Summary (U.S. Dollars except as noted):
- Delayed order release from a large U.S. customer in 2012
Q3 negatively impacted line entries and the production
schedule. As a result, bus revenue of $179.3 million decreased by 10.7% compared to
2011 Q3 as the number of EUs delivered decreased by 12.7%.
Production has returned to previous levels averaging 36 EUs per
week as the notice to proceed has been received.
- Aftermarket revenue of $29.1
million increased by 1.8% compared to 2011 Q3, but margins
remain under pressure.
- Consolidated Adjusted EBITDA of $14.1 million decreased by 36.6% compared to 2011
Q3 due to decreased bus deliveries and lower contract margins sales
mix.
- Net earnings of $1.7
million in 2012 Q3 decreased compared to net earnings of
$15.1 million in 2011
Q3.
- Free Cash Flow was C$6.1
million and declared dividends of C$7.5 million were consistent with Board policy.
The current dividend rate is expected to be
maintained.
- Order activity has improved which has resulted in firm
order backlog increasing by 15.4% . Management notes a significant
increase in recent bid activity evidenced by record bid universe
levels.
WINNIPEG,
Nov. 12, 2012 /CNW/ - New Flyer
Industries Inc. (TSX: NFI) (TSX: NFI.DB.U), ("New Flyer"
or the "Company"), the leading manufacturer of heavy-duty transit
buses in Canada and the United States, today announced its results
for the 13-week period ended September
30 2012 ("2012 Q3"). Full financial statements and
Management's Discussion and Analysis (the "MD&A") are available
at the Company's web site at:
www.newflyer.com/index/financialreport. Unless otherwise indicated,
all monetary amounts in this press release are expressed in U.S.
dollars.
Operating Results
|
|
|
|
|
|
|
Bus Deliveries |
2012 |
2011 |
|
2012 |
2011 |
|
(in thousands) |
Q3 |
Q3 |
change |
YTD |
YTD |
change |
Number of units delivered (EUs) |
386 |
442 |
-12.7% |
1,269 |
1,341 |
-5.4% |
Average EU selling price |
$464.6 |
$454.2 |
2.3% |
$451.5 |
$434.7 |
3.9% |
|
|
|
|
|
|
|
Consolidated Revenue |
2012 |
2011 |
|
2012 |
2011 |
|
(in millions) |
Q3 |
Q3 |
change |
YTD |
YTD |
change |
Bus |
$179.3 |
$200.7 |
-10.7% |
$572.9 |
$582.9 |
-1.7% |
Aftermarket |
29.1 |
28.6 |
1.8% |
90.1 |
86.6 |
4.1% |
Total Revenue |
$208.4 |
$229.3 |
-9.1% |
$663.0 |
$669.5 |
-1.0% |
|
|
|
|
|
|
|
- The decrease in 2012 Q3 revenue primarily resulted from a 12.7%
decrease in total bus deliveries, offset slightly by a 2.3%
increase in average selling price per equivalent unit ("EU").
The decrease in deliveries is primarily a result of the
delay in receiving the notice to proceed for the order of 90
60-foot Xcelsior buses (180 EUs) from New
York City Transit Authority, which caused the buses to be
removed from the 2012 Q3 production schedule.
- The increase in revenue from aftermarket operations when
comparing the periods is due to an increase in parts sales.
- Revenue from bus manufacturing operations for the 39-week
period ended September 30, 2012
("2012 YTD") also decreased compared to the 39-week period ended
October 2, 2011 ("2011 YTD"). The
2012 YTD decrease is due to decreased deliveries resulting from
lower production rates in 2012 YTD offset by higher average selling
price per EU in 2012 YTD compared to 2011 YTD.
