Summary of 2017 Q3 results compared to 2016 Q3 ( U.S.
Dollars except as noted) :
- Revenue of $541.7 million
increased by 5.9%.
- Adjusted EBITDA of $71.0
million increased by 11.3%.
- Net earnings of $34.6 million
increased 33.0% and earnings per share of $0.55 increased 27.9%.
- Liquidity increased by $94.0
million to $349.6 million as a
result of improved cash flow from operations.
- Free Cash Flow of C$25.9
decreased 47.0% primarily a result of increased capital
expenditures.
WINNIPEG, Nov. 8, 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 October 1,
2017 ("2017 Q3"). The unaudited interim condensed
consolidated financial statements ('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.
![New Flyer Industries Inc. (CNW Group/New Flyer Industries Inc.) New Flyer Industries Inc. (CNW Group/New Flyer Industries Inc.)](https://mma.prnewswire.com/media/600597/New_Flyer_Industries_Inc__New_Flyer_Announces_2017_Third_Quarter.jpg)
Year-over-year comparisons reported in the MD&A compare the
39-week period ended October 1, 2017
("2017 YTD") to the 40-week period ended October 2, 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.
2017 Third Quarter Financial Results
|
|
|
|
|
|
|
|
2017
Q3
|
2016
Q3
|
%
change
|
2017
YTD
|
2016
YTD
|
%
change
|
Transit Bus and
Coach Deliveries (EUs)
|
New transit bus and
coach
|
877
|
777
|
12.9%
|
2,760
|
2,518
|
9.6%
|
Pre-owned
coach
|
89
|
70
|
27.1%
|
264
|
280
|
(5.7)%
|
|
|
|
|
|
|
|
Average EU selling
price (U.S. dollars in thousands)
|
|
(restated)
|
|
|
(restated)
|
|
New transit bus and
coach average selling price
|
$
|
506.5
|
$
|
527.2
|
(3.9)%
|
$
|
514.2
|
$
|
523.1
|
(1.7)%
|
Pre-owned coach
average selling price
|
110.9
|
137.7
|
(19.5)%
|
115.0
|
130.8
|
(12.1)%
|
|
|
|
|
|
|
|
Consolidated
Revenue
|
2017
Q3
|
2016
Q3
|
%
change
|
2017
YTD
|
2016
YTD
|
%
change
|
(U.S. dollars in
millions)
|
|
|
(restated)
|
|
|
(restated)
|
|
New transit bus and
coach
|
$
|
444.2
|
$
|
409.6
|
8.4%
|
$
|
1,419.1
|
$
|
1,317.2
|
7.7%
|
Pre-owned
coach
|
9.9
|
9.6
|
3.1%
|
30.4
|
36.6
|
(16.9)%
|
Transit Bus and Coach
Manufacturing
|
454.1
|
419.2
|
8.3%
|
1,449.5
|
1,353.8
|
7.1%
|
Aftermarket
|
87.6
|
92.3
|
(5.1)%
|
277.8
|
297.9
|
(6.7)%
|
Total
Revenue
|
$
|
541.7
|
$
|
511.5
|
5.9%
|
$
|
1,727.3
|
$
|
1,651.7
|
4.6%
|
Revenue from transit bus and coach manufacturing operations for
2017 Q3 increased by 8.3% compared to the 13-week period ended
October 2, 2016 ("2016 Q3") primarily
resulted from a 12.9% increase in total new bus and coach
deliveries offset by a 3.9% 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 2017 YTD increased 7.1% compared to 2016 YTD
primarily resulting from increased new transit bus and coach
deliveries of 9.6% offset by a 1.7% decrease in the average selling
price.
Revenue from aftermarket operations in 2017 Q3 decreased
5.1% compared to 2016 Q3. The decrease in 2017 Q3 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.
With the continued strong deliveries of new buses and coaches in
the industry, there has been some softening in the current parts
market. Management believes that some of the factors causing
the decrease in volume are; a decline in the installed base of
certain acquired brands no longer in production (such as Orion and
NABI), a decrease in the average age of fleets and improved quality
of the Xcelsior® and MCI coaches compared to prior
models.
