Enerflex Systems Income Fund
TSX : EFX.UN

Enerflex Systems Income Fund

April 28, 2005 23:59 ET

Enerflex Announces First Quarter Results

CALGARY--(CCNMatthews - April 28) - Enerflex Systems Ltd. (EFX:TSX), a leading
Canadian supplier of products and services to the global oil and gas
production industry, today announced its financial and operating results for
the three months ended March 31, 2005.



Three Months Ended March 31
-------------------------------------------------------------------------
$ millions, except per share amounts
(unaudited) 2005 2004 % increase
-------------------------------------------------------------------------
Revenues $ 147.7 $ 128.3 15%
Gross margin $ 31.5 $ 29.5 7%
Net income $ 7.4 $ 7.1 3%
Earnings per share (Basic) $ 0.33 $ 0.32 3%
-------------------------------------------------------------------------


Mr. P. John Aldred, Chairman and Chief Executive Officer stated, "Enerflex has
delivered solid results even while we have been challenged by longer lead
times for major components and replacement parts in the first quarter."

"There are some very encouraging signs. New equipment bookings increased by
roughly 130% in the first quarter when compared to the same period of 2004
plus our fabrication backlog as of March 31, 2005 is approximately 260% higher
than a year ago. Our Mechanical Service division has performed well in the
face of parts shortages and our Leasing business continues to show strong
growth. The impact of longer lead times for major components is beginning to
ease, pointing toward steadily improving results for the balance of the year."

Quarterly Overview:

- Revenue increased by 15% over the first quarter of 2004. The increase in
revenue reflects the growth in our various divisions, with our Fabrication
segment leading the way with top line revenue growth.

- Production and Processing posted a very strong quarter, which saw the
substantial completion of two contracts in Pakistan, an increase in
international market share, a 47% increase in revenue and a 41% increase in
gross margin.

- The Compression division's revenue increased by 18% due to increased
customer demand for compression equipment and the division's careful management
of its inventory of major components.

- Revenue in our Leasing division increased by 17%, as a result of the growth
experienced in the size of the lease fleet.

- Mechanical Service posted a 10% increase in revenue, largely due to the
performance of its Canadian operations. Although engine sales are lagging
internationally, Enerflex has received a number of new maintenance contracts in
Australia which enabled us to slightly increase our international revenue.

- Gross margin as a percent of revenue decreased to 21.3% as a result of a
change in the mix of our consolidated revenue toward the Fabrication segment
which generates lower margins and additional costs incurred to limit the impact
of delays in the delivery and availability of compression components and parts.

- Selling, general and administrative expenses improved to 13.4% of revenue.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. The words
"anticipate", "expect", "project" and similar expressions identify forward-
looking statements. Such statements are subject to certain risks,
uncertainties and assumptions pertaining to operating performance, economic
conditions and other factors. Should one or more of these risks materialize,
or should underlying assumptions prove incorrect, actual results may vary
significantly from those expected.

CONSOLIDATED RESULTS OF OPERATIONS

The Company's performance and improving trend in reported quarterly earnings
was a result of increased natural gas infrastructure and maintenance spending
by oil and natural gas producers in a period of high commodity prices, and
cost and process efficiencies generated by the Company. It is presently
management's expectation that the strong business environment will continue to
influence Enerflex's performance throughout the year. During the first quarter
of 2005, Fabrication and Service revenues were affected by the availability of
major component and repair parts and, to a lesser extent, weather conditions
affected Service revenue. It is presently management's belief that the impact
of these factors was to defer revenues which would have otherwise been
recorded in the first three months of 2005 into subsequent months of 2005.
This belief is further supported by the high order backlog presently
maintained by the Fabrication segment.

