Summary (U.S. Dollars except as noted):
- Delayed order release from a large U.S. customer in 2012 Q3 negatively impacted line entries and the production schedule. As a result, bus revenue of $179.3 million decreased by 10.7% compared to 2011 Q3 as the number of EUs delivered decreased by 12.7%. Production has returned to previous levels averaging 36 EUs per week as the notice to proceed has been received.
- Aftermarket revenue of $29.1 million increased by 1.8% compared to 2011 Q3, but margins remain under pressure.
- Consolidated Adjusted EBITDA of $14.1 million decreased by 36.6% compared to 2011 Q3 due to decreased bus deliveries and lower contract margins sales mix.
- Net earnings of $1.7 million in 2012 Q3 decreased compared to net earnings of $15.1 million in 2011 Q3.
- Free Cash Flow was C$6.1 million and declared dividends of C$7.5 million were consistent with Board policy. The current dividend rate is expected to be maintained.
- Order activity has improved which has resulted in firm order backlog increasing by 15.4% . Management notes a significant increase in recent bid activity evidenced by record bid universe levels.
WINNIPEG, Nov. 12, 2012 /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 30 2012 ("2012 Q3"). 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.
|Number of units delivered (EUs)||386||442||-12.7%||1,269||1,341||-5.4%|
|Average EU selling price||$464.6||$454.2||2.3%||$451.5||$434.7||3.9%|
- The decrease in 2012 Q3 revenue primarily resulted from a 12.7% decrease in total bus deliveries, offset slightly by a 2.3% increase in average selling price per equivalent unit ("EU"). The decrease in deliveries is primarily a result of the delay in receiving the notice to proceed for the order of 90 60-foot Xcelsior buses (180 EUs) from New York City Transit Authority, which caused the buses to be removed from the 2012 Q3 production schedule.
- The increase in revenue from aftermarket operations when comparing the periods is due to an increase in parts sales.
- Revenue from bus manufacturing operations for the 39-week period ended September 30, 2012 ("2012 YTD") also decreased compared to the 39-week period ended October 2, 2011 ("2011 YTD"). The 2012 YTD decrease is due to decreased deliveries resulting from lower production rates in 2012 YTD offset by higher average selling price per EU in 2012 YTD compared to 2011 YTD.
- Revenue from aftermarket operations for 2012 YTD increased 4.1% compared to 2011 YTD as a result of higher parts volumes in the U.S. offset by a decrease in used bus sales.
|Consolidated Adjusted EBITDA||2012||2011||2012||2011|
|Total Adjusted EBITDA||$14.1||$22.2||-36.6%||$47.1||$64.2||-26.6%|
- 2012 Q3 bus manufacturing operations' Adjusted EBITDA decreased primarily as a result of a less bus deliveries, lower average contract margins due to sales mix and the decrease of investment tax credits realized in the quarter, which was offset partially by increased efficiencies resulting from the Company's Operational Excellence initiatives.
- The 2012 YTD decrease in bus manufacturing operations' Adjusted EBITDA when comparing the two periods is primarily a result of a sales mix with lower average margins, decreased bus deliveries, decreased investment tax credits realized in 2012 YTD of $0.5 million compared to $5.5 million in 2011 YTD and a decrease in realized foreign exchange gains.
- 2012 Q3 and 2012 YTD aftermarket operations' Adjusted EBITDA decreased, compared to their comparable 2011 periods, primarily due to lower profit margins driven largely by industry price pressure, the operating costs of the newer parts distribution centers required to achieve future revenue growth and decreased Adjusted EBITDA from the sale of used buses in 2011 YTD.
Management expects Adjusted EBITDA during the 13-week period ended December 30, 2012 ("2012 Q4") should be stronger than 2012 Q3, based on the positive impact derived from increased bus deliveries and the known contract sales mix, as all production slots in 2012 Q4 have been filled.
|Earnings from operations||$7.8||$15.8||-8.0||$26.5||$43.6||-17.1|
|Non-cash (charges) recovered||(0.9)||4.7||-5.6||(8.1)||(6.8)||-1.3|
|Income taxes (expense) recovered||(1.3)||5.0||-6.3||1.4||1.6||-0.2|
The Company reported net earnings of $1.7 million in 2012 Q3 which decreased compared to net earnings of $15.1 million during the 13-week period ended October 2, 2011 ("2011 Q3"), primarily as a result of lower earnings from operations, higher income taxes and higher non-cash charges offset by a $6.5 million decrease of finance costs. The increase in income taxes when comparing the two periods was primarily the result of a significant deferred tax recovery in 2011 Q3 caused by the refinancing of the Company's senior credit facility.
2012 YTD net earnings of $8.0 million increased compared to 2011 YTD net earnings of $1.4 million, primarily due to significantly reduced finance costs which offset the decrease in earnings from operations during 2012 YTD.
|Free Cash Flow||2012||2011||2012||2011|
|(CAD dollars in millions)||Q3||Q3||change||YTD||YTD||change|
|Free Cash Flow||6.1||0.0||100%||22.5||12.1||86.0%|
On August 8, 2012, the board of directors of the Company confirmed a new annual dividend rate equal to C$0.585 per common share ("Share"), effective for all dividends declared after August 20, 2012. The reduced dividend is expected to produce an annual improvement in cash flows of C$12.2 million, based on the current number of Shares outstanding.
