New Flyer Announces 2015 Third Quarter Results

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

  • Consolidated revenue of $364.7 million increased by 1.1% compared to 2014 Q3.
  • Consolidated Adjusted EBITDA of $36.3 million, an increase of 41.2% compared to 2014 Q3.
  • Net earnings of $16.6 million increased 61.6% compared to 2014 Q3 and earnings per share of $0.30 increased 66.7% from 2014 Q3.
  • Free Cash Flow was C$22.1 million and declared dividends were C$8.6 million. The Free Cash Flow payout ratio in 2015 YTD is 41.3% compared with 54.8% during 2014 YTD.
  • Total backlog of 7,290 EUs (valued at $3.59 billion) increased 4% during 2015 Q3.
  • Management anticipates the amount of bus procurement activity by public transit agencies throughout the United States and Canada to remain robust.

WINNIPEG, Nov. 4, 2015 /CNW/ - New Flyer Industries Inc. (TSX:NFI) (TSX:NFI.DB.U), ("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 September 27, 2015 ("2015 Q3"). Full unaudited 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.

Operating Results














Bus Deliveries


2015


2014




2015


2014



(U.S. dollars in thousands)


Q3


Q3


change


YTD


YTD


change

Number of equivalent units
("EUs") delivered



625



621


0.6%



1,791



1,757


1.9%

Average EU selling price


$

468.8


$

448.8


4.5%


$

485.5


$

452.7


7.2%


















Consolidated Revenue


2015


2014




2015


2014



(U.S. dollars in millions)


Q3


Q3


change


YTD


YTD


change

Bus


$

293.0


$

278.7


5.1%


$

869.5


$

795.4


9.3%

Aftermarket


$

71.7


$

82.0


(12.6)%


$

250.5


$

235.7


6.3%

Total Revenue


$

364.7


$

360.8


1.1%


$

1,120.0


$

1,031.1


8.6%

  • The increase in 2015 Q3 bus revenue primarily resulted from a 0.6% increase in total bus deliveries and a 4.5% increase in average selling price. The increase in average selling price is the result of a more favourable product sales mix of bus types and pricing during 2015 Q3. The average selling price can be volatile when comparing two fiscal quarters as a result of sales mix.
  • The decrease in revenue from aftermarket operations during 2015 Q3 is primarily a result of the completion of the Chicago Transit Authority ("CTA") mid-life overhaul program revenue stream.
  • The increase in revenue from aftermarket operations during the 39-week period ended September 27, 2015 ("2015 YTD") is primarily a result of improved aftermarket parts market fundamentals and incremental revenue from the CTA mid-life overhaul program.













Consolidated Adjusted EBITDA


2015


2014




2015


2014



(U.S. dollars in millions)


Q3


Q3


change


YTD


YTD


change

Bus


21.6


12.6


72.1%


58.8


34.2


71.8%

Aftermarket


14.7


13.1


11.7%


48.1


38.1


26.2%

Total Adjusted EBITDA


36.3


25.7


41.2%


106.9


72.3


47.8%














Adjusted EBITDA % of revenue













Bus


7.4%


4.5%


2.9%


6.8%


4.3%


2.5%

Aftermarket


20.5%


16.0%


4.5%


19.2%


16.2%


3.0%

Total


9.9%


7.1%


2.8%


9.5%


7.0%


2.5%

  • The increase in 2015 Q3 and 2015 YTD bus manufacturing operations Adjusted EBITDA as compared to the 13-week period ended September 28, 2014 ("2014 Q3") and the 39-week period ended September 28, 2014 ("2014 YTD") is primarily due to increased margins. Higher margins are primarily a result of a favourable sales mix, pricing, improved labour efficiencies and the cost savings achieved from transition to Xcelsior® in Anniston, Alabama. Management had anticipated and previously provided guidance that, on average, margins on orders planned for production in Fiscal 2015 are expected to be higher than the average margins achieved during Fiscal 2014. Adjusted EBITDA from bus manufacturing operations per EU can be volatile on a quarterly basis and therefore management believes that a longer term view should be taken when comparing bus manufacturing operations margins.
  • Aftermarket operations' profit margins have improved during 2015 Q3 and 2015 YTD primarily as a result of improved market fundamentals and the benefits to the product mix that have resulted from a far broader portfolio of services and parts offerings to customers. This has contributed to the increase in Adjusted EBITDA for 2015 YTD as compared to 2014 YTD.



