During the first quarter of 2005, the Company's fabrication segment
experienced a strong improvement in order bookings and backlog. Order bookings
in the first three months of 2005 are approximately 129% higher than the same
period in 2004 and the segment's order backlog as at March 31, 2005 is 260%
above the March 31, 2004 level. Despite this high demand, revenue, margins and
profitability were tempered by the availability of major components which
deferred fabrication projects, and fluctuating weather patterns which reduced
service related activity and revenue. As a result, Enerflex generated net
income for the three months ended March 31, 2005 of $7.4 million ($0.33 per
common share) from revenue of $147.7 million. This represents an increase in
net income of $0.2 million or 3%, resulting from a revenue increase of $19.4
million or 15%, all as compared to the three month period ended March 31,
2004. Net income increased at a rate lower than the percentage increase in
revenue as a result of increased selling, general and administrative expenses
and a lower gross margin of 21.3% in the first quarter of 2005, as compared to
23.0% in the same period in 2004. The lower gross margin arose from higher
input and shipping costs and a higher proportion of consolidated revenue being
generated in the Fabrication segment. Historically, the Fabrication segment
generates a lower gross margin than either the Leasing or Service segments.

The revenue improvements in the first quarter of 2005 were notable in a number
of divisions. Revenue improved in Production and Processing due to the
progress made on its contracts in Pakistan; Compression, due to increases in
customer demand; Mechanical Service, due to strong Canadian activity; Leasing,
as a result of a larger rental fleet; and, Power, as a result of additional
unit sales, all as compared to the same quarter in 2004. These increases were
offset by reduced revenue in Syntech which resulted from lower project and
field activity in January when cold temperatures curtailed certain projects.

Gross margin for the three months ended March 31, 2005 was $31.5 million or
21.3% of revenue as compared to $29.5 million or 23.0% of revenue for the
three months ended March 31, 2004, an increase of $2.1 million or 7%. The
reduction in the gross margin percentage is attributed to higher input and
shipping costs and a change in the mix of revenue from Service activity
towards lower margined Fabrication activity.

Selling, general and administrative ("SG&A") expenses were $19.7 million or
13.4% of revenue during the three months ended March 31, 2005, compared with
$17.8 million or 13.9% of revenue in the same period of 2004. Included in SG&A
for the first quarter of 2005 is $0.4 million of stock-based compensation
expense. In addition, the Company incurred $0.8 million associated with its
ongoing program for adopting compliance measures for Multilateral Instrument
52-109.

Income before interest and income taxes totalled $12.4 million for the first
quarter of 2005, as compared to $12.0 million for the same period in 2004, an
increase of $0.4 million or 3%.

SERVICE

The Service business segment provides a complete line of mechanical, and
electrical, instrumentation and controls services to the oil and gas industry
through an extensive branch network in Canada, as well as operations in the
United States, Germany, the Netherlands, Australia and Indonesia.



-------------------------------------------------------------------------
Service Three months ended March 31
-------------------------------------------------------------------------
(unaudited) (thousands) 2005 2004
-------------------------------------------------------------------------
Segment revenue $ 63,698 $ 62,915
Intersegment revenue (3,517) (4,158)
-------------------------------------------------------------------------
Revenue 60,181 58,757
-------------------------------------------------------------------------
Gross margin 15,558 16,369
-------------------------------------------------------------------------
EBITDA 3,830 5,306
-------------------------------------------------------------------------
Income before interest and income taxes $ 2,949 $ 4,518
-------------------------------------------------------------------------


Service revenue was $60.2 million in the first three months of 2005 and
comprised 41% of consolidated revenue. This compares to $58.8 million and 46%
of consolidated revenue in the same period of 2004. In the first quarter of
2005, Mechanical Service generated 58% of the division's revenue as compared
to 54% in 2004. Syntech contributed 42% of the division's revenue in the first
three months of 2005 and 46% in the same period of 2004. The revenue increase
of 2%, or $1.4 million, was a result of increased demand for products and
services in Mechanical Service offset by a decrease in revenue contributed by
Syntech. During January 2005, electrical construction projects were postponed
as a consequence of extremely cold weather and, due to the location of these
projects, it is unlikely that the associated revenue will be recognized during
2005. Gross margin for the segment totalled $15.6 million, or 25.8%, as
compared to 27.9% in the first quarter of 2004. The decrease in gross margin
percent was caused by lower margins on parts sales in Mechanical Service
caused by increased costs associated with the transportation of parts to
overcome supplier delivery obstacles and increased competitive pressures in
both the Company's Mechanical Service and Syntech divisions. Income before
interest and income taxes for the three months ended March 31, 2005 totalled
$2.9 million, a reduction of $1.6 million from the $4.5 million generated in
the first three months of 2004. This reduction in income before interest and
income taxes was a result of the gross margin reductions referred to above and
increased SG&A expenses associated with increased corporate security and
regulation compliance expenditures, stock-based compensation accruals and
inflationary pressures.

