Summary of 2019 Q3 results compared to 2018 Q3:
- Overall US and Canada
public Bid Universe increased by 28.7% from 2018 Q3 with active
bids up 18.0% from 2019 Q2.
- NFI secured new orders of 1,035 EUs, an increase of 36.7%
with a Last Twelve Months Book-to-Bill ratio of 90%. Backlog
of 11,594 EUs (valued at $5.5
billion) increased by 4.4%.
- Delivered a record 1,392 EUs in the quarter, an increase of
34.5%, resulting in revenue of $725.4
million, an increase of 19.8%.
- Adjusted EBITDA of $76.9
million increased by 9.5%.
- Free Cash Flow of $37.6
million and C$0.83 per Share,
increased by 30.6% and 40.2% respectively. Dividends declared of
C$26.5 million increased by 13.4%,
representing a third quarter payout ratio of 53.2% and a current
implied dividend yield of 5.7% at a Share price of $29.65
- Net loss of $1.0 million and
loss per Share of $0.02 decreased by
$38 million and $0.61 respectively, having been significantly
impacted by an $11.6 million unwind
of fair market value adjustments and $6.7
million of intangible asset amortization, both related to
the acquired assets of ADL, plus $4.7
million in mark-to-market losses.
- Adjusted Net Earnings of $15.0
million, or $0.24 per Share,
which is normalized for $16.1 million
of the non-cash adjustments impacting net earnings, decreased by
58.5%.
WINNIPEG, Nov. 12, 2019 /PRNewswire/ - (TSX:NFI) NFI
Group Inc., ("NFI" or the "Company"), one of the world's
leading independent bus manufacturers, today announced its
financial results for 2019 Q3(1). Readers are
advised to view the unaudited interim condensed consolidated
financial statements (the "Financial Statements") and the related
Management's Discussion and Analysis (the "MD&A") that are
available at the Company's website at:
https://www.nfigroup.com/investor-relations/performance-reports/
and under the Company's profile on www.sedar.com.
"We delivered a record 1,392 vehicles in the third quarter which
resulted in our highest quarterly revenue ever, driven largely by
our transformative acquisition of Alexander Dennis Limited. NFI is
now a leading independent global bus and coach manufacturer with
more than 105,000 vehicles in service and 9,000 team members," said
Paul Soubry, President and Chief
Executive Officer of NFI. "We have now stabilized our KMG parts and
component manufacturing operations and commenced the reduction of
excess vehicle work-in-progress inventory. The majority of vehicle
deliveries impacted by the work-in-progress reduction plan are
expected to be recovered in the fourth quarter of 2019 with some
units now expected to be delivered in the first quarter of 2020.
Our entire team is focused on ensuring we recover from the
production and operational challenges we experienced in the first
half of this year and expect a strong revenue and Adjusted EBITDA
performance in the fourth quarter. As we look into 2020, we
expect the strength of our businesses to allow us to maintain
leadership positions in all of our core markets, to continue
generating strong free cash flow, and to focus on returning capital
to shareholders. We have seen stability in our total bid
universe and, as anticipated, an increase in active bids – albeit
for a smaller number of buses per contract as operators continue
pilot or trial fleets of electric buses. Given the global
transition to electric buses, we do expect to see continued price
pressure in the near-term due to continuous product mix variation
and increasing competition, which only reinforces our strategy to
focus on scale, cost efficiency and competitiveness."
(1)
|
Results noted
herein are for the 13-week period ("2019 Q3") and the 52-week
period ("LTM 2019 Q3") ended September 29, 2019. Year-over-year
comparisons reported in this press release compare 2019 Q3 to the
13-week period ("2018 Q3") and the 52-week period ended September
30, 2018 ("LTM 2018 Q3"). Comparisons and comments are also made to
the 13-week period ("2018 Q4") ended December 30, 2018 and the
13-week period ("2019 Q4") ended December 29, 2019. Unless
otherwise indicated, all monetary amounts in this press release are
expressed in U.S. dollars.
|
Acquisition of Alexander Dennis
Limited (ADL)
In order to provide context regarding ADL's operations,
management has provided proforma Fiscal 2018, 2019 Q1 and 2019 Q2
(pre-and post-acquisition) within its MD&A. A brief summary of
consolidated proforma year-over-year activity during 2019 Q3 is
provided below.
