WINNIPEG, Sept. 6, 2016 /CNW/ - (TSX:NFI) (TSX:NFI.DB.U)
Motor Coach Industries ("MCI"), a subsidiary of New Flyer
Industries Inc. (the "Company"), the largest transit bus and motor
coach manufacturer and parts distributor in North America, provides an update regarding
the New Jersey Transit (NJ TRANSIT) contract suspension and the
Company reaffirms its total annual transit bus and motor coach
delivery guidance for fiscal year 2016.
NJ TRANSIT Contract
NJ TRANSIT awarded a contract to MCI in October 2015 for approximately 772 commuter
coaches and options for an additional 450 coaches over six years.
In April 2016, after delivering three
pilot coaches which successfully passed the in-service testing and
evaluation phase, MCI received a notice-to-proceed and purchase
order for the first fiscal year's production of 184 commuter
coaches, of which 142 were scheduled to be delivered in calendar
2016.
On July 7, 2016 after the first
five coaches were delivered and accepted, NJ TRANSIT advised MCI
that the replenishment of the New Jersey Transportation Trust Fund
Account (the "TTFA") had been delayed and that the Governor of the
State of New Jersey had issued
Executive Order No. 210 declaring a "State of Emergency and
directing the immediate and orderly shutdown of all ongoing work
funded by the TTFA". The mission of the TTFA is to finance the cost
of planning, acquisition, engineering, construction,
reconstruction, repair, resurfacing, and rehabilitation of the
state's transportation system.
On that date, MCI had 81 coaches that were either in various
stages of production for NJ TRANSIT or were completed and in
transit to NJ TRANSIT. Given MCI`s commuter manufacturing
line includes coaches of customers other than NJ TRANSIT, MCI
advised NJ TRANSIT that an orderly shutdown meant the completion of
the NJ TRANSIT coaches in process to allow MCI to deliver on other
customer commitments.
It is important to note that NJ TRANSIT has only suspended the
contract with MCI, as permitted under a specific provision, and not
terminated the contract in whole or in part. It is MCI's
understanding that NJ TRANSIT fully intends to acquire the coaches
and rescind the suspension once the TTFA funding issue has been
resolved. To that end, NJ TRANSIT advised MCI in a letter on
August 30, 2016 that "upon the
rescission of the Executive Order and availability of TTFA funds
for this contract, NJ TRANSIT will be able to authorize the
continuation of work under the contract consistent with applicable
obligations imposed by contract and statute".
NJ TRANSIT staff inspect coaches as they are completed at the
MCI facility in Pembina, ND. To
date, 10 coaches have been completed and are waiting acceptance in
New Jersey, with an additional 28
coaches inspected and ready for shipment from MCI. By
mid-September 2016, all 90 NJ TRANSIT
coaches from the first manufacturing tranche will be complete.
Paul Soubry, President and CEO of
New Flyer and MCI commented "Given that the TTFA funding issue has
not yet been resolved, MCI is now planning to induct an additional
21 NJ TRANSIT coaches on the D model production line starting
October 11, 2016 to allow for the
completion of all other non-NJ TRANSIT customer coaches currently
in process. This action is a prudent approach and a
commitment to balancing the interests of our key stakeholders:
employees, customers, shareholders and supplier partners".
Soubry further explained "With no indication of when the TTFA
funding issue will be resolved and with contingency plans being
developed by MCI that include possible future layoffs, the Company
is required by law to provide advance notice to the governments of
the Province of Manitoba and the
State of North Dakota, among
others". "Briefings to all MCI employees are scheduled for
September 6, 2016 and if the TTFA
funding issue is not resolved by mid-September notifications for
potential layoffs commencing around mid-November 2016 may be sent to the labour
unions and employees".
2016 Delivery Guidance Reaffirmed
If the NJ TRANSIT contract is not restarted in 2016, management
estimates the impact on MCI could be as much as 137 coaches in the
Company's 2016 annual operating plan not being delivered.
However, through production schedule adjustments and line rate
enhancements which could be implemented in the second half of 2016
at both New Flyer for transit buses, and at MCI for non-NJ TRANSIT
J model motor coaches, the Company still expects to be able to
achieve its 2016 annual delivery guidance of 3,450 units.
With certain milestone payments received prior to the contract
suspension, the ongoing delay in restarting the contract is
expected to result in approximately $30
million to $35 million of incremental working capital
deployed for the NJ TRANSIT coaches not yet delivered.
Notwithstanding, management is confident in the Company's
liquidity and does not expect any disruption to quarterly dividend
payments.
NOTE: All dollar amounts are stated in U.S. currency.
About the Company
The Company employs approximately 5,000 team members and is the
largest transit bus and motor coach manufacturer and parts
distributor in North America with
fabrication, manufacturing, distribution and service centers in
Canada and the United
States.
Through its Canadian and U.S. subsidiaries, Motor Coach
Industries Limited and Motor Coach Industries, Inc. (together,
"Motor Coach Industries"), the Company is the leader in motor
coaches in Canada and the US,
offering the MCI J4500, which is the industry's best-selling
intercity coach for 11 consecutive years, and the MCI D-Series, the
industry`s best-selling coach line in North American motor coach
history. MCI is also the exclusive distributor of Setra S417
and S407 in the United States and
Canada. MCI actively supports over 28,000 motor coaches
currently in service and offers 24-hour roadside assistance 365
days a year.
Through its Canadian and U.S. subsidiaries, New Flyer Industries
Canada ULC and New Flyer of America Inc. (together, "New Flyer"),
the Company is North America's
heavy-duty transit bus leader and offers the broadest transit bus
product line (Xcelsior® and MiDi® models),
incorporating the broadest range of drive systems available,
including: clean diesel, natural gas, diesel-electric hybrid,
electric-trolley and now battery-electric. New Flyer actively
supports over 42,000 heavy-duty transit buses (New Flyer, NABI and
Orion) currently in service.
The Company also operates North
America's most comprehensive aftermarket parts organization
providing support for all types of transit buses and motor
coaches. All buses and coaches are supported by an
industry-leading comprehensive warranty, service and support
network.
Further information is available on the Company's websites at
www.mcicoach.com and 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
This press release contains forward-looking statements relating
to expected future events and financial and operating results of
the Company that involve risks and uncertainties. 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. Actual results may differ materially from management
expectations as projected in such forward-looking statements for a
variety of reasons, including a prolonged suspension of the NJ
TRANSIT commuter coach contract, failure to receive authorization
to complete existing orders and/or failure to receive future orders
under the contract, delay or failure of NJ TRANSIT in making
payments for completed coaches, working capital increases as a
result of the contract suspension, the Company's ability to make
adjustments to its production schedule in order to mitigate the
consequences of the suspension of the contract, the Company may not
be able to rehire employees that may be laid off as a result of the
contract suspension, 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, the ability of
customers to terminate contracts for convenience and the other
risks and uncertainties discussed in the 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.