New Flyer Announces 2011 First Quarter Results

Summary (U.S. dollars except as noted):

  • 2011 Q1 revenue of $214.3 million decreased by 11.8% compared to 2010 Q1 revenue of $243.0 million primarily due to sales mix of largely 60' articulated buses.  The number of EU's delivered in 2011 Q1 increased by 3.3% over 2010 Q1.
  • 2011 Q1 consolidated Adjusted EBITDA of $22.0 million increased by 4.8% compared to 2010 Q1.
  • Liquidity of $67.8 million as at April 3, 2011, decreased by $55.7 million as expected during 2011 Q1 due to normalization of working capital upon completion of a large unique contract that provided positive cash flows.
  • 2011 Q1 cash distributions of C$14.5 million exceeded 2011 Q1 Distributable Cash of C$14.3 million resulting in a payout ratio of 101.1% compared to 2010 Q1 payout ratio of 99.3%.  Payout ratio since IPO in 2005 has averaged 80.7%.
  • Total order backlog consisting of firm orders and options was $3.5 billion (representing 8,339 equivalent units) compared to January 2, 2011 total order backlog of $3.7 billion (representing 8,712 equivalent units)
  • The annual ratio of new orders received to deliveries has approximated 1.0 to 1.0 for the past three quarters. In comparison, the annual ratio of new orders received to deliveries was approximately 0.75 to 1.0 in the first half of Fiscal 2010.

WINNIPEG, May 12 /CNW/ - New Flyer Industries Inc. (TSX:NFI.UN) ("New Flyer" or the "Company"), the leading manufacturer of heavy-duty transit buses in Canada and the United States, today announced its results for the 13-week period ended April 3, 2011 ("2011 Q1"). Full financial statements and Management's Discussion and Analysis (the "MD&A") are available at the Company's web site at: www.newflyer.com/index/financialreport. Unless otherwise indicated all monetary amounts in this press release are expressed in U.S. dollars.

Bus Deliveries 2011 2010  
(U.S. dollars in thousands) Q1 Q1 Change
Number of units delivered (EUs) 468 453 3.3%
Average EU selling price $400.1 $  477.1 -16.0%

The average selling price per equivalent unit (or "EU") decreased 16.0% to $400 thousand in 2011 Q1 from $477.1 thousand in the 13-week period ended April 4, 2010 ("2010 Q1"). This decreased average selling price per equivalent unit is attributable to a 2011 Q1 sales mix comprised of a very high percentage of articulated buses The company secured orders for 13 used buses for which the refurbishment work is underway at the company's Arnprior Service Center.  Revenue will be recognized the same as new buses, upon delivery.

Consolidated Revenue 2011

Q1
2010

Q1
 
(U.S. dollars in millions) change
Bus $   187.5 $  216.1 -13.3%
Aftermarket 26.9 26.9 0.0%
Total Revenue $   214.3 $  243.0 -11.8%
  • Bus manufacturing revenue in 2011 Q1 of $187.5 million decreased by 13.3% compared to bus manufacturing revenue of $216.1 million in 2010 Q1, primarily resulting from a 16.0% decrease in average selling price per EU , offset partially by a $4.5 million favourable foreign currency impact.
Consolidated Adjusted EBITDA 2011 2010  
(U.S. dollars in millions) Q1 Q1 change
Bus 16.4 14.5 12.7%
Aftermarket 5.6 6.5 -13.0%
Total Adjusted EBITDA 22.0 21.0 4.8%

Consolidated Adjusted EBITDA for 2011 Q1 totaled $22.0 million compared to $21.0 million in 2010 Q1, which represents an increase of 4.8%.

  • 2011 Q1 bus manufacturing operations Adjusted EBITDA of $16.4 million (8.7% of revenue) increased by 12.7% compared to bus manufacturing operations Adjusted EBITDA of $14.5 million (6.7% of revenue) in 2010 Q1. The increase in 2011 Q1 bus manufacturing operations is primarily due to a sales mix that included contract runs of higher average bus contract margins offset by $0.9 million of severance costs relating to recent employment reductions in March 2011. Management expects an annualized cost reduction of approximately $6.9 million as a result of the reduction in labour force.
  • 2011 Q1 aftermarket operations Adjusted EBITDA of $5.6 million (20.9% of revenue) decreased by 13.0% compared to $6.5 million (24.1% of revenue) in 2010 Q1, primarily due to lower profit margins in response to pricing pressure.
Net Earnings (loss) 2011 2010 $
(U.S. dollars in millions) Q1 Q1 change
Earnings from operations 15.0 15.3 (0.3)
Non-cash charges (excluding depreciation and amortization) (5.6) (13.8) 8.2 
Interest expense (13.2) (14.5) 1.3
Income tax expense (2.6) (0.9) (1.7)
Net earnings (loss) (6.4) (13.9) 7.5

The Company reported a net loss of $6.4 million in 2011 Q1 representing an improvement compared to a net loss of $13.9 million in 2010 Q1, primarily as a result of lower non-cash charges of $8.2 million and the elimination of $1.6 million of distributions on the former Class B Shares and Class C Shares due to the Retained Interest Conversion, offset by the increase in income taxes in the current period. The increase in income taxes of $1.7 million in 2011 Q1 as compared to 2010 Q1 was primarily a result of a decrease of $1.2 million in future income taxes recovered.  Current taxes will begin to trend higher in the future as the Company's foreign tax credit pool (generated prior to the initial public offering on August 19, 2005 ("IPO")) has become depleted.

