All figures quoted in US dollars unless otherwise noted:
- NFI delivered 1,279 EUs in 2020 Q1, resulting in revenue of
$710.4 million.
- Adjusted EBITDA of $56.1
million in 2020 Q1.
- 2020 Q1 Free Cash Flow of $14.2
million and C$0.32 per Share.
Total Leverage ratio of 3.68x.
- Declared dividends of C$13.3
million in 2020 Q1 representing a payout ratio of 67.1%.
- Net loss of $(67.2) million,
or $(1.08) per Share, in 2020 Q1,
earnings were impacted by a one-time, non-cash impairment charge of
$50.8 million related to the impact
of COVID-19 on MCI's private motor coach business and a
$22.5 million mark-to-market loss on
interest rate swaps.
- 2020 Q1 Adjusted Net Earnings of $(0.5) million, or $(0.01) per Share, which is normalized for
$66.7 million of non-cash adjustments
impacting net earnings.
- 2020 Q1 ending backlog, consisting of both firm and option
orders, was 10,579 EUs (valued at $5.1
billion). New firm and options orders of 1,346 EUs in the
quarter.
- Subsequent to quarter-end, NFI improved its liquidity
significantly through a combination of cash flow generation and new
credit facilities to a balance of $550
million as of May 6,
2020
WINNIPEG, May 7, 2020 /CNW/ - (TSX:NFI) NFI Group
Inc. ("NFI" or the "Company"), one of the world's leading
independent bus manufacturers, today announced its financial
results for 2020 Q1.
First quarter revenue increased to $710.4
million, an improvement of 25.3%, from the prior year. Other
key financial highlights of the quarter are below:
|
|
|
|
|
(unaudited, in
millions except per
Share
amounts)
|
2020
Q1
|
Change(2)
|
2020 Q1
LTM
|
Change(2)
|
|
|
|
|
|
Deliveries
(EUs)
|
1,279
|
376
|
5,691
|
1,468
|
|
|
|
|
|
IFRS
Measures
|
|
|
|
|
Revenue
|
$710.4
|
$143.4
|
$3,036.7
|
$529.3
|
Net
earnings
|
(67.2)
|
(83.3)
|
(25.7)
|
(171.4)
|
Net earnings per
Share
|
(1.08)
|
(1.34)
|
(0.41)
|
(2.76)
|
|
|
|
|
|
Non-IFRS
Measures(1)
|
|
|
|
|
Adjusted
EBITDA
|
$56.1
|
$(4.2)
|
$317.9
|
$16.0
|
Adjusted Net
Earnings
|
(0.5)
|
(22.2)
|
79.0
|
(87.2)
|
Adjusted Net Earnings
per Share
|
(0.01)
|
(0.37)
|
1.15
|
(1.34)
|
Free Cash
Flow
|
14.2
|
(18.2)
|
142.2
|
(9.1)
|
Leverage
|
3.68x
|
1.06x
|
3.68x
|
0.44x
|
|
|
(1)
|
Adjusted EBITDA,
Adjusted Net Earnings, Adjusted Net Earnings per Share and Free
Cash Flow are not recognized earnings measures and do not have
standardized meanings prescribed by IFRS. Therefore, they may not
be comparable to similar measures presented by other issuers. See
"Non-IFRS Measures" and detailed reconciliations of IFRS Measures
to Non-IFRS Measures in the Appendix of this press
release.
|
(2)
|
Results noted herein
are for the 13-week period ("2020 Q1") and the 52-week period
("2020 Q1 LTM") ended March 29, 2020. The comparisons reported in
this press release compare 2020 Q1 to the 13-week period ("2019
Q1") and 2020 Q1 LTM to the 52-week period ended March 31, 2019
("2019 Q1 LTM"). Comparisons and comments are also made to the
13-week period ("2019 Q4") ended December 29, 2019. Readers are
advised to view the unaudited consolidated financial statements
(the "Financial Statements") and the related Management's
Discussion and Analysis (the "MD&A") that are available at the
Company's website at:
https://www.nfigroup.com/investor-relations/performance-reports/
and under the Company's profile on www.sedar.com
|
First quarter Adjusted Net Earnings is adjusted for a
$50.8 million non-cash goodwill
impairment charge related to the acquired assets of MCI. The
goodwill impairment reflects the impact COVID-19 is having and is
expected to have on the private coach market in 2020, including the
cancellation or deferral of private customer orders for new and
pre-owned coaches. The uncertainty surrounding the outbreak of
COVID-19 also caused significant volatility in equity markets,
resulting in a systematic increase in the cost of equity capital
utilized in the calculation to determine the recoverable amount of
the MCI Cash Generating Unit. The impairment is mostly caused by
near-term cash flow impacts caused by COVID-19 in 2020, as
management believes MCI's longer-term cash flows are consistent
with those forecasted prior to the pandemic. Adjusted Net Earnings
also includes $15.5 million for fair
value adjustments on mark-to-market losses on interest rate swaps
and $1.4 million in adjustments for
losses on the total return swap. Full reconciliation of net
earnings to Adjusted Net Earnings is available in the accompanying
tables of this press release.