Net earnings


2015


2014


$



2015



2014


$

(U.S. dollars in millions)


Q3


Q3


change



YTD



YTD


change

Earnings from operations



$25.0



$12.9



12.1



$68.9



$35.0



33.9

Non-cash (losses) gain



(1.0)



(0.1)



(0.9)



(2.1)



0.5



(2.6)

Interest expense



(3.5)



(2.7)



(0.8)



(10.7)



(10.4)



(0.3)

Income tax (expense) recovered



(3.9)



0.1



(4.0)



(16.3)



(5.8)



(10.5)

Net earnings



16.6



10.2



6.4



39.8



19.3



20.5




















Net earnings per share


$

0.30


$

0.18


$

0.12



0.72



0.35


$

0.37

The Company reported net earnings of $16.6 million in 2015 Q3 representing a 61.6% improvement compared to 2014 Q3, primarily as a result of improved earnings from operations offset by increased income tax expense.

Liquidity














Free Cash Flow


2015


2014




2015


2014



(CAD dollars in millions)


Q3


Q3


change


YTD


YTD


change

Free Cash Flow


22.1


17.9


23.8%


60.9


44.4


37.2%

Declared dividends


8.6


8.1


6.0%


25.2


24.3


3.4%

The Free Cash Flow payout ratio is 41.3% in 2015 YTD compared with 54.8% during 2014 YTD. In May 2015, the Company increased the annual dividend from $0.585 to $0.62 per common share.











Liquidity Position



September 27



June 28



$

(U.S. dollars in millions)



2015



2015



change

Cash



6.5



8.8



(2.3)

Available funds from revolving credit facility



61.5



49.7



11.8

Total liquidity position



68.0



58.5



9.5

As at September 27, 2015, there were $44.0 million of direct borrowings and $9.5 million of outstanding letters of credit related to the $115.0 million revolving credit facility.

Outlook

Management believes pricing in certain types of bus competitions has normalized and expects that bus margins realized during Fiscal 2015 will be, on average, higher than those realized during Fiscal 2014. Management continues to pursue savings as a result of its decision to focus exclusively on the Xcelsior® platform as well as in daily operations through its Operational Excellence initiatives. Management anticipates that the increased bus margins for Fiscal 2015 will substantially mitigate the loss of Adjusted EBITDA derived from the Company's investment tax credits ("ITCs"), which were substantially realized during Fiscal 2014.

During the first week of July 2015 there were no scheduled assembly line entries, which resulted in a reduction of approximately 35 EUs being entered into production.  The New Flyer master production schedule combined with current backlog and orders anticipated to be awarded under new procurements is expected to enable the Company to continue to operate at a corporate average line entry rate of approximately 50 EUs per available production week for Fiscal 2015 and 2016.  The production rates vary from quarter to quarter due to sales mix and the phased introduction of the Xcelsior® platform in the Anniston, Alabama manufacturing facility in Fiscal 2015.

With respect to the aftermarket segment, management continues to expect core aftermarket parts revenue growth of approximately 5% during Fiscal 2015. Also, the aftermarket revenue generated from the CTA mid-life upgrade program ended in June 2015, which represented 13.6% of the total aftermarket revenue during 2015 YTD. In addition, management continues to be engaged in a strategic review of New Flyer's aftermarket business to identify efficiencies through business and system synchronization.

Conference Call

A conference call for analysts and interested listeners will be held on Friday November 6, 2015 at 9:00 a.m. (ET). The call-in number for listeners is 888-231-8191, 647-427-7450 or 403-451-9838. A live audio feed of the call will also be available at:

http://event.on24.com/r.htm?e=1083398&s=1&k=693E8B74E5E1B087D347863ABE9561E5

A replay of the call will be available from 12:00 p.m. (ET) on November 6, 2015 until 11:59 p.m. (ET) on November 13, 2015. To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 69218628. The replay will also be available on New Flyer's web site at www.newflyer.com.