The parts leadership team has developed a business strategy that
is expected to address the needs of the entire diverse customer
base. This new integrated organization is branded as
"nfi.parts", which will maintain focus on supporting the two
original equipment manufacturer ("OEM") businesses of NFI, while
targeting new market opportunities.
|
|
|
|
|
|
|
Consolidated
Adjusted EBITDA
|
2017
Q3
|
2016
Q3
|
%
change
|
2017
YTD
|
2016
YTD
|
%
change
|
(U.S. dollars in
millions)
|
|
|
(restated)
|
|
|
(restated)
|
|
Transit Bus and Coach
Manufacturing*
|
$
|
54.7
|
$
|
44.6
|
22.6%
|
$
|
171.4
|
$
|
150.7
|
13.7%
|
Aftermarket
|
16.3
|
19.2
|
(15.1)%
|
56.1
|
61.6
|
(8.9)%
|
Total Adjusted
EBITDA
|
$
|
71.0
|
$
|
63.8
|
11.3%
|
$
|
227.5
|
$
|
212.3
|
7.2%
|
|
|
|
|
|
|
|
Adjusted EBITDA %
of revenue
|
|
|
|
|
|
|
Transit Bus and Coach
Manufacturing*
|
12.0%
|
10.6%
|
1.4%
|
11.8%
|
11.1%
|
0.7%
|
Aftermarket
|
18.6%
|
20.9%
|
(2.3)%
|
20.2%
|
20.7%
|
(0.5)%
|
Total
|
13.1%
|
12.5%
|
0.6%
|
13.2%
|
12.8%
|
0.4%
|
|
* Transit Bus and
Coach Manufacturing's Adjusted EBITDA includes unrealized foreign
exchange gains or losses, interest and finance costs and corporate
overhead costs.
|
|
|
|
|
|
|
|
Bus and Coach
Adjusted EBITDA per new EU delivered
|
2017
Q3
|
2016
Q3
|
change
|
2017
YTD
|
2016
YTD
|
change
|
(U.S.
dollars)
|
|
|
(restated)
|
|
|
(restated)
|
|
Transit bus and coach
manufacturing Adjusted EBITDA* (in millions)
|
$
|
54.7
|
$
|
44.6
|
$
|
10.1
|
$
|
171.4
|
$
|
150.7
|
$
|
20.7
|
New transit bus and
coach deliveries (EUs)
|
877
|
777
|
100
|
2,760
|
2,518
|
242
|
Bus and Coach
Adjusted EBITDA* per new EU delivered (in thousands)
|
$
|
62.4
|
$
|
57.4
|
$
|
5.0
|
$
|
62.1
|
$
|
59.8
|
$
|
2.3
|
Consolidated Adjusted EBITDA increased by 11.3% and 7.2% during
2017 Q3 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.
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 Q3 aftermarket operations Adjusted EBITDA decreased
15.1% compared to 2016 Q3, primarily a result of lower sales
volumes. As well, the 2017 YTD aftermarket Adjusted EBITDA
decreased 8.9% compared to 2016 YTD, partly impacted by an extra
week in 2016 YTD.
|
|
|
|
|
|
|
2017
Q3
|
2016
Q3
|
$
change
|
2017
YTD
|
2016
YTD
|
$
change
|
Net
earnings
(U.S. dollars in
millions)
|
Earnings from
operations
|
$
|
55.1
|
$
|
46.6
|
8.5
|
$
|
184.7
|
$
|
155.3
|
29.4
|
Non-cash gain
(loss)
|
2.0
|
(1.4)
|
3.4
|
4.6
|
(0.4)
|
5.0
|
Interest and finance
costs
|
(4.9)
|
(2.9)
|
(2.0)
|
(14.8)
|
(24.6)
|
9.8
|
Income tax
expense
|
(17.6)
|
(16.3)
|
(1.3)
|
(59.3)
|
(47.0)
|
(12.3)
|
Net
earnings
|
$
|
34.6
|
$
|
26.0
|
8.6
|
$
|
115.2
|
$
|
83.3
|
31.9
|
|
|
|
|
|
|
|
Net earnings per
share (basic)
|
$
|
0.55
|
$
|
0.43
|
$
|
0.12
|
$
|
1.85
|
$
|
1.42
|
$
|
0.43
|
Net earnings during 2017 Q3 increased by 33.0% compared to 2016
Q3, primarily as a result of improved Earnings from Operations and
non-cash gain offset by the increase in interest and finance costs
and income tax expense. This resulted in net earnings per common
share ("Share") in 2017 Q3 of $0.55,
which increased 27.9% compared to $0.43 per Share generated during 2016 Q3.
