost $180 million higher, sequentially, than the first
quarter of 2014. The recent Axip acquisition is consistent with Enerflex's
objective of increasing recurring revenue streams and expanding geographic
markets while supporting the Company's strategy of being a global supplier
of turnkey energy solutions through compression, processing and electric power
equipment sales and after-market services," said J. Blair Goertzen,
Enerflex's President and Chief Executive Officer. "The improving
market dynamics, coupled with our recent acquisition, have enabled the Company
to capitalize on recent rental opportunities in MENA and Latin America that
have arisen and are expected to continue. After first half year results that
were adversely affected by cost increases previously anticipated and
communicated, we would expect to deliver stronger results through 2014, as the
higher opening backlog is converted to revenue, and as the Company continues to
deliver improved recurring revenue from its Service and Rental business." 
/T/ 
(unaudited)           Three months ended June 30, Six months ended June 30, 
($ millions, except                                                         
 per share amounts                         Change                    Change 
 and percentages)        2014      2013       ($)     2014     2013     ($) 
----------------------------------------------------------------------------
Financial Highlights                                                        
Revenue             $   446.1 $   311.0 $   135.1 $  778.5 $  664.3 $ 114.2 
Gross margin             86.0      64.4      21.6    137.3    125.4    11.9 
Gross margin %           19.3%     20.7%              17.6%    18.9%        
EBIT (1)                 30.5      27.1       3.4     40.5     49.9    (9.4)
EBIT %                    6.8%      8.7%               5.2%     7.5%        
Normalized EBIT (2)      38.6      27.1      11.5     49.6     49.9    (0.3)
Normalized EBIT %                                                           
 (2)                      8.7%      8.7%               6.4%     7.5%        
Net earnings (loss)                                                         
  Continuing             11.1      18.4      (7.3)    15.2     33.8   (18.6)
  Discontinued              -      (1.2)      1.2        -     (1.7)    1.7 
Normalized net                                                              
 earnings (2)            24.9      18.4       6.5     30.0     33.8    (3.8)
Earnings (loss) per                                                         
 share                                                                      
  Continuing             0.14      0.24     (0.10)    0.19     0.44   (0.25)
  Discontinued              -     (0.02)     0.02        -    (0.02)   0.02 
Normalized net                                                              
 earnings per share                                                         
 (2)                     0.33      0.24      0.09     0.38     0.42   (0.04)
Bookings (2)            414.3     317.5      96.8    652.2    506.8   145.4 
Backlog (2)             867.9     697.8     170.1    867.9    697.8   170.1  
(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. See "Non-GAAP  
Measures" in the Company's MD&A for the three and six month periods     
ended June 30, 2014.                                                    
(2)  Normalized EBIT, normalized EBIT%, normalized net earnings and          
normalized net earnings per share, bookings and backlog are considered  
non-GAAP measures that do not have standardized meanings as prescribed  
by GAAP, and are therefore unlikely to be comparable to similar         
measures used by other entities. See "Non-GAAP Measures" in the         
Company's MD&A for the three and six month periods ended June 30, 2014. 
/T/ 
Work on an international project in Oman continued to experience customer
driven scope and design variations during the first half of 2014. For the first
six months of 2014, cost increases resulted in a corresponding decrease in
gross margin of $17.6 million. With the project largely complete at the end of
June 2014, the risk of further margin deterioration is significantly reduced.
The Company has submitted and continues to pursue variation claims for cost
increases on the project, and expects resolution during the second half of
2014. 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
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.  
Segmented Financial Results 
Revenue for the second quarter and first six months of 2014 was $446.1 million
and $778.5 million respectively, representing increases of $135.1 million and
$114.2 million compared to the same periods in 2013. The increases were due to
higher revenue in the Canada and Northern U.S., and Southern U.S. and Latin
America segments, partially offset for the six months ended June 30, 2014 by
lower International segment revenue.  
Canada and Northern U.S. segment revenue increased by $61.0 million during the
second quarter of 2014, and by $82.9 million for the first six months of 2014,
on account of increased Engineered Systems revenue due to higher backlog, and
higher Service revenue coming from increased parts and engine sales, which was
partially offset by lower Rental revenue resulting from a decrease in the total
horsepower under rental contracts. 
