(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 third quarter of 2022.
Key financial metrics of the quarter are
highlighted below:
in millions except deliveries and per Share amounts. Unaudited |
2022 Q3 |
Change1 |
2022 Q3LTM |
Change1 |
|
|
|
|
|
Deliveries (EUs) |
|
783 |
|
4 % |
|
3,092 |
|
(21)% |
|
|
|
|
|
IFRS Measures |
|
|
|
|
Revenue |
$ |
514 |
|
4 % |
$ |
2,066 |
|
(12)% |
Net earnings (loss) |
|
(43 |
) |
177 % |
|
(136 |
) |
5,335 % |
Net earnings (loss) per Share |
$ |
(0.56 |
) |
155 % |
$ |
(1.78 |
) |
3,660 % |
|
|
|
|
|
Non-IFRS Measures2 |
|
|
|
|
Adjusted EBITDA |
$ |
(16 |
) |
(150)% |
$ |
(28 |
) |
(114)% |
Adjusted Net Earnings (Loss) |
$ |
(48 |
) |
326 % |
$ |
(153 |
) |
1423 % |
Adjusted Earnings (Loss) per Share |
$ |
(0.63 |
) |
294 % |
$ |
(2.02 |
) |
1288 % |
Free Cash Flow |
$ |
(58 |
) |
(600)% |
$ |
(167 |
) |
(336)% |
Liquidity (minimum liquidity requirement of $250 million) |
$ |
471 |
|
47 % |
$ |
471 |
|
47 % |
- Results noted herein are for the
13-week period (“2022 Q3”) and the 53-week period (“LTM 2022 Q3”)
ended October 2, 2022. The comparisons reported in this press
release compare 2022 Q3 to the 13-week period ("2021 Q3") and LTM
2022 Q3 to the 52-week period (“LTM 2021 Q3”) ended September 26,
2021. Comparisons and comments are also made to the 13-week period
(“2022 Q2”) ended August 3, 2022.
- 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.
"Third quarter results reflect the ongoing
impacts of unreliable supplier performance, associated production
inefficiencies, and heightened inflation on input costs. We remain
focused on executing our action plan to address these headwinds,
including lowering new vehicle starts so our teams can complete
buses built but missing certain components and to allow suppliers
additional lead time to deliver parts. In addition, we continue to
work with customers regarding surcharge requests and advanced
payment programs. These combined efforts will lower cash
consumption, increase deliveries, and support liquidity
improvements," said Paul Soubry, President and Chief Executive
Officer, NFI.
"Discussions with our banking syndicate and
government partners are advancing well and we are evaluating
potential credit facility covenant relief and financing structures.
EDC, a long-time partner and strong supporter of our international
expansion, and the Government of Manitoba, are both working with
NFI as we navigate through this period of disruption.
"Our overall financial targets and longer-term
vision has not changed; in fact, it has been further supported by
record levels of demand. In the third quarter of 2022, we submitted
our highest number of bids ever and we see this positive momentum
continuing, driven by unprecedented government investments in
public transit. We also recently announced that we have been named
as the preferred partner on almost $200 million in Federal Transit
Administration grant programs for 2022 and that we have received
the largest bus order in the UK since 2019. We remain leaders in
our industry and, while there will be challenges in 2023, including
some lower margin contracts carrying over into the new year and a
slower ramp up of new vehicle production as critical supply chains
recover, we anticipate significant improvement when compared to
2022 results,” Soubry concluded.
Liquidity and Covenant
Relief
The Company's liquidity position, which combines
cash on-hand plus available capacity under its credit facilities,
without consideration given to the minimum liquidity requirement
($250 million) under the amended facilities, was strong, at $471
million as at the end of 2022 Q3. Liquidity was down $157 million
from the end of 2022 Q2, 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 part of the Company's efforts to improve
working capital and liquidity, NFI had discussions on prepayments
and deposits with customers. The Company has received $42 million
in prepayments as of October 2, 2022, and is continuing to work
with other customers on plans that would help alleviate some of
NFI's working capital investments. NFI expects that it will see a
decrease in working capital in the fourth quarter and an associated
improvement in liquidity, improving to over $500 million, at the
end of the year.