"NFI's first quarter results saw a significant increase in
year-over-year vehicle deliveries and revenue, but was also a
period of disruption as we began to experience the impact of the
global COVID-19 pandemic during the last weeks of the quarter. In
response to the pandemic we moved quickly to protect the health and
safety of our team, customers and suppliers, while also lowering
our monthly cash expenditures," said Paul
Soubry, President and Chief Executive Officer of NFI. "We
worked proactively with our banking partners to obtain covenant
relief and increase our credit capacity and we are now better
positioned to navigate through the pandemic. As we begin the
process of planning to resume new vehicle production we remain
committed to supporting our customers, responding to an increase in
active procurements, and advancing our strategic initiatives."
2020 Q1 Segment Highlights
Manufacturing
- Manufacturing revenue for 2020 Q1 increased by $118.7 million, or 24.9% compared to 2019 Q1. The
increase is related to the acquisition of ADL, plus higher volumes
in the motor coach and medium duty and cutaway businesses. The
Company delivered significantly higher volumes of cutaway vehicles
as it did not have any chassis disruption like the one that was
experienced in the first quarter of 2019.
- Manufacturing gross margins for 2020 Q1 of $48.7 million (8.2% of revenue), decreased by
$17.0 million, or 25.9% compared to
$65.7 million (13.8% of revenue) for
2019 Q1. The decrease in gross margin as a percentage of revenue
was primarily caused by lower margins in the ADL business, as
compared to the Company's legacy manufacturing business (being New
Flyer, MCI and ARBOC) plus unfavourable sales mix in the legacy
transit bus business and continued margin pressure within the coach
business. In addition, included in manufacturing gross margin is a
charge for amortization of intangible assets of $4.3 million for 2020 Q1 related to the
acquisition of ADL. This decreased gross margin as a percentage of
revenue by 0.7% for 2020 Q1.
- 2020 Q1 Manufacturing Adjusted EBITDA decreased by $11.6 million, or 24.7%, due to lower gross
margins and higher SG&A costs from the addition of ADL.
- Manufacturing 2020 Q1 net earnings decreased by $59.9 million, or 325.5%, due to the same items
that impacted Adjusted EBITDA, plus a $50.8
million non-cash goodwill impairment charge and higher
depreciation and amortization related to the acquisition of ADL,
which includes the $4.3 million of
amortization related to ADL's intangible assets.
Aftermarket
- Aftermarket revenue in 2020 Q1 increased by $24.7 million, or 27.3% compared to 2019 Q1. The
acquisition of ADL and increased sales to public customers within
NFI Parts were the primary drivers of increased revenue during 2020
Q1.
- Aftermarket gross margin in 2020 Q1 of $35.0 million (30.4% of revenue) increased by
$10.1 million, or 40.6% compared to
2019 Q1 gross margin of $24.9 million
(27.5% of revenue). The increase as a percentage of revenue is
primarily due to favourable sales mix plus the addition of
ADL.
- 2020 Q1 Aftermarket Adjusted EBITDA increased by $3.0, or 16.8%, with volume increases from ADL
and improved margins from product mix offset by increased SG&A
costs from the addition of ADL.
- Aftermarket 2020 Q1 net earnings decreased by $6.5 million, or 30.5%, with the improvements in
Adjusted EBITDA being offset by higher depreciation and expenses
associated with accounting adjustments related to the acquisition
of ADL.
Liquidity
NFI's liquidity position as at March 29,
2020 was $146.6 million a
decrease of $62.7 million from
December 29, 2019. The decrease in
liquidity primarily relates to changes in non-cash working capital
which was impacted by increases to inventory balances and timing of
receivable payments. Subsequent to quarter-end, the Company entered
into a new $250 million unsecured,
one-year credit facility, available for general corporate purposes
as required, and NFI and its subsidiary, NFI International Limited,
entered into a new strategic £50 million unsecured facility that
management expects may lower interest expenses and withholding tax
exposure as it allows the Company to better manage international
transactions and borrowings for ADL's operations. These two new
facilities combined with cash generated subsequent to the quarter
left the Company with a total liquidity position of $550 million as of May 6,
2020. Further details on the new facilities can be found in
the 2020 Q1 MD&A.
While the additional credit facilities help improve the
Company's overall financial position, management believes the
credit capacity under its existing credit facility is currently
sufficient to fund operations, meet financial obligations as they
come due and provide the necessary funds for capital expenditures,
dividend payments and other operational needs.
Outlook
In response to the COVID-19 pandemic, NFI chose to idle the
majority of its new vehicle production facilities from the end of
March 2020 into May 2020. NFI is now beginning the process of a
planned restart of operations at idled production facilities on a
site-by-site basis taking into account all government mandates and
health and safety requirements. It will take time for operations to
recover to normal levels as production resumes at the Company's
various facilities and based on the site-by-site plan, management
anticipates that the Company's North American manufacturing
operations should resume throughout May
2020 and that all facilities will have resumed operations by
early June.
