NFI NFI Group Inc

Summary (U.S. Dollars except as noted):

• Results include acquisition of North American Bus Industries, Inc. ("NABI") from June 21, 2013 to June 30, 2013. 
  
  
• Revenue of $268.7 million increased by 18.4% compared to 2012 Q2 primarily due to 10.9% increased deliveries.
  
  
• Consolidated Adjusted EBITDA of $18.1 million increased by 10.4% compared to 2012 Q2.
  
  
• Net earnings were $1.7 million in 2013 Q2 compared to $3.4 million in 2012 Q2 due to impact of acquisition costs.
  
  
• Free Cash Flow was C$9.2 million and declared dividends were C$7.5 million during 2013 Q2 compared to Free Cash Flow of C$5.6 million and declared dividends of C$9.5 million in 2012 Q2.  The current dividend rate is expected to be maintained.
  
  
• Total bus order backlog of $3.7 billion, representing an increase of $0.4 billion during the quarter. Book-to bill ratio for the twelve month period ended June 30, 2013 of 230%. 

WINNIPEG, Aug. 6, 2013 /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 June 30, 2013 ("2013 Q2"). 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

The increased deliveries were as a result of the Company being able to reduce the work in process ("WIP") levels during 2013 Q2. The delivery increase was also impacted by a higher production rate (475 equivalent unit ("EUs") line entered in 2013 Q2 vs. 453 EUs line entered in the 13-week period ended July 1, 2012 ("2012 Q2")). 2013 Q2 operating results include NABI line entries of 18 EUs and deliveries of 15 EUs by NABI during the period June 21, 2013 to June 30, 2013.

Management currently expects the line entry rate to be on average less than 48 EUs per production week (including NABI), during the third quarter of 2013 due to a company-wide planned vacation during the first week in the third quarter which is expected to be offset by higher planned production in the fourth quarter of 2013.

• The increase in 2012 Q3 bus revenue primarily resulted from a 10.9% increase in total bus deliveries.
  
  
• The increase in revenue from aftermarket operations is primarily a result of increased volumes including incremental revenue from the Orion parts business during 2013 Q2 and a general sales volume increase when compared to 2012 Q2.
  
  
• Revenue from bus manufacturing operations for the 26-week period ended June 30, 2013 ("2013 YTD") also increased compared to the 26-week period ended July 1, 2012 ('2012 YTD"). The 2013 YTD increase is due to increased deliveries offset by lower average selling price per EU in 2013 YTD compared to 2012 YTD.
  
  
• Revenue from aftermarket operations for 2013 YTD increased compared to 2012 YTD as a result of the incremental revenue associated with the acquisition of Orion and higher parts volumes in the U.S.
  
  

• 2013 Q2 and 2013 YTD bus manufacturing operations Adjusted EBITDA decreased primarily as a result of less favourable settlements of foreign exchange contracts which resulted in a $1.6 million decrease in realized foreign exchange gain in 2013 Q2 and a $1.2 million decrease in 2013 YTD, as compared to the 2012 respective periods.
  
  
• 2013 Q2 and 2013 YTD aftermarket operations Adjusted EBITDA increased compared to their 2012 respective periods, primarily due to the additional Adjusted EBITDA generated from Orion parts business and the Adjusted EBITDA generated by the increase in  New Flyer parts sales in the U.S., which was offset by lower parts profit margins resulting from industry price pressure.
  
  
  

The Company reported net earnings of $1.7 million in 2013 Q2, a decrease compared to net earnings of $3.4 million in 2012 Q2, primarily as a result of $3.3 million increase in costs associated with acquisition of NABI and $0.6 million of non-recurring expenses related to the Orion parts business transition offset by the favourable impact caused by foreign currency translation which resulted from the weakening Canadian dollar.

2013 YTD net earnings of $5.2 million increased compared to 2012 YTD net earnings of $3.8 million, due to significantly reduced finance costs and decrease in income tax expense.

Liquidity

The amount of dividends declared decreased in 2013 Q2 as a result of reducing the annual dividend rate to C$0.585 per common share ("Share"), effective for all dividends declared after August 20, 2012. Management believes that sufficient Free Cash Flow will be generated to maintain this current annual dividend rate.

During 2013 Q2, the Company increased its cash by $9.8 million, primarily due to decreased investment in non-cash working capital items, such as decreased inventories and accounts receivables (excluding the impact of assets acquired by the acquisition of NABI) and the free cash flow generated from operations. The acquisition of NABI was funded with the cash received from the investment by Marcopolo S.A. ("Marcopolo") in New Flyer and a draw on the Company's renewed and extended term credit facility, as discussed below as part of the June 21, 2013 transaction.

Backlog and Market Indicators

Management believes that the transit market continues to show positive signs of recovery.  A number of large bids were awarded in 2013 Q2, as New Flyer was awarded new orders of 513 EUs. As well, the total number of active EUs (request for proposals received and in process of review at New Flyer, and bids or proposals submitted by New Flyer awaiting customer action) at the end of 2013 Q2 remains high at 8,489 EUs, compared to 6,730 EUs at July 1, 2012.

