WINNIPEG, Jan. 15, 2019 /CNW/ - (TSX: NFI) NFI Group Inc.
("NFI" or "the Company"), the largest bus and motor coach
manufacturer and parts distributor in North America, today announced its deliveries,
order activity and backlog update for the 13-week period ended
December 30, 2018 ("Q4 2018").
Year-over-year comparisons reported in this release compare Q4 2018
to the 13-week period ended December
31, 2017 ("Q4 2017") and previous quarter comparisons
compare Q4 2018 to the 13-week period ended September 30, 2018 ("Q3 2018"). References to
Fiscal 2019 are to the 52-week period of December 31, 2018 to December 29, 2019 and references to Q1 2019 are
to the 13-week period ended March 31,
2019.
Deliveries, Order Activity, and Option Expiry
NFI delivered 1,126 equivalent units ("EUs") in Q4 2018, an
increase of 58 EUs compared to Q4 2017 and an increase of 91 EUs
from Q3 2018. For the 52-week period from January 1, 2018 to December 30, 2018 ("Fiscal 2018") NFI delivered
4,313 EUs, up 485 EUs from the 52-week period January 1, 2017 to December 31, 2017 ("Fiscal 2017"). Total
inventory at December 30, 2018
decreased 48 EUs from the previous quarter to 523 EUs.
NFI Deliveries
(EUs)
|
|
Heavy-Duty
Transit
(New
Flyer)
|
Motor
Coaches
(MCI)
|
Cutaway and
Medium-Duty
(ARBOC)
|
Total
|
Q4 2017
|
695
|
346
|
27
|
1,068
|
Q4
2018
|
679
|
341
|
106
|
1,126
|
Fiscal
2017*
|
2,730
|
1,071
|
27
|
3,828
|
Fiscal
2018
|
2,781
|
1,030
|
502
|
4,313
|
*
|
Heavy-Duty Transit
Fiscal 2017 deliveries include 38 EUs from MiDi bus sales under the
terminated joint venture with Alexander Dennis Limited
|
Fiscal 2018 Heavy-Duty Transit deliveries were 29 EUs lower than
the previously announced annual delivery guidance primarily as a
result of timing related to delivery issues. Management expects the
majority of units impacted by the delay will be delivered in Q1
2019. Motor coach annual deliveries were 40 EUs lower than guidance
primarily from private motor coach sales activity. Private motor
coach sales were negatively impacted by a pre-owned coach auction
that was held in Q4 2018 by a customer who ceased operations to
liquidate 100 vehicles. ARBOC deliveries were eight EUs lower than
guidance as a result of timing delays. Management expects these
units will be delivered in 2019.
NFI's new orders in Q4 2018 totaled 857 EUs, which included firm
orders of 784 EUs (valued at $356.9
million) and option orders of 73 EUs (valued at $33.6 million). In addition, 575 option EUs were
converted to firm orders (valued at $361.6
million).
Total reported orders do not include 589 EUs of new firm and
option orders that were pending at the end of Q4 2018, where
approval of the award to NFI had been made by the customer's board,
council, or commission, as applicable, but purchase documentation
had not yet been received by NFI and are therefore not yet included
in the backlog.
NFI's Fiscal 2018 Book-to-Bill ratio (defined as new firm and
option orders divided by deliveries) was 87%, down from 152% in
Fiscal 2017. The Book-to-Bill ratio in the second half of Fiscal
2018 was impacted by a higher number of smaller individual
transactions and by delayed bid activity for multi-year contracts.
Management believes transit agencies' assessment of future
battery-electric vehicle adoption as a component of their overall
fleet renewal strategies contributed to the delays in releasing
multi-year procurements.
|
New
Orders
in Quarter
(Firm
and Option EUs)
|
New
Orders
LTM (Firm and
Option EUs)
|
Option EUs
Converted in
Quarter to Firm
|
Option EUs
Converted LTM
to Firm
|
Q4
2017
|
2,520
|
5,820
|
238
|
1,404
|
Q1
2018
|
736
|
5,848
|
441
|
1,627
|
Q2
2018
|
1,413
|
6,303
|
505
|
1,743
|
Q3
2018
|
757
|
5,426
|
274
|
1,458
|
Q4
2018
|
857
|
3,763
|
575
|
1,795
|
Note: LTM refers to
the last twelve months ended at the end of the quarterly period
indicated
|
The majority of public transit contracts, bid by both New Flyer
and MCI, have a term of five years and include both firm orders and
options. The following table shows the number of option EUs that
have been exercised or expired annually over the past five years,
as well as the current backlog of options that will expire each
year, if not exercised.