- Revenue from aftermarket operations for 2012 YTD increased 4.1%
compared to 2011 YTD as a result of higher parts volumes in the
U.S. offset by a decrease in used bus sales.
|
|
|
|
|
|
|
Consolidated Adjusted EBITDA |
2012 |
2011 |
|
2012 |
2011 |
|
(in millions) |
Q3 |
Q3 |
change |
YTD |
YTD |
change |
Bus |
$9.6 |
$16.8 |
-42.8% |
$31.8 |
$45.8 |
-30.5% |
Aftermarket |
4.5 |
5.4 |
-17.6% |
15.3 |
18.4 |
-16.9% |
Total Adjusted EBITDA |
$14.1 |
$22.2 |
-36.6% |
$47.1 |
$64.2 |
-26.6% |
|
|
|
|
|
|
|
- 2012 Q3 bus manufacturing operations' Adjusted EBITDA decreased
primarily as a result of a less bus deliveries, lower average
contract margins due to sales mix and the decrease of investment
tax credits realized in the quarter, which was offset partially by
increased efficiencies resulting from the Company's Operational
Excellence initiatives.
- The 2012 YTD decrease in bus manufacturing operations' Adjusted
EBITDA when comparing the two periods is primarily a result of a
sales mix with lower average margins, decreased bus deliveries,
decreased investment tax credits realized in 2012 YTD of
$0.5 million compared to $5.5 million in 2011 YTD and a decrease in
realized foreign exchange gains.
- 2012 Q3 and 2012 YTD aftermarket operations' Adjusted EBITDA
decreased, compared to their comparable 2011 periods, primarily due
to lower profit margins driven largely by industry price pressure,
the operating costs of the newer parts distribution centers
required to achieve future revenue growth and decreased Adjusted
EBITDA from the sale of used buses in 2011 YTD.
Management expects Adjusted EBITDA during the
13-week period ended December 30,
2012 ("2012 Q4") should be stronger than 2012 Q3, based on
the positive impact derived from increased bus deliveries and the
known contract sales mix, as all production slots in 2012 Q4 have
been filled.
|
|
|
|
|
|
|
Net earnings |
2012 |
2011 |
$ |
2012 |
2011 |
$ |
(in millions) |
Q3 |
Q3 |
change |
YTD |
YTD |
change |
Earnings from operations |
$7.8 |
$15.8 |
-8.0 |
$26.5 |
$43.6 |
-17.1 |
Non-cash (charges) recovered |
(0.9) |
4.7 |
-5.6 |
(8.1) |
(6.8) |
-1.3 |
Interest expense |
(3.9) |
(10.4) |
6.5 |
(11.8) |
(37.0) |
25.2 |
Income taxes (expense) recovered |
(1.3) |
5.0 |
-6.3 |
1.4 |
1.6 |
-0.2 |
Net earnings |
1.7 |
15.1 |
-13.4 |
8.0 |
1.4 |
6.6 |
The Company reported net earnings of
$1.7 million in 2012 Q3 which
decreased compared to net earnings of $15.1
million during the 13-week period ended October 2, 2011 ("2011 Q3"), primarily as a
result of lower earnings from operations, higher income taxes and
higher non-cash charges offset by a $6.5
million decrease of finance costs. The increase in income
taxes when comparing the two periods was primarily the result of a
significant deferred tax recovery in 2011 Q3 caused by the
refinancing of the Company's senior credit facility.
2012 YTD net earnings of $8.0 million increased compared to 2011 YTD net
earnings of $1.4 million, primarily
due to significantly reduced finance costs which offset the
decrease in earnings from operations during 2012 YTD.
Liquidity
|
|
|
|
|
|
|
Free Cash Flow |
2012 |
2011 |
|
2012 |
2011 |
|
(CAD dollars in millions) |
Q3 |
Q3 |
change |
YTD |
YTD |
change |
Free Cash Flow |
6.1 |
0.0 |
100% |
22.5 |
12.1 |
86.0% |
Declared dividends |
7.5 |
6.7 |
12.4% |
26.6 |
16.5 |
61.4% |
On August 8, 2012,
the board of directors of the Company confirmed a new annual
dividend rate equal to C$0.585 per
common share ("Share"), effective for all dividends declared after
August 20, 2012. The reduced dividend
is expected to produce an annual improvement in cash flows of
C$12.2 million, based on the current
number of Shares outstanding.