Similarly during 2017 YTD, net earnings increased by 38.3%
and net earnings per Share increased 30.3%, compared to 2016
YTD.
Liquidity
|
|
|
|
|
|
|
2017
Q3
|
2016
Q3
|
%
change
|
2017
YTD
|
2016
YTD
|
%
change
|
Free Cash
Flow
(in
millions)
|
Free Cash Flow
(USD dollars)
|
$
|
20.8
|
$
|
37.2
|
(44.1)%
|
$
|
101.9
|
$
|
131.7
|
(22.6)%
|
Free Cash Flow
(CAD dollars)
|
25.9
|
48.9
|
(47.0)%
|
132.5
|
171.2
|
(22.6)%
|
Declared dividends
(CAD dollars)
|
$
|
20.5
|
$
|
14.5
|
41.4%
|
$
|
55.6
|
$
|
39.1
|
42.2%
|
Payout
ratio
|
79.2%
|
29.7%
|
49.5%
|
42.0%
|
22.9%
|
19.1%
|
The Free Cash Flow of C$25.9
million generated by the Company during 2017 Q3 decreased
47.0% compared to C$48.9 million in
2016 Q3, primarily as a result of the increased cash capital
expenditures, timing of current income tax expense and impact of
foreign currency translation caused by a stronger Canadian dollar
against the U.S dollar when comparing the two periods. The
dividends declared by the Company in 2017 Q3 of C$20.5 million increased 41.4% compared to
C$14.5 million in 2016 Q3, primarily
as a result of the conversion of the convertible debentures into
Shares and the 36.8% annual dividend rate increase announced by the
Company in May 2017.
The Company generated Free Cash Flow of C$132.5 million during 2017 YTD a decrease
compared to C$171.2 million in 2016
YTD, primarily resulting from increased cash capital expenditures
and current income taxes. The dividends declared by the Company in
2017 YTD of C$55.6 million increased
42.2% compared to C$39.1 million in
2016 YTD. The 2017 YTD Free Cash Flow payout ratio (declared
dividends divided by Free Cash Flow) of 42.0% increased compared to
22.9% in 2016 YTD.
|
|
|
|
|
|
|
Property, Plant
and Equipment ("PPE") expenditures
|
2017
Q3
|
2016
Q3
|
%
change
|
2017
YTD
|
2016
YTD
|
%
change
|
(USD dollars in
millions)
|
PPE
expenditures
|
$
|
17.1
|
$
|
6.4
|
167.2%
|
$
|
33
|
$
|
16.6
|
98.8%
|
Less PPE expenditures
funded by capital leases
|
(0.7)
|
(0.8)
|
(12.5)%
|
(1.2)
|
(2.2)
|
(45.5)%
|
Cash acquisition
of PPE reported on statement of cash flows
|
$
|
16.4
|
$
|
5.6
|
192.9%
|
$
|
31.8
|
$
|
14.4
|
120.8%
|
PPE cash expenditures in 2017 Q3 have increased by 167.2%
compared to 2016 Q3 primarily as a result of investments to fund a
variety of initiatives such as: MCI's facility improvements, the
Company's recently opened Vehicle Innovation Center in Anniston, AL, OpEx activities, insourcing and
continuous improvement programs.
The October 1, 2017 liquidity
position of $349.6 million is
comprised of available cash of $15.4
million and $334.2 million
available under the revolving portion of the Company's credit
facility ("Credit Facility") increased as compared to a liquidity
position of $268.1 million at
January 1, 2017. The increased
liquidity relates to improved cash flow from operations during 2017
YTD.
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
October 1, 2017 of 15.4% increased
compared to 14.0% earned during the last twelve months ended
October 2, 2016.
Outlook
The Company's annual operating plan for 2017 is focused on
maintaining and profitably growing its leading market position in
the heavy-duty transit bus, motor coach and aftermarket parts
markets through enhanced competitiveness with focuses on quality,
customer satisfaction, and operating efficiency.
