NFI NFI Group Inc

Summary of 2017 Q2 results compared to 2016 Q2 (U.S. Dollars except as noted):

• Revenue of $613.4 million increased by 4.5%.
  
  
• Adjusted EBITDA of $85.1 million increased by 6.0%.
  
  
• Net earnings of $42.8 million increased 23.1% and earnings per share of $0.69 increased 19.0%.
  
  
• Liquidity improved by $123.5 million to $366.3 million.
  
  
• Free Cash Flow payout ratio for 2017 Q2 was 38.6%.
  
  
• Increased Fiscal 2017 projected deliveries of new transit buses and motor coaches to 3,800 EUs, an increase of 8.2% compared to Fiscal 2016.

WINNIPEG, Aug. 9, 2017 /CNW/ -New Flyer Industries Inc. (TSX:NFI) (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 July 2, 2017 ("2017 Q2").  The unaudited interim condensed consolidated 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.

2017 Second Quarter Financial Results

Year-over-year comparisons reported in the MD&A compare the 26-week period ended July 2, 2017 to the 27-week period ended July 3, 2016 ("2016 YTD").  Also, as a result of the organizational changes effective January 2, 2017, the service function, which was previously managed as part of the aftermarket operations, is now the responsibility of the transit bus and coach manufacturing operations.

*To improve the comparability, the related prior year segment information has been restated to reflect these changes.

Revenue from transit bus and coach manufacturing operations for 2017 Q2 increased by 6.6% compared to the 13-week period ended July 3, 2016 ("2016 Q2").  The increase in 2017 Q2 revenue primarily resulted from a 8.7% increase in total new bus and coach deliveries and a 1.8% decrease in the average selling price of new transit buses and coaches due to change in sales mix. Similarly, revenue from transit bus and coach manufacturing operations for the 26-week period ended July 2, 2017 ("2017 YTD ") increased 6.5% compared to 2016 YTD primarily resulting from increased new transit bus and coach deliveries of 8.2% offset by a 0.7% decrease in the average selling price. 

Revenue from aftermarket operations in 2017 Q2 decreased 5.7% compared to 2016 Q2. The decrease in 2017 Q2 aftermarket operations revenue is primarily a result of customers' inventory reduction, budgetary constraints and fleet modernization impacts.  The decrease in 2017 YTD aftermarket operations revenue was also impacted by an extra week in 2016 as compared to 2017.

Consolidated Adjusted EBITDA increased by 6.0% and 5.4% during 2017 Q2 and 2017 YTD respectively, compared to their corresponding periods in the previous year, primarily as a result of increased unit deliveries and improved margins.  Contributors to the increase in margin in the period is a favourable sales mix, cost savings synergies relating to the MCI acquisition, continued cost reductions achieved through the Company's operational excellence ("OpEx") initiatives and integration of MCI and the full impact from the New Flyer and NABI product rationalization.

Margins vary significantly between orders due to factors such as pricing due to competitive intensity, 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 2017 Q2 aftermarket operations Adjusted EBITDA decreased 8.7% compared to 2016 Q2, primarily a result of lower sales volumes. As well, the 2017 YTD aftermarket Adjusted EBITDA decreased 6.1% compared to 2016 YTD. However, the Adjusted EBITDA as a percentage of aftermarket revenue during 2017 YTD increased 0.3% when compared to 2016 YTD, primarily as a result of reduced costs and a focus on higher margin opportunities.

Net earnings during 2017 Q2 increased by 23.1% compared to 2016 Q2, primarily as a result of improved Earnings from Operations and interest and finance costs offset by the increase in income tax expense. This resulted in net earnings per common share ("Share") in 2017 Q2 of $0.69, which increased 19.0% compared to $0.58 per Share generated during 2016 Q2. Similarly during 2017 YTD, net earnings increased by 40.7% and net earnings per Share increased 31.3%, compared to 2016 YTD.

Liquidity

The Free Cash Flow of C$52.9 million generated by the Company during 2017 Q2 decreased 13.0% compared to C$60.8 million in 2016 Q2, primarily as a result of the increased cash capital expenditures and timing of current income tax expense when comparing the two periods.  The dividends declared by the Company in  2017 Q2  of C$20.4 million increased 43.7% compared to C$14.2 million in 2016 Q2. The amount of declared dividends increased in 2017 Q2 primarily as a result of the conversion of the Company's convertible debentures into Shares and the 36.8% annual dividend rate increase announced by the Company in May 2017.

The  Free Cash Flow of  C$106.6 million generated by  the Company during  2017 YTD  decreased compared  to  C$122.3 million in 2016 YTD. The dividends declared by the Company in 2017 YTD of C$35.2 million increased 42.5% compared to C$24.7 million in 2016 YTD.

PPE cash expenditures in 2017 Q2 have increased by 37.3% compared to 2016 Q2 primarily as a result of investments in facilities to fund a variety of OpEx, insourcing and continuous improvement programs.