EDC, a member of NFI's banking syndicate, and
the Government of Manitoba are both working with NFI as the Company
looks to strengthen its liquidity and execute on its strong backlog
and record bidding activity. NFI is also in detailed discussions
with other members of its banking syndicate regarding relief from
financial covenants under its credit facilities that would
otherwise become applicable on January 1, 2023. Based on the
potential solutions being discussed with government and banking
partners, NFI anticipates it will be able to obtain the covenant
relief required.
The terms of the Amended Facilities do not
restrict the payment of dividends, provided the Company is in
compliance with the financial covenants, a cumulative Free Cash
Flow test, and the dividend payments remain at the current level
for the remainder of the agreements (maturing in August 2024).
Under the Amended Facilities, the payment of dividends is subject
to a Free Cash Flow test that resumes during the fourth quarter of
2022. The Company currently does not expect to be able to meet that
test. NFI is discussing the impact of its expected financial
performance and the Free Cash Flow test on potential future
dividend payments with members of its credit syndicate. The Board
made the prudent decision to lower the dividend in April 2022 and,
as management continues to believe that supply and logistics
disruptions are temporary, dividend payments at current levels are
not expected to have a significant impact on the Company's
anticipated future cash flows.
Segment Results
Manufacturing segment revenue
for 2022 Q3 increased by $22 million, or 6%, compared to 2021 Q3.
The increase was primarily due to increased deliveries, however
overall deliveries remain significantly lower than pre-COVID-19
levels due to global supply chain logistics challenges and related
production inefficiencies. These challenges are largely the result
of suppliers recovering from impacts of the COVID-19 pandemic,
which has created numerous bottlenecks in supply chains and
disruptions to certain parts availability.
During the quarter, the Company worked to build
units that will be delivered primarily in 2022 Q4, leading to WIP
inventory increasing by $57 million due to the number of partially
completed buses awaiting parts. The previously disrupted control
module supply, originally announced in 2022 Q2, that impacted the
completion of a significant number of North American transit buses,
has been recovering according to plan. Of the $469 million in WIP
inventory at the end of 2022 Q3, only $39 million, or 68 EUs, was
related to this specific microprocessor shortage. This is down from
2022 Q2 figures of $57 million, or 117 EUs, respectively, as the
Company has now delivered the majority of buses that were missing
these specific components.
Manufacturing Adjusted EBITDA decreased by $39
million, or 1,773%, compared to 2021 Q3, driven by lower new
deliveries, unfavorable sales mix, and heightened inflation. Also
contributing were operational and production inefficiencies caused
by escalating supply problems, as NFI worked to build units that
will be delivered primarily in the fourth quarter of the year. In
addition, the Company did not receive any government wage subsidy
grants in 2022 Q3, as compared to the $14 million received in 2021
Q3, as the programs were either discontinued or NFI was no longer
eligible.
Aftermarket segment revenue
2022 Q3 of $118 million was flat with 2021 Q3. The Company also
continues to benefit from a multi-year retrofit program in the
Asia-Pacific region, which will continue throughout 2022, but at a
lower run rate as the program is completed. 2022 Q3 Aftermarket
Adjusted EBITDA was $18 million, an $8 million, or 31%,
year-over-year decrease, stemming from supplier surcharges and
inflationary impacts to freight and part costs that NFI was not
fully able to pass along to its customers.
Net Earnings, Adjusted Net Earnings and
Return on Invested Capital
2022 Q3 Adjusted Net Loss of $48 million
compared to 2021 Q3 Adjusted Net Loss of $11 million. The increase
in Adjusted Net Loss was driven by unfavorable sales mix and
heightened inflation. Decreased margins were the result of
operational and production inefficiencies caused by escalating
supply problems, as NFI worked to build units that will be
delivered primarily in the fourth quarter of the year. In addition,
the Company did not receive any government wage subsidy grants in
2022. The Adjusted Net Loss was partially offset by $15 million in
savings generated by NFI Forward.
2022 Q3 net loss of $43 million increased by $27
million from 2021 Q3, primarily due to the same items that impacted
Adjusted Net Loss combined with restructuring costs. The loss was
somewhat offset by favourable mark-to-market adjustments to the
Company's interest rate swaps and favourable fair value adjustment
to the Company's convertible debenture cash conversion option.