The unpredictable effects of COVID-19 may limit the Company's
ability to execute on its recovery plan, especially if there are
additional government restrictions or mandates that limit
production operations, customers' ability to accept vehicles and
occurrences of supply chain disruptions. The effects of COVID-19
are expected to continue to impact deliveries and financial
performance through the remainder of 2020, as some vehicles that
were originally planned for 2020 delivery may move into 2021.
Management and the Board have managed through several economic
cycles in the past and are confident that the Company has taken the
necessary steps to position it well to successfully navigate
through the pandemic. Management believes the Company's new credit
facilities, combined with credit covenant relief provided by its
banking partners under its existing facility, provide the Company
with sufficient financial flexibility and credit capacity to
withstand the impacts of COVID-19. In addition, the Company's
strong backlog of $5.1 billion and a
customer base that is primarily driven by public transit agencies
provide longer-term visibility.
Management's primary focus at this time is on lowering cash
expenditures during the COVID-19 pandemic and has taken numerous
measures including hiring freezes, suspension of salary increases
and 2019 earned executive incentive bonuses, decreased operating
and capital expenditures (including delays of several projects),
increased focus on working capital management and temporary
reductions in senior leadership salaries all of which are expected
to provide positive contribution to cash flow. In addition to those
items, the reduction in the Company's dividend also generates
$10 million in quarterly cash
savings. Management has been pleased with the results of these
combined measures to date, as the Company has seen its liquidity
improve by over $90 million since
quarter-end through positive cash flow generation.
Governments around the world have announced or are assessing
stimulus and COVID-19 relief programs. In certain cases, these
programs will benefit NFI's customers, which may create future
opportunities for the sale of NFI's products and services. One such
program is the U.S. government's Coronavirus Aid, Relief, and
Economic Security ("CARES") Act, which includes dedicated support
for transit agencies across the U.S., that continue to provide an
essential service during the COVID-19 pandemic. Under the CARES
Act, Congress appropriated USD $25
billion to the Federal Transit Administration for urban and
rural transit agencies to support operating and qualified capital
expenses to prevent, prepare for, and respond to the COVID-19
pandemic.
Other government programs in Canada, the U.S. and the UK may help NFI
offset costs incurred as a result of the COVID-19 pandemic. NFI is
currently utilizing several programs in the UK that are reimbursing
the Company for costs associated with employee salaries impacted by
the pandemic. The Company is monitoring similar programs in the
U.S. and Canada, including the
Canada Emergency Wage Subsidy, and
will avail of them where applicable.
Management remains optimistic with respect to the longer-term
outlook of the majority of the Company's global end markets. The
Company's vehicles (New Flyer, ARBOC, MCI public coach, ADL) are
primarily used for public transit, which remains a primary method
of transportation for millions of users and an economic enabler in
cities. As numerous jurisdictions recover from COVID-19 and execute
on strategies to improve accessibility and migrate to more ZEBs,
the Company expects to be a beneficiary of this activity.
Management's belief is supported by continued strong growth in the
Company's North American Bid Universe, which remains at record
levels, plus announcements from governments in Canada, the U.S. and the UK, regarding
dedicated multi-year funding to support transit operations and
vehicle procurements.
While the overall market demand outlook is positive, management
does expect that its private motor coach business, which represents
approximately 12% of consolidated revenue and an even lower
percentage of net earnings, will be negatively affected by the
impact of COVID-19 during 2020. The Company has responded to this
decrease in market activity by taking numerous measures to remove
costs going forward from this segment of its operations, including
permanent layoffs and a decrease in production levels, which are
expected to save the Company in excess of $10 million per annum. The Company is actively
evaluating other options to lower its overhead costs.
"As we operate through the challenges of the COVID-19 pandemic
we have strengthened our balance sheet and lowered our cost base,
and have already achieved several milestones on those fronts," said
Paul Soubry. "No doubt there have
been and will be considerable additional short-term challenges
caused by COVID-19 that impact results in 2020. We are confident in
our management team and the steps we've taken to ensure the safety
of our employees while continuing to deliver for our customers and
our shareholders in the face of this pandemic. The end-markets for
our manufacturing segment, outside of near-term impacts to private
motor coach, remain healthy, and our aftermarket parts businesses
provide recurring revenue."
Corporate Social Responsibility
NFI's vision is to enable the future of mobility with innovative
and sustainable solutions through the design and delivery of
exceptional transportation solutions that are safe, accessible,
efficient and reliable. NFI's end products are a key driver
to enable cities to lower emissions, decrease congestion and drive
economic opportunity for less-fortunate members of various
communities. NFI is committed to employees, customers and
shareholders, while also being responsible to the environment and
the communities that we live and work in, by focusing on using
renewable power, reducing waste, purchasing supplies from
disadvantaged business enterprises, promoting diversity and
adhering to our detailed governance structure.
NFI's 2019 Environmental Social Governance Report can be
accessed on the Company's website.
