NFI NFI Group Inc

WINNIPEG, Oct. 15, 2014 /CNW/ - (TSX:NFI) (TSX:NFI.DB.U) New Flyer Industries Inc. ("New Flyer" or the "Company"), the leading manufacturer of heavy-duty transit buses in Canada and the United States, announced its order activity and backlog update for the third fiscal quarter ended September 28, 2014 ("Q3 2014").

Bus Deliveries, Order Activity, and Option Expiry

New Flyer delivered 621 equivalent units ("EUs") in Q3 2014, which is an increase of 44 EUs over deliveries in the third fiscal quarter ended September 29, 2013 ("Q3 2013").  The total work in process ("WIP") for the Company at September 28, 2014 was 399 EUs. The increased WIP is related to the pace of customer inspection and acceptance on a few current contracts which management expects to recover by year end.

New Flyer's new bus orders (firm and options) in Q3 2014 totaled just 109 EUs.  At the end of the period, however, new firm and option orders of 472 EUs were pending from customers where approval of the award had been made by the customer's board, council, or commission, as applicable, but purchase documentation had not yet been received by the Company and therefore not yet included in the backlog.

Order activity in the period included:

• New firm orders for 57 EUs (valued at $33.2 million)
• New option orders for 52 EUs (valued at $25.0 million)
• Options for 359 EUs (valued at $171.9 million) converted to firm orders

New Flyer's last twelve months ("LTM") Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 62%, but is expected to recover in the next few quarters based on pending awards and current active competitions.

The New Flyer backlog and orders anticipated to be awarded by customers under new procurements are expected to enable the Company to continue to operate at a corporate average line entry rate of approximately 51 EUs per production week for fiscal 2014 from the New Flyer and NABI Bus facilities, including MiDi^®.  Management expects the corporate average line entry rate to remain stable at this level for 2015 as the Company executes on the rationalization of the NABI product lines to the Xcelsior^®.  Production rates may vary from quarter to quarter due to sales mix and the introduction of the Xcelsior into NABI's Anniston, AL facility.

In Q3 2014, New Flyer had 621 EUs expire.  Year-to-date, approximately 47% of options scheduled to expire have been successfully converted to active orders, compared to just 41% during the first three quarters of 2013.  Remaining options in backlog will expire if not exercised, as follows:

Total Backlog

At the end of Q3 2014, New Flyer's total backlog was 6,239 EUs (valued at $3.07 billion) compared to 7,372 EUs (valued at $3.54 billion) at the end of the second quarter of 2014 ("Q2 2014").

In 2013, the Federal Transit Administration ("FTA") issued a Dear Colleague or guidance letter to the transportation industry providing guidance on joint procurements and the assignment of options to purchase buses (referred to as "piggybacking"). The FTA encourages its grantees (such as transit agencies) to issue joint procurements, but now limits the amount of goods and services an agency can specify under a procurement to that amount required to meet its expected needs.  The FTA has reminded grantees that they are prohibited from improperly expanding a procurement to include excess goods simply for the purpose of assigning options to other agencies at a later date.  Since the FTA issued its guidance, there have been a greater number of procurements issued by agencies, but with a lower number of total options specified under each procurement.  Management believes the total number of EUs to be ordered will likely not change as a result of the FTA's guidance letter, however, the overall size of the industry's option backlog will likely decrease.  Management does not anticipate any further changes in the near term by the FTA in its Common Grant Rules.

New Flyer's backlog consists of 30', 35', 40' and 60-foot bus lengths.  Buses incorporating clean propulsion systems (such as natural gas, diesel-electric hybrid, electric-trolley, and battery-electric) represent approximately 69% of the total.

Economic Environment and Ridership

Preliminary data from the Rockefeller Institute (Preliminary Report on September 17, 2014) reports state tax collections declined slightly in the second quarter of 2014 by just 1.7% over the prior year.  The US Bureau of Labor Statistics (Employment Situation Summary on October 7, 2014) reports US unemployment reduced further in the quarter, ending with a rate of 5.9% in September 2014 as compared to a 7.2% unemployment rate at September 2013.

The latest data from the American Public Transportation Association (APTA) indicates overall stable ridership during the second quarter of 2014. The report indicated an increase of 1.1% in all modes of U.S. transit ridership during the second quarter of 2014 compared with the previous year; with a marginal decrease in bus ridership of 0.7%.  The same report indicates Canadian ridership increased by 1.5% in all modes of transit ridership during the second quarter of 2014 as compared to the previous year; however, specific data on bus ridership is not available.