In
EUs
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2023
|
A. Options
Expired
|
965
|
504
|
550
|
331
|
741
|
|
|
|
|
|
B. Options
Exercised
|
1,149
|
1,339
|
2,064
|
1,404
|
1,795
|
|
|
|
|
|
C. Remaining
Options by year
of expiry
|
|
|
|
|
|
1,243
|
1,031
|
1,633
|
2,335
|
942
|
D. Conversion
Rate % = B /
(A+B)
|
54%
|
73%
|
79%
|
81%
|
71%
|
|
|
|
|
|
While NFI's option conversion rate improved from Q3 2018 to Q4
2018, it was lower in Fiscal 2018 when compared to Fiscal 2017. The
decrease was primarily driven by expired five-year contracts with
three customers who no longer required the contracted specific
size/propulsion configurations, and who were not permitted to
assign the options to other transit agencies due to the amendment
to U.S. Federal Transit Administration guidelines which went into
effect after the contracts were awarded.
Total Backlog and 2018 Production
At the end of Fiscal 2018, NFI's total backlog was 10,833 EUs
(valued at $5.35 billion) compared to
11,110 EUs (valued at $5.51
billion) at the end of Q3 2018, and 12,157 EUs (valued at
$6.02 billion) at the end of Fiscal
2017.
Total Backlog
(EUs)
|
Firm
Orders
|
Options
|
Total
|
Ending backlog at Q3
2018
New orders in Q4
2018
Options exercised in Q4 2018
Deliveries in Q4
2018
Cancelled/expired
options in Q4 2018
|
3,423
784
575
(1,126)
(7)
|
7,687
73
(575)
-
(1)
|
11,110
857
-
(1,126)
(8)
|
Ending Backlog at
Q4 2018
|
3,649
|
7,184
|
10,833
|
Total Backlog
(EUs)
|
Firm
Orders
|
Options
|
Total
|
$B
US
|
Heavy-Duty Transit
Buses
|
3,024
|
6,177
|
9,201
|
$4.547
|
Motor
Coaches
|
468
|
1,007
|
1,475
|
$0.776
|
Cutaway and
Medium-Duty Buses
|
157
|
-
|
157
|
$0.028
|
Ending Backlog at
Q4 2018
|
3,649
|
7,184
|
10,833
|
$5.351
|
NFI's total backlog consists of buses sold primarily to public
customers. The majority of the backlog relates to New Flyer transit
buses for public clients with some of the backlog consisting of
units from MCI and ARBOC. Options for ARBOC vehicles are held by
dealers, rather than the operator, and are not included as options
in the NFI backlog, but are converted to firm backlog when vehicles
are ordered by the dealer.
Transit buses and motor coaches incorporating clean propulsion
systems, including compressed natural gas ("CNG"), diesel-electric
hybrid, and zero-emission buses and motor coaches ("ZEBs", which
consist of trolley-electric, fuel cell-electric and
battery-electric buses), represent approximately 42% of the total
backlog. ZEBs alone represent approximately 5% of total
backlog.
Parts Activity
Total shipments by NFI Parts for Q4 2018 decreased by 8.2%
compared to the previous quarter, and decreased by 6.9% compared to
Q4 2017. The lower shipments in Q4 2018 compared to Q3 2018 was
largely due to lower bid activity during the period. The win
rate for NFI Parts during Q4 2018 was within historical ranges.
ARBOC aftermarket parts orders and shipments are not included in
these figures as they are not material.
Market Demand and Outlook
NFI's Bid Universe metric attempts to forecast active
public-sector competitions in Canada and the
United States ("U.S.") and to provide an overall indicator
of active bid activity and anticipated heavy-duty transit bus and
motor coach market demand. It is a point-in-time snapshot of: (i)
EUs in active competitions, defined as all requests for proposals
received and in process of review plus bids submitted and awaiting
customer action, and (ii) management's forecast based on public
customer projections of expected EUs to be placed out for
competition over the next five years.
At the end of Q4 2018, the total Bid Universe was 23,425 EUs, an
increase of 2,063 EUs from Q3 2018. The Bid Universe EUs may
fluctuate significantly from quarter-to-quarter based on public
tender activity procurement and award processes.