Conference Call
A conference call for analysts and interested listeners will be
held on Thursday, May 7, 2020 at
9:30 a.m. Eastern Time (ET). The
call-in number for listeners is 888-231-8191 or 647-427-7450. An
accompanying results presentation will be available prior to the
call at www.nfigroup.com/investor-relations.
A live audio feed of the call will also be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1303924&tp_key=84dcf5f159
A replay of the call will be available from 12:30 p.m. (ET) on May 7,
2020 until 11:59 p.m. (ET) on
June 8, 2020. To access the replay,
call 855-859-2056 or 416-849-0833 and then enter pass code number
7435389. The replay will also be available on NFI's web site at
www.nfigroup.com.
Annual and Special Meeting of Shareholders
As NFI previously announced its Annual and Special Meeting of
Shareholders will be held on Thursday, May
7, 2020 at 2:00 p.m. (ET). Due
to the restrictions imposed in connection with the COVID-19
pandemic and in consideration of the health and safety of our
shareholders, team members and the broader community, the meeting
will be held in a virtual meeting format only. Details on how to
join the meeting can be found on NFI's website.
About NFI Group
With more than 9,000 team members operating from 50 facilities
across ten countries, NFI is a leading independent global bus
manufacturer providing a comprehensive suite of mass transportation
solutions under brands: New Flyer® (heavy-duty transit buses),
Alexander Dennis Limited (single and double-deck buses), Plaxton
(motor coaches), MCI® (motor coaches), ARBOC® (low-floor
cutaway and medium-duty buses), and NFI Parts™. NFI vehicles
incorporate the widest range of drive systems available including:
clean diesel, natural gas, diesel-electric hybrid, and
zero-emission electric (trolley, battery, and fuel cell). In
total, NFI now supports over 105,000 buses and coaches currently in
service around the world.
NFI common shares are traded on the Toronto Stock Exchange under
the symbol NFI. Further information is available
at www.nfigroup.com, www.newflyer.com, www.mcicoach.com, www.arbocsv.com, www.nfi.parts, www.alexander-dennis.com,
and www.carfaircomposites.com.
Appendix - Reconciliation Tables
Reconciliation of Net Earnings to Adjusted
EBITDA
Management believes that Adjusted EBITDA is an important measure
in evaluating the historical operating performance of the Company.
However, Adjusted EBITDA is not a recognized earnings measure under
IFRS and does not have a standardized meaning prescribed by IFRS.
Accordingly, Adjusted EBITDA may not be comparable to similar
measures presented by other issuers. Readers of this press release
are cautioned that Adjusted EBITDA should not be construed as an
alternative to net earnings or loss determined in accordance with
IFRS as indicators of the Company's performance, or cash flows from
operating activities determined in accordance with IFRS as a
measure of liquidity and cash flow. See Non-IFRS measures for the
definition of Adjusted EBITDA. The following table reconciles net
earnings to Adjusted EBITDA based on the historical Financial
Statements of the Company for the periods indicated.
|
(Unaudited, U.S.
dollars in thousands)
|
|
|
|
|
52-Weeks
|
52-Weeks
|
|
|
|
|
Ended
March
|
Ended
March
|
|
2020
Q1
|
2019
Q1
|
|
29,
2020
|
31,
2019
|
Net earnings
(loss)
|
$
|
(67,239)
|
$
|
16,149
|
|
$
|
(25,688)
|
$
|
145,735
|
Addback(1)
|
|
|
|
|
|
Income
taxes
|
4,578
|
7,655
|
|
38,920
|
43,826
|
Interest
expense
|
37,135
|
18,057
|
|
92,432
|
41,999
|
Amortization
|
30,140
|
18,981
|
|
115,729
|
70,109
|
Loss (gain) on
disposition of property, plant and equipment
|
163
|
(20)
|
|
137
|
261
|
Fair value adjustment
for total return swap(10)
|
1,970
|
44
|
|
2,875
|
8,222
|
Unrealized foreign
exchange loss (gain) on non-current monetary items
|
|
|
|
|
|
and forward foreign
exchange contracts
|
(43)
|
(935)
|
|
952
|
(2,675)
|
Costs associated with
assessing strategic and corporate
initiatives(7)
|
—
|
5
|
|
13,064
|
96
|
Past service
costs(11) and other pension costs
(recovery)
|
(463)
|
—
|
|
(2,064)
|
672
|
Non-recurring
restructuring costs (8)
|
22
|
—
|
|
387
|
—
|
Fair value adjustment
to acquired subsidiary company's inventory and
|
|
|
|
|
|
deferred
revenue(9)
|
—
|
—
|
|
31,004
|
—
|
Proportion of the
total return swap realized(8)
|
(940)
|
(53)
|
|
(1,513)
|
(5,651)
|
Equity settled
stock-based compensation
|
14
|
419
|
|
1,161
|
1,359
|
Recovery on currency
transactions(13)
|
—
|
—
|
|
(4,287)
|
—
|
Prior year sales tax
provision (14)
|
(56)
|
—
|
|
4,038
|
—
|
Release of provisions
related to purchase accounting(12)
|
—
|
—
|
|
—
|
(2,138)
|
Impairment loss on
goodwill(14)
|
50,790
|
—
|
|
50,790
|
—
|
Adjusted
EBITDA(1)
|
$
|
56,071
|
$
|
60,302
|
|
$
|
317,936
|
$
|
301,815
|
Adjusted EBITDA is
comprised of:
|
|
|
|
|
|
Manufacturing
|
$
|
35,443
|
$
|
47,012
|
|
$
|
244,528
|
$
|
260,858
|
Aftermarket
|
20,937
|
17,912
|
|
77,597
|
71,657
|
Corporate
|
(308)
|
(4,622)
|
|
(4,188)
|
(30,700)
|
|
See footnotes on page
7 and 8.