Southern U.S. and Latin America segment revenue increased by $71.9 million in
the second quarter of 2014 and by $75.2 million for the first six months of
2014, as a result of higher Engineered Systems revenue due to higher opening
backlog, and higher Service revenue on increased service calls and parts sales,
compared to the same periods in 2013. 
International segment revenue increased by $2.1 million in the second quarter
of 2014, and decreased by $44.0 million in the first six months of 2014. The
increase in the second quarter of 2014 was a result of higher Service revenue,
partially offset by lower Engineered Systems and Rental revenues compared to
the same period in 2013. For the six months ended June 30, 2014, the decrease
was on account of lower Engineered Systems revenue due to lower opening
backlog, particularly in the AustralAsia and MENA regions, and lower Rental
revenue, partially offset by an increase in Service revenue as a result of
increased activity in the AustralAsia and MENA regions. 
Gross margin for the second quarter of 2014 was $86.0 million or 19.3% of
revenue compared to $64.4 million or 20.7% of revenue for the same period in
2013. The gross margin for the first six months of 2014 was $137.3 million or
17.6% as compared to $125.4 million or 18.9% of revenue for the same period of
2013. The increases were due to higher gross margin in the Canada and Northern
U.S., and Southern U.S. and Latin America segments, partially offset by lower
gross margin in the International segment.  
The increase in gross margin in Canada and the Northern U.S. was due to the
positive impact of higher revenue, lower warranty expense and stronger plant
utilization, partially offset by lower project margins. The higher gross margin
in the Southern U.S. and Latin America segment was due to higher revenues,
improved project margins, and improved plant utilization, and for the six
months ended June 30, 2014 partially offset by lower warranty releases. In the
International segment, for the second quarter, lower gross margin was due to
lower project margins, partially offset by slightly higher revenues and the
corresponding impact on gross margin. Despite generally higher project margins
in the first six months of 2014 in the International segment, the lower gross
margin was driven primarily by cost increases on the Oman project due to scope
and design variations, and schedule delays. In addition, lower revenues
negatively impacted gross margin.  
During the second quarter of 2014, Enerflex recorded bookings of $414.3 million
compared to $317.5 million during the same period in 2013, an increase of $96.8
million. During the six months ended June 30, 2014, bookings were $652.2
million compared to $506.8 million during the same period in 2013, an increase
of $145.4 million. The increase in the second quarter of 2014 was due to higher
bookings in the Southern U.S. and Latin America, partially offset by lower
Canada and Northern U.S. segment bookings. For the six months ended June 30,
2014, bookings were higher in all segments. Enerflex finished the second
quarter with a backlog of $867.9 million, compared to $697.8 million at the end
of the second quarter of 2013, an increase of $170.1 million or 24.4%.
Sequentially, backlog has increased by $73.9 million since December 31, 2013. 
Subsequent to the end of the second quarter of 2014, Enerflex declared a
quarterly dividend of $0.075 per share, payable on October 3, 2014, to
shareholders of record on August 27, 2014. 
Quarterly Results Material  
Enerflex's interim condensed financial statements for the three and six
months ended June 30, 2014, 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, August 08, 2014 at 9:00 a.m. MDT
(11:00 a.m. EDT) to discuss the second quarter 2014 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, Executive Vice
President and Chief Financial Officer of Enerflex Ltd. 
If you wish to participate in this conference call, please call 1.800.734.4208.
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
08, 2014 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 15, 2014. Please call 1.800.558.5253 or
1.416.626.4100 and enter passcode 21728767. 
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 3,400 employees
worldwide. Enerflex, its subsidiaries, interests in associates and
joint-ventures, operate in Canada, the United States of America, Argentina,
Brazil, Colombia, Mexico, Peru, Australia, the United Kingdom, Russia, the
United Arab Emirates, Oman, Bahrain, Indonesia, Malaysia, Singapore and
Thailand. 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; (iii) the nature and scope of challenges and opportunities in
the International segment, including the nature and magnitude of cost estimates
and the success of variation claims; and (iv) the emergence of liquefied
natural gas projects in Canada, the U.S. and AustralAsia regions. 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: 
For investor and media inquiries:
J. Blair Goertzen
President & Chief Executive Officer
403.236.6852
or
D. James Harbilas
Executive Vice President & Chief Financial Officer
403.236.6857 
INDUSTRY:  Energy and Utilities - Equipment, Energy and Utilities - Oil and Gas 
SUBJECT:  ERN 
-0-
-0- Aug/07/2014 21:16 GMT
 
 
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