Enerflex Reports Second Quarter 2014 Financial Results and Announces Quarterly Dividend

Enerflex Reports Second Quarter 2014 Financial Results and Announces Quarterly 
Dividend 
CALGARY, ALBERTA -- (Marketwired) -- 08/07/14 --   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 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." 


 
 
(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.

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. 
Contacts:
For investor and media inquiries:
J. Blair Goertzen
President & Chief Executive Officer
403.236.6852 
D. James Harbilas
Executive Vice President & Chief Financial Officer
403.236.6857
 
 
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