(TSX: NFI, OTC: NFYEF, TSX: NFI.DB) NFI Group Inc.
("NFI" or the "Company"), a leader in zero-emission electric
mobility solutions, today announced its unaudited interim condensed
consolidated financial results for the second quarter of 2022.
Key financial metrics of the quarter are
highlighted below:
in millions except deliveries
and per Share amounts. Unaudited |
2022 Q2 |
Change(1) |
2022 Q2 LTM |
Change(1) |
|
|
|
|
|
Deliveries (EUs) |
|
562 |
|
(43)% |
|
3,061 |
|
(32)% |
|
|
|
|
|
IFRS Measures |
|
|
|
|
Revenue |
$ |
398 |
|
(32)% |
$ |
2,044 |
|
(19)% |
Net earnings (loss) |
$ |
(57 |
) |
(2,281)% |
$ |
(109 |
) |
(1,501)% |
Net earnings (loss) per
Share |
$ |
(0.74 |
) |
(1,950)% |
$ |
(1.44 |
) |
(1,100)% |
|
|
|
|
|
Non-IFRS Measures(2) |
|
|
|
|
Adjusted EBITDA |
$ |
(21 |
) |
(141)% |
$ |
19 |
|
(92)% |
Adjusted Net Earnings
(Loss) |
$ |
(49 |
) |
(663)% |
$ |
(117 |
) |
(307)% |
Adjusted Earnings (Loss) per
Share |
$ |
(0.64 |
) |
(633)% |
$ |
(1.60 |
) |
472 % |
Free Cash Flow |
$ |
(49 |
) |
(433)% |
$ |
(97 |
) |
(212)% |
Liquidity (minimum liquidity
requirement of $300 million) |
$ |
629 |
|
62 % |
$ |
629 |
|
62 % |
(1) Results noted herein are for the
13-week period ("2022 Q2”) and the 53-week period ("LTM 2022 Q2”)
ended July 3, 2022. The comparisons reported in this press release
compare 2022 Q2 to the 13-week period ("2021 Q2") and LTM 2022 Q2
to the 52-week period ("LTM 2021 Q2") ended June 27, 2021.
Comparisons and comments are also made to the 13-week period (“2022
Q1”) ended April 3, 2022.
(2) Adjusted EBITDA, Adjusted Net
Earnings (loss), and Free Cash Flow represent non-IFRS measures,
Adjusted Net Earnings (loss) per Share and Return on Invested
Capital (ROIC) are non-IFRS ratios, and Liquidity and Backlog are
supplementary financial measures. Such measures and ratios are not
defined terms under IFRS and do not have standard meanings, so they
may not be a reliable way to compare NFI to other companies.
Adjusted Net Earnings (loss) per Share is based on the non-IFRS
measure Adjusted Net Earnings (Loss). ROIC is based on net
operating profit after tax and average invested capital, both of
which are non-IFRS measures. See “Non-IFRS Measures” and detailed
reconciliations of IFRS Measures to Non-IFRS Measures in Appendix B
of this press release. Readers are advised to review the unaudited
interim condensed consolidated financial statements (including
notes) (the “Financial Statements”) and the related Management's
Discussion and Analysis (the "MD&A") that are available at the
Company's website at www.nfigroup.com and under the Company's
profile at www.sedar.com.
“We are seeing significant positive momentum in
our order book, with record bid activity within our North American
business contributing to significant new orders, especially for
zero-emission buses. Similar to the first quarter of 2022, our
ability to meet demand has been hampered by supply chain
constraints. Our manufacturing segment results reflect the impacts
of lower deliveries as we had a temporary build-up of
work-in-progress inventory delaying deliveries until later in the
year. Our customers continue to be extremely understanding and
supportive through these difficult periods, working with us on
price increases that reflect inflation, and schedule changes based
on supply availability," said Paul Soubry, President and Chief
Executive Officer, NFI.
"We were pleased to complete amendments to our
credit facilities in July and thank our banking partners for their
continued support. These amendments position us for success as we
move into a period of recovery and the return of volume
deliveries.
"2022 has presented a number of challenges, but
our future is brighter than ever, as we expect to capitalize on our
growing backlog, order book momentum, strong win rates, and the
investments made in our products and operations to deliver on our
targets," Soubry concluded.
Segment Results
Manufacturing segment revenue
for 2022 Q2 decreased by $176 million, or 38%, compared to 2021 Q2.
The decrease was primarily due to the reduction in deliveries in
North America as a result of the global supply chain and logistics
challenges. These challenges are largely the result of suppliers
recovering from impacts of the COVID-19 pandemic, which has created
numerous bottlenecks in the supply chain and disruptions to parts
availability. During the quarter, WIP inventory increased by 117
EUs ($57 million) from vehicles waiting for control modules, due to
a shortage of specific microprocessors. These units are planned to
be delivered primarily in the second half of the year.
Manufacturing Adjusted EBITDA decreased by $64
million, or 299%, compared to 2021 Q2, driven by lower new vehicle
deliveries, unfavorable sales mix, heightened inflation, and
operational inefficiencies resulting from global supply chain and
logistics challenges. In addition, government grants, which were
primarily received to assist with the retention of skilled
personnel, decreased by $18 million in 2022 Q2 compared to the same
period in 2021, as the programs were either discontinued or NFI was
no longer eligible.
During 2022 Q2, NFI delivered 59
battery-electric and fuel cell-electric vehicles, representing 11%
of total deliveries, up from 8% in 2021 Q2. NFI's battery-electric
and fuel cell-electric vehicles have collectively travelled more
than 70 million zero-emission miles.
Aftermarket segment revenue
2022 Q2 decreased by 8% to $114 million, compared to 2021 Q2. The
decrease was driven by reduced volumes in North America, the United
Kingdom, and Europe. The aftermarket segment continues to benefit
from a multi-year retrofit program in the APAC region, where NFI
experienced record volumes in 2021 Q2, making for a difficult
comparison period. This program will continue throughout 2022, but
at a lower run rate. 2022 Q2 Aftermarket Adjusted EBITDA achieved
$22 million, a $3 million, or 10%, year-over-year decrease,
stemming from lower revenue and inflationary impacts from both
freight and part costs, where NFI was not fully able to pass along
these impacts to its customers.
Net Earnings, Adjusted Net Earnings and
Return on Invested Capital
2022 Q2 Adjusted Net Loss of $49 million
compared to 2021 Q2 Adjusted Net Earnings of $9 million. The
increase in Adjusted Net Loss was driven by the reduction in
deliveries as a result of the global supply chain and logistics
challenges plus lower aftermarket sales volumes and inflationary
impacts to both freight and part costs. In addition, the Company
did not receive any government wage subsidy grants, as the programs
were either discontinued or NFI was no longer eligible. The
Adjusted Net Loss was partially offset by $15 million in savings
generated by NFI Forward.
