Summary (U.S. Dollars except as noted):
- 2016 results include the acquisition of Motor Coach
Industries ("MCI") effective December 18,
2015
- Revenue of $511.5 million
increased by 40.3% compared to 2015 Q3 revenue of $364.7 million.
- Adjusted EBITDA of $63.8
million increased by 75.8% compared to 2015 Q3 of
$36.3 million.
- Net earnings of $26.0 million
increased 57.0% compared to $16.6
million in 2015 Q3 and earnings per share of $0.43 increased from $0.30 in 2015 Q3.
- Liquidity improved by $12.8 million
to $255.6 million compared to 2016 Q2.
- Free Cash Flow of C$48.9
million increased 121.3% compared to $22.1 million in 2015 Q3 while dividends of
C$14.5 million were declared compared
to C$8.6 million during 2015 Q3.
- 2016 YTD Free Cash Flow payout ratio of 22.8% compared to
41.3% in 2015 YTD.
WINNIPEG, Nov. 10, 2016 /CNW/ - New Flyer
Industries Inc. (TSX:NFI) (TSX:NFI.DB.U) (the "Company"), the
largest transit bus and motor coach manufacturer and parts
distributor in North America,
today announced its results for the 13-week period ended
October 2, 2016 ("2016 Q3").
The unaudited interim condensed financial statements and
Management's Discussion and Analysis (the "MD&A") are available
at the Company's web site at: www.newflyer.com. Unless otherwise
indicated all monetary amounts in this press release are expressed
in U.S. dollars.
Operating Results
|
|
|
|
|
|
|
Transit Bus and
Coach Deliveries
|
2016
|
2015
|
%
|
2016
|
2015
|
%
|
Equivalent units
("EUs")
|
Q3
|
Q3
|
change
|
YTD
|
YTD
|
change
|
New transit bus and
coach
|
777
|
625
|
24.3%
|
2,518
|
1,791
|
40.6%
|
Pre-owned
coach
|
70
|
—
|
100.0%
|
280
|
—
|
100.0%
|
Number of Total
EUs delivered
|
847
|
625
|
35.5%
|
2,798
|
1,791
|
56.2%
|
|
|
|
|
|
|
New transit bus and
coach average selling price
|
$
|
518.4
|
$
|
468.8
|
10.6%
|
$
|
515.0
|
$
|
485.5
|
6.1%
|
Pre-owned coach
average selling price
|
137.7
|
—
|
100.0%
|
130.8
|
—
|
100.0%
|
Total average EU
selling price
(U.S. dollars in
thousands)
|
$
|
486.9
|
$
|
468.8
|
3.9%
|
$
|
476.5
|
$
|
485.5
|
(1.9)%
|
|
|
|
|
|
|
|
Consolidated
Revenue
|
2016
Q3
|
2015
Q3
|
%
change
|
2016
YTD
|
2015
YTD
|
%
change
|
(U.S. dollars in
millions)
|
New transit bus and
coach
|
$
|
402.9
|
$
|
293.0
|
37.5%
|
$
|
1,296.8
|
$
|
869.5
|
49.1%
|
Pre-owned
coach
|
9.6
|
—
|
100.0%
|
36.6
|
—
|
100.0%
|
Transit Bus and
Coach Manufacturing
|
412.5
|
293.0
|
40.8%
|
1,333.4
|
869.5
|
53.4%
|
Aftermarket
|
99.0
|
71.7
|
38.1%
|
318.3
|
250.5
|
27.1%
|
Total
Revenue
|
$
|
511.5
|
$
|
364.7
|
40.3%
|
$
|
1,651.7
|
$
|
1,120.0
|
47.5%
|
Revenue from transit bus and coach manufacturing operations for
2016 Q3 increased by 40.8% compared to the 13-week period ended
September 27, 2015 ("2015 Q3"),
primarily resulting from a 24.3% increase in total transit bus and
coach deliveries compared to 2015 Q3 and a 10.6% increase in the
average selling price of new buses and coaches resulting from a
favourable sales mix which now includes coaches. The deliveries
increased primarily as a result of the inclusion of MCI's new and
pre-owned coaches. Similarly, bus and coach revenue for the
40-week period ended October 2, 2016
("2016 YTD") increased by 53.4% compared to the 39-week period
ended September 27, 2015 ("2015
YTD"), primarily as a result of an increase in new bus and coach
deliveries of 40.6% and a 6.1% increase in the average selling
price of new transit buses and coaches.