The July 2, 2017 liquidity position of $366.3 million is comprised of available cash of $32.1 million and $334.2 million available under the revolving portion of the Company's credit facility ("Credit Facility") as compared to a liquidity position of $268.1 million at January 1, 2017.  The increased liquidity relates to improved cash flow from operations.

There are certain financial covenants under the Credit Facility that must be maintained. At July 2, 2017, the Company was in compliance with all the ratios. The results of the financial covenant tests as of such date are as follows:

Management believes that return on invested capital ("ROIC") is an important ratio and tool that can be used to assess possible investments against their related earnings and capital utilization.  The ROIC during the last twelve months ended July 2, 2017 of 14.9% increased compared to 14.0% earned during the last twelve months ended July 3, 2016.

Outlook

The Company's annual operating plan for the 52-weeks ended December 31, 2017 ("Fiscal 2017") is focused on maintaining and growing its leading market position in the North American heavy-duty transit bus and motor coach markets and aftermarket parts distribution through enhanced competitiveness.

The Company now expects to deliver approximately 3,800 EUs of new transit buses and motor coaches during Fiscal 2017, an increase of 8.2% from the 53-weeks ended January 1, 2017 ("Fiscal 2016"), based on a solid production schedule for Fiscal 2017.

The Company continues to invest in MCI's facilities and to harmonize MCI's information technology systems with those of New Flyer, along with a transformation to enhance MCI's Quality-at-the-Source, "zero defect" production culture. In addition to the continued focus on investing capital for insourcing projects at the manufacturing plants, the Company plans to make further PPE investment with respect to: the launch of a new vehicle innovation center in Anniston AL that will be focused on electric and autonomous buses; service centers and support infrastructure and next generation product development (such as a battery-electric coach and a 35-foot J-model coach). During Fiscal 2017, the Company plans to invest in total PPE expenditures, in the range of approximately $55 million to $65 million.

On June 1, 2017, New Flyer acquired Carlson Engineered Composite Inc. ("Carlson") and the assets of its affiliated U.S. companies. Carlson was a privately-owned composites company headquartered in Winnipeg, Manitoba with facilities in Minnesota and Alabama. The acquisition of Carlson, together with the Company's ownership of Frank Fair Industries Ltd., the Winnipeg composite business owned by MCI, permits the Company to now have control over 90% of the Company's fiberglass reinforced polymer requirements. The Company is now exploring sharing best practices in composite part manufacturing, optimizing processes, and pursuing new technologies. Carlson's U.S. facilities will also contribute to the Company complying with the increasing U.S. content requirements under Buy America regulations resulting from the 2015 FAST Act for the purchase of transit buses and motor coaches by U.S. federally-funded transit agencies.

Conference Call

A conference call for analysts and interested listeners will be held on Thursday August 10, 2017 at 8:00 a.m. (ET). 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=1476574&s=1&k=9C9BF0DD72E8853D470CCC31929F2160

A replay of the call will be available from 11:00 a.m. (ET) on August 10, 2017 until 11:59 p.m. (ET) on August 18, 2016. To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 62438415. The replay will also be available on New Flyer's web site at www.newflyer.com.

Non-IFRS Measures

"Earnings from Operations" refers 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 losses or gains 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, 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, proportion of the total return swap realized, proceeds on disposition of property, plant and equipment, gain received on total return swap settlement, fair value adjustment to MCI's inventory and deferred revenue and principal payments on capital leases. References to "ROIC" are net operating profit after taxes (calculated by Adjusted EBITDA less depreciation of plant and equipment and income taxes at 35% US tax rate) divided by average invested capital for the last twelve month period (calculated as total debt, net of cash and shareholders' equity).

Management believes Earnings from Operations, Adjusted EBITDA, ROIC and Free Cash Flow are useful measures in evaluating the performance of the Company. However, Earnings from Operations, Adjusted EBITDA, ROIC 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 ROIC 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, as applicable, 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 across Canada. It employs over 5,400 team members.

The Company is North America's heavy-duty transit bus leader and offers the broadest transit bus product line under the brand Xcelsior^®, incorporating the broadest range of drive systems available, including: clean diesel, natural gas, diesel-electric hybrid, trolley-electric, and battery-electric. New Flyer actively supports over 44,000 heavy-duty transit buses (New Flyer, NABI, and Orion) currently in service, of which 6,400 are powered by electric and battery propulsion.

The Company is also North America's motor coach market leader offering the Motor Coach Industries ("MCI") J-Series, the industry's best-selling intercity coach for 11 consecutive years, and the MCI D-Series, the industry's best-selling motor coach line in North American history. MCI is also the exclusive distributor of Daimler's Setra S 417 and S 407 in the United States and Canada. MCI actively supports over 28,000 coaches 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.newflyer.com. The common shares of the Company are traded on the Toronto Stock Exchange under the symbol NFI.

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 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, trade polices in the United States and Canada may undergo significant change, potentially in a manner materially adverse to the Company, 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 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 or unique 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.