Revenues for 2019 Q3 decreased by $95.3
million compared to 2018 Q3 proforma and 2019 Q3 YTD
proforma decreased by $198.6 million
compared to 2018 Q3 YTD proforma. While NFI's legacy manufacturing
business experienced a decline year-over-year due to lower
heavy-duty transit and low-floor cutaway vehicle deliveries
(discussed below), ADL also experienced a decrease in revenue
during both periods due to lower activity in the Asia Pacific market, primarily in Hong Kong, and timing of deliveries in
North America and the UK. 2018 Q3
Hong Kong activity was
particularly elevated compared to 2019 Q3 due to the timing of
deliveries to meet new emissions regulations.
ADL expects to have significantly higher activity during 2019 Q4
compared to 2018 Q4 as it fulfills its contracted order book and
its performance is expected to be in line with NFI's investment
case.
2019 Q3 Impact of the Transition to IFRS 16
Effective December 31, 2018, the
Company adopted IFRS 16, the accounting standard which specifies
how to recognize, present and disclose leases. The adoption of IFRS
16 primarily impacts NFI's gross margin, Adjusted EBITDA, net
earnings and Adjusted Net Earnings, and the associated per common
share ("Share") amounts, ROIC and several balance sheet accounts as
reported in the Financial Statements and MD&A. The primary
impacts of the transition on several of NFI's key financial metrics
are summarized in the table below.
Impact of IFRS 16
Transition on
Consolidated
Results
|
2019
Q3
|
2019
Q3
|
2018
Q3
|
(Unaudited, U.S.
dollars in millions)
|
|
(excluding
IFRS
16)
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
|
|
|
|
Manufacturing
|
$
|
53.3
|
$
|
52.7
|
$
|
78.8
|
Aftermarket
|
|
32.8
|
|
33.5
|
|
25.7
|
Total Gross
Margins
|
$
|
86.1
|
$
|
86.2
|
$
|
104.5
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
Manufacturing
|
$
|
61.5
|
$
|
58.0
|
$
|
61.0
|
Aftermarket
|
|
16.4
|
|
15.6
|
|
17.2
|
Corporate
|
|
(1.0)
|
|
(1.0)
|
|
(8.0)
|
Total Adjusted
EBITDA
|
$
|
76.9
|
$
|
72.6
|
$
|
70.2
|
|
|
|
|
|
|
|
Net
Earnings
|
|
|
|
|
|
|
Manufacturing
|
$
|
14.5
|
$
|
14.4
|
$
|
35.2
|
Aftermarket
|
|
11.1
|
|
11.2
|
|
15.3
|
Corporate
|
|
(26.6)
|
|
(26.6)
|
|
(13.5)
|
Total Net earnings
(loss)
|
$
|
(1.0)
|
$
|
(1.0)
|
$
|
37.0
|
|
|
|
|
|
|
|
Adjusted Net
Earnings
|
$
|
15.0
|
$
|
15.1
|
$
|
36.2
|
|
|
|
|
|
|
|
Adjusted EBITDA % of
revenue
|
|
|
|
|
|
|
Manufacturing
|
|
10.0%
|
|
9.4%
|
|
11.9%
|
Aftermarket
|
|
15.0%
|
|
14.3%
|
|
18.5%
|
Total Adjusted
EBITDA as % of revenue
|
|
10.6%
|
|
10.0%
|
|
11.6%
|
|
|
|
|
|
|
|
Net earnings
(loss) per Share - basic
|
$
|
(0.02)
|
$
|
(0.02)
|
$
|
0.59
|
Adjusted Net
Earnings per Share - basic
|
$
|
0.24
|
$
|
0.24
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
2,946.2
|
$
|
2,844.0
|
$
|
2,050.2
|
Total long-term
liabilities
|
$
|
1,543.5
|
$
|
1,434.5
|
$
|
807.3
|
ROIC (Last Twelve
Months ("LTM"))
|
|
10.2%
|
|
10.6%
|
|
14.8%
|
Totals may not add due to rounding.
Management recommends readers review the Company's financial
statements and MD&A for 2019 Q3 that provides further details
on the impact of adoption of IFRS 16. All other financial
information provided for 2019 Q3 within this release is presented
with the adoption for IFRS 16.