Mechanical Service

Mechanical Service revenue for the first quarter of 2005 was $34.7 million, or
10% higher than the $31.5 million generated during the first three months of
2004. Canadian operations accounted for 68% of the division's revenue for the
first quarter of 2005. The increase in divisional revenue was attributed to
increased customer demand for the division's services and parts, particularly
in Canada. International revenue also increased by 1% in the first three
months of 2005 as compared to 2004. The increase in international revenue
resulted from new maintenance contracts in Australia, offset by lower engine
and parts sales.

Gross margin percentage for three months ended March 31, 2005 decreased by 2
percentage points to 29.1% as a consequence of additional shipping costs to
overcome supplier delivery shortfalls, and increased competitive pressures in
certain markets.

A challenge to achieving improved profitability in 2005 will be the timely
availability of certain Original Equipment Manufacturer ("OEM") components and
repair parts, which will be in steady demand as activity levels and production
of natural gas in North America remain high.

Electrical, Instrumentation and Controls ("EI&C")

During the first quarter, Syntech generated revenue of $25.4 million, a
decrease of $1.8 million, or 7% as compared to $27.3 million during the same
period in 2004. The EI&C business in western Canada is highly competitive.
Consequently, this division realizes lower margins compared with Mechanical
Service and, as such, it requires a focused and disciplined approach to the
bidding and execution of the services provided. The division's gross margin
for the first three months of 2005 was 21.4% as compared to 24.1% during the
same period in 2004. The reduction in revenue and gross margin percentage was
a result of projects which were adversely affected by the cold weather
encountered in January 2005 and the continuation of competitive bidding
practices throughout this segment of the industry.

FABRICATION

The Fabrication business segment engineers, fabricates and assembles standard
and custom-designed compression packages, production and processing equipment
and facilities, and power generation systems.

The Fabrication business tends to have more volatility in revenue, gross
margin and income before interest and income taxes than Enerflex's other
business segments. Revenues are derived primarily from investments made in
natural gas infrastructure by producers. Capital spending by Enerflex's
customers was high in 2001, dropped sharply in 2002 and early 2003, and
increased in late 2003 and 2004. It is presently estimated by industry
commentators that this increased investment rate will continue throughout
2005.



-------------------------------------------------------------------------
Fabrication Three months ended March 31
-------------------------------------------------------------------------
(unaudited) (thousands) 2005 2004
-------------------------------------------------------------------------
Segment revenue $ 84,359 $ 70,410
Intersegment revenue (4,858) (7,726)
-------------------------------------------------------------------------
Revenue 79,501 62,684
-------------------------------------------------------------------------
Gross margin 10,821 8,852
-------------------------------------------------------------------------
EBITDA 5,493 4,506
-------------------------------------------------------------------------
Income before interest and income taxes $ 4,419 $ 3,305
-------------------------------------------------------------------------


Fabrication revenue totalled $79.5 million for the first three months of 2005
and comprised 54% of consolidated revenue. This compares to $62.7 million and
49% of consolidated revenue for the same period in 2004. Compression generated
68% of the segment's revenue in the first quarter of 2005 and 73% during the
comparable period in 2004. Production and Processing contributed 29% of the
segment's revenue in first three months of 2005 and 25% during the same period
of 2004. Power contributed 3% of the division's revenue in the first quarter
of 2005 and 2% in 2004.