LTM 2022 Q3 ROIC decreased by 1.8% from LTM 2022
Q2, due to the decrease in Adjusted EBITDA offset by a lower
invested capital base. The decrease in invested capital is
primarily due to a decrease in average long-term debt and fair
market value adjustments to the interest rate swaps that reduced
the associated liability, partially offset by the issuance of
convertible debentures (the "Debentures") which occurred in the
last twelve months.
Low-No Grants Update
On November 3, 2022, NFI announced the results
of grants for the Low-No and Buses & Bus Facility programs for
2022. Due to an internal error, both the number of grants where NFI
was the named partner and the associated grant amounts were not
correctly stated. The correct information is as follows: In 2022,
as part of the Federal Transit Administration’s (“FTA”) 2022 Low or
No Emission (“Low-No”) and Buses and Bus Facilities Grant Programs.
New Flyer supported the successful applications for almost $200
million in grants awarded to 15 U.S. public transit agencies
(rather than the previously reported $380 million in grants for 38
transit agencies). All other information in the original release
was correct including that NFI was the named partner for two
individual agency awards of over $25 million each and that this was
an increase from the $40 million in Low-No grants awarded to nine
U.S. public transit agencies that NFI subsidiaries supported in
2021.
While New Flyer has been named as a partner, new
awards will not be added to NFI’s backlog until contract
documentation is completed and a formal purchase order is received.
New Flyer’s success with Low-No and Buses and Bus Facilities grants
provide future backlog growth opportunities. In addition,
approximately $800 million in Low-No grants were provided to
transit agencies that had not formally named a preferred partner,
which the Company expects will generate future bidding activities
going forward.
Outlook
The global macroeconomic environment continues
to face headwinds from supply chain challenges, heightened
inflation, a strengthening U.S. dollar and rising interest rates.
Despite these broader issues, NFI's outlook remains strong based on
its backlog, growing demand for its products and historic funding
levels in core markets. NFI has received significant new orders
over the past 12 months that support the Company's anticipated
financial recovery including new firm and option orders for 4,815
EUs, an increase of 17% from LTM 2021 Q3. Its closing backlog (firm
and options) was 8,505 EUs (valued at $4.9 billion). In addition,
1,360 EUs of new firm and option orders were in bid award pending
at the end of 2022 Q3. For these EUs, approval of the award to the
Company had been made by the customer’s board, council, or
commission, as applicable, but purchase documentation had not yet
been received by the Company and therefore not yet included in the
backlog.
While the Company had anticipated it would begin
to ramp-up its production in earnest during the second half of
2022, due to ongoing and escalating supply chain disruption plus
longer supplier lead times, it now plans to begin ramping up
production in the first half of 2023, subject to supply chains
showing sustained improvement. The Company anticipates that supply
chain and parts availability will improve and it will be able to
source the additional labour required to drive higher production
and volume deliveries in 2023.
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 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. Generally, when an option contract is exercised from NFI's
North American backlog, a PPI adjustment is recorded to reflect the
higher input costs of a new vehicle. For those contracts where
these clauses are not being applied, NFI is seeking price increases
and surcharges through negotiations with customers and surcharge
letters. The Company has experienced some success with these
efforts and expects they will help offset some of the margin
pressure facing the Company. Certain surcharges that the Company
has secured, or are currently pursuing, are expected to support
margin enhancement in 2023.
While these issues are anticipated to be
near-term headwinds and will have some impact on 2023 financial
performance, NFI's longer-term outlook remains strong based on its
backlog and broader market conditions including record bid demand
in the third quarter. As of 2022 Q3, active bids reached 10,107
EUs, up 46.5% year-over-year, with 2,881 EUs of bids in process,
and another 7,226 EUs of bids submitted, up 14.6%, or 4,121 EUs,
year-over-year. Management expects active bids will continue to
remain high into 2023 as markets recover from the COVID-19 pandemic
and new government funding is used by transit agencies.
NFI Forward and Financial
Guidance
In 2022 Q3, NFI Forward realized Adjusted EBITDA
savings of approximately $15 million and an additional $3 million
of Free Cash Flow savings.
NFI reaffirms its financial guidance for 2022,
as updated on October 24, 2022, and its previously disclosed 2025
financial targets.