In
EUs
|
Bids in
Process
|
Bids
Submitted
|
Total
Active
|
Forecast New
Procurements
over next 5 Years
|
Total Bid
Universe
|
Q4
2017
|
3,091
|
1,687
|
4,778
|
16,406
|
21,184
|
Q1
2018
|
2,974
|
3,479
|
6,453
|
17,186
|
23,639
|
Q2
2018
|
1,319
|
2,391
|
3,710
|
18,440
|
22,150
|
Q3
2018
|
955
|
2,323
|
3,278
|
18,084
|
21,362
|
Q4
2018
|
670
|
2,061
|
2,731
|
20,694
|
23,425
|
The size of active procurements in the second half of Fiscal
2018 was impacted by smaller individual bids and delayed bid
activity for multi-year contracts. Management's ongoing discussions
with several public transit customers throughout the U.S. and
Canada suggest there may be an
increase in the number of requests for proposals and public tenders
issued in Fiscal 2019 and 2020 to account for this delayed or
decreased activity. This anticipated increase in bid activity has
been reflected in the chart above describing the growth in
forecasted procurements.
Procurement of heavy-duty transit buses and motor coaches by the
public sector is typically accomplished through formal multi-year
contracts, while procurement by the private sector is typically
made on a transactional basis. As a result, NFI is unable to create
a Bid Universe metric for private sector buses or motor
coaches.
Cutaway and medium-duty buses manufactured by ARBOC are also
typically sold on a transactional basis through third party dealers
who hold contracts directly with the operators. Bids are
submitted by and contracts are held with non-exclusive dealers and
therefore there is no NFI Bid Universe metric for cutaways and
medium-duty buses.
Management expects heavy-duty transit bus and motor coach
procurement activity by public agencies throughout the U.S. and
Canada to be healthy in 2019 based
on an aging fleet, economic conditions, defined federal funding and
expected customer fleet replacement plans. Management expects
Fiscal 2019 will be a more active period for new public customer
vehicle procurements. In addition, management expects industry
demand for ZEBs to increase slightly in Fiscal 2019 and represent
approximately 10% to 15% of the industry's active heavy-duty
transit procurements. Management believes the Company has a strong
offering to meet this increased demand for ZEBs given NFI has over
50 years of experience in manufacturing zero-emission buses and has
more electric buses on the road in North
America than any other manufacturer. In order to further
strengthen its ZEB product offering, the Company recently launched
New Flyer Infrastructure Solutionsâ„¢ a service aimed at providing
safe, reliable, smart, and sustainable charging and mobility
solutions to public transit customers.
Management continues to anticipate relatively stable private
sector demand for motor coaches through 2019. During Fiscal 2019
management anticipates gaining market share in the motor coach
market through the sales of new vehicle models, including the D45
Commuter Rapid Transit Low Entry vehicle ("D45 CRT LE"), which
features revolutionary improvements to support individuals with
disabilities, and the new J3500, the 35-foot version of MCI's
best-selling 45-foot coach, the J4500. During Q4 2018 MCI was
awarded a contract for 77 D45 CRT LE motor coaches from a
significant employee shuttle customer in the San Francisco Bay area
and delivered its first J3500 vehicles.
Management believes the demand for low-floor cutaway and
medium-duty buses with greater accessibility will continue to grow
from current levels and that ARBOC will be a beneficiary of this
increased demand. ARBOC's medium-duty Spirit of Equess ("Equess")
product launched in late Q4 2018 and management is focused on
quality, production efficiencies and increasing deliveries of the
Equess in Fiscal 2019. The Equess has a higher average selling
price and higher gross profit per unit than ARBOC's low-floor
cutaway vehicles and is expected to represent 10% to 15% of ARBOC's
total Fiscal 2019 deliveries.
Based on NFI's current master production schedule, combined with
the current firm backlog, the anticipated option conversion rate
and new orders anticipated to be awarded by public customers from
procurements, management expects to deliver 4,455 EUs in Fiscal
2019, an increase of 142 EUs, or 3.3%, over Fiscal 2018.
NFI's Fiscal 2019 deliveries are expected to comprise the
following vehicle types:
Heavy-Duty
Transit
|
Motor
Coach
|
Cutaway and
Medium-Duty
|
Total
|
2,845
EU
|
1,065
EU
|
545
EU
|
4,455
EU
|
Due to the nature of the aftermarket parts business, parts sales
remain difficult to forecast as a result of typical
quarter-to-quarter volatility which at times can be material.
Management expects that the vendor managed inventory ("VMI")
programs NFI Parts secured in Fiscal 2018 will have a positive
impact on parts sales volumes in Fiscal 2019 and beyond, but at
potentially slightly lower margins than historical periods.