Revenue from aftermarket operations for 2016 Q3 increased by
38.1% compared to 2015 Q3 and increased 27.1% in 2016 YTD compared
to 2015 YTD, primarily as a result of MCI's aftermarket revenues.
The pro forma aftermarket business revenue (which includes
MCI) for 2015 Q3 was $105.7 million
and $105.0 million when excluding the
revenue from the Chicago Transit Authority ("CTA") mid-life
overhaul program. Therefore, the core aftermarket revenue in 2016
Q3 decreased 5.7% compared to the pro forma aftermarket revenue for
the core business in 2015 Q3, but remained essentially flat in 2016
YTD compared to 2015 YTD. Management believes that the increase in
new bus and coach sales in recent years leading to increased fleet
replacement has had a short term dampening effect on the
aftermarket parts business. 2016 YTD also had an extra week
compared to 2015 YTD.
|
|
|
|
|
|
|
Consolidated
Adjusted EBITDA
|
2016
Q3
|
2015
Q3
|
%
change
|
2016
YTD
|
2015
YTD
|
%
change
|
(U.S. dollars in
millions)
|
Transit Bus and Coach
Manufacturing
|
$
|
43.8
|
$
|
21.6
|
102.8%
|
$
|
149.8
|
$
|
58.8
|
154.8%
|
Aftermarket
|
20.0
|
14.7
|
36.1%
|
62.5
|
48.1
|
29.9%
|
Total Adjusted
EBITDA
|
$
|
63.8
|
$
|
36.3
|
75.8%
|
$
|
212.3
|
$
|
106.9
|
98.6%
|
|
|
|
|
|
|
|
Adjusted EBITDA %
of revenue
|
|
|
|
|
|
|
Transit Bus and Coach
Manufacturing
|
10.6%
|
7.4%
|
3.2%
|
11.2%
|
6.8%
|
4.4%
|
Aftermarket
|
20.2%
|
20.5%
|
-0.3%
|
19.6%
|
19.2%
|
0.4%
|
Total
|
12.5%
|
10.0%
|
2.5%
|
12.8%
|
9.5%
|
3.3%
|
Consolidated Adjusted EBITDA increased by 75.8% and 98.6% during
2016 Q3 and 2016 YTD respectively, compared to their corresponding
periods in the previous year, which is primarily a result of
increased unit deliveries and improved margins. Contributors
to the increase in margin in the period is a very favourable sales
mix (experienced in the past few quarters), cost savings recognized
as a result of MCI synergies and the full impact from the New Flyer
and NABI product rationalization.
|
|
|
|
|
|
|
Bus and Coach
Adjusted EBITDA per new
EU delivered
|
2016
Q3
|
2015
Q3
|
$
change
|
2016
YTD
|
2015
YTD
|
$
change
|
(U.S.
dollars)
|
Transit bus and coach
manufacturing Adjusted
EBITDA (in millions)
|
$
|
43.8
|
$
|
21.6
|
$
|
22.2
|
$
|
149.8
|
$
|
58.8
|
$
|
91.0
|
New transit bus and
coach deliveries (EUs)
|
777
|
625
|
152
|
2,518
|
1,791
|
727
|
Bus and Coach
Adjusted EBITDA per new
EU delivered (in thousands)
|
$
|
56.4
|
$
|
34.6
|
$
|
21.8
|
$
|
59.5
|
$
|
32.8
|
$
|
26.7
|
Pre-owned coaches are sold at effectively break even and are
therefore the related deliveries are not included in the
calculation of bus and coach Adjusted EBITDA per new EU
delivered.