2019 Q3 Financial Results
Summarized financial results of the Company are as follows:
Consolidated
Results
|
|
2019
|
|
2018
|
|
|
LTM
|
|
LTM
|
(Unaudited, U.S.
dollars in millions, except per share amounts)
|
|
Q3
|
|
Q3
|
|
|
2019
Q3(1)
|
|
2018
Q3(1)
|
Deliveries
|
|
|
|
|
|
|
|
|
|
Transit bus
|
|
1,052
|
|
692
|
|
|
3,263
|
|
2,797
|
Motor coach
|
|
266
|
|
215
|
|
|
988
|
|
1,035
|
Medium-duty and
cutaway buses
|
|
74
|
|
128
|
|
|
345
|
|
423
|
Total
Deliveries
|
|
1,392
|
|
1,035
|
|
|
4,596
|
|
4,255
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
|
Firm Backlog
(EUs)
|
|
4,313
|
|
3,423
|
|
|
|
|
|
Firm
Backlog
|
$
|
1,877.3
|
$
|
1,781.3
|
|
|
|
|
|
Option Backlog
(EUs)
|
|
7,281
|
|
7,687
|
|
|
|
|
|
Option
Backlog
|
$
|
3,598.6
|
$
|
3,728.3
|
|
|
|
|
|
Total Backlog
(EUs)
|
|
11,594
|
|
11,110
|
|
|
|
|
|
Total
Backlog
|
$
|
5,475.9
|
$
|
5,509.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Transit bus
|
$
|
448.8
|
$
|
369.3
|
|
$
|
1,650.1
|
$
|
1,480.3
|
Motor coach
|
|
141.0
|
|
112.8
|
|
|
510.5
|
|
543.9
|
Medium-duty and
cutaway buses
|
|
13.8
|
|
11.1
|
|
|
41.1
|
|
34.7
|
New transit bus,
coach and cutaway revenue
|
$
|
603.6
|
$
|
493.2
|
|
$
|
2,201.7
|
$
|
2,058.9
|
Pre-owned coach
revenue
|
|
11.4
|
|
15.5
|
|
|
43.3
|
|
55.4
|
Fiberglass reinforced
polymer components revenue
|
|
1.1
|
|
3.5
|
|
|
6.9
|
|
14.3
|
Manufacturing
revenue
|
$
|
616.0
|
$
|
512.2
|
|
$
|
2,251.9
|
$
|
2,128.6
|
Aftermarket
revenue
|
|
109.3
|
|
93.2
|
|
|
385.8
|
|
383.1
|
Total
Revenue
|
$
|
725.3
|
$
|
605.4
|
|
$
|
2,637.7
|
$
|
2,511.7
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
$
|
61.5
|
$
|
61.0
|
|
$
|
243.2
|
$
|
283.6
|
Aftermarket
|
|
16.4
|
|
17.2
|
|
|
73.5
|
|
74.2
|
Corporate
|
|
(1.0)
|
|
(8.0)
|
|
|
(18.5)
|
|
(31.8)
|
Total Adjusted
EBITDA
|
$
|
76.9
|
$
|
70.2
|
|
$
|
298.2
|
$
|
326.0
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
$
|
15.7
|
$
|
47.1
|
|
$
|
136.2
|
$
|
220.3
|
Aftermarket
|
|
12.5
|
|
15.4
|
|
|
63.5
|
|
64.8
|
Corporate
|
|
(7.9)
|
|
(6.6)
|
|
|
(36.8)
|
|
(37.9)
|
Total
EBIT
|
$
|
20.3
|
$
|
55.9
|
|
$
|
162.9
|
$
|
247.2
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
|
25.2
|
$
|
53.5
|
|
$
|
163.7
|
$
|
248.8
|
Non-cash gain
(loss)
|
|
(4.9)
|
|
2.3
|
|
|
(0.8)
|
|
(1.6)
|
Interest
expense
|
|
(19.0)
|
|
(6.9)
|
|
|
(72.7)
|
|
(20.2)
|
Income tax
expense
|
|
(2.4)
|
|
(11.9)
|
|
|
(23.8)
|
|
(33.8)
|
Net earnings
(loss)
|
$
|
(1.0)
|
$
|
37.0
|
|
$
|
66.4
|
$
|
193.2
|
Adjusted Net
Earnings
|
$
|
15.0
|
$
|
36.2
|
|
$
|
115.7
|
$
|
199.1
|
|
|
|
|
|
|
|
.
|
|
|
Free cash flow (U.S.