2022 Q2 net loss of $57 million increased by $59
million from 2021 Q1, primarily due to the same items that impacted
Adjusted Net Loss combined with restructuring costs, the settlement
of a lawsuit and the recognition of a pension liability from the
withdrawal of a multi-employer pension plan related to the closure
of NFI's Pembina, North Dakota facility. The loss was somewhat
offset by fair value adjustments to the Company’s convertible
debenture cash conversion option and unrealized gains on NFI's
interest rate swaps.
LTM 2022 Q2 ROIC decreased by 7.4% from LTM 2021
Q1, due to the decrease in Adjusted EBITDA offset by a lower
invested capital base. The decrease in invested capital is
primarily due to repayments of long-term debt and fair market value
adjustments to the interest rate swaps that reduced the associated
liability, partially offset by the issuance of new common shares
and convertible debentures (the "Debentures") which occurred in the
last twelve months.
Liquidity and Credit
Amendments
The Company's liquidity position, which combines
cash on-hand plus available capacity under its credit facilities
was strong, at $629 million, without consideration given to the
minimum liquidity requirement of $300 million under the amended
facilities, as at the end of 2022 Q2. Liquidity is down $21 million
from the end of 2022 Q1, primarily due to an increase in long-term
debt (which was used to finance growth in inventory and other
working capital balances) related to supply chain disruptions, as
well as a decrease in cash on-hand as a result of timing of
payments.
Subsequent to quarter-end, on July 29, 2022, NFI
amended the Company's existing $1.25 billion senior revolving
credit facility (the "Revolver") and its £50 million revolving UK
credit facility (the "UK Facility"). The amended facilities provide
NFI with relaxed covenants through 2023 as the Company recovers
from supply chain disruptions, heightened inflation, and other
impacts of the COVID-19 pandemic. Full details on the covenants and
their respective timing are outlined in the Capital Allocation
section of the MD&A.
As part of the Company's efforts to improve
working capital and liquidity, NFI had significant discussions on
prepayments and deposits with customers. The Company has received
some prepayments and is continuing to work with other customers on
plans that would help alleviate some of NFI's working capital
investments while it navigates through the supply chain
challenges.
Management believes that, with the amended
credit facilities, the Company's cash position and capacity under
the credit facilities, combined with anticipated future cash flows
and access to capital markets, will be sufficient to fund
operations, meet financial obligations as they come due, and
provide the funds necessary for capital expenditures, interest
payments, dividend payments and other operational needs.
While NFI has demonstrated strong access to
capital markets, given its existing liquidity position and
amendments to the Credit Facilities, the Company does not currently
have any plans to raise additional external capital. See
“Forward-Looking Statements”.
Outlook
In each of NFI’s core markets, government
support for public transit vehicles is at an all-time high.
Governments have committed billions of dollars for long-term fleet
investments in zero-emission vehicles and infrastructure. As the
market leader in North American transit and coach operations and
the UK's leading provider of buses and coaches, management believes
NFI is extremely well-positioned for both the near- and long-term
based on the multi-year commitments being made by governments in
all of the Company's core markets.
In response to a specific microprocessor
shortage impacting NFI's North American manufacturing business, as
detailed in the Company's 2022 Q1 financial results, NFI has been
building and holding a number of vehicles in inventory. This has
grown inventory by $57 million on a temporary basis. NFI continues
to have detailed discussions with the microprocessor supplier and
fully expects to receive the required modules to meet NFI's latest
guidance. Delivery of these vehicles is expected to occur in the
third and fourth quarters of 2022. Some deliveries may, however,
occur in the first quarter of 2023 due to the complexity of
customer delivery acceptance processes. In addition, NFI continues
to work with other suppliers and microprocessor sources to assist
in production recovery plans and future sourcing alternatives.
Significant progress has been made on a new alternative
microprocessor module that will be installed in some vehicles,
helping to lower the risk of future supply disruptions.
Given NFI's expectations that supply impacts
continue to be temporary and based on the strong signs of market
recovery in all of NFI's end markets, any cost and capital
reductions will be balanced with the ability to continue to secure
new orders, invest in new product development, and deliver on
existing customer orders.
NFI is experiencing significantly increased
inflation with respect to supplier pricing and wages, and through
raw material commodities purchased directly by NFI. The majority of
the impacts from inflation are expected to be seen in 2022 results
due to legacy firm order contracts, and these impacts are reflected
in NFI's financial guidance. Newer contracts are being priced to
reflect current input costs and future options contracts generally
have clauses where a government purchase price index ("PPI") will
be applied. For contracts where NFI has significant inflation
exposure, the Company is seeking price increases and surcharges
through negotiations with customers and surcharge letters. The
Company has experienced success with these efforts and expects they
will help offset some of the margin pressure facing the Company.
NFI's financial guidance reflects the adverse impacts of inflation,
with improved margins anticipated in 2023.
While these issues are anticipated to be
near-term headwinds, NFI's longer-term outlook remains strong based
on its backlog and broader market conditions. NFI has received
significant new orders over the past twelve months that support the
Company's plan to increase headcount, and ramp-up production late
in 2022 and into 2023. The Company anticipates that it will be able
to source the labor required to drive higher production and volume
deliveries in 2023. These new orders, combined with existing
backlog, other recent bid activity, and continuing growth in
government investments in transportation, are expected to drive
significant revenue and Adjusted EBITDA growth for NFI from 2023 to
2025.
NFI Forward
In 2022 Q2, NFI Forward realized Adjusted EBITDA
savings of approximately $15 million and $1 million of additional
Free Cash Flow savings.
The Company expects to achieve its target of $67
million in Adjusted EBITDA savings (from 2019 production levels) by
the end of Fiscal 2022, a year ahead of the original plan. With the
majority of the original projects completed, the Company has
implemented a series of additional projects called “NFI Forward
2.0”, that are expected to generate additional annualized Adjusted
EBITDA savings in 2023 and beyond. NFI Forward 2.0 includes the
integration of its Delaware parts distribution facility (a legacy
parts warehouse of NABI that NFI acquired in 2013) into its
existing NFI Parts™ footprint during the third quarter of 2022, and
a plan to close the MCI coach manufacturing facility in Pembina,
North Dakota, by the end of 2022.
NFI Forward 2.0 will be smaller in scale and
financial impact when compared to the original NFI Forward
initiatives. In total, the Company believes NFI Forward 2.0 will
generate $5 million to $8 million in annual savings from one-time
capital investments of $8 million to $10 million.
Financial Guidance
On April 29, 2022, NFI announced that it was
lowering its financial guidance for Fiscal 2022 due to shortages of
critical microprocessor modules expected to result in
lower-than-planned deliveries in the second and third quarters of
2022. It is also important to note that NFI does not anticipate
receiving any Canadian or UK government wage subsidy support in
2022, compared to the $56 million of wage subsidy grants received
during Fiscal 2021.