The bus and coach manufacturing Adjusted EBITDA per EU delivered
in 2016 Q3 has increased by $21.8
thousand compared to 2015 Q3. The pro forma Adjusted EBITDA
per EU delivered in 2015 Q3 was $40.0
thousand, the acquisition of MCI having increased Adjusted
EBITDA per EU by $5.4 thousand. The
remaining increase of $16.4 thousand
of Adjusted EBITDA per EU delivered in 2016 Q3 compared to 2015 Q3
is a result of margin enhancements, contributed by higher sales
price, cost savings recognized as a result of MCI synergies, cost
reductions as a result of the full impact from the New Flyer and
NABI product rationalization, on-going continuous improvements
efforts and a favourable sales mix.
Similarly, the bus and coach manufacturing Adjusted EBITDA per
EU delivered in 2016 YTD has increased by $26.7 thousand compared to 2015 YTD. The pro
forma Adjusted EBITDA per EU delivered in 2015 YTD was $39.8 thousand, the acquisition of MCI having
increased Adjusted EBITDA per EU by $7.0
thousand. The remaining increase of $19.7 thousand of Adjusted EBITDA per EU
delivered in 2016 YTD compared to 2015 YTD is a result of margin
enhancements and a favourable sales mix.
Margins vary significantly between orders due to factors such as
pricing, order size, propulsion system, product type and components
specified by the customer. Management cautions readers that
quarterly transit bus and coach manufacturing Adjusted EBITDA can
be volatile and should be considered over a period of several
quarters.
The 2016 Q3 aftermarket operations Adjusted EBITDA increased
36.1% compared to 2015 Q3, primarily as a result of the addition of
MCI's aftermarket business. As well, the 2016 YTD aftermarket
Adjusted EBITDA increased 29.9% compared to 2015 YTD.
|
|
|
|
|
|
|
Net
earnings
(U.S. dollars in
millions)
|
2016
Q3
|
2015
Q3
|
$
change
|
2016
YTD
|
2015
YTD
|
$
change
|
Earnings from
operations
|
$
|
46.6
|
$
|
25.0
|
21.6
|
$
|
155.3
|
$
|
68.9
|
86.4
|
Non-cash (loss)
gain
|
(1.4)
|
(1.0)
|
(0.4)
|
(0.4)
|
(2.1)
|
1.7
|
Interest
expense
|
(2.9)
|
(3.5)
|
0.6
|
(24.6)
|
(10.7)
|
(13.9)
|
Income tax
expense
|
(16.3)
|
(3.9)
|
(12.4)
|
(47.0)
|
(16.3)
|
(30.7)
|
Net
earnings
|
$
|
26.0
|
$
|
16.6
|
9.4
|
$
|
83.3
|
$
|
39.8
|
43.5
|
|
|
|
|
|
|
|
Net earnings per
share (basic)
|
$
|
0.43
|
$
|
0.30
|
$
|
0.13
|
$
|
1.42
|
$
|
0.72
|
$
|
0.70
|
Net earnings for 2016 Q3 increased by 57.0% compared to 2015 Q3,
primarily as a result of improved Earnings from Operations offset
by the increase in income tax expense. The increase in the 2016 Q3
effective tax rate when compared to 2015 Q3, is primarily a result
of the revision of tax estimates and foreign exchange impact on
translation of foreign branch operations and the term credit
facility.
Net earnings per common share ("Share") of $0.43 increased compared to $0.30 per Share generated during 2015 Q3.
Similarly, net earnings for 2016 YTD increased by 109.5% compared
to 2015 YTD.
Liquidity
|
|
|
|
|
|
|
Free Cash Flow and
Declared Dividends
|
2016
Q3
|
2015
Q3
|
%
change
|
2016
YTD
|
2015
YTD
|
%
change
|
(CAD dollars in
millions)
|
Free Cash
Flow
|
$
|
48.9
|
$
|
22.1
|
121.3%
|
$
|
171.2
|
$
|
60.9
|
181.1%
|
Declared
dividends
|
$
|
14.5
|
$
|
8.6
|
68.6%
|
$
|
39.1
|
$
|
25.2
|
55.2%
|
The Company generated Free Cash Flow of C$48.9 million compared to C$22.1 million in 2015 Q3, primarily as a result
of improved Earnings from Operations. The Company's declared
dividends of C$14.5 million increased
compared to C$8.6 million in 2015 Q3,
primarily as a result of conversion of the Company's 6.25%
convertible debentures (the "Debenture") to Shares and the 35.7%
annual dividend rate increase announced in May 2016. The
current annual dividend rate is C$0.95 per Share.
