NFI NFI Group Inc

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

• Revenue of $360.8 million in 2014 Q3 increased by 17.7% compared to 2013 Q3 primarily due to a 7.6% increase in bus deliveries and a 40.7% increase in aftermarket revenue.
• Consolidated Adjusted EBITDA in 2014 Q3 of $25.7 million increased by 5.2% compared to 2013 Q3.
• Net earnings were $10.2 million in 2014 Q3 compared to $7.8 million in 2013 Q3 and earnings per share of $0.18 increased 28.6 % from $0.14 in 2013 Q3.
• Free Cash Flow was C$17.9 million and declared dividends were C$8.1 million.  The Free Cash Flow payout ratio of 54.7% in 2014 YTD improved as compared to 76.9% during 2013 YTD.  The current dividend rate is expected to be maintained.

WINNIPEG, Nov. 5, 2014 /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 28, 2014 ("2014 Q3"). Full unaudited 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 increased during 2014 Q3 as compared to the previous quarter primarily as a result of higher production rates; however, the number of EUs delivered in 2014 Q3 was negatively impacted as a result of delayed customer bus inspections and final acceptance with respect to a few contracts.  Management expects to substantially recover these deliveries by year-end. As a result, finished goods inventory at the end of 2014 Q3 included 90 EUs.

• The increase in 2014 Q3 bus revenue resulted from a 7.6% increase in total bus deliveries and a 4.3% increase in average selling price. The increase in average selling price is the result of changes in the product sales mix, which included fewer articulated buses. The average selling price can be volatile when comparing quarters as a result of sales mix and propulsion type.
• Revenue from bus manufacturing operations for the 39-week period ended September 28, 2014 ("2014 YTD") increased 18.5% compared to the 39-week period ended September 29, 2013 ("2013 YTD"). The increased deliveries during 2014 YTD were primarily as a result of the NABI acquisition effective June 21, 2013 and the increased number of EUs produced per week in 2014 Q3 versus 13-week period ended September 29, 2013 ("2013 Q3").
• The increase in revenue from aftermarket operations during 2014 Q3 of 40.7% is primarily a result of increased volumes from an improved aftermarket parts market. The increased aftermarket revenue during 2014 YTD resulted from incremental revenue from the Chicago Transit Authority ("CTA") midlife overhaul program, and the acquisitions of both the Orion and NABI Parts businesses in 2013.

• The 2014 Q3 bus manufacturing operations Adjusted EBITDA decrease was expected and management had previously provided guidance about lower than average margins and a temporary spike in bus inventory levels at the end of 2014 Q3. 2014 Q3 Adjusted EBITDA also decreased as a result of an accounting provision made for the expected payment of $2.6 million for the 2012 performance share units, the performance targets in respect of which are now expected to be achieved.
• Bus manufacturing operations Adjusted EBITDA for 2014 YTD was 4.3% of bus revenue, a decrease compared to 5.4% of bus revenue during 2013 YTD. Management has continued its efforts to recover margins during 2014 YTD through cost reductions, improved labour efficiency and change orders to mitigate the impact of the lower margins on planned production throughout Fiscal 2014.
• 2014 Q3 and 2014 YTD aftermarket operations Adjusted EBITDA increased compared to the 2013 respective periods, primarily due to increased volumes and higher profit margins as improved general market fundamentals have more than offset lower than average margins generated by the CTA midlife overhaul program.

The Company reported net earnings of $10.2 million in 2014 Q3 representing an improvement compared to net earnings of $7.8 million during 2013 Q3. Earnings from operations decreased in 2014 Q3 compared to 2013 Q3 as a result of higher amortization expense.

2014 YTD net earnings increased primarily due to improved earnings from operations offset by the increase in income tax expense. The Company's net earnings per share in 2014 Q3 were $0.18, a 28.6% increase from net earnings per share of $0.14 generated during 2013 Q3.Net earnings per share in 2014 YTD of $0.35 also improved compared to $0.26 generated during 2013 YTD.

Liquidity

Management believes that sufficient Free Cash Flow will be generated to maintain the current annual dividend rate of $0.585 per common share. The Free Cash Flow payout ratio of 54.7% in 2014 YTD improved as compared to 76.9% during 2013 YTD.

As at September 28, 2014, there were $45.0 million of direct borrowings and $19.9 million of outstanding letters of credit related to the $115.0 million revolving credit facility. 

During 2014 Q3, the increased investment in non-cash working capital items, such as increased bus inventories resulted in a $15.0 million draw on the Company's revolving credit facility.

Outlook

Management believes pricing in certain types of bus competitions continues to normalize. Management continues to pursue cost and overhead savings as a result of its decision to focus on the Xcelsior^® bus platform as well as in daily operations through its Operational Excellence initiatives. 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 (including MiDi^®) per production week for fiscal 2014 from the New Flyer and NABI Bus facilities.  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.

Conference Call

A conference call for analysts and interested listeners will be held on Thursday November 6, 2014 at 4 p.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/1433972/1593540

A replay of the call will be available from 7:00 p.m. (ET) on November 6, 2014 until 11:59 p.m. (ET) on November 13, 2014.  To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 27028423. The replay will also be available on New Flyer's web site at www.newflyer.com.

Non-IFRS Measures

"Earnings from Operations" refer to earnings before interest, income taxes and unrealized foreign exchange losses or gains on non-current monetary items. "Adjusted EBITDA" consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges 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, non-recurring transitional costs relating to business acquisition, costs associated with assessing strategic and corporate initiatives, product rationalization costs 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") and may not be comparable to similarly titled measures used by other issuers. Readers 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 determined in accordance with IFRS, 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 is the industry technology leader and offers the broadest product line of transit buses including drive systems powered by: clean diesel, natural gas, electric trolley, diesel-electric hybrid 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 heavy-duty 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. 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 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 to successfully complete the product rationalization of the NABI bus platform, on budget and on schedule, 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.