New Flyer's Book-to-Bill ratio (is defined as new order intake - both firm and options - divided by deliveries in the quarter, including the 9 days of NABI operations) for the last twelve months ("LTM") ending June 30, 2013 was 230% as compared to a Book-to-Bill ratio of only 13% for the LTM ended July 1, 2012. A ratio of above 100% implies that more orders were received than filled, indicating strong demand.

The total backlog at the end of 2013 Q2 was 8,536 EUs, an increase of 13.4% from the backlog at the end of 2013 Q1. The firm portion of the total backlog at the end of 2013 Q2 is made up of 2,252 EUs which has increased 18.6% compared with 1,899 EUs at the end of 2013 Q1.  The total value of the order backlog at the end of 2013 Q2 was $3.7 billion, compared with $3.3 billion at the end of 2013 Q1. In addition to New Flyer's 2013 Q2 order activity, the total backlog also increased due to the addition of 1,159 EUs relating to the acquired NABI backlog that has now been validated by New Flyer.

In addition to the new orders recorded in the backlog during 2013 Q2, the Company was advised subsequent to June 30, 2013 of the following awards:

• New Flyer has been selected by a major US public transit agency to provide up to 350 40' and up to 180 60' electric trolley Xcelsior buses (a total of up to 710 EUs).  A notice to proceed has been received and a press release has been issued.
  
  
• NABI Bus LLC, the name under which the Company operates the NABI bus business, has been selected by a major US public transit agency to provide up to 238 40' diesel-electric hybrid BRT buses, up to 370 40' CNG BRT buses, and up to 71 60' diesel-electric hybrid BRT buses (a total of up to 750 EUs).  In July 2013 the contract was executed and a press release issued.

June 21, 2013 Transaction

On June 21, 2013, the Company acquired NABI from an affiliate of Cerberus Capital Management, L.P. for cash consideration of approximately $80.0 million, virtually all for the satisfaction of affiliate debt. The purchase price was funded by the proceeds from the C$64.7 million equity investment by Marcopolo S.A. and an additional $20 million that was drawn from the Company's renewed senior secured credit facility.

The Company issued 6,162,304 shares to Marcopolo for proceeds of C$64.7 million. The shares were issued as part of the second and final tranche of strategic equity investment in New Flyer. Under the agreement with Marcopolo dated as of January 23, 2013, Marcopolo agreed to make a strategic investment of C$116.4 million to acquire 11,087,834 newly issued shares, representing a 19.99% stake in New Flyer. The first tranche of the Marcopolo investment was completed in February 2013. Each share was issued at a price of C$10.50 per share.

Concurrent with the acquisition of NABI, the Company completed a fourth amended and restated credit agreement which extended its senior secured credit facility to April 24, 2017 and increased the term credit facility by $20 million.

Conference Call

A conference call for analysts and interested listeners will be held on Wednesday August 7, 2013 at 1:00 p.m. (ET). The call-in number for listeners is 888-390-0605 or 416-764-8609. A live audio feed of the call will also be available at:

http://www.newswire.ca/en/webcast/detail/1204281/1320721

A replay of the call will be available from 3:00 p.m. (ET) on August 7, 2013 until 11:59 p.m. (ET) on August 14, 2013.  To access the replay, call 416-764-8677 or 888-390-0541 and then enter pass code number 695373. The replay will also be available on New Flyer's web site at www.newflyer.com.

Non-GAAP and Additional GAAP Measures

"Earnings from Operations" refer to earnings before interest expense, income taxes, losses or gains on disposal of property, plant and equipment, unrealized foreign exchange losses or gains on non-current monetary items and fair value adjustment to embedded derivatives. 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 Earnings from Operations, Adjusted EBITDA and Free Cash Flow are useful measures in evaluating the performance of the Company. However, Earnings from Operations, 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 MD&A are cautioned that Earnings from Operations, 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, with recently acquired NABI, is the leading manufacturer of heavy-duty transit buses in the United States and Canada.  The Company is the industry technology leader and offers the broadest product line including drive systems powered by: clean diesel, natural gas and electric trolley as well as energy-efficient diesel-electric hybrid vehicles.  All buses are supported by an industry-leading comprehensive warranty and support program, and service network.   New Flyer and NABI also operate the transit industry's most sophisticated aftermarket parts organization, sourcing parts from hundreds of different suppliers and providing support for all types of heavy-duty transit buses.

Together New Flyer and NABI employ over 3,000 team members with manufacturing, fabrication, parts distribution and service centers in both Canada and the United States.  Further information is available on New Flyer's web site at www.newflyer.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", "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, 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 convertible 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, new products must be tested and proven in operating conditions and there may be no demand for such new products from customers, the ability of the Company to successfully execute strategic plans and maintain profitability, risks related to acquisitions, joint ventures and other strategic relationships with third parties and the ability to successfully integrate acquired businesses and assets into the Company's existing business and to generate accretive effects to income and cash flow as a result of integrating these acquired businesses and assets. 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 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.