The Company generated Free Cash Flow of C$171.2 million during 2016 YTD compared to
C$60.9 million in 2015 YTD. The
Company declared dividends in 2016 YTD of C$39.1 million compared to C$25.2 million in 2015 YTD. The 2016 YTD
Free Cash Flow payout ratio is 22.8% compared to 41.3% in 2015
YTD.
The October 2, 2016 liquidity
position of $255.6 million is
comprised of $256.1 million available
under the Company's revolving credit facility less $0.5 million of bank indebtedness, compared to a
liquidity position of $242.8 million
at July 3, 2016. The liquidity has
improved $12.8 million or 5.5% during
2016 Q3. The increased liquidity relates to improved cash flow from
operations and focused cash management during 2016 Q3 assisted in
mitigating the negative working capital impact of the New Jersey
Transit ("NJ Transit") contract suspension. Management
believes these funds, together with other borrowings capacity and
the cash generated from the Company's operating activities and
access to capital markets for debt and equity issuances, will
provide the Company with sufficient liquidity and capital resources
to meet its current financial obligations as they come due, as well
as providing funds for its financing requirements, capital
expenditures, dividend payments and other operational needs for the
foreseeable future.
The Company's total leverage ratio of 2.08 at October 2, 2016 has improved from 2.91 at
December 27, 2015.
Outlook
The Company's annual operating plan for the 53-weeks ending
January 1, 2017 ("Fiscal 2016") is
focused on maintaining and growing its leading market position in
the heavy-duty transit bus and motor coach markets through enhanced
competitiveness.
Management continues to gain knowledge and experience about the
motor coach business and is developing a long-term
integration/combination plan for operating MCI. The focus to date
has been on culture, facilities upgrades, investigating information
technology harmonization potential, build quality and customer
service. To date, MCI has performed to management's
acquisition case, and management believes approximately
$7.6 million of the targeted annual
cost saving synergies of approximately $10
million have been achieved through the rationalization of
corporate costs and the coordination of basic sourcing and
purchasing activities. Approximately 30% of these annualized cost
savings have been recorded in 2016 YTD net earnings.
On July 7, 2016, after the first
five coaches were accepted, NJ Transit advised MCI that the
replenishment of the New Jersey Transportation Trust Fund Account
(the "TTFA") had been delayed and that New Jersey Governor Christie had issued an
Executive Order directing the immediate and orderly shutdown of all
ongoing work funded under the TTFA.
On October 14, 2016, the
New Jersey Governor issued another
Executive Order lifting the suspension of all work funded under the
TTFA. NJ Transit has formally advised MCI to commence delivery of
the completed coaches and to start inducting new coaches into
production.
As schedules for the inspections by NJ Transit at MCI's facility
and by the New Jersey Department of Transportation upon arrival of
the coaches in New Jersey are
variable, management anticipates that approximately 50 completed
coaches will be sold in 2016, with the remaining coaches being sold
in the first quarter of 2017. As a result of these 50 coaches
being delivered in 2016, management now expects the Company to
deliver approximately 3,500 EUs in Fiscal 2016 as compared to 3,265
EUs (New Flyer plus pro forma MCI) in Fiscal 2015 (52-week
period).
During its fiscal 2015, MCI recorded 71% of annual new coach
deliveries during the first three quarters of that year and 29%
during the last quarter. Management expects similar coach revenue
seasonality for Fiscal 2016. In addition to the expected seasonal
impact, there will also be an impact as a result of NJ Transit
coach deliveries that will now be delivered during the fourth
quarter of 2016. The Company's transit bus business does not
experience the same season fluctuations as the coach business.
