|By Marketwired .||
|August 7, 2014 05:16 PM EDT||
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.
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.
For investor and media inquiries:
J. Blair Goertzen
President & Chief Executive Officer
D. James Harbilas
Executive Vice President & Chief Financial Officer
SYS-CON Events announced today that EastBanc Technologies will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. EastBanc Technologies has been working at the frontier of technology since 1999. Today, the firm provides full-lifecycle software development delivering flexible technology solutions that seamlessly integrate with existing systems – whether on premise or cloud. EastBanc Technologies partners with p...
May. 27, 2016 04:30 AM EDT Reads: 2,142
SYS-CON Events announced today that Tintri Inc., a leading producer of VM-aware storage (VAS) for virtualization and cloud environments, will exhibit at the 18th International CloudExpo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, New York, and the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
May. 27, 2016 04:15 AM EDT Reads: 2,263
SYS-CON Events announced today that Isomorphic Software will exhibit at SYS-CON's [email protected] at Cloud Expo New York, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Isomorphic Software provides the SmartClient HTML5/AJAX platform, the most advanced technology for building rich, high-productivity enterprise web applications for any device. SmartClient couples the industry’s broadest, deepest UI component set with a java server framework to deliver an end-...
May. 27, 2016 03:00 AM EDT Reads: 2,054
SYS-CON Events announced today that BMC Software has been named "Siver Sponsor" of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2015 at the Javits Center in New York, New York. BMC is a global leader in innovative software solutions that help businesses transform into digital enterprises for the ultimate competitive advantage. BMC Digital Enterprise Management is a set of innovative IT solutions designed to make digital business fast, seamless, and optimized from mainframe to mo...
May. 27, 2016 01:45 AM EDT Reads: 2,084
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, wh...
May. 27, 2016 01:30 AM EDT Reads: 1,951
Companies can harness IoT and predictive analytics to sustain business continuity; predict and manage site performance during emergencies; minimize expensive reactive maintenance; and forecast equipment and maintenance budgets and expenditures. Providing cost-effective, uninterrupted service is challenging, particularly for organizations with geographically dispersed operations.
May. 27, 2016 01:00 AM EDT Reads: 1,883
The IoT is changing the way enterprises conduct business. In his session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, discuss how businesses can gain an edge over competitors by empowering consumers to take control through IoT. We'll cite examples such as a Washington, D.C.-based sports club that leveraged IoT and the cloud to develop a comprehensive booking system. He'll also highlight how IoT can revitalize and restore outdated business models, making them profitable...
May. 27, 2016 12:45 AM EDT Reads: 2,773
SYS-CON Events announced today that Alert Logic, Inc., the leading provider of Security-as-a-Service solutions for the cloud, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Alert Logic, Inc., provides Security-as-a-Service for on-premises, cloud, and hybrid infrastructures, delivering deep security insight and continuous protection for customers at a lower cost than traditional security solutions. Ful...
May. 27, 2016 12:45 AM EDT Reads: 2,708
The essence of data analysis involves setting up data pipelines that consist of several operations that are chained together – starting from data collection, data quality checks, data integration, data analysis and data visualization (including the setting up of interaction paths in that visualization). In our opinion, the challenges stem from the technology diversity at each stage of the data pipeline as well as the lack of process around the analysis.
May. 27, 2016 12:15 AM EDT Reads: 1,359
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 18th International Cloud Expo, which will take place on June 7–9, 2016, at the Javits Center in New York City, NY, and the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management...
May. 27, 2016 12:00 AM EDT Reads: 3,047
Many banks and financial institutions are experimenting with containers in development environments, but when will they move into production? Containers are seen as the key to achieving the ultimate in information technology flexibility and agility. Containers work on both public and private clouds, and make it easy to build and deploy applications. The challenge for regulated industries is the cost and complexity of container security compliance. VM security compliance is already challenging, ...
May. 27, 2016 12:00 AM EDT Reads: 1,205
Designing IoT applications is complex, but deploying them in a scalable fashion is even more complex. A scalable, API first IaaS cloud is a good start, but in order to understand the various components specific to deploying IoT applications, one needs to understand the architecture of these applications and figure out how to scale these components independently. In his session at @ThingsExpo, Nara Rajagopalan is CEO of Accelerite, will discuss the fundamental architecture of IoT applications, ...
May. 27, 2016 12:00 AM EDT Reads: 1,150
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty ...
May. 26, 2016 11:30 PM EDT Reads: 2,566
As cloud and storage projections continue to rise, the number of organizations moving to the cloud is escalating and it is clear cloud storage is here to stay. However, is it secure? Data is the lifeblood for government entities, countries, cloud service providers and enterprises alike and losing or exposing that data can have disastrous results. There are new concepts for data storage on the horizon that will deliver secure solutions for storing and moving sensitive data around the world. ...
May. 26, 2016 11:00 PM EDT Reads: 1,249
SYS-CON Events announced today that MangoApps will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. MangoApps provides modern company intranets and team collaboration software, allowing workers to stay connected and productive from anywhere in the world and from any device. For more information, please visit https://www.mangoapps.com/.
May. 26, 2016 10:45 PM EDT Reads: 685