CALGARY, ALBERTA--(Marketwire - Aug. 9, 2012) - Enerflex Ltd. (EFX.TO) ("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, 2012.
(unaudited) Three months ended June 30, Six months ended June 30,
($ millions, except
per share amounts Change Change
and percentages) 2012 2011(1) ($) 2012 2011(1) ($)
Revenue $ 354.6 $ 246.5 108.1 $ 710.4 $ 561.0 149.4
Gross margin 66.0 48.3 17.7 128.3 103.7 24.6
Gross margin % 18.6% 19.6% 18.1% 18.5%
Operating income(2) 28.4 16.3 12.1 49.6 31.6 18.0
EBITDA(2) 38.2 27.6 10.6 69.5 54.7 14.8
Net earnings (loss)
Continuing 19.4 12.2 7.2 34.3 22.0 12.3
Discontinued (7.6) (2.9) (4.7) (8.4) (2.8) (5.6)
11.8 9.3 2.5 25.9 19.2 6.7
Earnings (loss) per
Continuing 0.25 0.16 0.09 0.44 0.29 0.15
Discontinued (0.10) (0.04) (0.06) (0.11) (0.04) (0.07)
0.15 0.12 0.03 0.33 0.25 0.08
Bookings 266.8 231.3 35.5 489.6 475.0 14.6
Backlog $ 921.2 $ 722.3 198.9 $ 921.2 $ 722.3 198.9
(1) Results for Q2 2011 have been prepared on a carve-out basis. Enerflex
became an independently operated and listed company on June 1, 2011.
(2) Operating Income, Earnings before Interest, Taxes, Depreciation and
Amortization ("EBITDA"), Bookings and Backlog are non-GAAP measures that
do not have a standardized meaning and therefore are unlikely to be
comparable to similar measures presented by other issuers.
Enerflex reported stronger results from continuing operations in the second quarter of 2012, compared to the same period last year. Revenues were higher in the Canada and Northern U.S., Southern U.S. and South America, and International segments. Net earnings from continuing operations were $7.2 million higher ($0.09 cents per share) as a result of the increased revenues and corresponding higher gross margins. The increase was partially offset by higher selling, general and administrative expenses. The loss from discontinued operations, for the European Service and Combined Heat and Power ("CHP") business, includes an additional provision of $5.9 million for anticipated termination payments under the applicable laws in the Netherlands.
The Company recorded bookings for Engineered Systems of $266.8 million during the quarter, which was $35.5 million higher than the comparable period last year and $44.1 million higher than the first quarter of 2012. The increase in bookings during the second quarter of 2012, compared to the same period last year, was primarily due to increased activity in the Southern U.S., Australia and the Middle East and North Africa ("MENA") regions. The increase was partially offset by lower bookings in the Canada and Northern U.S. segment as a result of weak natural gas prices and the corresponding reduction in activity levels by natural gas producers. Backlog has grown to $921.2 million, which represents an increase of $198.9 million (27.5%) compared to the same period last year. This Engineered Systems backlog provides good visibility for revenue growth in 2012. Sequentially, the backlog decreased by $6.4 million from March 31, 2012.
"Enerflex reported excellent second quarter and first half results, specifically in the Southern U.S. and South America, and International segments," said J. Blair Goertzen, Enerflex's President and Chief Executive Officer. "The increase in these segments offset performance in Canada and Northern U.S. where activity levels were lower as a result of weak natural gas prices. Natural gas producers have curtailed or 'shut-in' dry gas production. Enerflex views the downturn in activity in Canada as a trend for the remainder of the year. Our geographical diversification and strong balance sheet should provide us with the financial flexibility to weather any protracted downturn in the Canadian natural gas market."