The Company's Bid Universe metric estimates active public
competitions in Canada and
the United States and attempts to
provide an overall indication of expected heavy-duty transit bus
and motor coach public sector market demand. It is a
point-in-time snapshot of: (i) EUs in active competitions, defined
as all requests for proposals ("RFPs") received by the Company and
in process of review plus bids submitted by the Company and
awaiting customer action, and (ii) management's forecast of
expected EUs to be placed out for competition over the next five
years.
The total number of active bids at the end of 2016 Q3 was 6,597
EUs,a significant increase of 2,399 EUs over the 13- weeks ended
July 3, 2016 ("2016 Q2"). The
number of EUs in the total Bid Universe at the end of 2016 Q3 was
23,735 EUs, which is an increase of 4,403 EUs over 2016 Q2.
The Company expects to deliver new transit buses and coaches of
approximately 3,650 EUs during the 52-weeks ended December 31, 2017 ("Fiscal 2017").
Management believes that growth in the coach and transit bus
aftermarket industry will be in the range of zero to 2% in
2017. This expectation is due to a number of factors such
as:
- The increase in new and coach bus deliveries in recent years to
medium and large operators has resulted in enhanced fleet
replacement, creating somewhat of a dampening effect on the
aftermarket business, and
- Overall transit bus and coach fleet size and utilization remain
fairly consistent which drives demand for routine bus preventive
maintenance and repair.
While overall industry aftermarket growth is anticipated to be
relatively flat, the Company continues to focus on enhancing
customer service levels, growing New Flyer's market share and
improving efficiency, profitability and working capital
utilization.
Conference Call
A conference call for analysts and interested listeners will be
held on Friday November 11, 2016 at
8:00 a.m. (CT). The call-in
number for listeners is 888-231-8191, 647-427-7450 or 403-451-9838.
A live audio feed of the call will also be available at:
http://event.on24.com/r.htm?e=1292438&s=1&k=481D9C952104F4CC27EB4EFCF69C4075
A replay of the call will be available from 11:00 a.m. (CT) on November 11, 2016 until 11:59 p.m. (CT) on November 17, 2016. To access the replay,
call 855-859-2056 or 416-849-0833 and then enter pass code number
3255456. 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 net cash generated by
operating activities adjusted for changes in non-cash working
capital items, interest paid, interest expense, income taxes paid,
current income tax expense, effect of foreign currency rate on
cash, past service costs, defined benefit funding, non-recurring
transitional costs relating to business acquisitions, costs
associated with assessing strategic and corporate initiatives,
product rationalization costs, defined benefit expense, cash
capital expenditures, realized investment tax credits, fair value
adjustment to MCI's inventory and deferred revenue,
proportion of the total return swap realized 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
and Adjusted EBITDA 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, and Free Cash Flow should
not be construed as an alternative 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 the Company
The Company 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 and employs approximately 5,000 team
members.
Through its Canadian and U.S. subsidiaries, NFI ULC and NFAI,
the Company is North America's
heavy-duty transit bus leader and offers a high quality 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.
Through its Canadian and U.S. subsidiaries, Motor Coach
Industries Limited and Motor Coach Industries, Inc., the Company is
the leader in motor coaches in Canada and the U.S., MCI offers a J-model
which is the industry's best-selling intercity coach for 11
consecutive years, and the D-model, the industry's best-selling
coach line in North American motor coach history. MCI is also
the exclusive distributor of the Setra S417 and S407 in
the United States and
Canada. MCI actively supports over 28,000 MCI motor coaches
currently in service and offers 24-hour roadside assistance 365
days a year.
The Company also operates North
America's most comprehensive aftermarket parts organization
providing support for all types of transit buses and motor
coaches. All New Flyer's transit buses and MCI's coaches are
supported by an industry-leading comprehensive warranty, service
and support network.
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 transit buses and coaches 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
and product liability claims, changes in Canadian or United States tax legislation, the absence of
fixed term customer contracts and the suspension or 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 its 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 limited 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.