Management believes that the current dividend
rate is sustainable due to, among other factors, improved cash
flows due to lower level of dividends than in the past, 2012 Q3
Adjusted EBITDA was negatively impacted due to a temporary
reduction in productions levels, the improvements in operational
performance resulting from Operational Excellent initiatives and
the market conditions are beginning to show improvement.
|
|
|
|
Liquidity Position |
Sept 30 |
July 1 |
$ |
(in millions) |
2012 |
2012 |
change |
Cash |
3.1 |
67.2 |
(64.1) |
Amount required for redemption of Subordinated
Notes |
- |
(61.7) |
61.7 |
Available funds from revolving credit
facility |
58.5 |
55.6 |
2.9 |
Total liquidity position |
61.6 |
61.1 |
0.5 |
During 2012 Q3, the Company decreased its cash
by $64.1 million, primarily due to
$62.4 million of net cash used to
redeem the 14% subordinated notes of New Flyer Industries Canada
ULC on August 20, 2012. This decrease
in cash was expected as the Company raised the financing to redeem
the subordinated notes through the issuance of the 6.25%
convertible unsecured subordinated debentures (the "Debentures") in
2012 Q2.
As at September 30,
2012, there were $18.0 million
of direct borrowings and $13.5
million of outstanding letters of credits related to the
$90.0 million of secured revolving
credit (the "Revolver"). The Revolver decreased by $3.0 million in 2012 Q3.
Backlog and Market Indicators
The total backlog at the end of 2012 Q3 was
6,206 EUs and decreased by 0.3% from the backlog at the end of 2012
Q2 and now totals $2.64 billion. The
decline in the backlog appears to be slowing as compared to the
19.4% decrease from the backlog at the end of 2011 Q3, primarily as
a result of increased order intake in 2012 Q3 as compared to 2011
Q3. As well, the firm portion of the total backlog at the end
of 2012 Q3 of 1,462 EUs increased 15.4% compared to the 1,267 EUs
at July 1, 2012. This improving
trend in total backlog is consistent with management's expectations
taking into account current market conditions and upcoming
procurements.
The total backlog combined with the recent order
intake is expected to allow New Flyer to average a production line
entry rate of approximately 36 EUs per week during 2012 Q4. This
line entry rate reflects 12 weeks of production as the Company does
not plan to line enter new buses into production during the winter
holiday period occurring the last six days of this year. Management
expects the line entry rate to be maintained at an average of 36
EUs per week for the 52-week period ended December 29, 2013; however this rate will vary
quarter to quarter due to the mix of 40-foot and 60-foot buses.
In 2008, the Company created and now tracks a
new potential "pipeline" or "bid universe" of anticipated
heavy-duty transit bus order activity. The pipeline consists
of: bids received with proposal in process, bids submitted and
awaiting award and solicitations that management expects to be
released by transit agencies within a five-year horizon.
At the end of 2012 Q3, there were approximately
17,730 EUs in New Flyer's new potential pipeline or bid universe
for heavy-duty transit buses, an increase from the approximately
15,184 EUs reported at July 1,
2012. The increase was expected as many transit
agencies awarded multi-year contracts in 2007 and 2008 which are
now set to expire. This is the highest amount of EUs in the bid
universe since New Flyer began tracking it, and therefore a
positive indicator; however the pipeline is expected to remain
volatile for the next several years. The total number of EUs
for bids received with proposals in process or where bids were
submitted and awaiting award was just over 6,000 EUs at the end of
2012 Q3 compared to approximately 2,500 EUs at the same time last
year.
Conference Call
A conference call for analysts and interested
listeners will be held on Tuesday, November
13, 2012 at 11:00 a.m. (ET).
The call-in number for listeners is 888-231-8191 or 647-427-7450. A
live audio feed of the call will also be available at:
http://www.newswire.ca/en/webcast/detail/1063113/1155853
A replay of the call will be available from
2:00 p.m. (ET) on November 13th until 11:59
p.m. (ET) on November
20th. To access the replay, call toll free
1-855-859-2056 and then enter pass code number 64472902. The replay
will also be available on New Flyer's web site at
www.newflyer.com.
Non-GAAP Measures
Adjusted EBITDA consists of earnings before
interest, income taxes, depreciation, amortization and other
non-cash charges, adjusted for certain costs related to offerings
and certain other non-recurring charges as set out in the MD&A.
