2003 Annual Report - Enerflex

Note 12. GUARANTEES, COMMITMENTS AND CONTINGENCIESAt December 31, 2003 the Company had outstanding letters of credit issued in lieu of holdbacks, performance guarantees andbid bonds of $6,078,000 (2002 - $6,140,000) of which $2,155,000 (2002 - $1,506,000) are insured by Export Development Canada.The aggregate minimum lease payments for operating leases for equipment, automobiles and premises are $24,665,000 andamounts payable for the next five years and thereafter are:2004 $ 7,0792005 6,1432006 4,0512007 1,8432008 681Thereafter 4,868$ 24,665In addition, the Company has purchase obligations over the next three years:2004 $ 1,2432005 4422006 250$ 1,935The Company is involved in litigation and claims associated with normal operations. Management is of the opinion that anyresulting settlement would not materially affect the financial position or results of operations of the Company.Note 13. INCOME TAXESThe provision for income taxes differs from that which would be expected by applying statutory rates. A reconciliation of thedifference is as follows:Year ended December 31 2003 2002Income before income taxes $ 31,224 $ 14,278Canadian statutory rate 36.7% 39.2%Expected income tax provision 11,459 5,603Add (deduct)Manufacturing and processing profit reduction (287) (21)Income taxed in jurisdictions with lower tax rates (468) (81)Other 137 (455)Income tax provision $ 10,841 $ 5,046The composition of the income tax provision is as follows:Year ended December 31 2003 2002Current income taxes $ 7,964 $ 2,178Future income taxes 2,877 2,868Income tax provision $ 10,841 $ 5,046The computation of the Company’s provision for income taxes involves tax interpretations, regulations and legislation that arecontinually changing. There are tax matters that have not yet been confirmed by the various tax authorities; however, managementbelieves that the provision for income taxes is adequate.Enerflex 2003 Annual Report65