Distributable Cash 2011 2010  
(CAD dollars in millions) Q1 Q1 Change
Distributable Cash 14.3 14.7 -2.5%
Cash Distributions (14.5) (14.6) -0.8%
Excess of Distributable Cash (0.2) 0.1 -261.5%
Payout Ratio 101.1% 99.3% 1.8%

The Company generated Distributable Cash of C$14.3 million during 2011 Q1 and declared distributions of C$14.5 million, which represents a 2011 Q1 payout ratio of 101.1%. By comparison, in 2010 Q1, the Company generated Distributable Cash of C$14.7 million and declared distributions of C$14.6 million, resulting in a payout ratio of 99.3%. The decrease in 2011 Q1 Distributable Cash is primarily a result of the strengthening Canadian dollar during 2011 Q1 as compared to the U.S. dollar and an increase in current tax, which is expected to continue to be comparably higher in the future, increasing pressure on the payout ratios.

Cumulatively, since the IPO, the Company has generated Distributable Cash of C$374.9 million and has declared distributions of $302.6 million, resulting in a cumulative surplus of C$72.3 million and a payout ratio of 80.7%.

Liquidity Position April 3 January 4 $
(U.S. dollars in millions) 2011 2011 change
Cash            17.8            73.5 (55.7)
Available funds from revolving credit facility            50.0            50.0      -  
Total liquidity position            67.8            123.5 (55.7)

During 2011 Q1, the Company decreased its cash by $55.7 million due to increasing the investment in non-cash working capital by $52.8 million, primarily as a result of increased accounts receivables, inventories and a reduction in deferred revenue offset by an increase in accounts payable. The increase in accounts receivable and reduction in deferred revenue is associated with the completion of deliveries of remaining City of Ottawa buses during 2011 Q1 as this contract had favourable payment terms in comparison to other contracts. The increase in inventory and accounts payable is primarily a result of the change in product mix. Total units in inventory increased to 218 EUs from 209 EUs as a result of an increase in finished goods in transit to the customer, while work-in-process levels were reduced to 200 EUs which represents a reduction of 6 EUs during 2011 Q1.

New Flyer expects to continue bidding aggressively to maintain its industry leading backlog. During 2011 Q1 options for 36 EUs expired. New Flyer continues to monitor and promote the conversion of options to customers; and where not required by the transit authorities holding the options, they are actively brokered to other customers.

Bus deliveries in 2011 Q1 were 468 EUs and, as a result, new firm orders and options received in the quarter of 131 EUs represent 28% of buses delivered during the quarter.  Management advises that order activity is not consistent on a quarterly basis and therefore believes the ratio of orders received to deliveries is more meaningful, compared on an annual basis. Over the past four quarters the Company has delivered 2,038 EUs and received new orders (firm and options) totaling 2,045 EUs. The annual ratio of new orders received to deliveries has approximated 1.0 to 1.0 for the past three quarters. In comparison, the annual ratio of new orders received to deliveries was approximately 0.75 to 1.0 in the first half of Fiscal 2010.

Part of the Company's long-term strategy is to implement warehousing and distribution capability to provide industry-leading response times to all of New Flyer's customers in Canada and the United States. The Company announced a plan to open a fourth Parts Distribution Center in the Greater Toronto and Hamilton Area in 2011.

Further, New Flyer appointed A. Girardin Inc. of Drummondville, Quebec, as the exclusive distributor of New Flyer buses in the Province of Quebec, including distribution of spare parts, training, publications and other services to those customers. This strategic relationship will provide the Company greater opportunity to sell and support its products, particularly New Flyer's state-of-the-art Xcelsior model, to customers that it may not have been able to reach in the past.

New Flyer continues to anticipate some rationalization in the Canadian and United States bus manufacturing industry to occur in the coming years and is committed to continue as the leading market player. Management continues to expect New Flyer's bus delivery market share to increase in 2011. Management and its advisors are also investigating a number of potential acquisitions and strategic initiatives, including assessing the overall structure and dividend policy of the Company in relation to growth opportunities and the ongoing needs of the business.