|
Reconciliation of Net Earnings to Adjusted Net
Earnings
Adjusted Net Earnings and Adjusted Earnings per Share are not
recognized measures under IFRS and do not have a standardized
meaning prescribed by IFRS. Accordingly, Adjusted Net Earnings and
Adjusted Earnings per Share may not be comparable to similar
measures presented by other issuers. Readers of this press release
are cautioned that Adjusted Net Earnings and Adjusted Earnings per
Share should not be construed as an alternative to net earnings, or
net earnings per Share, determined in accordance with IFRS as
indicators of the Company's performance. See Non-IFRS Measures for
the definition of Adjusted Net Earnings and Adjusted Earnings per
Share. The following tables reconcile net earnings to
Adjusted Net Earnings based on the historical Financial Statements
of the Company for the periods indicated.
|
(Unaudited, U.S.
dollars in thousands other than
|
earnings per Share
and Adjusted Earnings per Share)
|
|
|
|
|
52-Weeks
|
52-Weeks
|
|
|
|
|
Ended
March
|
Ended
March
|
|
2020
Q1
|
2019
Q1
|
|
29,
2020
|
31,
2019
|
Net earnings
(loss)
|
$
|
(67,239)
|
16,149
|
|
$
|
(25,690)
|
$
|
145,735
|
|
|
|
|
|
|
Adjustments, net of
tax (1) (10)
|
|
|
|
|
|
Fair value adjustments
of total return swap(7)
|
1,359
|
30
|
|
1,878
|
6,247
|
Unrealized foreign
exchange (gain) loss
|
(30)
|
(635)
|
|
640
|
(1,824)
|
Unrealized (gain) loss
on interest rate swap
|
15,510
|
6,415
|
|
21,816
|
8,462
|
Impairment loss on
goodwill(14)
|
50,790
|
—
|
|
50,790
|
—
|
Portion of the total
return swap realized(8)
|
(649)
|
(36)
|
|
(975)
|
(4,309)
|
Costs associated with
assessing strategic and corporate
initiatives(4)
|
—
|
3
|
|
13,066
|
72
|
Fair value adjustment
to acquired subsidiary company's inventory and
|
|
|
|
|
|
deferred
revenue(6)
|
—
|
—
|
|
17,943
|
—
|
Equity settled
stock-based compensation
|
10
|
284
|
|
632
|
972
|
Gain on disposition of
property, plant and equipment
|
112
|
(14)
|
|
99
|
187
|
Past service
costs(9) and other pension costs (recovery)
|
(319)
|
—
|
|
(1,246)
|
506
|
Gain on release of
provision related to purchase accounting (11)
|
—
|
—
|
|
—
|
(1,623)
|
Recovery on currency
transactions(12)
|
—
|
—
|
|
(2,481)
|
—
|
Prior year sales tax
provision (13)
|
(39)
|
—
|
|
2,330
|
—
|
Non-recurring
restructuring costs (5)
|
15
|
—
|
|
226
|
—
|
Adjusted Net
Earnings
|
$
|
(480)
|
22,196
|
|
$
|
79,028
|
154,425
|
|
|
|
|
|
|
|
Earnings per Share
(basic)
|
$
|
(1.08)
|
$
|
0.26
|
|
$
|
(0.41)
|
$
|
2.35
|
Earnings per Share
(fully diluted)
|
$
|
(1.08)
|
$
|
0.26
|
|
$
|
(0.41)
|
$
|
2.33
|
|
|
|
|
|
|
Adjusted Earnings per
Share (basic)
|
$
|
(0.01)
|
$
|
0.36
|
|
$
|
1.15
|
$
|
2.49
|
Adjusted Earnings per
Share (fully diluted)
|
$
|
(0.01)
|
$
|
0.36
|
|
$
|
1.15
|
$
|
2.47
|
|
|
1.
|
Addback items are
derived from the historical Financial Statements of the
Company.
|
2.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have standardized
meaning prescribed by IFRS. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers. See
"Definitions of Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net
Earnings and Adjusted Net Earnings per Share" in Appendix B.