Second Quarter Highlights
In the three and six months ended June 30, 2012, Enerflex:
-- Generated revenue of $354.6 million compared to $246.5 million in the
second quarter of 2011. The increase of $108.1 million was a result of
increased revenue in all Enerflex segments. Revenues for the first six
months of 2012 were $710.4 million compared to $561.0 million during the
same period of the prior year;
-- Achieved a gross margin of $66.0 million or 18.6% compared to $48.3
million or 19.6% during the second quarter of 2011, an increase of $17.7
million. Gross margin for the first six months of the year totaled
$128.3 million or 18.1%, an increase of 23.7% over the same period of
the prior year;
-- Achieved operating income of $28.4 million or 8.0% of revenue compared
to $16.3 million or 6.6% during the second quarter of 2011. Operating
income for the first six months of the year was $49.6 million or 7.0% of
revenue, an increase of $18.0 million from the first six months of 2011;
-- Generated second quarter EBITDA of $38.2 million, an increase of $10.6
million over the second quarter of 2011. EBITDA for the first six months
of 2012 was $69.5 million, an increase of $14.8 million over the first
two quarters of 2011;
-- Recorded net earnings from continuing operations in the second quarter
of $19.4 million ($0.25 cents per share), an increase of $7.2 million
over the same period last year. For the six months ended June 30, 2012,
net earnings from continuing operations were $34.3 million ($0.44 cents
per share), compared to $22.0 million ($0.29 cents per share) in the
same period of 2011;
-- Increased backlog to $921.2 million at June 30, 2012 compared to $722.3
million at June 30, 2011, an increase of 27.5%. Backlog at June 30, 2012
decreased by $6.4 million or 0.7% from March 30, 2012;
-- Exited the quarter with $102.9 million in cash, resulting in a net debt
to EBITDA ratio of 0.32:1 and a net debt to equity ratio of 0.05:1;
-- Completed the reorganization of our Service business in response to
lower activity levels in the Canadian market. The Company recorded
reorganization costs of $1.5 million during the quarter;
-- Enerflex entered into an agreement to sell its Joint Venture interest in
Presson Descon International Limited ("PDIL") during the second quarter
of 2012 to its joint venture partner, Descon Engineering Limited.
Enerflex recorded a loss of $0.8 million on the sale which was included
in selling, general and administrative expenses; and
-- The Houston facility expansion was completed during the second quarter
of 2012 and is now fully operational. This expansion has doubled the
capacity of the Houston facility which will be used to serve the
Southern U.S., South American and International markets for compression
and processing equipment.
Subsequent to the end of the second quarter of 2012:
-- Enerflex declared a dividend of $0.06 per share, payable on October 4,
2012, to shareholders of record on September 12, 2012.
Enerflex's $108.1 million or 43.9% period-over-period increase in revenue to $354.6 million in the second quarter of 2012 was a result of increased revenue in all of Enerflex's segments, as a result of higher opening backlog for the Engineered Systems product line and stronger service revenues in the International segment. Canada and Northern U.S. segment revenues increased $25.2 million compared to the same period of last year, while International segment revenues increased by $42.6 million. The Southern U.S. and South America segment revenues increased by $40.3 million to $102.8 million from $62.4 million in 2011.
During the first six months of 2012, the Company generated $710.4 million in revenue as compared to $561.0 million in the same period of 2011. The increased revenues in all of Enerflex's segments were a result of higher opening backlog for the Engineered Systems product line and stronger Service revenues in the International segment. Canada and Northern U.S. revenues increased by $33.5 million, International segment revenues increased by $52.0 million, and Southern U.S. and South America revenues increased by $63.8 million for the first six months of 2012, compared to the same period in 2011.
Gross margin of $66.0 million represented an increase of 36.6% over the second quarter of 2011 primarily due to strong gross margin performance in the Southern U.S. and South America, and International segments, as a result of higher margin projects in opening backlog, better plant utilization and improved project execution. This was partially offset by lower gross margin performance in the Canada and Northern U.S. segment, as a result of cost overruns and warranty claims incurred on certain projects. Gross margin for the comparable quarter of 2011 includes $7.0 million with respect to variation claims for a project in the MENA region that were approved during the quarter.