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.
Third Quarter 2022 Results Conference
Call
A conference call for analysts and interested
listeners will be held on November 16, 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/4yq42yda. 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/BI50f1557ad9f643389da01dc8c17146de.
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 November 16, 2022 until 11:59 p.m.
ET on November 15, 2023 at
https://edge.media-server.com/mmc/p/4yq42yda. 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 Q3 |
|
2021 Q3 |
|
|
|
53-Weeks EndedOctober 2, 2022 |
|
52-Weeks Ended September 26, 2021 |
|
Net (loss) earnings |
(42,595 |
) |
(15,415 |
) |
|
|
(136,095 |
) |
2,672 |
|
Addback |
|
|
|
|
|
|
Income taxes |
(10,133 |
) |
(5,004 |
) |
|
|
(37,539 |
) |
23,608 |
|
Interest expense15 |
12,274 |
|
15,624 |
|
|
|
11,420 |
|
54,249 |
|
Amortization |
22,282 |
|
23,970 |
|
|
|
91,032 |
|
98,163 |
|
(Gain) loss on disposition of property, plant and equipment |
(544 |
) |
642 |
|
|
|
(1,161 |
) |
41 |
|
Fair value adjustment for total return swap9 |
— |
|
736 |
|
|
|
1,599 |
|
(1,550 |
) |
Unrealized foreign exchange loss (gain) on non-current monetary
items and forward foreign exchange contracts |
(2,481 |
) |
1,356 |
|
|
|
9,130 |
|
2,755 |
|
Costs associated with assessing strategic and corporate
initiatives7 |
— |
|
— |
|
|
|
(106 |
) |
165 |
|
Past service costs and other pension costs11 |
— |
|
— |
|
|
|
7,000 |
|
7 |
|
Proportion of the total return swap realized10 |
— |
|
(653 |
) |
|
|
(872 |
) |
526 |
|
Equity settled stock-based compensation |
421 |
|
293 |
|
|
|
1,242 |
|
2,053 |
|
Unrecoverable insurance costs and other12 |
— |
|
— |
|
|
|
8,325 |
|
718 |
|
Expenses incurred outside of normal operations17 |
2,054 |
|
— |
|
|
|
2,054 |
|
— |
|
Prior year sales tax provision13 |
— |
|
— |
|
|
|
1,996 |
|
77 |
|
COVID-19 costs14 |
— |
|
279 |
|
|
|
2,926 |
|
6,446 |
|
Out of period costs16 |
(659 |
) |
— |
|
|
|
575 |
|
— |
|
Restructuring costs8 |
3,672 |
|
9,502 |
|
|
|
10,632 |
|
13,053 |
|
Adjusted EBITDA |
(15,709 |
) |
31,330 |
|
|
|
(27,842 |
) |
202,983 |
|
Depreciation of property, plant and equipment and right of use
assets |
(14,571 |
) |
(15,786 |
) |
|
|
(59,094 |
) |
(64,961 |
) |
Tax at 31% |
9,387 |
|
(4,819 |
) |
|
|
26,950 |
|
(42,787 |
) |
NOPAT |
(20,893 |
) |
10,725 |
|
|
|
(59,986 |
) |
95,235 |
|
|
|
|
|
|
|
|
Adjusted EBITDA is comprised of: |
|
|
|
|
|
|
Manufacturing |
(36,804 |
) |
2,197 |
|
|
|
(126,354 |
) |
113,627 |
|
Aftermarket |
18,182 |
|
26,169 |
|
|
|
88,355 |
|
90,689 |
|
Corporate |
2,913 |
|
2,964 |
|
|
|
10,157 |
|
(1,333 |
) |
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 Q3 |
|
2021 Q3 |
|
|
|
53-Weeks EndedOctober 2, 2022 |
|
52-Weeks EndedSeptember 26, 2021 |
|
Net cash generated by (used in) operating activities |
(128,669 |
) |
(38,487 |
) |
|
|
(93,108 |
) |
53,092 |
|
Changes in non-cash working capital items3 |
97,939 |
|
41,429 |
|
|
|
(11,727 |
) |
43,620 |
|
Interest paid3 |
15,384 |
|
13,619 |
|
|
|
60,135 |
|
62,883 |
|
Interest expense3 |
(18,788 |
) |
(17,127 |
) |
|
|
(73,749 |