NFI confirms its 2022 lowered financial guidance
for revenue, ZEBs as a percentage of manufacturing sales, Adjusted
EBITDA and expected seasonality, with negative Adjusted EBITDA in
the third quarter and positive Adjusted EBITDA in the fourth
quarter. The Company is updating its guidance for cash capital
expenditures and has increased the range to $35 million to $45
million (from a previous range of $25 million to $35 million), in
response to investments by the Company in electric innovation
projects (both battery and fuel cell) for its ADL business in
international markets and other EV growth projects in North
America.
NFI expects a significant ramp-up in both
production and deliveries in 2023 that are expected to drive
revenue and Adjusted EBITDA growth. This is supported by NFI's firm
and option backlog, recent bid activity, and continuing growth in
government investments in transportation.
Management also reaffirms its Fiscal 2025
longer-term targets, originally announced in January 2021, to
deliver $3.9 billion to $4.1 billion in revenue, Adjusted EBITDA of
$400 million to $450 million, with approximately 40% of vehicle
sales coming from zero-emission vehicles, and ROIC of higher than
12%. These targets are driven by several factors and expectations,
including the recovery of supply chains and other COVID-19-related
impacts, a higher percentage of ZEB sales (which provide a higher
revenue and dollar margin benefit), the mitigation of inflationary
pressures, end markets recovery to pre-pandemic levels, realization
of NFI Forward initiatives driving volume leverage, growth of
cutaway and medium-duty products, aftermarket expansion, and
continuous improvement initiatives.
Please review the Company's SEDAR filings for
details on the assumptions that drive Fiscal 2022 guidance and 2025
targets. Management's expectations regarding financial guidance and
targets above are subject to the risks and other factors referred
to in Appendix B.
Environmental, Social &
Governance
In May 2022, NFI released its environmental,
social, and governance ("ESG") Report for 2021, which provides
updated key performance indicators, highlights for 2021, ESG
priorities for 2022, as well as case studies outlining some of the
specific projects and initiatives the Company undertook in the
year. The ESG Report focuses on the three main components of NFI’s
Sustainability Pledge, first adopted in 2006: “Better Product.
Better Workplace. Better World”, which guides the Company’s daily
actions and long-term planning. The ESG Report for 2021 can be
found at: https://www.nfigroup.com/esg/
In June 2022, NFI announced that it had been
ranked among Corporate Knights’ 2022 Best 50 Corporate Citizens in
Canada. The Best 50 Corporate Citizens represent a rising standard
and ambition for corporate sustainability leadership in Canada.
Second Quarter 2022 Results Conference
Call
A conference call for analysts and interested
listeners will be held on August 3, 2022 at 8:30 a.m. Eastern Time
(ET). Please be advised that the process for listening to and
participating in NFI’s quarterly conference calls has changed. For
attendees who wish to join by webcast, registration is not
required; the event can be accessed at
https://edge.media-server.com/mmc/p/kwf9ya6m. NFI encourages
attendees to join via webcast as a results presentation will be
presented via webcast and users can also submit questions to
management through the platform.
Attendees who wish to join by phone must visit
the following link and preregister:
https://register.vevent.com/register/BIf6f5a0ea586f4cc4860810ee372c72f2.
An email will be sent to the users registered email address, which
will provide the call-in details. Due to the possibility of emails
being held up in spam filters, we highly recommend that attendees
wishing to join via phone register ahead of time to ensure receipt
of their access details.
The results presentation will be made available
prior to the call at www.nfigroup.com. A replay of the call will be
accessible from 11:30 a.m. ET on August 3, 2022 until 11:59 p.m. ET
on August 4, 2023 at https://edge.media-server.com/mmc/p/kwf9ya6m.
The replay will also be available on NFI's website at:
www.nfigroup.com
About NFI Group
Leveraging 450 years of combined experience, NFI
is leading the electrification of mass mobility around the world.
With zero-emission buses and coaches, infrastructure, and
technology, NFI meets today’s urban demands for scalable smart
mobility solutions. Together, NFI is enabling more livable cities
through connected, clean, and sustainable transportation.
With 7,500 team members in nine countries, NFI
is a leading global bus manufacturer of mass mobility solutions
under the brands New Flyer® (heavy-duty transit
buses), MCI® (motor coaches), Alexander
Dennis Limited (single and double-deck buses),
Plaxton (motor coaches), ARBOC®
(low-floor cutaway and medium-duty buses), and NFI
Parts™. NFI currently offers the widest range of
sustainable drive systems available, including zero-emission
electric (trolley, battery, and fuel cell), natural gas, electric
hybrid, and clean diesel. In total, NFI supports its installed base
of over 105,000 buses and coaches around the world. NFI’s common
shares ("Shares") trade on the Toronto Stock Exchange (“TSX”) under
the symbol NFI and its Debentures trade on the TSX under the symbol
NFI.DB. News and information is available at www.nfigroup.com,
www.newflyer.com, www.mcicoach.com, www.nfi.parts,
www.alexander-dennis.com, www.arbocsv.com, and
www.carfaircomposites.com.
For investor inquiries, please contact:
Stephen KingP: 204.224.6382Stephen.King@nfigroup.com
Appendix A - Reconciliation Tables
Reconciliation of Net Earnings (Loss) to Adjusted
EBITDA and Net Operating Profit after Taxes
Management believes that Adjusted EBITDA, and
net operating profit after taxes ("NOPAT") are important measures
in evaluating the historical operating performance of the Company.
However, Adjusted EBITDA and NOPAT are not recognized earnings
measures under International Financial Reporting Standards ("IFRS")
and do not have standardized meanings prescribed by IFRS.
Accordingly, Adjusted EBITDA and NOPAT may not be comparable to
similar measures presented by other issuers. Readers of this press
release are cautioned that Adjusted EBITDA should not be construed
as an alternative to net earnings or loss determined in accordance
with IFRS as an indicator of the Company's performance and NOPAT
should not be construed as an alternative to earnings or loss from
operations determined in accordance with IFRS as an indicator of
the Company's performance. See "Non-IFRS Measures" for the
definition of Adjusted EBITDA. The following table reconciles net
earnings (loss) to Adjusted EBITDA based on the historical
Financial Statements of the Company for the periods indicated.
The company defines NOPAT as Adjusted EBITDA less depreciation of
plant and equipment, depreciation of right-of-use assets and income
taxes at a rate of 31%.