Gross margin for the six months ended June 30, 2012 was $128.3 million or 18.1% of revenue as compared to $103.7 million or 18.5% of revenue for the six months ended June 30, 2011, an increase of $24.6 million. Contributing to the gross margin increase over the first six months of 2011 was strong gross margin performance in all regional segments as a result of higher gross margins in opening backlog, improved plant utilization and improved rental utilization rates. This increase was partially offset by costs incurred due to scope changes and warranty claims for certain projects in the Northern U.S., Australia and International Production and Processing business. Finally, gross margin in the comparable period of 2011 for the International segment includes $16.5 million for variation claims that were approved and for a project that was completed on more favorable terms than originally anticipated in the MENA region.
Backlog at June 30, 2012 increased to $921.2 million compared to $722.3 million at June 30, 2011, a 27.5% increase over the comparable period. This increase was a result of increased activity in liquids rich shale resources in the United States, increased activity in the MENA region and various construction projects in Australia. This was offset by a decrease in the Canada and Northern U.S. segment as a result of lower activity in the Western Canadian Sedimentary resource basins due to weak natural gas prices. As compared to March 31, 2012, backlog at June 30, 2012 decreased by $6.4 million or 0.7%.
Update on Discontinued Operations
The European Service and CHP business, within the International segment, has been reported as a discontinued operation since the third quarter of 2011. In 2011, Enerflex recorded a total impairment of $54.0 million, consisting of non-cash impairments of $46.0 million for goodwill, intangible assets, deferred tax assets and fair value adjustments, and anticipated cash transaction costs totaling $8.0 million.
As discussed in previous public disclosures Enerflex would consider a sale, partial sale, exit or combination thereof of the Service and CHP business. Enerflex engaged in a process to sell this business as a 'turn-key' operation to third parties. This process was unsuccessful as offers received were not considered fair and reasonable, resulting in the termination of the sale process. Enerflex will now seek alternatives which could include a partial sale and wind up of the Service and CHP business, between now and the end of 2012. As a result of the possibility that parts of the Service and CHP business could be wound up, Enerflex had to record additional reorganization costs during the second quarter of 2012 totaling $5.9 million to reflect anticipated termination payments to employees, lessors and vendors under the applicable laws in the Netherlands. The process is subject to and shall be conducted in compliance with Dutch information and consultation rules.
Quarterly Results Material
Enerflex's consolidated financial statements as at and for the three and six months ended June 30, 2012, and the accompanying management's discussion and analysis, will be available on the Enerflex website at www.enerflex.com under the Investors section or on SEDAR at www.sedar.com.
Conference Call and Webcast Details
Enerflex will host a conference call for analysts and investors on Friday, August 10, 2012 at 9:00 a.m. MST (11:00 a.m. EST) to discuss the Company's 2012 second quarter results. 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, 1.866.225.0198 or 1.416.340.8061. 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 Investor Relations section on August 10, 2012 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, August 17, 2012. Please call 1.800.408.3053 or 1.905.694.9451 and enter passcode 9053421.
Enerflex Ltd. is a single source supplier of products and services to the global oil and gas production industry. Enerflex provides natural gas compression and oil and gas processing equipment for sale or lease, refrigeration systems and power generation equipment, and a comprehensive package of field maintenance and contracting capabilities. Through the Company's ability to provide these products and services in an integrated manner, or as stand-alone offerings, Enerflex offers its customers a unique value proposition.
Headquartered in Calgary, Canada, Enerflex has approximately 3,200 employees worldwide. Enerflex, its subsidiaries, interests in affiliates and joint-ventures operate in Canada, the United States, Argentina, Colombia, Australia, the United Kingdom, Russia, the United Arab Emirates, Oman, Egypt, Bahrain and Indonesia. 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 is 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. In developing the forward-looking information in this news release, we have made certain assumptions with respect to general economic and industry growth rates, commodity prices, currency exchange and interest rates, competitive intensity and shareholder, regulatory and TSX 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, the reliability of Toromont's historical financial information as an indicator of Enerflex's historical or future results; potential tax liabilities if the requirements of the tax-deferred spinoff rules are not met; the effect of Enerflex's rights plan on any potential change of control transaction; 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 variations 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.
- Investment & Company Information
President & Chief Executive Officer
D. James Harbilas
Vice President & Chief Financial Officer