dollars)
|
$
|
37.6
|
$
|
28.8
|
|
$
|
153.8
|
$
|
176.5
|
Free cash flow (CAD
dollars)
|
$
|
49.8
|
$
|
37.2
|
|
$
|
205.1
|
$
|
227.0
|
Declared dividends
(CAD dollars)
|
$
|
26.5
|
$
|
23.4
|
|
$
|
101.8
|
$
|
87.9
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA % of
revenue
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
10.0%
|
|
11.9%
|
|
|
10.8%
|
|
13.3%
|
Aftermarket
|
|
15.0%
|
|
18.5%
|
|
|
19.1%
|
|
19.4%
|
Total Adjusted
EBITDA as % of revenue
|
|
10.6%
|
|
11.6%
|
|
|
11.3%
|
|
13.0%
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) per Share - basic
|
$
|
(0.02)
|
$
|
0.59
|
|
$
|
1.08
|
$
|
3.09
|
Adjusted Net
Earnings per Share - basic
|
$
|
0.24
|
$
|
0.58
|
|
$
|
1.87
|
$
|
3.18
|
(1)
|
Within the LTM 2019
Q3 results, 2019 Q1, 2019 Q2 and 2019 Q3 numbers reflect the impact
of IFRS 16. 2018 Q3 and LTM 2018 Q3 results do not reflect the
impact of IFRS 16. Totals may not add due to rounding.
|
Manufacturing revenue for 2019 Q3 increased by $103.9 million, or 20.3%, compared to 2018 Q3
primarily driven by the acquisition of ADL and higher motor coach
deliveries offset by lower transit bus and low-floor cutaway
vehicle deliveries. As previously reported, the Company
experienced production and delivery challenges in the first half of
2019 ("2019 H1") as a result of new product launches at New Flyer
and MCI, supply disruption of certain ARBOC chassis, extended
start-up of KMG, the Company's new parts fabrication facility,
external supply issues and lost production days due to inclement
weather. The result of these factors also led to a temporary
growth in work-in-progress inventory ("WIP") during 2019 H1. The
majority of the WIP is expected to be reduced in 2019 Q4 with some
carryover to the first quarter of 2020 to account for the timing of
deliveries.
Aftermarket revenue increased by $16.2
million, or 17.4%, compared to 2018 Q3 with the acquisition
of ADL being the primary driver. Partially offsetting the increase
were lower sales volumes within the legacy aftermarket business due
to increased competitive pressure in the private motor coach market
as well as fewer mid-life or fleet renewal programs.
Manufacturing gross margins for 2019 Q3 decreased by
$25.5 million, or 32.4%, compared to
2018 Q3 primarily caused by a $20.2
million unwinding of fair value adjustments relating to the
valuation of ADL assets and $9.1
million of intangible asset amortization both related to the
acquisition of ADL. Without this impact, gross margins would have
increased by $3.8 million, or 4.8%.
In addition to the unwind, costs associated with production
inefficiencies and WIP reduction efforts within the legacy
heavy-duty transit and coach businesses also impacted gross
margins. Aftermarket gross margins increased by $7.1 million, or 27.6%, compared to 2018 Q3
primarily due to the addition of ADL.
Manufacturing Adjusted EBITDA increased by $0.5 million, with the addition of ADL being
offset by the previously mentioned impacts on vehicle deliveries
and higher selling and general and administrative costs
("SG&A") from the addition of ADL. Aftermarket Adjusted EBITDA
decreased by $0.8 million compared to
2018 Q3 due to higher SG&A costs from the addition of ADL.
Consolidated earnings before interest and income taxes ("EBIT")
decreased by $35.6 million, or 63.7%,
primarily driven by the impacts on gross margins. Without the
purchase accounting adjustments from the acquisition of ADL, EBIT
would have decreased by $6.3 million,
or 11.3%. Partially offsetting these negative impacts were
lower compensation expense as a result of reduced incentive
compensation accruals.
Net loss of $1.0 million compared
to net earnings of $37.0 million in
2018 Q3, with a net loss per Share of $0.02. In addition to the items that impacted
EBIT, interest expense increased by $12.0
million, primarily from losses on the Company's interest
rate derivatives of $1.6 million and
higher average draws under the Company's credit facility, driven by
the acquisition of ADL and higher working capital balances. Net
earnings was also impacted by $3.1
million of unrealized foreign exchange losses.
Adjusted Net Earnings, which adds back the unwind of the fair
value adjustment, plus mark-to-market losses, decreased by
$21.2 million compared to 2018 Q3,
primarily due to higher amortization costs on the intangible assets
created from the acquisition of ADL.
Liquidity
Free cash flow in 2019 Q3 increased by $8.8 million, or 30.6%, when compared to 2018 Q3
primarily due to higher Adjusted EBITDA, lower capital expenditures
and lower income tax expense, partially offset by increased
interest expense. Free cash flow per share of C$0.83 was up by 40.2%. Dividends declared
increased by 13.0% in 2019 Q3 as a result of the increase in the
annual dividend rate declared in March
2019, partially offset by the impact of repurchases under
the Company's Normal Course Issuer Bid ("NCIB") during the second
half of 2018 and 2019 Q1 which lowered the number of Shares
outstanding. Management believes the current dividend rate has been
established at a sustainable level.
