May 13, 2013 18:36 ET
Enerflex Reports First Quarter 2013 Financial Results and Announces Quarterly Dividend
CALGARY, ALBERTA--(Marketwired - May 13, 2013) - 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 ended March 31, 2013.
|(unaudited)||Three months ended March 31,|
|($ millions, except per share amounts and percentages)||2013||2012||Change ($||)|
|Revenue||$ 353.3||$ 355.7||$ (2.4||)|
|Gross margin %||17.3||%||17.5||%|
|Net earnings (loss)|
|Earnings (loss) per share|
|(1)||Earnings before Interest (Finance Costs) and Taxes ("EBIT")|
|(2)||Earnings before Interest (Finance Costs), Taxes, Depreciation and Amortization ("EBITDA") is a non-GAAP measure that does not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers|
Enerflex reported results for the first quarter of 2013 that were in line with the same period of 2012. The $2.4 million decrease in revenue was due to lower revenue in the Canada and Northern U.S. segment, which was largely offset by increases in the Southern U.S. and Latin America, and International segments. Net earnings from continuing operations for the first quarter of 2013 were $0.5 million higher compared to 2012 as a result of lower selling and administrative expenses, partially offset by lower gross margin and higher income taxes.
Effective January 1, 2013, the reporting for the Production and Processing division was changed from the International business segment to the Canada and Northern U.S. segment. The change in reporting was to focus the division on expansion into Alberta's oil sands, and to better align Enerflex's North American manufacturing facilities. Comparative amounts for 2012 have been reclassified to reflect this change for both the Canada and Northern U.S., and International business segments.
The Company recorded bookings of $189.3 million during the first quarter, which was $33.4 million lower than the comparable period last year. This decrease was primarily due to decreased booking activity in the Canada and Northern U.S. and International segments. The decrease in bookings compared to the first quarter of 2012 of $42.9 million in the Canada and Northern U.S. segment was a result of continued weak natural gas prices, which have caused lower activity levels in the Western Canadian Sedimentary Resource basins. Bookings in the Southern U.S. and Latin America segment increased over the first quarter of the prior year as a result of strong activity levels consistent with stable natural gas liquids ("NGL") prices. The International segment recorded bookings that were $7.6 million lower in 2013 when compared to the same period in 2012; however these projects have long lead times associated with tendering, bid evaluation and contract award as they tend to be larger in scale and scope. It is important to highlight that $37.6 million of first quarter 2013 bookings recorded in the Canada and Northern U.S., and Southern U.S. and Latin America segments were related to compression and processing equipment that will be manufactured in these segments but are destined for international markets, compared to $50.6 million in the same period of 2012. Enerflex had a backlog of $603.2 million at the end of the first quarter of 2013, compared to $927.6 million at the end of the same period last year, a decrease of $324.4 million (35.0%). Sequentially, backlog decreased by $80.0 million from December 31, 2012.
"The Enerflex management team is pleased with our first quarter financial results," said J. Blair Goertzen, Enerflex's President and Chief Executive Officer. "As a result of steady revenue levels from our geographical diversification, we have recorded strong first quarter results. The Canada and Northern U.S. market continues to struggle with weak natural gas prices and this trend is expected to continue through the first half of 2013. The Southern U.S. and Latin America region has been stable from a bookings stand point, and we remain cautiously optimistic for the remainder of 2013 in this region. Finally, there continue to be opportunities in our International segment; however we expect that these potential project awards will have long lead times, as evidenced by $55.5 million in bookings in this segment subsequent to the end of the first quarter of 2013. With a strong balance sheet, a continued focus on expanding our capabilities and a focus on controlling our costs, we are currently right-sized for the challenges of 2013, and well positioned to capitalize on the opportunities that will arise."
First Quarter Highlights
In the three months ended March 31, 2013, Enerflex:
Subsequent to the end of the first quarter of 2013:
The Company generated $353.3 million in revenue in the first quarter of 2013 compared to $355.7 million in 2012. The decrease in revenue of $63.7 million in the Canada and Northern U.S. segment was largely offset by revenue increases of $2.5 million and $58.7 million in the Southern U.S. and Latin America, and International segments, respectively. Lower opening backlog resulted in decreased Engineered Systems revenue, partially offset by stronger Service revenue in all regions, and an increase in Rental revenue in Canada and Northern U.S.