) |
(65,554 |
) |
Income taxes paid3 |
(6,556 |
) |
6,987 |
|
|
|
(7,464 |
) |
26,672 |
|
Current income tax (expense) recovery3 |
(7,184 |
) |
8,185 |
|
|
|
(12,264 |
) |
(17,646 |
) |
Repayment of obligations under lease |
(8,017 |
) |
(5,645 |
) |
|
|
(21,094 |
) |
(23,815 |
) |
Cash capital expenditures |
(6,199 |
) |
(5,309 |
) |
|
|
(29,587 |
) |
(30,013 |
) |
Acquisition of intangible assets |
(2,947 |
) |
(256 |
) |
|
|
(8,364 |
) |
(889 |
) |
Proceeds from disposition of property, plant and equipment |
360 |
|
515 |
|
|
|
4,322 |
|
5,792 |
|
Costs associated with assessing strategic and corporate
initiatives7 |
— |
|
— |
|
|
|
(106 |
) |
165 |
|
Defined benefit funding4 |
2,270 |
|
625 |
|
|
|
6,156 |
|
3,180 |
|
Defined benefit expense4 |
(1,860 |
) |
(1,111 |
) |
|
|
(7,483 |
) |
(4,106 |
) |
Past service costs and other pension costs11 |
— |
|
— |
|
|
|
7,000 |
|
7 |
|
Expenses incurred outside of normal operations17 |
2,054 |
|
— |
|
|
|
2,054 |
|
— |
|
Equity Hedge |
(297 |
) |
— |
|
|
|
(421 |
) |
— |
|
Proportion of the total return swap realized10 |
— |
|
(653 |
) |
|
|
(872 |
) |
526 |
|
Unrecoverable insurance costs and other12 |
— |
|
— |
|
|
|
8,325 |
|
718 |
|
Out of period costs16 |
(659 |
) |
— |
|
|
|
1,839 |
|
— |
|
Prior year sales tax provision13 |
— |
|
— |
|
|
|
1,996 |
|
77 |
|
Restructuring costs8 |
2,281 |
|
8,598 |
|
|
|
6,175 |
|
9,791 |
|
COVID-19 costs14 |
— |
|
279 |
|
|
|
2,926 |
|
6,446 |
|
Foreign exchange gain (loss) on cash held in foreign currency5 |
2,404 |
|
43 |
|
|
|
(2,023 |
) |
(52 |
) |
Free Cash Flow1 |
(58,484 |
) |
11,692 |
|
|
|
(167,334 |
) |
70,894 |
|
U.S. exchange rate2 |
1.3826 |
|
1.2652 |
|
|
|
1.3096 |
|
1.2650 |
|
Free Cash Flow (C$)1 |
(80,860 |
) |
14,793 |
|
|
|
(219,141 |
) |
89,678 |
|
Free Cash Flow per Share (C$)6 |
(1.0598 |
) |
0.2084 |
|
|
|
(3.2522 |
) |
1.3309 |
|
Declared dividends on Shares (C$) |
4,096 |
|
15,086 |
|
|
|
28,678 |
|
58,542 |
|
Declared dividends per Share (C$)6 |
0.0537 |
|
0.2125 |
|
|
|
0.3724 |
|
0.8500 |
|
-
Free Cash Flow is not a recognized measure under IFRS and does not
have a standardized meaning prescribed by IFRS.
-
U.S. exchange rate (C$ per US$) is the weighted average exchange
rate applicable to dividends declared for the period.
-
Changes in non-cash working capital are excluded from the
calculation of Free Cash Flow as these temporary fluctuations are
managed through the credit facilities which are available to fund
general corporate requirements, including working capital
requirements, subject to borrowing capacity restrictions. Changes
in non-cash working capital are presented on the consolidated
statements of cash flows net of interest and income taxes
paid.
-
The cash effect of the difference between the defined benefit
expense and funding is included in the determination of cash from
operating activities. This cash effect is excluded in the
determination of Free Cash Flow as management believes that the
defined benefit expense amount provides a more appropriate measure,
as the defined benefit funding can be impacted by special payments
to reduce the unfunded pension liability.