(U.S. dollars in thousands) - unaudited |
2022 Q2 |
|
2021 Q2 |
|
|
|
53-Weeks Ended July 3, 2022 |
|
52-Weeks Ended June 27, 2021 |
|
Net (loss) earnings |
(56,740 |
) |
2,587 |
|
|
|
(108,914 |
) |
(6,827 |
) |
Addback(1) |
|
|
|
|
|
|
Income taxes |
(17,595 |
) |
8,040 |
|
|
|
(32,410 |
) |
25,599 |
|
Interest expense(15) |
9,130 |
|
13,930 |
|
|
|
14,769 |
|
53,899 |
|
Amortization |
20,282 |
|
23,503 |
|
|
|
92,720 |
|
100,565 |
|
Loss (gain) on disposition of property, plant and equipment |
(58 |
) |
10 |
|
|
|
25 |
|
(793 |
) |
Fair value adjustment for total return swap(9) |
— |
|
(264 |
) |
|
|
2,335 |
|
(2,279 |
) |
Unrealized foreign exchange loss (gain) on non-current monetary
items and forward foreign exchange contracts |
1,045 |
|
2,107 |
|
|
|
12,968 |
|
(2,208 |
) |
Costs associated with assessing strategic and corporate
initiatives(7) |
— |
|
— |
|
|
|
(106 |
) |
165 |
|
Past service costs and other pension costs(11) |
7,000 |
|
— |
|
|
|
7,000 |
|
7 |
|
Proportion of the total return swap realized(10) |
— |
|
91 |
|
|
|
(1,525 |
) |
1,482 |
|
Equity settled stock-based compensation |
243 |
|
502 |
|
|
|
1,114 |
|
2,356 |
|
Unrecoverable insurance costs and other(12) |
7,913 |
|
718 |
|
|
|
8,324 |
|
718 |
|
Prior year sales tax provision(13) |
— |
|
— |
|
|
|
1,996 |
|
310 |
|
COVID-19 costs(14) |
— |
|
465 |
|
|
|
3,205 |
|
30,559 |
|
Out of period costs(16) |
— |
|
— |
|
|
|
1,234 |
|
— |
|
Restructuring costs(8) |
7,435 |
|
167 |
|
|
|
16,462 |
|
28,981 |
|
Adjusted EBITDA(1) |
(21,345 |
) |
51,856 |
|
|
|
19,197 |
|
232,534 |
|
Depreciation of property, plant and equipment and right of use
assets |
(12,346 |
) |
(15,253 |
) |
|
|
(60,350 |
) |
(67,999 |
) |
Tax at 31% |
10,444 |
|
(11,347 |
) |
|
|
12,757 |
|
(51,006 |
) |
NOPAT |
(23,247 |
) |
25,256 |
|
|
|
(28,396 |
) |
113,529 |
|
|
|
|
|
|
|
|
Adjusted EBITDA is comprised
of: |
|
|
|
|
|
|
Manufacturing |
(42,380 |
) |
21,297 |
|
|
|
(87,353 |
) |
156,044 |
|
Aftermarket |
22,256 |
|
24,936 |
|
|
|
96,342 |
|
81,169 |
|
Corporate |
(1,221 |
) |
5,623 |
|
|
|
10,208 |
|
(4,679 |
) |
Free Cash Flow and Free Cash Flow per Share
Management uses Free Cash Flow and Free Cash
Flow per Share as non-IFRS measures to evaluate the Company’s
operating performance and liquidity and to assess the Company’s
ability to pay dividends on its Shares, service debt, and meet
other payment obligations. However, Free Cash Flow and Free Cash
Flow per Share are not recognized earnings measures under IFRS and
do not have standardized meanings prescribed by IFRS. Accordingly,
Free Cash Flow and the associated per Share figure may not be
comparable to similar measures presented by other issuers. Readers
of this press release are cautioned that Free Cash Flow should not
be construed as an alternative to cash flows from operating
activities determined in accordance with IFRS as a measure of
liquidity and cash flow. See "Non-IFRS Measures" for the definition
of Free Cash Flow. The following table reconciles net cash
generated by operating activities to Free Cash Flow.
The Company defines Free Cash Flow per Share as
Free Cash Flow divided by the average number of Shares
outstanding.
(U.S. dollars in thousands, except per Share figures) |
2022 Q2 |
|
2021 Q2 |
|
|
|
53-Weeks Ended July 3, 2022 |
|
52-Weeks Ended June 27, 2021 |
|
Net cash generated by
operating activities |
8,440 |
|
91,139 |
|
|
|
(2,926 |
) |
89,400 |
|
Changes in non-cash working capital items(3) |
(61,534 |
) |
(61,841 |
) |
|
|
(68,237 |
) |
(6,945 |
) |
Interest paid(3) |
12,961 |
|
14,697 |
|
|
|
58,370 |
|
65,947 |
|
Interest expense(3) |
(18,561 |
) |
(16,518 |
) |
|
|
(72,088 |
) |
(65,766 |
) |
Income taxes paid(3) |
2,974 |
|
6,430 |
|
|
|
6,079 |
|
29,806 |
|
Current income tax (expense) recovery(3) |
2,824 |
|
(7,818 |
) |
|
|
3,105 |
|
(34,237 |
) |
Repayment of obligations under lease |
(6,029 |
) |
(3,296 |
) |
|
|
(18,722 |
) |
(21,673 |
) |
Cash capital expenditures |
(4,232 |
) |
(9,558 |
) |
|
|
(28,697 |
) |
(29,331 |
) |
Acquisition of intangible assets |
(2,214 |
) |
(604 |
) |
|
|
(5,673 |
) |
(604 |
) |
Proceeds from disposition of property, plant and equipment |
228 |
|
704 |
|
|
|
4,477 |
|
5,633 |
|
Costs associated with assessing strategic and corporate
initiatives(7) |
— |
|
— |
|
|
|
(106 |
) |
165 |
|
Defined benefit funding(4) |
1,261 |
|
388 |
|
|
|
4,511 |
|
3,902 |
|
Defined benefit expense(4) |
(1,745 |
) |
(364 |
) |
|
|
(6,734 |
) |
(4,533 |
) |
Past service costs and other pension costs (recovery)(11) |
7,000 |
|
— |
|
|
|
7,000 |
|
7 |
|
Equity Hedge |
(124 |
) |
— |
|
|
|
(124 |
) |
— |
|
Proportion of the total return swap realized(10) |
— |
|
91 |
|
|
|
(1,525 |
) |
1,482 |
|
Unrecoverable insurance costs and other(12) |
7,913 |
|
718 |
|
|
|
8,314 |
|
718 |
|
Out of period costs(16) |
— |
|
— |
|
|
|
2,498 |
|
— |
|
Prior year sales tax provision(13) |
— |
|
— |
|
|
|
1,996 |
|
313 |
|
Restructuring costs(8) |
3,627 |
|
167 |
|
|
|
12,492 |
|
21,866 |
|
COVID-19 costs(14) |
— |
|
465 |
|
|
|
3,217 |
|
30,559 |
|
Foreign exchange loss on cash held in foreign currency(5) |
(2,118 |
) |
(34 |
) |
|
|
(4,384 |
) |
(111 |
) |
Free Cash Flow(1) |
(49,330 |
) |
14,766 |
|
|
|
(97,158 |
) |
86,598 |
|
U.S. exchange rate(2) |
1.2883 |
|
1.2294 |
|
|
|
1.2710 |
|
1.2874 |
|
Free
Cash Flow (C$)(1) |
(63,552 |
) |
18,153 |
|
|
|
(123,488 |
) |
111,486 |
|
Free Cash Flow per Share (C$)(6) |
(0.8238 |
) |
0.2557 |
|
|
|
(1.8921 |
) |
1.7082 |
|
Declared dividends on Shares (C$) |
4,096 |
|
15,085 |
|
|
|
39,668 |
|
56,743 |
|
Declared dividends per Share (C$)(6) |
0.0531 |
|
0.2125 |
|
|
|
0.5312 |
|
0.8500 |
|
-
Free Cash Flow is not a recognized measure under IFRS and does not
have a standardized meaning prescribed by IFRS.