Gross margin for the quarter ended March 31, 2013 was $61.0 million or 17.3% of revenue compared to $62.3 million or 17.5% of revenue for the same period of 2012. The decrease in gross margin of $1.3 million (2.1%) was primarily due to lower gross margin in the Canada and Northern U.S. segment, which was partially offset by stronger gross margins in the Southern U.S. and Latin America, and International segments. Gross margin was lower as a result of weaker plant utilization, warranty costs incurred that were higher than historical averages on three projects in the Canada and Northern U.S. segment and cost escalations on International projects.
Backlog at March 31, 2013 was $603.2 million compared to $927.6 million at March 31, 2012, a 35.0% decrease over the comparable period. As compared to December 31, 2012, backlog at March 31, 2013 decreased by $80.0 million or 11.7%. In Canada and the Northern U.S., the decrease was a result of continued weak natural gas prices and a corresponding drop in customers' capital spending levels. In the Southern U.S. and Latin America, bookings relating to the liquids-rich shale resources basins temporarily slowed in the third quarter of 2012, before recovering in the fourth quarter of 2012 and into the first quarter of 2013. The decrease in International backlog was primarily attributable to the Company's partial fulfillment of the equipment orders destined for Australia and the Sultanate of Oman, compounded by lower bookings in the first quarter of 2013.
Update on Discontinued Operations
As noted in previous public disclosures, Enerflex would consider a sale, partial sale, exit or combination thereof of the European Service and Combined Heat and Power ("CHP") business. Enerflex is now pursuing alternatives involving a partial sale and wind up of the Service and CHP business. The partial sale and wind up process is ongoing and is subject to, and shall be conducted in accordance with, Dutch information and consultation rules.
Quarterly Results Material
Enerflex's interim condensed financial statements for the three months ended March 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 Tuesday, May 14, 2013 at 9:00 a.m. MDT (11:00 a.m. EDT) to discuss the first quarter 2013 financial results and operating highlights. The call will be hosted by Mr. J. Blair Goertzen, President and Chief Executive Officer and Mr. D. James Harbilas, Vice President and Chief Financial Officer of Enerflex Ltd.
If you wish to participate in this conference call, please call 1.800.406.9725. 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 May 14, 2013 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, May 21, 2013. Please call 1.800.558.5253 and enter passcode 21655065.
Enerflex Ltd. is a single source supplier for natural gas compression, oil and gas processing, refrigeration systems and power generation equipment - plus in-house engineering and mechanical service expertise. The Company's broad in-house resources provide the capability to engineer, design, manufacture, construct, commission and service hydrocarbon handling systems. Enerflex's expertise encompasses field production facilities, compression and natural gas processing plants, CO2 processing plants, refrigeration systems and power generators service the natural gas production industry.
Headquartered in Calgary, Canada, Enerflex has approximately 3,000 employees worldwide. Enerflex, its subsidiaries, interests in associates and joint-ventures operate in Canada, the United States, Argentina, Colombia, Australia, the United Kingdom, Russia, the United Arab Emirates, Oman, Egypt, Bahrain, Indonesia and Singapore. Enerflex's shares trade on the Toronto Stock Exchange under the symbol "EFX". For more information about Enerflex, go to www.enerflex.com.
Advisory Regarding Forward-Looking Statements
To provide Enerflex shareholders and potential investors with information regarding Enerflex, including management's assessment of future plans, Enerflex has included in this news release certain statements and information that are forward-looking statements or information within the meaning of applicable securities legislation, and which are collectively referred to in this advisory as "forward-looking statements". Information included in this news release that is not a statement of historical fact may be forward-looking information. When used in this document, words such as "plans", "expects", "will", "may" and similar expressions are intended to identify statements containing forward-looking information. Forward-looking statements and information contained in this news 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 opportunities in the International segment; and (iv) alternatives being pursued relating to the European Service and CHP business. 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 shareholder 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.