NFI's liquidity position as at September
29, 2019 was $86.6 million a
decrease from the position of $202.2
million at June 30, 2019. The
decrease in liquidity primarily relates to the amount of capital
returned to shareholders through dividends and changes in non-cash
working capital primarily a result of seasonality and delivery
disruption which increased WIP and is expected to be temporary in
nature. Management believes these funds, together with share and
debt issuances, other borrowings capacity and the cash generated
from NFI's operating activities, will provide the Company with
sufficient liquidity and capital resources to meet its current
financial obligations as they come due, as well as provide funds
for its financing requirements, capital expenditures, dividend
payments and other operational needs for the foreseeable
future.
Outlook
Management's Fiscal 2019 delivery guidance has been reduced to
5,490 EUs, a decrease of 170 EUs, or 3.0%, to reflect the impact of
New Flyer and MCI's WIP reduction plan carrying over into the first
quarter of 2020 and the timing of ARBOC medium-duty vehicle
deliveries. This decrease is primarily a timing issue as the
majority of the vehicles removed from the Company's revised
delivery guidance are under contract and will be delivered in 2020.
The cash impact of these delayed deliveries will be realized in
2020, net of any previously received progress payments. There have
been no changes to ADL's anticipated 2019 deliveries. Management
now expects the Company will deliver 2,020 EUs, or 36.8%, of its
annual deliveries in the fourth quarter. Management notes that ADL
vehicle revenue and gross margins vary significantly by geographic
region and product type and recommends that readers review the
adjusted ADL historical financial information provided within the
MD&A for further context.
The Company's annual delivery schedule has an element of
seasonality due to the nature of each unique market segment and the
varied annual production and vacation schedule of each production
facility. With the addition of ADL, management now expects
seasonality to become even more pronounced in the fourth quarter of
the year.
The North American heavy-duty transit market's active Bid
Universe continued to grow in 2019 Q3, up by 18.0% from 2019 Q2 and
49.7% from 2018 Q3. Award activity for active competitions is
expected to increase over the next 12 months. While the private
motor coach market in North
America has declined year-to-date in 2019, management
expects strong private MCI motor coach deliveries in 2019 Q4.
Overall, demand for low-floor cutaway and medium-duty buses remains
encouraging with ARBOC backlog now at record levels.
The Company's transformative acquisition of ADL provides NFI
with an additional product line in North
America and an international platform for growth. ADL is the
largest bus and coach provider in the UK and the global market
leader in double deck buses with an established presence in
numerous geographic jurisdictions.
Zero Emission Buses ("ZEBs") continue to be an area of growing
focus, with the Company strengthening its leadership position.
ZEBs are now being built in all New Flyer transit bus
factories, comprising 4% of New Flyer's heavy-duty transit backlog
and representing a growing portion of the active bids in
North America. ADL's current
ZEB offering includes the UK's leading double deck battery-electric
vehicle and single-deck electric variants sold to the UK and
New Zealand markets. In addition,
ADL currently has two contracts in place for battery-electric
double deck buses in North America
to be delivered in 2020. MCI continues the development and
testing of its battery electric motor coaches (a J4500 and a D45
CRT LE) and ARBOC recently launched an electrification project for
the Equess medium duty bus.
Management believes its turn-key solution of high-quality and
reliable vehicles; infrastructure advisory, sourcing and
installation services and unmatched aftermarket support makes NFI
the partner of choice for customers exploring the addition of ZEBs
to their fleet. In addition, the combination of NFI's electric
vehicle expertise with ADL's global reach and existing customer
partnerships is anticipated to generate long-term benefits.
NFI Parts continues to focus on numerous strategic initiatives
to counter market pressures, competitive intensity and a declining
operating fleet from the retirement of previously acquired NABI and
Orion buses. These initiatives include additional focus on vendor
managed inventory ("VMI") programs, an enhanced product offering
and capitalizing on the implementation of a common IT
platform. In addition, NFI Parts has absorbed ARBOC's cutaway
bus parts business which management believes will provide an
additional revenue synergy. ADL's parts business has begun
collaborating with NFI Parts and is focused on enhancing its online
parts and services platform (AD 24) which provides industry leading
aftermarket support to customers in the UK. ADL Parts revenue
is also expected to grow as ADL expands its installed base around
the world.