Management believes that Adjusted EBITDA is a useful supplemental
measure in evaluating performance of the Company.
|
3.
|
As a result of the
Company's multinational corporate structure, income taxes paid are
subject to high degrees of volatility due to the mix of earnings
within various jurisdictions and the timing of required installment
payments.
|
4.
|
Normalized to exclude
non-recurring expenses related to the costs of assessing strategic
and corporate initiatives.
|
5.
|
Normalized to exclude
non-recurring restructuring costs.
|
6.
|
The revaluation of
ADL's inventory included an adjustment of $31.0 million in Fiscal
2019 after-tax value of $17.9 million. These revaluation
adjustments relate to purchase accounting as a result of the
related acquisitions.
|
7.
|
The fair value
adjustment of the total return swap is a non-cash gain that is
deducted from the definition of Adjusted EBITDA.
|
8.
|
A portion of the gain
from the fair value adjustment of the total return swap is added to
Adjusted EBITDA to match the equivalent portion of the related
deferred compensation expense recognized.
|
9.
|
In 2019 Q3, the
Company received $1.6 million recovery related to the closing of
one of its pension plans. An additional amount of $0.46 million was
received in 2020 Q1. In 2018 Q2, the Company completed an actuarial
valuation related to the past service costs of the new collective
bargaining agreement at the Company's Winnipeg facility which
resulted in an adjustment of $0.7 million.
|
10.
|
In 2020 Q1, the
Company has utilized a rate of 31% to tax effect the
adjustments.
|
11.
|
During 2018 Q4
purchase accounting provisions recorded during the acquisition of
MCI were deemed to be no longer needed and were released resulting
in an increase to net earnings. The amounts released have
been deducted in the calculation of Adjusted EBITDA.
|
12.
|
Recovery of prior
period banking fees related to foreign exchange
transactions.
|
13.
|
Provision for sales
taxes as a result of an ongoing state tax review.
|
14.
|
Impairment charge on
MCI's goodwill.
|
Appendix - Non-IFRS Measures
References to "Adjusted EBITDA" are to earnings before interest,
income taxes, depreciation and amortization after adjusting for the
effects of certain non-recurring and/or non-operations related
items that do not reflect the current ongoing cash operations of
the Company. These adjustments include gains or losses on disposal
of property, plant and equipment, fair value adjustment for total
return swap, unrealized foreign exchange losses or gains on
non-current monetary items and forward foreign exchange contracts,
costs associated with assessing strategic and corporate
initiatives, past service costs and other pension costs,
non-recurring restructuring costs, fair value adjustment to
acquired subsidiary company's inventory and deferred revenue,
proportion of the total return swap realized, equity settled
stock-based compensation, recovery of currency transactions, prior
year sales tax provision, impairment loss on goodwill, and release
of provision related to purchase accounting.
"Free Cash Flow" means net cash generated by operating
activities adjusted for changes in non-cash working capital items,
interest paid, interest expense, income taxes paid, current income
tax expense, principal portion of finance lease payments, cash
capital expenditures, proceeds from disposition of property, plant
and equipment, costs associated with assessing strategic and
corporate initiatives, fair value adjustment to acquired subsidiary
company's inventory and deferred revenue, defined benefit funding,
defined benefit expense, past service costs, proportion of total
return swap, recovery on currency transactions, prior year sales
tax provision, non-recurring restructuring costs, gain on release
of provision related to purchase accounting, foreign exchange gain
(loss) on cash held in foreign currency.
References to "ROIC" are to net operating profit after taxes
(calculated as Adjusted EBITDA less depreciation of plant and
equipment, depreciation of right-of-use assets and income taxes at
a rate of 31%) divided by average invested capital for the last
twelve month period (calculated as to shareholders' equity plus
long-term debt, obligations under leases, other long-term
liabilities and derivative financial instrument liabilities less
cash).
References to "Adjusted Net Earnings" are to net earnings after
adjusting for the after tax effects of certain non-recurring and/or
non-operational related items that do not reflect the current
ongoing cash operations of the Company including: fair value
adjustments of total return swap, unrealized foreign exchange loss
or gain, unrealized gain or loss on the interest rate swap, portion
of the total return swap realized, costs associated with assessing
strategic and corporate initiatives, fair value adjustment to
acquired subsidiary company's inventory and deferred revenue,
equity settled stock-based compensation, gain or loss on disposal
of property, plant and equipment, past service costs and other
pension costs, gain on release of provision related to purchase
accounting, recovery on currency transactions, prior year sales tax
provision, and non-recurring restructuring costs .
References to "Adjusted Earnings per Share" are to Adjusted Net
Earnings divided by the average number of Shares outstanding.