-
Foreign exchange gain (loss) on cash held in foreign currency is
excluded in the determination of cash from operating activities
under IFRS; however, because it is a cash item, management believes
it should be included in the calculation of Free Cash Flow.
-
Per Share calculations for Free Cash Flow (C$) 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 Q3 was
76,299,666 and 70,985,041 for 2021 Q3. The weighted average number
of Shares outstanding for the 52-weeks ended October 2, 2022 and
52-weeks ended September 26, 2021 are 74,517,345 and 67,383,534,
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, inefficient labour 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 Q3
includes a gain of $10.5 million and 2021 Q3 includes a gain of
$1.8 million for the interest rate swaps.
-
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. 2022 Q3 includes expenses related to
amounts that should have been capitalized from Fiscal years 2010 -
2021.
-
Includes adjustments made related to items that occurred outside of
normal operations. This mostly includes items purchased in broker
markets at a premium, which the company provided to suppliers, and
does not normally directly purchase.
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 Q3 |
|
2021 Q3 |
|
|
|
53-Weeks EndedOctober 2, 2022 |
|
52-Weeks EndedSeptember 26, 2021 |
|
Net (loss) earnings |
(42,595 |
) |
(15,415 |
) |
|
|
(136,094 |
) |
2,672 |
|
|
|
|
|
|
|
|
Adjustments, net of tax 1, 7 |
|
|
|
|
|
|
Fair value adjustments of total return swap4 |
— |
|
334 |
|
|
|
952 |
|
(1,078 |
) |
Unrealized foreign exchange loss (gain) |
(1,713 |
) |
617 |
|
|
|
4,937 |
|
493 |
|
Unrealized gain on interest rate swap |
(7,271 |
) |
(815 |
) |
|
|
(31,310 |
) |
(8,319 |
) |
Unrealized loss (gain) on convertible debt embedded derivative |
217 |
|
— |
|
|
|
(12,573 |
) |
— |
|
Portion of the total return swap realized5 |
— |
|
(297 |
) |
|
|
(462 |
) |
391 |
|
Costs associated with assessing strategic and corporate
initiatives2 |
— |
|
— |
|
|
|
(106 |
) |
165 |
|
Equity settled stock-based compensation |
291 |
|
133 |
|
|
|
789 |
|
1,076 |
|
Loss (gain) on disposition of property, plant and equipment |
(376 |
) |
293 |
|
|
|
(758 |
) |
(42 |
) |
Past service costs and other pension costs6 |
— |
|
— |
|
|
|
4,830 |
|
4 |
|
Unrecoverable insurance costs12 |
— |
|
— |
|
|
|
7,214 |
|
327 |
|
Expenses incurred outside of normal operations13 |
1,417 |
|
— |
|
|
|
1,417 |
|
— |
|
Prior year sales tax provision8 |
— |
|
— |
|
|
|
— |
|
44 |
|
Other tax adjustments10 |
(1,428 |
) |
(616 |
) |
|
|
(6,141 |
) |
5,502 |
|
COVID-19 costs9 |
— |
|
127 |
|
|
|
1,331 |
|
4,205 |
|
Out of period costs11 |
(455 |
) |
— |
|
|
|
809 |
|
— |
|
Accretion in carrying value of convertible debt and cash conversion
option |
1,321 |
|
— |
|
|
|
4,204 |
|
— |
|
Restructuring costs3 |
2,534 |
|
4,323 |
|
|
|
7,470 |
|
6,178 |
|
Adjusted Net Earnings (Loss) |
(48,058 |
) |
(11,316 |
) |
|
|
(153,491 |
) |
11,618 |
|
|
|
|
|
|
|
|
Net Earnings (Loss) per Share (basic) |
(0.56 |
) |
(0.22 |
) |
|
|
(1.78 |
) |
0.07 |
|
Net Earnings (Loss) per Share (fully diluted) |
(0.56 |
) |
(0.22 |
) |
|
|
(1.78 |
) |
0.07 |
|
|
|
|
|
|
|
|
Adjusted Earnings (Loss) per Share (basic) |
(0.63 |
) |
(0.16 |
) |
|
|
(2.02 |
) |
0.17 |
|
Adjusted Earnings (Loss) per Share (fully diluted) |
(0.63 |
) |
(0.16 |
) |
|
|
(2.02 |
) |
0.17 |
|
|
|
|
|
|
|
|
-
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, inefficient labour 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 Q3. The 2020 amounts result from the reversal of
previously enacted UK tax rate decline in 2020 Q3.
