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.
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