Management believes Adjusted EBITDA, ROIC, Free Cash Flow,
Adjusted Net Earnings and Adjusted Earnings per Share are useful
measures in evaluating the performance of the Company. However,
Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net Earnings and
Adjusted Earnings per Share are not recognized earnings measures
under IFRS and do not have standardized meanings prescribed by
IFRS. Readers of this MD&A are cautioned that ROIC, Adjusted
Net Earnings and Adjusted EBITDA should not be construed as an
alternative to net earnings or loss or cash flows from operating
activities determined in accordance with IFRS as an indicator of
NFI's performance, and Free Cash Flow should not be construed as an
alternative to cash flows from operating, investing and financing
activities determined in accordance with IFRS as a measure of
liquidity and cash flows. A reconciliation of net earnings to
Adjusted EBITDA, based on the Financial Statements, has been
provided under the headings "Reconciliation of Net Earnings to
Adjusted EBITDA". A reconciliation of Free Cash Flow to cash flows
from operations is provided under the heading "Summary of Free Cash
Flow". A reconciliation of net earnings to Adjusted Net Earnings is
provided under the heading "Reconciliation of Net Earnings to
Adjusted Net Earnings".
NFI's method of calculating Adjusted EBITDA, ROIC, Free Cash
Flow, Adjusted Net Earnings and Adjusted Earnings per Share may
differ materially from the methods used by other issuers and,
accordingly, may not be comparable to similarly titled measures
used by other issuers. Dividends paid from Free Cash Flow are not
assured, and the actual amount of dividends received by holders of
Shares will depend on, among other things, the Company's financial
performance, debt covenants and obligations, working capital
requirements and future capital requirements, all of which are
susceptible to a number of risks, as described in NFI's public
filings available on SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements in this press release are "forward looking
statements", which reflect the expectations of management regarding
the Company's future growth, results of operations, performance and
business prospects and opportunities. The words "believes",
"anticipates", "plans", "expects", "will", "intends", "projects",
"forecasts", "estimates" and similar expressions are intended to
identify forward looking statements. These forward-looking
statements reflect management's current expectations regarding
future events and operating performance and speak only as of the
date of this press release. Forward-looking statements involve
significant risks and uncertainties, should not be read as
guarantees of future performance or results, and will not
necessarily be accurate indications of whether or not or the times
at or by which such performance or results will be achieved.
A number of factors could cause actual results to differ materially
from the results discussed in the forward-looking statements.
Such differences may be caused by factors which include, but are
not limited to, the magnitude and length of the global, national
and regional economic and social disruption being caused as a
result of the global COVID-19 pandemic; the impact of national,
regional and local governmental laws, regulations and "shelter in
place" or similar orders relating to the COVID-19 pandemic which
may materially adversely impact the Company's ability to continue
operations; additional partial or complete closures of one, more or
all of the Company's facilities and work locations (including to
protect the health and safety of the Company's employees), the
extension of such closures and the ability to execute planned
return to production and the increase of production rates over time
as a result of the COVID-19 pandemic; continuing and worsening
supply delays and shortages of parts and components and disruption
to labour supply as a result of the COVID-19 pandemic; the COVID-19
pandemic will likely adversely affect operations of customers as a
result of shutdowns and/or disruptions to their operations and the
services provided to their customers and end users and may delay,
for an unknown period, customers' purchases of the Company's
products; the Company's ability to obtain access to additional
capital if required; the Company's financial performance and
condition, obligations, cash flow and liquidity and its ability to
maintain compliance with the covenants under its credit facilities,
which may also negatively impact the ability of the Company to fund
dividends. These above risks relating to the impact of the COVID-19
pandemic may materially adversely impact the Company's business,
operating performance and financial condition, including as a
result of reduction to the Company's cashflow, liquidity and its
ability to maintain compliance with covenants under its credit
facilities. There can be no assurance that the Company will
be able to maintain sufficient liquidity for an extended period,
obtain future covenant relief under its credit facilities or access
to additional capital or access to government financial support or
as to when production operations will commence or return to
previous production rates.
The Company cautions that due to the dynamic, fluid and highly
unpredictable nature of the COVID-19 pandemic and its impact on
global and local economies, businesses and individuals, it is
impossible to predict the severity of the impact on the Company's
business, operating performance and financial condition and any
material adverse effects could very well be rapid, unexpected and
may continue for an extended and unknown period of time. The extent
of such impact will depend on future developments, which are
unpredictable, including new information which may emerge
concerning the spread and severity of COVID-19 and actions taken by
governments and health organizations around the world to address
its impact, among others.