-
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. 2022 Q3 includes
expenses related to amounts that should have been capitalized from
2010 - 2021.
-
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.
-
Includes adjustments made related to items that occurred outside of
normal operations. This mostly includes items purchased in broker
markets at a premium, which the company provided to suppliers, and
does not normally directly purchase.
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 Q3 |
2022 Q2 |
2022 Q1 |
2021 Q4 |
Shareholders' Equity |
710,984 |
|
783,905 |
|
850,323 |
|
871,772 |
|
|
|
|
|
|
Addback |
|
|
|
|
Long term debt |
859,297 |
|
718,139 |
|
677,996 |
|
586,411 |
|
Obligation under lease |
122,666 |
|
131,077 |
|
139,129 |
|
143,675 |
|
Convertible Debentures |
211,281 |
|
224,947 |
|
229,673 |
|
225,768 |
|
Derivatives |
(18,904 |
) |
(8,179 |
) |
4,806 |
|
31,883 |
|
Cash |
(39,832 |
) |
(50,274 |
) |
(26,604 |
) |
(77,318 |
) |
Bank indebtedness |
— |
|
— |
|
1,233 |
|
— |
|
Invested Capital |
1,845,492 |
|
1,799,615 |
|
1,876,556 |
|
1,782,191 |
|
Average of invested capital over the quarter |
1,822,554 |
|
1,838,086 |
|
1,829,374 |
|
1,862,392 |
|
|
|
|
|
|
|
2021 Q3 |
2021 Q2 |
2021 Q1 |
2020 Q4 |
Shareholders' Equity |
787,010 |
|
814,502 |
|
824,643 |
|
620,141 |
|
|
|
|
|
|
Addback |
|
|
|
|
Long term debt |
1,049,273 |
|
963,630 |
|
1,008,733 |
|
1,125,685 |
|
Obligations under lease |
150,212 |
|
153,967 |
|
150,553 |
|
150,577 |
|
Convertible Debentures |
— |
|
— |
|
— |
|
— |
|
Derivatives |
20,920 |
|
21,609 |
|
23,996 |
|
29,656 |
|
Cash |
(64,822 |
) |
(47,695 |
) |
(23,063 |
) |
(55,769 |
) |
Bank indebtedness |
— |
|
— |
|
1 |
|
— |
|
Invested Capital |
1,942,593 |
|
1,906,013 |
|
1,984,863 |
|
1,870,290 |
|
Average of invested capital over the quarter |
1,924,303 |
|
1,945,438 |
|
1,927,577 |
|
1,896,489 |
|
|
|
|
|
|
|
|
|
|
|
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 and expenses incurred outside the
normal course of operations 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, expenses
incurred outside the normal course of operations, 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, expenses incurred outside the normal course of
operations, 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,
expenses incurred outside the normal course of operations 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 liquidity 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, supply chain disruptions and plans to address them, and
the Company's expectation of receiving further covenant relief
under its senior credit facilities. 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 and operational challenges,
production improvement, 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 Company’s plans and expectations
relating to the duration, impact of and recovery from the COVID-19
pandemic, supply chain disruptions and inflationary pressures, will
not occur or be achieved. In connection with obtaining the
necessary covenant relief under the Company's senior credit
facilities, it is possible that certain other amendments could be
made, including with respect to a reduction in the size of the
facilities, an increase in the interest rates and other fees and
additional restrictions on dividends and acquisitions. There can be
no assurance that the Company will be successful in obtaining the
necessary covenant relief under its senior credit facilities, any
other financing solution, or 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 disruptions and
inflationary pressures; 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 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, obtain satisfactory covenant relief under its
credit facilities, 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”
initiative include: the Company's ability to successfully execute
the initiative 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 initiative 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 initiative; the estimated amount of savings generated under the
initiative 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
initiative.
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” initiative 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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