Transit Bus Demand

In 2008, New Flyer created the Bid Universe metric as an indicator for overall transit bus market demand and active bids in Canada and the United States.  The Bid Universe is a point-in-time snapshot of the estimated EUs for: all requests for proposals ("RFPs") received and in process of review at New Flyer, bids or proposals submitted by New Flyer awaiting customer action, and management's forecast of all expected EUs to be placed out for competition over the next five years. 

The number of EUs in the total Bid Universe at the end of Q3 2014 increased substantially to 21,773 EUs compared to 19,941 EUs at the end of Q3 2013. The total number of Active EUs (defined as RFPs received and in process of review at New Flyer, and bids or proposals submitted by New Flyer awaiting customer action) at the end of Q3 2014 increased by 34% to 6,283 EUs, compared to 4,698 EUs at the end of Q3 2014.  This increase is consistent with management's expectations of forecasted bid activity.

Management anticipates that the amount of bus procurement activity by public transit agencies throughout the United States and Canada should remain robust based on expected customer fleet replacement plans, and active procurements.

Funding Environment

The U.S. federal transit program is funded from General Revenues of the U.S. government and from revenues credited to the Mass Transit Account of the Highway Trust Fund.  With the appropriation funding Bill titled MAP-21 expiring on September 30, 2014, President Obama released earlier in 2014 a $90.9 billion budget for Department of Transportation in Fiscal Year 2015 as part of a $302 billion, four year surface transportation reauthorization ("The Grow America Act").  The proposal included significant increases in funding for the state-of-good repair and bus and bus facilities accounts, which have historically been a source of funding for bus replacement and bus maintenance activities for US transit agencies.  There was also a recommendation for a significant discretionary program aimed at establishing bus rapid transit (BRT) service in areas with rapidly growing populations.

In June 2014, the Grow America Act was introduced to the House of Representatives and Congress and was referred to a number of committees and subcommittees.  Without sufficient time to debate and negotiate such a significant proposal, MAP-21 was extended, making approximately $10.8 billion available for the Highway Account and Mass Transit Account of the Highway Trust Fund and effectively providing sufficient funds to support highway and transit expenditures at current levels through May 2015.  The transit industry currently anticipates the potential for a number of extensions before a substantial multi-year funding bill is approved in Washington.

New Flyer Aftermarket

Gross orders received by New Flyer's aftermarket parts business during Q3 2014 increased 50% compared to Q3 2013.  Parts shipments in Q3 2014 also increased 41% over Q3 2013.

Quarter-over-quarter Q3 2014 gross parts orders were up 18% over Q2 2014, while actual part shipments grew by 3% over Q2 2014.   This revenue growth in Q3 2014 was driven largely by a mix change in the Chicago Transit Authority midlife program.  These orders however, arose under the New Flyer prime contract portion of the midlife program where margins are slightly lower than under the earlier portion of the program where New Flyer was not the prime contractor.

NOTE: All dollar amounts are stated in US currency based on an exchange rate of US $1.00 = CAD $1.1155 to calculate the value of the Canadian contracts in this release.

About New Flyer
New Flyer is the leading manufacturer of heavy-duty transit buses in the United States and Canada, with more than 32,000 buses in service today.  The Company is the industry technology leader and offers the broadest product line of transit buses including drive systems powered by: clean diesel, natural gas, diesel-electric hybrid, electric trolley and now, battery-electric.  All buses are supported by an industry-leading comprehensive warranty and support program, and service network.  New Flyer also operates the industry's most sophisticated aftermarket parts organization, sourcing parts from hundreds of different suppliers and providing support for all types of transit buses.

The New Flyer group of companies 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.

The common shares and convertible unsecured subordinated debentures of the Company are traded on the Toronto Stock Exchange under the symbols NFI and NFI.DB.U, respectively.

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", "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 and should not be read as guarantees of future performance or results.  Actual performance or results may not be consistent with these forward-looking statements, and the differences may be material for a variety of reasons, including market and general economic conditions and economic conditions of and funding availability for customers to purchase buses and to purchase parts or services, customers may not exercise options to purchase additional buses, aggressive competition and reduced pricing exist in the industry, the ability of customers to terminate contracts for convenience, 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 condition and impact the amount of cash available for distribution, 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, 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 the Company's press releases and materials filed with the Canadian securities regulatory authorities and available on SEDAR at www.sedar.com.  Due to the potential impact of these factors, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

SOURCE New Flyer Industries Inc.