Conference Call

A conference call for analysts and interested listeners will be held on Friday, May 13th, at 1:00 p.m. (ET). The call-in number for listeners is 888-231-8191 or 647-427-7450. A live audio feed of the call will also be available at:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3522200

A replay of the call will be available from 7:00 p.m. (ET) on May 13th until 11:59 p.m. (ET) on May 20th.  To access the replay, call 416-849-0833 or 800-642-1687 and then enter pass code number 65544124. The replay will also be available on New Flyer's web site at www.newflyer.com.

Non-IFRS Measures

Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges, adjusted for certain costs related to offerings, business acquisition related costs, warranty expense assumed from the ISE bankruptcy and certain other non-recurring charges as set out in the MD&A. Management believes Adjusted EBITDA and Distributable Cash (as defined below) and Distributable Cash Per Unit are useful measures in evaluating the performance of the Company. "Distributable Cash" means cash flows from operations adjusted for changes in non-cash working capital items, and effect of foreign currency rate on cash and increased for withholding taxes related to capital transactions, defined benefit funding, distributions on the former Class B and Class C common shares of New Flyer Holdings, Inc., costs related to offerings, business acquisition related costs, warranty expense assumed from the ISE bankruptcy, fair market value adjustment to inventory, fair market value adjustment to prepaid expenses, proceeds on sale of redundant assets, and interest on subordinated notes forming part of the IDSs and decreased for defined benefit expense, maintenance capital expenditures, fair market value adjustment to deferred revenue, fair market value adjustment to accounts payable and accrued liabilities and principal payments on capital leases. Adjusted EBITDA and Distributable Cash are not earnings measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings as prescribed by IFRS. Therefore, Adjusted EBITDA, Distributable Cash and Distributable Cash Per Unit may not be comparable to similar measures presented by other entities. Investors are cautioned that Adjusted EBITDA and Distributable Cash should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of New Flyer's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.

About New Flyer

New Flyer is the leading manufacturer of heavy-duty transit buses in the United States and Canada. The Company's facilities are all ISO 9001, ISO 14001 and OHSAS 18001 certified. With a skilled workforce of over 2,000 employees, New Flyer is a technology leader, offering the broadest product line in the industry, including drive systems powered by clean diesel, LNG, CNG and electric trolley as well as energy-efficient diesel-electric hybrid vehicles. All products are supported with an industry-leading, comprehensive parts and support network. The Company's IDSs are traded on the Toronto Stock Exchange under the symbol NFI.UN.

Forward-Looking Statements

Certain statements in this press release are "forward-looking statements", which reflect the expectations of management regarding the Issuer's and the Company's future growth, results of operations, performance and business prospects and opportunities. The words "believes", "anticipates", "plans", "expects", "intends", "projects", "estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this MD&A. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Such differences may be caused by factors which include, but are not limited to, competition in the heavy-duty transit bus industry, availability of funding to the Company's customers to purchase buses, parts or services at current levels or at all, competition and aggressive and reduced pricing in the industry, material losses and costs may be incurred as a result of product warranty issues, material losses and costs may be incurred as a result of product liability claims, changes in Canadian or United States tax legislation, the Company's success depends on a limited number of key executives who the Company may not be able to adequately replace in the event that they leave the Company, the absence of fixed term customer contracts and the termination of contracts by customers for convenience, the current "Buy-America" legislation and  the Ontario government's Canadian content purchasing policy may change and/or become more onerous, production delays may result in liquidated damages under the Company's contracts with its customers, the Company's ability to execute its planned production targets and reallocate production as a result of deferred bus orders, the Company's ability to generate cash from the planned reduction in excess work in process, currency fluctuations could adversely affect the Company's financial results or competitive position in the industry, the Company may not be able to maintain performance bonds or letters of credit required by its existing contracts or obtain performance bonds and letters of credit required for new contracts, third party debt service obligations may have important consequences to the Company, the covenants contained in NFI ULC's senior credit facility and Subordinated Note indenture could impact the ability of the Company to fund distributions and take certain other actions, interest rates could change substantially and materially impact the Company's profitability, the dependence on limited sources of supply, the timely supply of materials from suppliers, the possibility of fluctuations in the market prices of the pension plan investments and discount rates used in the actuarial calculations will impact pension expense and funding requirements, the Company's profitability and performance can be adversely affected by increases in raw material and component costs, the availability of labour could have an impact on production levels, the ability of the Company to successfully execute strategic plans and maintain profitability and risks related to acquisitions. The Issuer cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the Issuer's press releases and materials filed with the Canadian securities regulatory authorities and are available on SEDAR at www.sedar.com.

Although the forward-looking statements contained in this MD&A are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. These forward-looking statements are made as of the date of this MD&A and the Issuer and the Company assume no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.

SOURCE New Flyer Industries Inc.

For further information:

Glenn Asham

Chief Financial Officer

Tel: (204) 224-1251

E-mail: investor@newflyer.com


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