Management is exploring numerous opportunities to combine ADL's
strengths in engineering, sales, new product development and
third-party assembly with NFI's expertise in operational
excellence, insourcing, fabrication and systems management. Initial
efforts are primarily aimed at the North American market where NFI
seeks to optimize its product portfolio, customer strategy and
geographic footprint. Management is pursuing numerous initiatives
and investigating longer-term financial benefits.
In addition to these operational initiatives, NFI is working
closely with ADL's leadership team to explore new market growth
opportunities while continuing to maintain or expand market share
in existing jurisdictions. ADL's 2018 contract win in Berlin is expected to provide meaningful
financial benefit starting in 2021 and appears to be a platform for
future European growth.
Management believes ADL's operations have less exposure to the
potential implications of the UK withdrawing from the European
Union (commonly referred to as "Brexit") than many of its peers
within the automobile or specialty vehicle industries given it
currently has minimal sales to other member states of the European
Union. While the outcome of Brexit remains unclear, with several
possible scenarios, management is taking steps to mitigate
potential risks including: diversifying its supplier base, using
global assembly partners, identifying components that may be
impacted by tariffs or that may be delayed entry into the UK and
building appropriate inventories, and continuing to use its hedging
strategy to manage foreign exchange risk, which it has focused on
since the original Brexit referendum in 2016.
Following the increase in total leverage from the unplanned
growth in work in process in 2019 and required to complete the
acquisition of ADL, management remains focused on deleveraging and
anticipates combined financial results will enable it to return to
its target of 2.0x to 2.5x net debt to EBITDA within 18 to 24
months without impacting the Company's dividend policy. Management
is focused on decreasing WIP, improving deliveries and moving past
production challenges while continuing to generate significant
positive free cash flow, return cash to shareholders and realize
meaningful value from investments made.
"As our Company looks forward to Fiscal 2020 we expect to see
revenue and Adjusted EBITDA growth driven by a full-year of ADL's
operations being reflected in the financial results, reduction of
our excess inventory, delivery of firm vehicle orders and
conversion of our option backlog," said Paul Soubry. "However, competitive pressures and
product mix in the legacy heavy-duty transit and coach businesses
are expected to have an adverse impact on margins. The headwinds
are amplified in the short-term as numerous public transit agencies
evaluate their ZEB transition plans resulting in more competitions
with less units per contract at this time. Market data supports our
view that the core fleet is aging and NFI is very well positioned
to support transit agencies in North
America, and the UK and Europe as they transition to ZEBs, and we
expect to be the beneficiary of revenue and margin growth as that
change takes place over the longer-term."
Corporate Social Responsibility
NFI's vision is to enable the future of mobility with innovative
and sustainable solutions through the design and delivery of
exceptional transportation solutions that are safe, accessible,
efficient and reliable. NFI is committed to employees,
customers and shareholders, while being responsible to the
environment and the communities that we live and work in. NFI
Group's full report can be accessed
at: https://www.nfigroup.com/site-content/uploads/2019/03/Environmental-
Social-Governance-Report-2019-web.pdf.
Conference Call
A conference call for analysts and interested listeners will be
held on November 13, 2019 at
8 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:
https://event.on24.com/wcc/r/2113786/0FFA8FA3693971315720A1D42A50E496
A replay of the call will be available from 11:00 a.m. (ET) on November 13, 2019 until 11:59 p.m. (ET) on November 20, 2019. To access the replay, call
855-859-2056 or 416-849-0833 and then enter pass code number
1357288. The replay will also be available on NFI's web site at
www.nfigroup.com.
About NFI Group
With 9,000 team members operating from more than 50 facilities
across ten countries, NFI is a leading independent global bus
manufacturer providing a comprehensive suite of mass transportation
solutions under brands: New Flyer® (heavy-duty transit
buses), Alexander Dennis Limited (single and double-deck buses),
Plaxton (motor coaches), MCI® (motor coaches),
ARBOC® (low-floor cutaway and medium-duty buses), and
NFI Parts™. NFI vehicles 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). In total, NFI now supports over
105,000 buses and coaches currently in service around the world.