For Fiscal 2017, the Company maintains its guidance of expecting
to deliver approximately 3,800 EUs of new transit buses and motor
coaches, an increase of 8.2% from the 53-weeks ended January 1, 2017 ("Fiscal 2016").
With a current healthy production schedule, low leverage, and
solid liquidity, management is focused on PPE investment in the
range of approximately $55 to $65
million during Fiscal 2017, with Fiscal 2018 expenditures
expected to be at similar levels.
In addition to the targeted insourcing efforts at the
manufacturing plants, the Company plans to make further investment
in: MCI facility upgrades, the recently opened Vehicle Innovation
Center in Anniston, AL (focused on
development of electric, autonomous drive and telematics for
buses); service center enhancements, and next generation product
development (such as MCI's new D-model coach, battery-electric
coach and a 35-foot J-model coach).
The company has succeeded because it provides quality, reliable
and affordable bus products and support for many years. Today, the
majority of buses are powered by either diesel, diesel-hybrids, or
natural gas. The company has consciously chosen to offer multiple
propulsion options on proven and common bus platforms to allow
choice for unique customer requirements and environments.
There has been much discussion recently in the industry and
public media regarding the electrification of transit bus and motor
coach fleets to reduce environmental impact. Currently, the
market for battery-electric buses in North America is relatively small, but
management believes the future of electric buses is a matter of
when it will occur, not if it will occur. Management
anticipates the proportion will grow given the interested political
support and the declining cost of batteries and electric
motors. The company characterizes the process as evolution or
migration to zero-emission fleets, not a revolution. A number
of public transit agencies are now becoming vocal and setting
target dates for adoption of all zero emission fleets.
Starting early last year and throughout 2017, MCI has made
great progress on the development of it's next generation D coach,
which was recently unveiled at the Association of Public Transit
Agencies (APTA) conference in Atlanta, GA. The new style coach, built
on the Model J chassis was very well received by the market, as was
its unique low-floor vestibule compartment allowing easy entry and
exit for elderly and disabled riders (similar to a transit
bus). The new Model D series is currently undergoing
extensive testing and customer demonstrations and will be ready for
production in early 2018. Other product progress at MCI
includes a 35' J Model and development of a battery-electric motor
coach for both public and private operators has been very good.
Finally, the model year 2018 product enhancements for the Model J
now in production has been met with great fanfare and positive
response.
The parts business is dealing with certain sales head
winds. This business unit should be viewed as a business in
transition as it continues through the combination of the New Flyer
and MCI parts businesses into one company, in addition to the
significant task of harmonizing the IT systems.
With current business performance and backlog growth healthy,
management continues to investigate opportunities for additional
growth and diversification. The company continues to evaluate both
domestic and international opportunities within the bus envelope as
well as within its supply chain, as evidenced by recent
acquisitions (Carlson Composites business and the assets of
Sintex-Wausaukee Composites Inc.) to take control of and optimize
the fabrication of the majority of fiberglass reinforced polymer
parts for New Flyer and MCI.
Conference Call
A conference call for analysts and interested listeners will be
held on Thursday November 9, 2017 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=1506890&s=1&k=AE24A69F1215F6E03BAC84E0142E75E5
A replay of the call will be available from 11:00 a.m. (CT) on November 9, 2017 until 11:59 p.m. (CT) on November 16, 2017. To access the replay, call
855-859-2056 or 416-849-0833 and then enter pass code number
85206820. 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 federal 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 North America's
largest transit bus and motor coach manufacturer and parts
distributor with fabrication, manufacturing, distribution and
service centers in Canada and
the United States and employs
approximately 5,800 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 the best selling product
line Xcelsior®, incorporating the broadest range of
drive systems available, including: clean diesel, natural gas,
diesel-electric hybrid, electric-trolley and
battery-electric. New Flyer actively supports over 44,000
heavy-duty transit buses (New Flyer, NABI and Orion) in service, of
which 6,400 are powered by electric or battery propulsion.
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 is largely used by
public customers. MCI is also the exclusive distributor of
Daimler's Setra models S417 and S407 in the United States and Canada. MCI
actively supports over 28,000 motor coaches (MCI and Setra)
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.
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
(including NAFTA) 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.