Non-IFRS Measures

"Earnings from Operations" refer to earnings before interest, income taxes and unrealized foreign exchange losses or gains on non-current monetary items. "Adjusted EBITDA" consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges and certain other non-recurring charges as set out in the MD&A. "Free Cash Flow" means net cash generated by operating activities adjusted for changes in non-cash working capital items, interest paid, interest expense, income taxes paid, current income tax expense, effect of foreign currency rate on cash, past service costs, defined benefit funding, non-recurring transitional costs relating to business acquisitions, costs associated with assessing strategic and corporate initiatives, product rationalization costs, defined benefit expense, cash capital expenditures, realized ITCs and principal payments on capital leases. Management believes Earnings from Operations, Adjusted EBITDA and Free Cash Flow are useful measures in evaluating the performance of the Company. However, Earnings from Operations, Adjusted EBITDA and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") and may not be comparable to similarly titled measures used by other issuers. Readers are cautioned that Earnings from Operations and 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 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 Adjusted EBITDA and Free Cash Flow to net earnings and cash flow from operations, respectively, is provided in the MD&A.

About New Flyer

New Flyer is the leading manufacturer of heavy-duty transit buses in the United States and Canada.  The Company is the industry technology leader and offers the broadest product line of transit buses including drive systems powered by: clean diesel, natural gas, electric trolley, diesel-electric hybrid and now, battery electric.  All buses are supported by an industry-leading comprehensive warranty and support program, and service network.  New Flyer also operates the industry's most sophisticated aftermarket parts organization, sourcing parts from hundreds of different suppliers and providing support for all types of heavy-duty transit buses.

The New Flyer group of companies employ over 3,300 team members with manufacturing, fabrication, parts distribution and service centers in both Canada and the United States.  Further information is available on New Flyer's web site at www.newflyer.com.

The common shares and convertible unsecured subordinated debentures of the Company are traded on the Toronto Stock Exchange under the symbols NFI and NFI.DB.U, respectively.

Forward-Looking Statements

Certain statements in this press release are "forward‑looking statements", which reflect the expectations of management regarding the Company's future growth, results of operations, performance and business prospects and opportunities. The words "believes", "anticipates", "plans", "expects", "intends", "projects", "forecasts", "estimates" and similar expressions are intended to identify forward‑looking statements. These forward‑looking statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this press release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Such differences may be caused by factors which include, but are not limited to, availability of funding to the Company's customers to purchase buses and to exercise options and to purchase parts or services at current levels or at all, aggressive competition and reduced pricing in the industry, material losses and costs may be incurred as a result of product warranty issues and product liability claims, changes in Canadian or United States tax legislation, the absence of fixed term customer contracts and the termination of contracts by customers for convenience, the current U.S federal "Buy-America" legislation, certain states' U.S. content bidding preferences and certain Canadian content purchasing policies 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 as required for current business and operational needs, 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 the Company's senior credit facility and the indenture governing its Debentures could impact the ability of the Company to fund dividends 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, new products must be tested and proven in operating conditions and there may be limited demand for such new products from customers, the ability to successfully complete the product rationalization of the NABI bus platform to the Xcelsior on budget and on schedule and to achieve the projected costs savings, the ability of the Company to successfully execute strategic plans and maintain profitability, risks related to acquisitions, joint ventures, and other strategic relationships with third parties and the ability to successfully integrate acquired businesses and assets into the Company's existing business and to generate accretive effects to income and cash flow as a result of integrating these acquired businesses and assets. The Company cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in its press releases and materials filed with the Canadian securities regulatory authorities and available on SEDAR at www.sedar.com.

Although the forward‑looking statements contained in this press release are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward‑looking statements, and the differences may be material. These forward‑looking statements are made as of the date of this press release and the Company assumes 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: Jon Koffman, Investor Relations, Tel: (204) 224-6672, E-mail: investor@newflyer.com

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