NFI common shares are traded on the Toronto Stock Exchange under
the symbol NFI. Further information is available at
www.nfigroup.com, www.newflyer.com, www.mcicoach.com,
www.arbocsv.com, www.nfi.parts, www.alexander-dennis.com,
and www.carfair.com
Non-IFRS Measures
References to "Adjusted EBITDA" are to earnings before interest,
income taxes, depreciation and amortization after adjusting for the
effects of certain non-recurring and/or non-operations related
items that do not reflect the current ongoing cash operations of
the Company including: gains or losses on disposal of property,
plant and equipment, unrealized foreign exchange losses or gains on
non-current monetary items, fair value adjustment for total return
swap, non-recurring transitional costs or recoveries relating to
business acquisitions, equity settled stock-based compensation,
gain on bargain purchase of subsidiary company, fair value
adjustment to acquired subsidiary company's inventory and deferred
revenue, past service costs, costs associated with assessing
strategic and corporate initiatives and proportion of the total
return swap realized. "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, past service costs, costs
associated with assessing strategic and corporate initiatives,
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 acquired subsidiary company's
inventory and deferred revenue and principal payments on capital
leases. References to "ROIC" are to net operating profit after
taxes (calculated as Adjusted EBITDA less depreciation of plant and
equipment and income taxes at the expected effective tax rate)
divided by average invested capital for the last twelve-month
period (calculated as to shareholders' equity plus long-term debt,
obligations under finance leases, other long-term liabilities,
convertible debentures and derivative financial instrument
liabilities less cash). References to "Adjusted Net Earnings" are
to net earnings after adjusting for the after tax effects of
certain non-recurring and/or non-operational related items that do
not reflect the current ongoing cash operations of the Company
including: fair value adjustments of total return swap, unrealized
foreign exchange loss or gain, unrealized gain or loss on the
interest rate swap, portion of the total return swap realized,
costs associated with assessing strategic and corporate
initiatives, non-recurring costs or recoveries relating to business
acquisition, fair value adjustment to acquired subsidiary company's
inventory and deferred revenue, equity settled stock-based
compensation, gain or loss on disposal of property, plant and
equipment, gain on bargain purchase option, past service costs,
recovery on currency transactions, prior year sales tax provision,
gain on release of provision related to purchase accounting.
References to "Adjusted Net Earnings per Share" are to Adjusted Net
Earnings divided by the average number of Shares outstanding.
Management believes Adjusted EBITDA, Free Cash Flow, ROIC,
Adjusted Net Earnings and Adjusted Earnings per Share are useful
measures in evaluating the performance of the Company. However,
Adjusted EBITDA, Free Cash Flow, ROIC, Adjusted Net Earnings and
Adjusted Earnings per Share are not recognized earnings measures
under IFRS and do not have standardized meanings prescribed by
IFRS. Readers of this press release are cautioned that ROIC,
Adjusted Net Earnings and Adjusted EBITDA should not be construed
as an alternative to net earnings or loss or cash flows from
operating activities determined in accordance with IFRS as an
indicator of NFI'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 net
earnings and cash flows to Adjusted EBITDA, based on the Financial
Statements, has been provided in the MD&A under the headings
"Reconciliation of Net Earnings to Adjusted EBITDA" and
"Reconciliation of Cash Flow to Adjusted EBITDA", respectively. A
reconciliation of Free Cash Flow to cash flows from operations is
provided under the heading "Summary of Free Cash Flow". A
reconciliation of net earnings to Adjusted Net Earnings is provided
under the heading "Reconciliation of Net Earnings to Adjusted Net
Earnings".
NFI's method of calculating Adjusted EBITDA, ROIC, Free Cash
Flow, Adjusted Net Earnings and Adjusted Earnings per Share may
differ materially from the methods used by other issuers and,
accordingly, may not be comparable to similarly titled measures
used by other issuers. Dividends paid from Free Cash Flow are not
assured, and the actual amount of dividends received by holders of
Shares will depend on, among other things, the Company's financial
performance, debt covenants and obligations, working capital
requirements and future capital requirements, all of which are
susceptible to a number of risks, as described in NFI's public
filings available on SEDAR at www.sedar.com.