A number of other factors that may cause actual results to
differ materially from the results discussed in the forward-looking
statements include, but are not limited to, funding may not
continue to be available to the Company's customers at current
levels or at all; the Company's business is affected by economic
factors and adverse developments in economic conditions which could
have an adverse effect on the demand for the Company's products and
the results of its operations; currency fluctuations could
adversely affect the Company's financial results or competitive
position; interest rates could change substantially, materially
impacting the Company's revenue and profitability; an active,
liquid trading market for the Shares may cease to exist, which may
limit the ability of shareholders to trade Shares; the market price
for the Shares may be volatile; if securities or industry analysts
do not publish research or reports about the Company and its
business, if they adversely change their recommendations regarding
the Shares or if the Company's results of operations do not meet
their expectations, the Share price and trading volume could
decline. In addition, if securities or industry analysts
publish inaccurate or unfavorable research about the Company or its
business, the Share price and trading volume of the Shares could
decline; competition in the industry and entrance of new
competitors; failure of the ratification of the Unites
States-Mexico-Canada Agreement (USMCA) could be materially adverse
to NFI; current requirements under "Buy America" regulations may
change and/or become more onerous or suppliers' "Buy America"
content may change; failure of the Company to comply with the DBE
program requirements or the failure to have its DBE goals approved
by the FTA; absence of fixed term customer contracts, exercise of
options and customer suspension or termination for convenience;
local content bidding preferences in the
United States may create a competitive disadvantage;
uncertainty resulting from the exit of the UK from the European
Union; requirements under Canadian content policies may change
and/or become more onerous; operational risk resulting from
inadequate or failed internal processes, people and/or systems or
from external events, including fiduciary breaches, regulatory
compliance failures, legal disputes, business disruption,
pandemics, floods, technology failures, processing errors, business
integration, damage to physical assets, employee safety and
insurance coverage; international operations subject the Company to
additional risks and costs and may cause profitability to decline;
dependence on limited sources or unique sources of supply;
dependence on supply of engines that comply with emission
regulations; a disruption, termination or alteration of the supply
of vehicle chassis or other critical components from third-party
suppliers could materially adversely affect the sales of certain of
the Company's products; the Company's profitability can be
adversely affected by increases in raw material and component
costs; the Company may incur material losses and costs as a result
of product warranty costs, recalls and remediation of transit buses
and motor coaches; production delays may result in liquidated
damages under the Company's contracts with its customers;
catastrophic events may lead to production curtailments or
shutdowns; the Company may not be able to successfully renegotiate
collective bargaining agreements when they expire and may be
adversely affected by labour disruptions and shortages of labour;
the Company's operations are subject to risks and hazards that may
result in monetary losses and liabilities not covered by insurance
or which exceed its insurance coverage; the Company may be
adversely affected by rising insurance costs; the Company may not
be able to maintain performance bonds or letters of credit required
by its contracts or obtain performance bonds and letters of credit
required for new contracts; the Company is subject to litigation in
the ordinary course of business and may incur material losses and
costs as a result of product liability claims; the Company may have
difficulty selling pre-owned coaches and realizing expected resale
values; the Company may incur costs in connection with regulations
relating to axle weight restrictions and vehicle lengths; the
Company may be subject to claims and liabilities under
environmental, health and safety laws; dependence on management
information systems and cyber security risks; the Company's ability
to execute its strategy and conduct operations is dependent upon
its ability to attract, train and retain qualified personnel,
including its ability to retain and attract executives, senior
management and key employees; the Company may be exposed to
liabilities under applicable anti-corruption laws and any
determination that it violated these laws could have a material
adverse effect on its business; the Company's risk management
policies and procedures may not be fully effective in achieving
their intended purposes; internal controls over financial
reporting, no matter how well designed, have inherent limitations;
there are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls and
procedures; ability to successfully execute strategic plans and
maintain profitability; development of competitive or disruptive
products, services or technology; development and testing of new
products or model variants; acquisition risk; reliance on
third-party manufacturers; third-Party Distribution/Dealer
Agreements; availability to the Company of future financing; the
Company may not be able to generate the necessary amount of cash to
service its existing debt, which may require the Company to
refinance its debt; the restrictive covenants in the Credit
Facility could impact the Company's business and affect its ability
to pursue its business strategies; payment of dividends is not
guaranteed; a significant amount of the Company's cash is
distributed, which may restrict potential growth; the Company is
dependent on its subsidiaries for all cash available for
distributions; future sales or the possibility of future sales of a
substantial number of Shares may impact the price of the Shares and
could result in dilution; if the Company is required to write down
goodwill or other intangible assets, its financial condition and
operating results would be negatively affected; income tax risk due
to the Company's operations being complex and income tax
interpretations, regulations and legislation that pertain to its
activities are subject to continual change; investment eligibility
and Canadian federal income tax risks; certain U.S. tax rules may
limit the ability of NF Holdings and its U.S. subsidiaries (the "NF
Group") to deduct interest expense for U.S. federal income tax
purposes and may increase the NF Group's tax liability and certain
financing transactions could be characterized as "hybrid
transactions" for U.S. tax purposes, which could increase the NF
Group's tax liability. NFI cautions that this list of factors
is not exhaustive. These factors and other risks and uncertainties
are discussed in NFI's press releases, Annual Information Form and
materials filed with the Canadian securities regulatory authorities
which are available on SEDAR at www.sedar.com.
Although the forward looking statements contained in this press
release are based upon what management believes to be reasonable
assumptions, investors cannot be assured that actual results will
be consistent with these forward looking statements, and the
differences may be material. These forward looking statements are
made as of the date of this press release and NFI assumes no
obligation to update or revise them to reflect new events or
circumstances, except as required by applicable securities
laws.
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SOURCE NFI Group Inc.