-
U.S. exchange rate (C$ per US$) is the weighted average exchange
rate applicable to dividends declared for the period.
-
Changes in non-cash working capital are excluded from the
calculation of Free Cash Flow as these temporary fluctuations are
managed through the credit facilities which are available to fund
general corporate requirements, including working capital
requirements, subject to borrowing capacity restrictions. Changes
in non-cash working capital are presented on the consolidated
statements of cash flows net of interest and income taxes
paid.
-
The cash effect of the difference between the defined benefit
expense and funding is included in the determination of cash from
operating activities. This cash effect is excluded in the
determination of Free Cash Flow as management believes that the
defined benefit expense amount provides a more appropriate measure,
as the defined benefit funding can be impacted by special payments
to reduce the unfunded pension liability.
-
Foreign exchange loss on cash held in foreign currency is excluded
in the determination of cash from operating activities under IFRS;
however, because it is a cash item, management believes it should
be included in the calculation of Free Cash Flow.
-
Per Share calculations for Free Cash Flow (C$) are determined by
dividing Free Cash Flow by the total number of all issued and
outstanding Shares using the weighted average over the period. The
weighted average number of Shares outstanding for 2022 Q2 was
77,140,467 and 70,985,041 for 2021 Q2. The weighted average number
of Shares outstanding for the 52-weeks ended July 3, 2022 and
52-weeks ended June 27, 2021 are 74,517,345 and 65,264,409,
respectively. Per Share calculations for declared dividends (C$)
are determined by dividing the amount of declared dividends by the
number of outstanding Shares at the respective period end
date.
-
Normalized to exclude non-operating expenses and recoveries related
to the costs of assessing strategic and corporate initiatives.
-
Normalized to exclude non-operating restructuring costs. Costs
primarily relate to severance costs, right-of-use asset impairments
and inventory impairments associated with NFI Forward restructuring
initiatives. Free Cash Flow reconciling amounts are net of
right-of-use asset and property, plant and equipment
impairments.
-
The fair value adjustment of the total return swap is a non-cash
(gain) loss that is excluded from the definition of Adjusted
EBITDA. Beginning in Q2 2022, hedge accounting was applied to the
total return swap derivative and therefore, the portion of the
(gain) loss on the fair value adjustment, which does not apply to
the current period is recognized in other comprehensive
income.
-
A portion of the fair value adjustment of the total return swap is
added to Adjusted EBITDA and Free Cash Flow to match the equivalent
portion of the related deferred compensation expense recognized.
Beginning in Q2 2022, hedge accounting was applied to the total
return swap derivative and therefore, the portion of the (gain)
loss on the fair value adjustment, which does not apply to the
current period is recognized in other comprehensive income.
-
Costs and recoveries associated with amendments to, and closures
of, the Company's pension plans. Q2 2022 includes $7.0 million for
the liability related to the closure of the Pembina facility and
withdrawal from the multi-employer pension plan.
-
Normalized to exclude non-operating costs related to an insurance
event that are not recoverable, or are related to the deductible.
Q2 2022 includes the costs associated with a legal settlement,
which was not recoverable under insurance.
-
Provision for sales taxes as a result of an ongoing state sales tax
review.
-
Normalized to exclude COVID-19 related costs. Costs primarily
relate to asset impairments, medical costs directly related to
COVID-19 and miscellaneous operating costs associated with
COVID-19. Asset impairments are primarily attributable to pre-owned
coach inventory. During 2022, management determined costs related
to sanitization and masks were an operating cost and would no
longer be included in the definition.
-
Includes fair market value adjustments to interest rate swaps and
the cash conversion option on the Convertible Debentures. 2022 Q2
includes a gain of $5.8 million and 2021 Q2 includes a gain of $3.8
million for the interest rate swaps. 2022 Q2 includes a gain of
$6.0 million and 2021 Q2 includes a gain of $nil for the cash
conversion option.
-
Includes adjustments made related to expenses that pertain to prior
years. 2021 Q4 includes expenses related to amounts owed from
fiscal years 2016 - 2020, and expenses related to amounts owed from
fiscal years 2014 - 2020.
Reconciliation of Net Earnings (Loss) to Adjusted
Net Earnings (Loss)
Adjusted Net Earnings and Adjusted Earnings per
Share are not recognized measures under IFRS and do not have a
standardized meaning prescribed by IFRS. Accordingly, Adjusted Net
Earnings and Adjusted Earnings per Share may not be comparable to
similar measures presented by other issuers. Readers of this press
release are cautioned that Adjusted Net Earnings and Adjusted
Earnings per Share should not be construed as an alternative to net
earnings, or net earnings per Share, determined in accordance with
IFRS as indicators of the Company's performance. See Non-IFRS
Measures for the definition of Adjusted Net Earnings and Adjusted
Earnings per Share. The following table reconcile net earnings to
Adjusted Net Earnings based on the historical Financial Statements
of the Company for the periods indicated.