The increase of $16.8 million, or 27%, in segment revenue for the first
quarter of 2005 over the first quarter of 2004, was a result of international
growth in the Production and Processing division and increased demand for the
Company's compression products. It is important to note that this growth in
revenue occurred despite significant delays in the delivery of key components
for compression packages. Given this segment's high order backlog as of March
31, 2005, management is of the belief that had delivery schedules from
suppliers been more consistent with past experience, revenues would have
increased further. As such, it is presently believed that the remainder of
2005 will experience higher compression related revenue than was experienced
in 2004 as the order backlog is filled and additional orders are received.
Gross margin for the segment in the first quarter of 2005 was 13.6%, or $10.8
million, as compared to 14.1% in the first quarter of 2004. The small
reduction in gross margin percent was a result of competitive pressures and
the incurrence of additional costs to limit the impact of delays in the
delivery of major components. Income before interest and income taxes for the
three months ended March 31, 2005 increased by $1.1 million, or 34%, to $4.4
million.

Compression

The Compression division contributed revenue of $53.8 million during the first
quarter of 2005, an increase of 18% and comprised 68% of the segment's revenue
compared to 73% during the same period in 2004 on revenue of $45.6 million.
Increased customer demand for compression equipment accounted for the
increased revenue. While definitive market share data is difficult to obtain,
Enerflex estimates that its Canadian large horsepower compressor package
market share was consistent during the first quarters of 2005 and 2004.

During the first quarter of 2005 as compared to the same period of 2004, gross
margin was virtually unchanged at 13.3% in 2005, as compared to 13.9% in 2004.
Enerflex owns approximately 370,000 square feet of compression shop floor
space in North America and during the first three months of 2005 management
estimates that the average utilization rate, based on the theoretical plant
capacity in labour hours, was 64% as compared to 67% during the same period in
2004. With the increase in customer demand and the above utilization of the
facilities, overhead rates per hour were consistent in both periods. A
continuing challenge to achieving improved profitability in 2005 will be the
timely availability of certain OEM components, which will be in steady demand
as activity levels and demand for natural gas in North America remain high.

Production and Processing

During the first three months of 2005, the Production and Processing division
contributed revenue of $23.3 million, an increase of 47%, and comprised 29% of
the segment's revenue. This compares to 25% of segment revenue during the same
quarter of 2004 or $15.9 million. While definitive market share data is
difficult to obtain, Enerflex estimates that it has maintained its Canadian
market share and increased its international market share, particularly in
Pakistan, through its Presson-Descon International (Private) Limited joint-
venture. In each market segment competition remains strong. The Company
attributes its increased international market share to the extensive
experience of both the Presson and Mactronic business units in these markets
and Enerflex's willingness to work cooperatively with international partners.
In 2005, Enerflex will pursue additional international contracts in order to
support its domestic operations in this division. The awarding of such
contracts is difficult to predict and often requires substantial sales efforts
and lead time prior to the commencement of such contracts. As such, future
revenues are difficult to predict and are subject to significant levels of
volatility.

During the first quarter of 2005, gross margin dollars also increased by 41%
as a result of an increase in international projects, improved plant
utilization and lower overhead application rates. Enerflex owns approximately
100,000 square feet of production and processing shop floor space in Alberta,
and during the first quarter of 2005 management estimates that the average
utilization rate, based on labour hours, was 94% as compared to 89% during the
same period in 2004. With the increase in international projects and
utilization of the facilities, overhead application rates were maintained at
2004 levels.

Power

The Power division contributed revenue of $2.4 million, an increase of 103%
and contributed 3% of the segment's first quarter revenue as compared to 2% in
2004. The division showed improved margins in the first three months of 2005
over the same period in 2004.

Fabrication Segment Bookings

During the first three months of 2005, Enerflex increased its order bookings
in the Fabrication segment by approximately 129% versus bookings recorded in
the same period of 2004. The Fabrication segment's order backlog at March 31,
2005 was approximately 13% above the segment's order backlog at December 31,
2004, and 260% above the segment's order backlog at March 31, 2004.

LEASING

The Leasing business segment provides a variety of rental and leasing
alternatives for natural gas compression, power generation and processing
equipment. As of March 31, 2005, the Enerflex lease fleet was comprised of
approximately 350 compression units and 97,000 horsepower, as compared with
300 units and 84,000 horsepower as at March 31, 2004. This resulted in an
average fleet of 356 units and 96,000 horsepower for the three months ended
March 31, 2005, and 40% of the Company's income before interest and income
taxes.