Management believes that the current dividend rate is sustainable due to, among other factors, improved cash flows due to lower level of dividends than in the past, 2012 Q3 Adjusted EBITDA was negatively impacted due to a temporary reduction in productions levels, the improvements in operational performance resulting from Operational Excellent initiatives and the market conditions are beginning to show improvement.
|Liquidity Position||Sept 30||July 1||$|
|Amount required for redemption of Subordinated Notes||-||(61.7)||61.7|
|Available funds from revolving credit facility||58.5||55.6||2.9|
|Total liquidity position||61.6||61.1||0.5|
During 2012 Q3, the Company decreased its cash by $64.1 million, primarily due to $62.4 million of net cash used to redeem the 14% subordinated notes of New Flyer Industries Canada ULC on August 20, 2012. This decrease in cash was expected as the Company raised the financing to redeem the subordinated notes through the issuance of the 6.25% convertible unsecured subordinated debentures (the "Debentures") in 2012 Q2.
As at September 30, 2012, there were $18.0 million of direct borrowings and $13.5 million of outstanding letters of credits related to the $90.0 million of secured revolving credit (the "Revolver"). The Revolver decreased by $3.0 million in 2012 Q3.
Backlog and Market Indicators
The total backlog at the end of 2012 Q3 was 6,206 EUs and decreased by 0.3% from the backlog at the end of 2012 Q2 and now totals $2.64 billion. The decline in the backlog appears to be slowing as compared to the 19.4% decrease from the backlog at the end of 2011 Q3, primarily as a result of increased order intake in 2012 Q3 as compared to 2011 Q3. As well, the firm portion of the total backlog at the end of 2012 Q3 of 1,462 EUs increased 15.4% compared to the 1,267 EUs at July 1, 2012. This improving trend in total backlog is consistent with management's expectations taking into account current market conditions and upcoming procurements.
The total backlog combined with the recent order intake is expected to allow New Flyer to average a production line entry rate of approximately 36 EUs per week during 2012 Q4. This line entry rate reflects 12 weeks of production as the Company does not plan to line enter new buses into production during the winter holiday period occurring the last six days of this year. Management expects the line entry rate to be maintained at an average of 36 EUs per week for the 52-week period ended December 29, 2013; however this rate will vary quarter to quarter due to the mix of 40-foot and 60-foot buses.
In 2008, the Company created and now tracks a new potential "pipeline" or "bid universe" of anticipated heavy-duty transit bus order activity. The pipeline consists of: bids received with proposal in process, bids submitted and awaiting award and solicitations that management expects to be released by transit agencies within a five-year horizon.
At the end of 2012 Q3, there were approximately 17,730 EUs in New Flyer's new potential pipeline or bid universe for heavy-duty transit buses, an increase from the approximately 15,184 EUs reported at July 1, 2012. The increase was expected as many transit agencies awarded multi-year contracts in 2007 and 2008 which are now set to expire. This is the highest amount of EUs in the bid universe since New Flyer began tracking it, and therefore a positive indicator; however the pipeline is expected to remain volatile for the next several years. The total number of EUs for bids received with proposals in process or where bids were submitted and awaiting award was just over 6,000 EUs at the end of 2012 Q3 compared to approximately 2,500 EUs at the same time last year.
A conference call for analysts and interested listeners will be held on Tuesday, November 13, 2012 at 11:00 a.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:
A replay of the call will be available from 2:00 p.m. (ET) on November 13th until 11:59 p.m. (ET) on November 20th. To access the replay, call toll free 1-855-859-2056 and then enter pass code number 64472902. The replay will also be available on New Flyer's web site at www.newflyer.com.
Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges, adjusted for certain costs related to offerings and certain other non-recurring charges as set out in the MD&A. "Free Cash Flow" means cash flows from operations adjusted for changes in non-cash working capital items, effect of foreign currency rate on cash, defined benefit funding, business acquisition related costs, costs associated with assessing strategic and corporate initiatives, past service pension costs, proceeds on sale of redundant assets and decreased for defined benefit expense, capital expenditures and principal payments on capital leases. Management believes Adjusted EBITDA and Free Cash Flow are useful measures in evaluating the performance of the Company. However, Adjusted EBITDA and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS"). Readers of this press release are cautioned that Adjusted EBITDA and Free Cash Flow 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 or to cash flows from operating, investing and financing activities 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'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 Shares of the Company are traded on the TSX under the symbol "NFI" and the Debentures are traded under the symbol "NFI.DB.U".
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", "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, competition in the heavy-duty transit bus industry, 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, 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 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 the Company's 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, battery-electric propulsion on transit buses is still largely unproven technology and there is no assurance that such technology will result in a product desired by customers, prototype buses must be tested and proven in operating conditions, a commercialized product must be marketed and sold to potential customers and there may be no significant demand for an all-electric bus from customers, the ability of the Company to successfully execute strategic plans and maintain profitability and risks related to acquisitions, joint ventures and other strategic relationships with third parties. 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 are available on SEDAR at www.sedar.com.
Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. These forward-looking statements are made as of the date of this press release and 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.
Tel: (204) 224-6672