2003 Annual Report - Enerflex

Income tax expense was $10.8 million in 2003 compared with $5.0 million in the prior year. The increase in taxexpense is a result of higher pre-tax earnings in the current year. The effective rate of income tax in 2003 was34.7%, compared to 35.3% in 2002. Contributing to the change in the effective tax rate was a change in taxestimate relating to the timing of realizing future tax assets and liabilities, which were partially offset by an increasein capital taxes payable in 2003. The Company expects the effective tax rate in 2004 will continue to be less than 35%with a larger relative proportion being current tax. The utilization of losses in 2003 arising from the EnSource EnergyServices Inc. acquisition in 2002 resulted in a reduction in current taxes otherwise payable for the current year.2003 income$36.5 million before interest and taxes2002 income$17.9 million before interest and taxesLeasing 35% Fabrication 21%Leasing 35%Service 65%Service 44%(Fabrication income was negative,therefore excluded from above2002 income total.)Segmented resultsFollowing the business combination with EnSource, Enerflex established three business segments: Service,Fabrication and Leasing. The business segments are comprised of the following operating units:ServiceSyntech’s electrical, instrumentation and controls business in Canada; and,Mechanical Service businesses in the United States, Canada (Pamco and Jiro), the Netherlands (Landré Ruhaak),Germany (S&L Energie), Australia and Indonesia (Gas Drive Systems);FabricationCompression – Enerflex Compression, including manufacturing facilities in Calgary, Alberta and Odessa, Texas, andthe Jiro low-horsepower screw compressor manufacturing facility in Stettler, Alberta;Production & Processing – Presson’s modular natural gas processing facilities manufacturing in Nisku, Alberta,and Mactronic’s waste gas systems design and manufacturing in Red Deer, Alberta;Enerflex 2003 Annual Report40