-------------------------------------------------------------------------
Leasing Three months ended March 31
-------------------------------------------------------------------------
(unaudited) (thousands) 2005 2004
-------------------------------------------------------------------------
Segment revenue $ 8,039 $ 6,856
Intersegment revenue (32) (23)
-------------------------------------------------------------------------
Revenue 8,007 6,833
-------------------------------------------------------------------------
Gross Margin 5,149 4,244
-------------------------------------------------------------------------
EBITDA 6,912 5,854
-------------------------------------------------------------------------
Income before interest and income taxes 5,009 4,150
-------------------------------------------------------------------------
Capital expenditures, net of proceeds on disposal $ (1,372) $ 4,766
-------------------------------------------------------------------------


Revenue during the first three months of 2005 increased by 17% to $8.0 million
compared with $6.8 million in the first quarter of 2004. Though the division
owns and rents compression, power and processing equipment, the main driver
for its revenue growth is compression equipment. The increase in revenue
during the period was a result of a larger average fleet offset by slightly
lower fleet utilization rates. Rental rates have not increased significantly
during the period. For the three months ended March 31, 2005, the division's
revenue was generated 93% by compression and 7% by power and production
process equipment. Overall, the division experienced compression rental
utilization rates, based on capital deployed, of 83.2% compared to 85.4% for
the first quarter of 2004. The decline in utilization rates was attributed to
the timing of disposals of leased units. It is currently management's belief
that the increase in 2005 drilling activity and subsequent production
requirements for new wells in the division's core market of Canada, the
increase in the number of coal bed methane ("CBM") wells, and a desire by
natural gas producers to maintain production during periods when their
equipment requires maintenance will continue to positively affect the
segment's performance in 2005. A continuing challenge to increasing the
compression rental fleet in 2005 will be the timely availability of certain
OEM components and repair parts, which will be in steady demand as activity
levels and demand for natural gas in North America remain high.

During the first quarter of 2005, Leasing sold 15 compression units and 15
power and process equipment units from its fleet, for gross proceeds of $6.5
million and a gain on sale of $0.6 million. This compares to 12 compression
units and 16 power and process equipment units, for gross proceeds of $4.6
million and a gain on sale of $0.7 million, in the same period of 2004. The
sale of units generally occurs when customers exercise their contractual
option to purchase equipment. To satisfy growing demand for leased
compression, Enerflex added 8 compression units and 12 power and processing
units to its fleet during the first three months of 2005, for an investment of
$5.1 million. This turnover of assets renews the fleet, resulting in an
average fleet age of less than five years.

The leasing business is a significant contributor to earnings, despite its low
proportion of overall Company revenue. In addition, Enerflex Leasing makes the
Company's other business segments stronger. Leasing is a significant customer
of the compression fabrication business units, as almost all of its equipment
is purchased from Fabrication. Service also benefits because the majority of
Leasing's customers use Pamco and Jiro Service to perform routine maintenance
over the term of the lease.

FINANCIAL CONDITION AND LIQUIDITY

During the first three months of 2005, Enerflex reduced its cash balances by
$3.7 million. This reduction in cash balances occurred as the Company incurred
net capital additions of $0.5 million, repaid operating loans of $1.4 million,
paid dividends of $2.2 million and increased its working capital by $9.3
million. These activities were offset by funds generated from operations
before changes in non-cash working capital of $7.4 million and the receipt of
proceeds on the exercise of stock options of $2.2 million.

INDUSTRY OUTLOOK

While Enerflex continues to build its international presence, the Company's
fortunes are largely tied to natural gas capital and operating expenditures in
western Canada. In 2005, industry analysts forecast that capital expenditures
on plant and equipment will remain strong and will be at least comparable to
2004. Many forecasters expect that, in the absence of significant discoveries,
North American conventional natural gas production will decrease. Sustaining
or increasing production volumes is progressively more dependent upon
development of tight gas and CBM, both of which require more compression than
traditional reservoirs, and expansion in frontier regions such as the
Northwest Territories. The continuation of higher natural gas prices similar
to or above those experienced in recent years will be required to support gas
development in these areas.