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, funding may not continue to be available to the
Company's customers at current levels or at all; the Company's
business is affected by economic factors and adverse developments
in economic conditions which could have an adverse effect on the
demand for the Company's products and the results of its
operations; currency fluctuations could adversely affect the
Company's financial results or competitive position; interest rates
could change substantially, materially impacting the Company's
revenue and profitability; an active, liquid trading market for the
Shares may cease to exist, which may limit the ability of
shareholders to trade Shares; the market price for the Shares may
be volatile; if securities or industry analysts do not publish
research or reports about the Company or if their reports are
inaccurate or unfavorable to the Company or its business, or if
they adversely change their recommendations regarding the Shares or
if the Company's results of operations do not meet their
expectations, the Share price and trading volume could
decline. In addition, other risk factors may include entrance
of new competitors; failure of the ratification of the United States-Mexico-Canada Agreement
(USMCA) could be materially adverse to NFI; current requirements
under "Buy America" regulations may change and/or become more
onerous or suppliers' "Buy America" content may change; the
implications from the exit of United
Kingdom (UK) from the European Union (commonly referred to
as "Brexit") could have a materially negative impact on the
Company's UK business, operations and sales from the UK into the
European Union and the Company may have to modify its UK business
practices in order to attempt to mitigate such impact and such
mitigation steps may not be effective; failure of the Company to
comply with the disadvantaged business enterprise ("DBE") program
requirements or the failure to have its DBE goals approved by the
FTA; absence of fixed term customer contracts; exercise of options
and customer suspension or termination for convenience;
United States content bidding
preference rules may create a competitive disadvantage; local
content bidding preferences in the United
States may create a competitive disadvantage; requirements
under Canadian content policies may change and/or become more
onerous; operational risk, dependence on limited sources or unique
sources of supply; dependence on supply of engines that comply with
emission regulations; a disruption, termination or alteration of
the supply of vehicle chassis or other critical components from
third-party suppliers could materially adversely affect the sales
of certain of the Company's products; the Company's profitability
can be adversely affected by increases in raw material and
component costs as well as the imposition of tariffs and surtaxes
on material imports; the Company may incur material losses and
costs as a result of product warranty costs, recalls and
remediation of buses; production delays may result in liquidated
damages under the Company's contracts with its customers;
catastrophic events may lead to production curtailments or
shutdowns; the Company may not be able to successfully renegotiate
collective bargaining agreements when they expire and may be
adversely affected by labour disruptions and shortages of labour;
the Company's operations are subject to risks and hazards that may
result in monetary losses and liabilities not covered by insurance
or which exceed its insurance coverage; the Company may be
adversely affected by rising insurance costs; the Company may not
be able to maintain performance bonds or letters of credit required
by its contracts or obtain performance bonds and letters of credit
required for new contracts; the Company is subject to litigation in
the ordinary course of business and may incur material losses and
costs as a result of product liability claims; the Company may have
difficulty selling pre-owned coaches and realizing expected resale
values; the Company may incur costs in connection with provincial,
state or federal regulations relating to axle weight restrictions
and vehicle lengths; the Company may be subject to claims and
liabilities under environmental, health and safety laws; dependence
on management information systems and cyber security risks; the
Company's ability to execute its strategy and conduct operations is
dependent upon its ability to attract, train and retain qualified
personnel, including its ability to retain and attract executives,
senior management and key employees; the Company may be exposed to
liabilities under applicable anti-corruption laws and any
determination that it violated these laws could have a material
adverse effect on its business; the Company's risk management
policies and procedures may not be fully effective in achieving
their intended purposes; internal controls over financial
reporting, disclosure controls and procedures; ability to
successfully execute strategic plans and maintain profitability;
development of competitive or disruptive products, services or
technology; development and testing of new products; acquisition
risk; third-party distribution/dealer agreements; availability to
the Company of future financing; the Company may not be able to
generate the necessary amount of cash to service its existing debt,
which may require the Company to refinance its debt; the Company's
substantial consolidated indebtedness could negatively impact the
business; the restrictive covenants in the Company's credit
facilities could impact the Company's business and affect its
ability to pursue its business strategies; payment of dividends is
not guaranteed; a significant amount of the Company's cash is
distributed, which may restrict potential growth; NFI is dependent
on its subsidiaries for all cash available for distributions;
future sales or the possibility of future sales of a substantial
number of Shares may impact the price of the Shares and could
result in dilution; if the Company is required to write down
goodwill or other intangible assets, its financial condition and
operating results would be negatively affected; income tax risk,
investment eligibility and Canadian federal income tax risks; the
effect of comprehensive U.S. tax reform legislation on the NF
Holdings and its U.S. subsidiaries (the "NF Group"), whether
adverse or favorable, is uncertain; certain U.S. tax rules may
limit the ability of NF Group to deduct interest expense for U.S.
federal income tax purposes and may increase the NF Group's tax
liability; certain financing transactions could be characterized as
"hybrid transactions" for U.S. tax purposes, which could increase
the NF Group's tax liability. NFI cautions that this list of
factors is not exhaustive. These factors and other risks and
uncertainties are discussed in NFI's press releases, Annual
Information Form 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.
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SOURCE NFI Group Inc.