(U.S. dollars in thousands, except per Share figures) -
unaudited |
2022 Q2 |
|
2021 Q2 |
|
|
|
53-WeeksEnded July 3,2022 |
|
52-WeeksEnded June 27,2021 |
|
Net (loss) earnings |
(56,740 |
) |
2,587 |
|
|
|
(108,914 |
) |
(6,827 |
) |
|
|
|
|
|
|
|
Adjustments, net of tax(1)
(7) |
|
|
|
|
|
|
Fair value adjustments of total return swap(4) |
— |
|
(120 |
) |
|
|
1,286 |
|
(1,408 |
) |
Unrealized foreign exchange loss (gain) |
722 |
|
958 |
|
|
|
7,267 |
|
(2,613 |
) |
Unrealized (gain) loss on interest rate swap |
(4,010 |
) |
(1,736 |
) |
|
|
(24,854 |
) |
(9,406 |
) |
Unrealized gain on Cash Conversion Option |
(4,122 |
) |
— |
|
|
|
(12,790 |
) |
— |
|
Portion of the total return swap realized(5) |
— |
|
42 |
|
|
|
(759 |
) |
897 |
|
Costs associated with assessing strategic and corporate
initiatives(2) |
— |
|
— |
|
|
|
(106 |
) |
164 |
|
Equity settled stock-based compensation |
167 |
|
228 |
|
|
|
631 |
|
1,355 |
|
Loss (gain) on disposition of property, plant and equipment |
(40 |
) |
5 |
|
|
|
(89 |
) |
(466 |
) |
Past service costs and other pension costs(6) |
4,830 |
|
— |
|
|
|
4,830 |
|
4 |
|
Unrecoverable insurance costs(12) |
5,460 |
|
327 |
|
|
|
7,214 |
|
327 |
|
Prior year sales tax provision(8) |
— |
|
— |
|
|
|
— |
|
204 |
|
Other tax adjustments(10) |
(1,700 |
) |
6,118 |
|
|
|
(5,329 |
) |
6,118 |
|
COVID-19 costs(9) |
— |
|
212 |
|
|
|
1,458 |
|
20,909 |
|
Out of period costs(11) |
— |
|
— |
|
|
|
1,264 |
|
— |
|
Accretion in carrying value of convertible debt and cash conversion
option |
1,309 |
|
— |
|
|
|
2,883 |
|
— |
|
Restructuring costs(3) |
5,130 |
|
76 |
|
|
|
9,259 |
|
19,401 |
|
Adjusted Net Earnings
(Loss) |
(48,993 |
) |
8,697 |
|
|
|
(116,749 |
) |
28,659 |
|
|
|
|
|
|
|
|
Net Earnings (Loss) per Share
(basic) |
(0.74 |
) |
0.04 |
|
|
|
(1.44 |
) |
(0.11 |
) |
Net Earnings (Loss) per Share
(fully diluted) |
(0.74 |
) |
0.04 |
|
|
|
(1.44 |
) |
(0.11 |
) |
|
|
|
|
|
|
|
Adjusted Earnings (Loss) per
Share (basic) |
(0.64 |
) |
0.12 |
|
|
|
(1.60 |
) |
0.43 |
|
Adjusted Earnings (Loss) per
Share (fully diluted) |
(0.64 |
) |
0.12 |
|
|
|
(1.60 |
) |
0.43 |
|
|
|
|
|
|
|
|
-
Addback items are derived from the historical financial statements
of the Company.
-
Normalized to exclude non-operating expenses related to the costs
of assessing strategic and corporate initiatives.
-
Normalized to exclude non-operating restructuring costs. Costs
primarily relate to severance costs, right-of-use asset impairments
and inventory impairments associated with NFI Forward restructuring
initiatives.
-
The fair value adjustment of the total return swap is a non-cash
(gain) loss that is excluded from the definition of Adjusted Net
Earnings (Loss). Beginning in Q2 2022, hedge accounting was applied
to the total return swap derivative and therefore, the portion of
the (gain) loss on the fair value adjustment, which does not apply
to the current period is recognized in other comprehensive
income.
-
A portion of the fair value adjustment of the total return swap is
excluded from Adjusted Net Earnings (Loss) to match the equivalent
portion of the related deferred compensation expense recognized.
Beginning in Q2 2022, hedge accounting was applied to the total
return swap derivative and therefore, the portion of the (gain)
loss on the fair value adjustment, which does not apply to the
current period is recognized in other comprehensive income.
-
Costs and recoveries associated with amendments to, and closures
of, the Company's pension plans. Q2 2022 includes $7.0 million for
the liability related to the closure of the Pembina facility and
withdrawal from the multi-employer pension plan.
-
The Company has utilized a rate of 54.5% to tax effect the
adjustments in periods related to Fiscal 2021. A rate of 31.0% has
been used to tax effect the adjustments for all other periods.
-
Provision for sales taxes as a result of a state tax review.
-
Normalized to exclude COVID-19 related costs. Costs primarily
relate to asset impairments, medical costs directly related to
COVID-19 and miscellaneous operating costs associated with
COVID-19. Asset impairments are primarily attributable to pre-owned
coach inventory. During 2022, management determined costs related
to sanitization and masks were an operating cost and would no
longer be included in the definition.
-
Includes the impact of changes in deferred tax balances as a result
of substantively enacted tax rate changes. The 2021 and 2022
amounts include the impact of the revaluation of deferred tax
balances due to the increase in the UK corporate tax rate from 19%
to 25% in 2021 Q2. The 2020 amounts result from the reversal of
previously enacted UK tax rate decline in 2020 Q2.
-
Includes adjustments made related to expenses that pertain to prior
years. 2022 Q1 includes expenses related to tax amounts owed from
fiscal years 2016 - 2018. 2021 Q4 includes expenses related to
amounts owed from fiscal years 2016 - 2020, and expenses related to
amounts owed from fiscal years 2014 - 2020.
-
Normalized to exclude non-operating costs related to an insurance
event that are not recoverable, or are related to the deductible.
Q2 2022 includes the costs associated with a legal settlement,
which was not recoverable under insurance
Reconciliation of Shareholders' Equity to
Invested Capital
The following table reconciles Shareholders'
Equity to Invested Capital. The average invested capital for the
last twelve months is used in the calculation of ROIC. ROIC is not
a recognized measure under IFRS and does not have a standardized
meaning prescribed by IFRS. Accordingly, ROIC may not be comparable
to similar measures presented by other issuers. See Non-IFRS
Measures for the definition of ROIC.
(U.S. dollars in thousands) |
2022 Q2 |
|
2022 Q1 |
|
2021 Q4 |
|
2021 Q3 |
|
Shareholders' Equity |
783,905 |
|
850,323 |
|
871,772 |
|
787,010 |
|
|
|
|
|
|
Addback |
|
|
|
|
Long term debt |
718,139 |
|
677,996 |
|
586,411 |
|
1,049,273 |
|
Capital leases |
131,077 |
|
139,129 |
|
143,675 |
|
150,212 |
|
Convertible Debentures |
224,947 |
|
229,673 |
|
225,768 |
|
— |
|
Derivatives |
(8,179 |
) |
4,806 |
|
31,883 |
|
20,920 |
|
Cash |
(50,274 |
) |
(26,604 |
) |
(77,318 |
) |
(64,822 |
) |
Bank indebtedness |
— |
|
1,233 |
|
— |
|
— |
|
Invested Capital |
1,799,615 |
|
1,876,556 |
|
1,782,191 |
|
1,942,593 |
|
Average of invested capital over the quarter |
1,838,086 |
|
1,829,374 |
|
1,862,392 |
|
1,945,438 |
|
|
|
|
|
|
|
2021 Q2 |
|
2020 Q4 |
|
2020 Q3 |
|
2020 Q2 |
|
Shareholders' Equity |
814,502 |
|
824,643 |
|
620,141 |
|
602,178 |
|
|
|
|
|
|
Addback |
|
|
|
|
Long term debt |
963,630 |
|
1,008,733 |
|
1,125,685 |
|
1,123,281 |
|
Capital leases |
153,967 |
|
150,553 |
|
150,577 |
|
152,912 |
|
Convertible Debentures |
— |
|
— |
|
— |
|
— |
|
Derivatives |
21,609 |
|
23,996 |
|
29,656 |
|
35,493 |
|
Cash |
(47,695 |
) |
(23,063 |
) |
(55,769 |
) |
(1,176 |
) |
Bank indebtedness |
— |
|
1 |
|
— |
|
10,000 |
|
Invested Capital |
1,906,013 |
|
1,984,863 |
|
1,870,290 |
|
1,922,688 |
|
Average of invested capital over the quarter |
1,945,437 |
|
1,927,577 |
|
1,896,489 |
|
1,973,970 |
|
|
|
|
|
|
Appendix B - 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. These adjustments include
gains or losses on disposal of property, plant and equipment, fair
value adjustment for total return swap, unrealized foreign exchange
losses or gains on non-current monetary items and forward foreign
exchange contracts, costs associated with assessing strategic and
corporate initiatives, past service costs and other pension costs
or recovery, non-operating costs or recoveries related to business
acquisition, fair value adjustment to acquired subsidiary company's
inventory and deferred revenue, proportion of the total return swap
realized, equity settled stock-based compensation, recovery of
currency transactions, prior year sales tax provision, COVID-19
costs and impairment loss on goodwill and non-operating
restructuring costs.