Internationally, Enerflex will continue to incrementally grow its existing
international operations, seek new opportunities to expand its market presence
and will pursue additional international contracts in order to support its
domestic operations. The awarding of such contracts is difficult to predict
and often requires substantial sales efforts and lead time prior to the
commencement of such contracts. As such, future revenues are difficult to
predict and are subject to significant levels of volatility.



CONSOLIDATED BALANCE SHEETS
(Unaudited)

March 31, December 31,
(Thousands) 2005 2004
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Assets
Current assets
Cash $ 9,114 $ 12,840
Accounts receivable 118,238 132,562
Inventory 70,414 63,176
Income taxes receivable 1,348 412
Future income taxes 3,605 3,402
-------------------------------------------------------------------------
Total current assets 202,719 212,392

Rental equipment 86,117 88,772
Property, plant and equipment 65,093 65,814
Assets under construction 579 -
Future income taxes 4,246 4,425
Intangible assets 3,091 3,210
Goodwill 112,128 112,252
-------------------------------------------------------------------------
$ 473,973 $ 486,865
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Operating bank loans $ 27,496 $ 28,853
Accounts payable and accrued liabilities 59,605 72,699
Dividends payable 2,247 2,234
Income taxes payable 4,630 6,729
Current portion of long-term debt 24,036 16,009
-------------------------------------------------------------------------
Total current liabilities 118,014 126,524

Long-term debt 40,060 48,027
Future income taxes 11,170 14,445
-------------------------------------------------------------------------
169,244 188,996
Shareholders' equity
Share capital 180,979 178,540
Cumulative translation adjustment (984) (414)
Contributed surplus 1,059 1,203
Retained earnings 123,675 118,540
-------------------------------------------------------------------------
304,729 297,869
-------------------------------------------------------------------------
$ 473,973 $ 486,865
-------------------------------------------------------------------------
-------------------------------------------------------------------------

See accompanying note to the Consolidated Financial Statements.



CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended March 31
(Thousands, except share amounts) 2005 2004
-------------------------------------------------------------------------
Revenue $ 147,689 $ 128,274
Cost of goods sold 116,161 98,809
-------------------------------------------------------------------------
Gross margin 31,528 29,465
Selling, general and administrative expenses 19,726 17,773
Foreign currency losses 97 467
Gain on sale of assets (672) (748)
-------------------------------------------------------------------------
Income before interest and taxes 12,377 11,973
Interest 962 996
-------------------------------------------------------------------------
Income before income taxes 11,415 10,977
Income taxes 4,033 3,834
-------------------------------------------------------------------------
Net income $ 7,382 $ 7,143
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income per common share - basic $ 0.33 $ 0.32
- diluted $ 0.33 $ 0.32
Weighted average number of common shares 22,408,621 22,250,674
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)

Three Months Ended March 31
(Thousands) 2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 118,540 $ 95,409
Net income 7,382 7,143
Dividends (2,247) (2,231)
-------------------------------------------------------------------------
Retained earnings, end of period $ 123,675 $ 100,321
-------------------------------------------------------------------------
-------------------------------------------------------------------------

See accompanying note to the Consolidated Financial Statements.



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended March 31
(Thousands) 2005 2004
-------------------------------------------------------------------------
Operating Activities
Net income $ 7,382 $ 7,143
Depreciation and amortization 3,858 3,693
Future income taxes (3,268) 963
Gain on sale of assets (672) (748)
Stock option expense 135 218
-------------------------------------------------------------------------
7,435 11,269
Changes in non-cash working capital
and other (8,944) (1,573)
-------------------------------------------------------------------------
Cash flow from operations (1,509) 9,696
-------------------------------------------------------------------------

Investing Activities
Purchase of:
Rental equipment (5,096) (9,403)
Property, plant and equipment (1,322) (1,175)
Assets under construction (579) -
Proceeds on disposal of:
Rental equipment 6,453 4,640
Property, plant and equipment 66 41
-------------------------------------------------------------------------
(478) (5,897)
Changes in non-cash working capital and other (384) (302)
-------------------------------------------------------------------------
(862) (6,199)
-------------------------------------------------------------------------