NFI's Q4 2018 earnings are expected to be impacted by several
factors including: ongoing start-up expenses of NFI's new
Shepherdsville, KY parts
fabrication facility, costs and lost revenue from the termination
of MCI's Distribution Rights Agreement ("DRA") for Daimler's Setra
motor coaches and spare parts in North
America, lower than anticipated vehicle deliveries, and
margin pressure in the private motor coach segment as a result of
sales mix, higher trade-in subsidies and fair market value
adjustments on pre-owned coaches in MCI's inventory.
In the Company's Q3 2018 financial results NFI disclosed that
start-up costs of $1.6 million
related to the Shepherdsville
facility and price reductions of $2.2
million on the sale of new and pre-owned Setra coaches had a
negative impact on Q3 2018 Adjusted EBITDA. For Fiscal 2019,
management expects the Shepherdsville facility start-up expenses to
continue to impact Adjusted EBITDA for the first two quarters,
before the facility achieves break-even operating status in the
second half of the year. Management does not expect the
termination of the DRA to have a material impact on Fiscal 2019
results.
Having completed several significant capital expenditure
projects in Fiscal 2018, management expects that its property,
plant and equipment ("PPE") expenditures will decrease in Fiscal
2019 and will be in the range of approximately $50 to $60 million.
This is a decrease from the Fiscal 2018 expected range of
$63 to $73
million. This estimated expenditure includes investments for
several capital projects that were started in Fiscal 2018,
including the Shepherdsville
facility and IT harmonization projects at MCI, and are expected to
be completed in Fiscal 2019.
NOTE: All dollar amounts in this release are stated in U.S.
currency. Canadian dollar amounts have been converted based on an
exchange rate of U.S. $1.00 = CAD
$1.3638 to calculate the value of the
Canadian contracts in this release. One equivalent unit ("EU")
represents one 30-foot, 35-foot or 40-foot heavy-duty transit bus,
one medium-duty bus, one low-floor cutaway bus or one motor coach.
An articulated transit bus, which is an extra long transit bus
(approximately 60-feet in length), composed of two passenger
compartments connected by a joint mechanism represents two EUs.
About NFI Group Inc.
With over 6,100 team members,
operating from 31 facilities across Canada and the
United States, NFI is North
America's largest bus manufacturer providing a comprehensive
suite of mass transportation solutions under brands: New
Flyer® (heavy-duty transit buses), ARBOC®
(low-floor cutaway and medium-duty buses), MCI® (motor
coaches), and NFI Partsâ„¢ (parts, support, and service). NFI buses
incorporate the widest range of drive systems available including:
clean diesel, natural gas, diesel-electric hybrid, and
zero-emission electric (trolley, battery, and fuel cell) on proven
bus platforms. It also supports infrastructure development through
New Flyer Infrastructure Solutionsâ„¢, a service dedicated to
providing safe and reliable charging and mobility solutions. In
total, NFI supports over 74,000 buses and coaches currently in
service across North America. For
the fiscal year ended December 31,
2017, NFI posted revenues of US $2.4
billion.
Further information is available at www.nfigroup.com,
www.newflyer.com, www.mcicoach.com and www.arbocsv.com. The
common shares of NFI 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 and the market outlook for the
Company's products and services. 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 release. Such forward-looking statements include
statements with respect to customer demand for buses, motor coaches
and parts; management's forecasted outlook for the bus, motor coach
and parts businesses; management's expectations regarding future
heavy-duty bus and motor coach procurement and bid activity;
management's expectations regarding unit deliveries and PPE
expenditures in 2019 and continuing expenditures in 2019 relating
to the operation of the Shepherdsville,
KY facility and the termination of the DRA.
Forward-looking statements involve significant risks and
uncertainties, and are not to 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,
customer demand and 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; the Company may have difficulty selling preowned coaches and
realizing expected resale values; aggressive competition and
reduced pricing in the industry; the absence of fixed term customer
contracts and the suspension or the termination of contracts by
customers for convenience; production delays may result in
liquidated damages under the Company's contracts with its
customers; inability of the Company 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;
inability of the Company to successfully execute strategic plans on
time and on budget and maintain profitability, development of
competitive products or technologies; risks related to acquisitions
and other strategic relationships with third parties; inability 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. NFI cautions that this list of factors is
not exhaustive. These factors and other risks and uncertainties are
discussed in NFI's press releases and materials filed with the
Canadian securities regulatory authorities which are 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 NFI assumes no
obligation to update or revise them to reflect new events or
circumstances, except as required by applicable securities
laws.
SOURCE NFI Group Inc.