References to "NOPAT" are to Adjusted EBITDA
less depreciation of plant and equipment, depreciation of
right-of-use assets and income taxes at a rate of 31%.
“Free Cash Flow” means net cash generated by or
used in operating activities adjusted for changes in non-cash
working capital items, interest paid, interest expense, income
taxes paid, current income tax expense, repayment of obligation
under lease, cash capital expenditures, acquisition of intangible
assets, proceeds from disposition of property, plant and equipment,
costs associated with assessing strategic and corporate
initiatives, fair value adjustment to acquired subsidiary company's
inventory and deferred revenue, defined benefit funding, defined
benefit expense, past service costs and other pension costs or
recovery, proportion of total return swap, unrecoverable insurance
costs, prior year sales tax provision, non-operating restructuring
costs, extraordinary COVID-19 costs, foreign exchange gain or loss
on cash held in foreign currency.
References to "ROIC" are to NOPAT divided by
average invested capital for the last twelve month period
(calculated as to shareholders’ equity plus long-term debt,
obligations under leases, other long-term liabilities and
derivative financial instrument liabilities less cash).
References to "Adjusted Net Earnings (Loss)" are
to net earnings (loss) 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, impairment loss on goodwill, portion of the
total return swap realized, costs associated with assessing
strategic and corporate initiatives, 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, past service costs and other
pension costs or recovery, recovery on currency transactions, prior
year sales tax provision, COVID-19 costs and non-operating
restructuring costs .
References to "Adjusted Earnings (Loss) per
Share" are to Adjusted Net Earnings (Loss) divided by the average
number of Shares outstanding.
Management believes Adjusted EBITDA, ROIC, Free
Cash Flow, Adjusted Net Earnings and Adjusted Earnings per Share
are useful measures in evaluating the performance of the Company.
However, Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net
Earnings and Adjusted Earnings per Share are not recognized
earnings or cash flow 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 to Adjusted EBITDA, based on the
Financial Statements, has been provided under the headings
“Reconciliation of Net Earnings to Adjusted EBITDA”. A
reconciliation of net earnings to Adjusted Net Earnings is provided
under the heading “Reconciliation of Net Earnings (Loss) to
Adjusted Net Earnings (Loss)”.
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.
"Liquidity" is not a recognized measure under
IFRS and does not have a standardized meaning prescribed by IFRS.
The Company defines liquidity as cash on-hand plus available
capacity under its credit facilities.
"Backlog" value is not a recognized measure
under IFRS and does not have a standardized meaning prescribed by
IFRS.
References to NFI's geographic regions for the
purpose of reporting global revenues are as follows: "North
America" refers to Canada, United States, and Mexico; United
Kingdom and Europe refer to the United Kingdom and Europe; "Asia
Pacific" or "APAC" refers to Hong Kong, Malaysia, Singapore,
Australia, and New Zealand; and the "Other" category includes any
sales that do not fall into the categories above.
Forward-Looking Statements
This press release contains “forward-looking
information” and “forward-looking statements” within the meaning of
applicable Canadian securities laws, which reflect the expectations
of management regarding the Company’s future growth, financial
performance and objectives and the Company’s strategic initiatives,
plans, business prospects and opportunities, including the
duration, impact of and recovery from the COVID-19 pandemic, and
supply chain disruptions. The words “believes”, “views”,
“anticipates”, “plans”, “expects”, “intends”, “projects”,
“forecasts”, “estimates”, “guidance”, “goals”, “objectives” and
“targets” and similar expressions of future events or conditional
verbs such as “may”, “will”, “should”, “could”, “would” are
intended to identify forward-looking statements. These
forward-looking statements reflect management’s current
expectations regarding future events (including the temporary
nature of the supply chain disruptions, the recovery of the
Company’s markets and the expected benefits to be obtained through
its “NFI Forward” initiative) and the Company’s financial and
operating performance and speak only as of the date of this press
release. By their very nature, forward-looking statements require
management to make assumptions and involve significant risks and
uncertainties, should not be read as guarantees of future events,
performance or results, and give rise to the possibility that
management’s predictions, forecasts, projections, expectations or
conclusions will not prove to be accurate, that the assumptions may
not be correct and that the Company’s future growth, financial
performance and objectives and the Company’s strategic initiatives,
plans, business prospects and opportunities, including the
duration, impact of and recovery from the COVID-19 pandemic and
supply chain disruptions, will not occur or be achieved. There can
be no assurance that dividends will continue to be paid.