"Free Cash Flow" means cash flows from operations adjusted for
changes in non-cash working capital items, effect of foreign
currency rate on cash, defined benefit funding, business
acquisition related costs, costs associated with assessing
strategic and corporate initiatives, past service pension costs,
proceeds on sale of redundant assets and decreased for defined
benefit expense, capital expenditures and principal payments on
capital leases. Management believes Adjusted EBITDA and Free Cash
Flow are useful measures in evaluating the performance of the
Company. However, Adjusted EBITDA and Free Cash Flow are not
recognized earnings measures and do not have standardized meanings
prescribed by International Financial Reporting Standards ("IFRS").
Readers of this press release are cautioned that Adjusted EBITDA
and Free Cash Flow should not be construed as an alternative to net
earnings or loss determined in accordance with IFRS as an indicator
of the Company's performance or to cash flows from operating,
investing and financing activities as a measure of liquidity and
cash flows. A reconciliation of Adjusted EBITDA and Free Cash Flow
to net earnings and cash flow from operations, respectively, is
provided in the MD&A.
About New Flyer
New Flyer is the leading manufacturer of
heavy-duty transit buses in the United
States and Canada. The
Company's facilities are all ISO 9001, ISO 14001 and OHSAS 18001
certified. With a skilled workforce of over 2,000 employees, New
Flyer is a technology leader, offering the broadest product line in
the industry, including drive systems powered by clean diesel, LNG,
CNG and electric trolley as well as energy-efficient
diesel-electric hybrid vehicles. All products are supported with an
industry-leading, comprehensive parts and support network. The
Shares of the Company are traded on the TSX under the symbol "NFI"
and the Debentures are traded under the symbol "NFI.DB.U".
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", "intends",
"projects", "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, competition in the heavy-duty transit bus industry,
availability of funding to the Company's customers to purchase
buses and to exercise options and to purchase parts or services at
current levels or at all, aggressive competition and reduced
pricing in the industry, material losses and costs may be incurred
as a result of product warranty issues, material losses and costs
may be incurred as a result of product liability claims, changes in
Canadian or United States tax
legislation, the Company's success depends on a limited number of
key executives who the Company may not be able to adequately
replace in the event that they leave the Company, the absence of
fixed term customer contracts and the termination of contracts by
customers for convenience, the current U.S. federal "Buy-America"
legislation, certain states' U.S. content bidding preferences and
certain Canadian content purchasing policies may change and/or
become more onerous, production delays may result in liquidated
damages under the Company's contracts with its customers, the
Company's ability to execute its planned production targets as
required for current business and operational needs, currency
fluctuations could adversely affect the Company's financial results
or competitive position in the industry, the Company may not be
able to maintain performance bonds or letters of credit required by
its existing contracts or obtain performance bonds and letters of
credit required for new contracts, third party debt service
obligations may have important consequences to the Company, the
covenants contained in the Company's senior credit facility and the
indenture governing the Company's Debentures could impact the
ability of the Company to fund dividends and take certain other
actions, interest rates could change substantially and materially
impact the Company's profitability, the dependence on limited
sources of supply, the timely supply of materials from suppliers,
the possibility of fluctuations in the market prices of the pension
plan investments and discount rates used in the actuarial
calculations will impact pension expense and funding requirements,
the Company's profitability and performance can be adversely
affected by increases in raw material and component costs, the
availability of labour could have an impact on production levels,
battery-electric propulsion on transit buses is still largely
unproven technology and there is no assurance that such technology
will result in a product desired by customers, prototype buses must
be tested and proven in operating conditions, a commercialized
product must be marketed and sold to potential customers and there
may be no significant demand for an all-electric bus from
customers, the ability of the Company to successfully execute
strategic plans and maintain profitability and risks related to
acquisitions, joint ventures and other strategic relationships with
third parties. The Company cautions that this list of factors is
not exhaustive. These factors and other risks and uncertainties are
discussed in its press releases and materials filed with the
Canadian securities regulatory authorities and 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 the Company assumes no obligation to update or revise
them to reflect new events or circumstances, except as required by
applicable securities laws.
SOURCE New Flyer Industries Inc.