Financing Activities
Decrease in operating bank loans (1,357) (2,319)
Stock options exercised 2,160 1,041
Dividends (2,234) (2,231)
-------------------------------------------------------------------------
(1,431) (3,509)
Changes in non-cash working capital and other 76 272
-------------------------------------------------------------------------
(1,355) (3,237)
-------------------------------------------------------------------------
(Decrease) Increase in cash (3,726) 260
Cash, beginning of period 12,840 6,741
-------------------------------------------------------------------------
Cash, end of period $ 9,114 $ 7,001
-------------------------------------------------------------------------
-------------------------------------------------------------------------

See accompanying note to the Consolidated Financial Statements.



Note 1. Segmented Information

The Company has three reportable segments: Service, Fabrication and
Leasing. The Service reportable segment is the aggregation of the
Mechanical Service and Syntech divisions. The Fabrication reportable
segment is the aggregation of the Production & Processing, Compression
and Power divisions.


(Unaudited)
($ Thousands) Service Fabrication Leasing
Three months
ended March 31 2005 2004 2005 2004 2005 2004
-------------------------------------------------------------------------
Segment
revenue $ 63,698 $ 62,915 $ 84,359 $ 70,410 $ 8,039 $ 6,856
Intersegment
revenue (3,517) (4,158) (4,858) (7,726) (32) (23)
-------------------------------------------------------------------------
Revenue 60,181 58,757 79,501 62,684 8,007 6,833
-------------------------------------------------------------------------
Gross margin 15,558 16,369 10,821 8,852 5,149 4,244
-------------------------------------------------------------------------
Depreciation
and
amortization 881 788 1,074 1,201 1,903 1,704
-------------------------------------------------------------------------
Income before
interest and
income taxes 2,949 4,518 4,419 3,305 5,009 4,150
-------------------------------------------------------------------------
Segment
assets 121,449 110,175 133,831 137,653 91,717 78,971
Corporate
Goodwill 52,686 53,283 52,086 52,135 7,356 7,356
-------------------------------------------------------------------------
Total segment
assets 174,135 163,458 185,917 189,788 99,073 86,327
-------------------------------------------------------------------------
Capital
expenditures $ 769 $ 407 $ 791 $ 652 $ 5,081 $ 9,406
Corporate
-------------------------------------------------------------------------

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Proceeds on
disposal $ 45 $ 28 $ 21 $ 13 $ 6,453 $ 4,640
Corporate
-------------------------------------------------------------------------

-------------------------------------------------------------------------
-------------------------------------------------------------------------


(Unaudited)
($ Thousands) Consolidated
Three months
ended March 31 2005 2004
----------------------------------
Segment
revenue $156,096 $140,181
Intersegment
revenue (8,407) (11,907)
----------------------------------
Revenue 147,689 128,274
----------------------------------
Gross margin $ 31,528 $ 29,465
----------------------------------
Depreciation
and
amortization $ 3,858 $ 3,693
----------------------------------
Income before
interest and
income taxes 12,377 11,973
----------------------------------
Segment
assets $346,997 $326,799
Corporate $ 14,848 $ 7,684
Goodwill $112,128 $112,774
----------------------------------
Total segment
assets $473,973 $447,257
----------------------------------
Capital
expenditures $ 6,641 $ 10,465
Corporate 356 113
----------------------------------
$ 6,997 $ 10,578
----------------------------------
----------------------------------
Proceeds on
disposal $ 6,519 $ 4,681
Corporate - -
----------------------------------
$ 6,519 $ 4,681
----------------------------------
----------------------------------

Contact Information

  • P. John Aldred
    Chairman and Chief Executive Officer
    4700 47 Street SE, Calgary, Alberta
    (403) 236-6806
    (403) 236-6816
    E-mail: john.aldred@enerflex.com

    or

    Leonard Cornez
    Vice-President and Chief Financial Officer
    4700 47 Street SE, Calgary, Alberta
    (403) 236-6857
    (403) 236-6816 (FAX)
    E-mail: len.cornez@enerflex.com
    Website: www.enerflex.com