A number of factors that may cause actual
results to differ materially from the results discussed in the
forward-looking statements include: the Company’s business,
operating results, financial condition and liquidity may be
materially adversely impacted by the ongoing COVID-19 pandemic and
related supply chain challenges, employee absenteeism and
inflationary effects; the Company’s business, operating results,
financial condition and liquidity may be materially adversely
impacted by the Russian invasion of Ukraine due to factors
including but not limited to further supply chain issues and
inflationary pressures and supply chain disruptions; funding may
not continue to be available to the Company’s customers at current
levels or at all and proposed government funding plans may not
materialize or result in vehicle or parts purchase contracts being
awarded to the Company; 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 and/or the Debentures
may cease to exist, which may limit the ability of securityholders
to trade Shares and/or Debentures; the market price for the Shares
and/or the Debentures may be volatile; if securities or industry
analysts do not publish research or reports about the Company and
its business, 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, if securities or industry analysts
publish inaccurate or unfavorable research about the Company or its
business, the Share price and trading volume of the Shares could
decline; competition in the industry and entrance of new
competitors; current requirements under U.S. “Buy America”
regulations may change and/or become more onerous or suppliers’
“Buy America” content may change; failure of the Company to comply
with the U.S. Disadvantaged Business Enterprise (“DBE”) program
requirements or the failure to have its DBE goals approved by the
U.S. Federal Transit Administration; absence of fixed term customer
contracts, exercise of options and customer suspension or
termination for convenience; 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; the Company’s business may be materially
impacted by climate change matters, including risks related to the
transition to a lower-carbon economy); operational risk resulting
from inadequate or failed internal processes, people and/or systems
or from external events, including fiduciary breaches, regulatory
compliance failures, legal disputes, business disruption,
pandemics, floods, technology failures, processing errors, business
integration, damage to physical assets, employee safety and
insurance coverage; international operations subject the Company to
additional risks and costs and may cause profitability to decline;
compliance with international trade regulations, tariffs and
duties; dependence on unique or limited sources of supply (such as
engines, components containing microprocessors or, in other cases,
for example, the supply of transmissions, batteries for
battery-electric buses, axles or structural steel tubing) resulting
in the Company’s raw materials and components not being readily
available from alternative sources of supply, being available only
in limited supply, a particular component may be specified by a
customer, the Company’s products have been engineered or designed
with a component unique to one supplier or a supplier may have
limited or no supply of such raw materials or components or sells
such raw materials or components to the Company on less than
favorable commercial terms; the Company’s vehicles and certain
other products contain electronics, microprocessors control
modules, and other computer chips, for which there has been a surge
in demand, resulting in a worldwide supply shortage of such chips
in the transportation industry, and a shortage or disruption of the
supply of such microchips could materially disrupt the Company’s
operations and its ability to deliver products to customers;
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; the Company may incur material losses and costs as a result
of product warranty costs, recalls and remediation of transit buses
and motor coaches; production delays may result in liquidated
damages under the Company’s contracts with its customers;
catastrophic events, including those related to impacts of climate
change, 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 labor disruptions and shortages of labor; 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 and other claims; the
Company may have difficulty selling pre-owned coaches and realizing
expected resale values; the Company may incur costs in connection
with 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, no matter how well designed, have inherent limitations;
there are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the 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 or model variants; acquisition risk; reliance on
third-party manufacturers; 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; the Company is dependent on its subsidiaries for
all cash available for distributions; the Company may not be able
to make principal payments on the Debentures; redemption by the
Company of the Debentures for Shares will result in dilution to
holders of Shares; Debentures may be redeemed by the Company prior
to maturity; the Company may not be able to repurchase the
Debentures upon a change of control as required by the trust
indenture under which the Debentures were issued (the “Indenture”);
conversion of the Debentures following certain transactions could
lessen or eliminate the value of the conversion privilege
associated with the Debentures; future sales or the possibility of
future sales of a substantial number of Shares or Debentures may
impact the price of the Shares and/or the Debentures and could
result in dilution; payments to holders of the Debentures are
subordinated in right of payment to existing and future Senior
Indebtedness (as described under the Indenture) and will depend on
the financial health of the Company and its creditworthiness; if
the Company is required to write down goodwill or other intangible
assets, its financial condition and operating results would be
negatively affected; and income and other tax risk resulting from
the complexity of the Company’s businesses and operations and the
income and other tax interpretations, legislation and regulations
pertaining to the Company’s activities being subject to continual
change.
Factors relating to the global COVID-19 pandemic
include: the magnitude and duration of the global, national and
regional economic and social disruption being caused as a result of
the pandemic; the impact of national, regional and local
governmental laws, regulations and “shelter in place” or similar
orders relating to the pandemic which may materially adversely
impact the Company’s ability to continue operations; partial or
complete closures of one, more or all of the Company’s facilities
and work locations or the reduction of production rates (including
due to government mandates and to protect the health and safety of
the Company’s employees or as a result of employees being unable to
come to work due to COVID-19 infections with respect to them or
their family members or having to isolate or quarantine as a result
of coming into contact with infected individuals); production rates
may be further decreased as a result of the pandemic; ongoing and
future supply delays and shortages of parts and components, and
shipping and freight delays, and disruption to labor supply as a
result of the pandemic; the pandemic will likely adversely affect
operations of suppliers and customers, and reduce and delay, for an
unknown period, customers’ purchases of the Company’s products and
the supply of parts and components by suppliers; the anticipated
recovery of the Company’s markets in the future may be delayed or
increase in demand may be lower than expected as a result of the
continuing effects of the pandemic; the Company’s ability to obtain
access to additional capital if required; and the Company’s
financial performance and condition, obligations, cash flow and
liquidity and its ability to maintain compliance with the covenants
under its credit facilities, which may also negatively impact the
ability of the Company to pay dividends. There can be no assurance
that the Company will be able to maintain sufficient liquidity for
an extended period, or access to additional capital or access to
government financial support or as to when production operations
will return to previous production rates. There is also no
assurance that governments will provide continued or adequate
stimulus funding during or after the pandemic for public transit
agencies to purchase transit vehicles or that public or private
demand for the Company’s vehicles will return to pre-pandemic
levels in the anticipated period of time. The Company cautions that
due to the dynamic, fluid and highly unpredictable nature of the
pandemic and its impact on global and local economies, supply
chains, businesses and individuals, it is impossible to predict the
severity of the impact on the Company’s business, operating
performance, financial condition and ability to generate sufficient
cash flow and maintain adequate liquidity and any material adverse
effects could very well be rapid, unexpected and may continue for
an extended and unknown period of time.
Factors relating to the Company's “NFI Forward”
initiatives include: the Company's ability to successfully execute
the initiatives and to generate the planned savings in the expected
time frame or at all; management may have overestimated the amount
of savings and production efficiencies that can be generated or may
have underestimated the amount of costs to be expended; the
implementation of the initiatives may take longer than planned to
achieve the expected savings; further restructuring and
cost-cutting may be required in order to achieve the objectives of
the initiatives; the estimated amount of savings generated under
the initiatives may not be sufficient to achieve the planned
benefits; combining business units and/or reducing the number of
production or parts facilities may not achieve the efficiencies
anticipated; and the impact of the continuing global COVID-19
pandemic, supply chain issues and inflationary pressures. There can
be no assurance that the Company will be able to achieve the
anticipated financial and operational benefits, cost savings or
other benefits of the initiatives.
Factors relating to the Company’s financial
guidance and targets disclosed in this press release include, in
addition to the factors set out above, the degree to which actual
future events accord with, or vary from, the expectations of, and
assumptions used by, NFI’s management in preparing the financial
guidance and targets and the Company’s ability to successfully
execute the “NFI Forward” initiatives and to generate the planned
savings in the expected time frame or at all.
Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that could
cause actions, events or results not to be as anticipated,
estimated or intended or to occur or be achieved at all. Specific
reference is made to “Risk Factors” in the Company’s Annual
Information Form for a discussion of the factors that may affect
forward-looking statements and information. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in forward-looking statements and information.
The forward-looking statements and information contained herein are
made as of the date of this press release (or as otherwise
indicated) and, except as required by law, the Company does not
undertake to update any forward-looking statement or information,
whether written or oral, that may be made from time to time by the
Company or on its behalf. The Company provides no assurance that
forward-looking statements and information will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers and investors should not place undue reliance on
forward-looking statements and information.
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