New Flyer announces 2012 Fiscal Year and Fourth Quarter Results

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

• Bus revenue of $180.9 million decreased by 20.5% compared to 2011 Q4. The number of EUs delivered decreased by 17.7% primarily as a result of a supplier quality issue that has been subsequently rectified and the temporary delay in receiving a notice to proceed from a large U.S. customer.
• Aftermarket revenue of $28.9 million decreased by 1.6% compared to 2011 Q4, due to discontinuation of used bus sales.
• Consolidated Adjusted EBITDA of $14.5 million decreased by 8.8% compared to 2011 Q4.
• Net earnings of $3.9 million in 2012 Q4 decreased compared to net earnings of $15.6 million in 2011 Q4 as a result of a one-time recognition of investment tax credits.
• Free Cash Flow was C$7.5 million and declared dividends of C$6.5 million compared to negative Free Cash Flow of C$3.2 million and declared dividends of C$9.5 million in 2011 Q4. The current dividend rate is expected to be maintained.
• The industry bid universe increased 46% during Fiscal 2012.
• A number of strategic growth transactions have been completed; such as, investment by Marcopolo, worldwide license to sell aftermarket treated brakes under New Flyer's Xtended Life™ brand and acquisition of Orion's aftermarket parts business.

WINNIPEG, March 20, 2013 /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 December 30, 2012 ("2012 Q4") and the 52-week period ended December 30, 2012 ("Fiscal 2012"). 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.

Operating Results

Bus Deliveries	2012	2011		2012	2011
(in thousands)	Q4	Q4	change	Fiscal	Fiscal	change
Number of units delivered (EUs)	387	470	-17.7%	1,656	1,811	-8.6%
Average EU selling price	$467.5	$484.0	-3.4%	$455.2	$447.5	1.7%
Consolidated Revenue	2012	2011		2012	2011
(in millions)	Q4	Q4	change	Fiscal	Fiscal	change
Bus	$180.9	$227.5	-20.5%	$753.9	$810.4	-7.0%
Aftermarket	28.9	29.4	-1.6%	119.1	116.0	2.6%
Total Revenue	$209.9	$256.9	-18.3%	$872.9	$926.4	-5.8%

• The decrease in 2012 Q4 revenue primarily resulted from a 17.7% decrease in total bus deliveries and a 3.4% decrease in average selling price per equivalent unit ("EU"). The decrease in deliveries is primarily a result of a supplier quality issue that has been subsequently rectified and the temporary delay in receiving the notice to proceed ("NTP") 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 third fiscal quarter of 2012 ("2012 Q3") production schedule. This resulted in WIP at the end of 2012 Q4 totaling 225 EUs, or 42 EUs more than at the end of 2012 Q3. This is the first time WIP has exceeded 200 EUs at a reporting period since the third fiscal quarter of 2011 ("2011 Q3").
• The decrease in revenue from aftermarket operations when comparing the periods is due to a decrease in used bus sales. Management does not expect used bus sales to continue in the future.
• Revenue from bus manufacturing operations for Fiscal 2012 decreased by 7.0% compared to the 52-week period ended January 1, 2012 ("Fiscal 2011"). The Fiscal 2012 decrease is due primarily to decreased deliveries resulting from lower production rates in Fiscal 2012 offset by higher average selling price per EU in Fiscal 2012 compared to Fiscal 2011.
• Revenue from aftermarket operations for Fiscal 2012 increased 2.6% compared to Fiscal 2011 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
(in millions)	Q4	Q4	change	Fiscal	Fiscal	change
Bus	$10.2	$10.8	-5.7%	$42.0	$56.6	-25.8%
Aftermarket	4.3	5.1	-15.5%	19.6	23.5	-16.6%
Total Adjusted EBITDA	$14.5	$15.9	-8.8%	$61.6	$80.1	-23.1%

• 2012 Q4 bus manufacturing operations' Adjusted EBITDA decreased slightly primarily as a result of fewer bus deliveries and the decrease of investment tax credits ("ITCs") realized in the quarter, which was offset partially by higher average contract margins due to sales mix and increased efficiencies resulting from the Company's Operational Excellence initiatives.
• The Fiscal 2012 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 and decreased ITCs realized, offset partially by an increase in realized foreign exchange gains.
• 2012 Q4 and Fiscal 2012 aftermarket operations' Adjusted EBITDA decreased compared to the comparable 2011 periods, primarily due to lower profit margins resulting from 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 Fiscal 2011.

Net earnings	2012	2011	$	2012	2011	$
(in millions)	Q4	Q4	change	Fiscal	Fiscal	change
		(*restated)			(*restated)
Earnings from operations	$7.7	$30.1	-22.4	$34.2	$73.6	-39.4
Non-cash (charges) recovered	(0.3)	1.8	-2.1	(8.3)	(5.0)	-3.3
Interest expense	(3.3)	(5.0)	1.7	(15.1)	(42.0)	26.9
Income tax expense (*restated)	(0.2)	(11.3)	11.1	(1.0)	(10.7)	9.7
Net earnings (*restated)	3.9	15.6	-11.7	9.8	15.9	-6.1

The Company reported net earnings of $3.9 million in 2012 Q4 which decreased compared to net earnings of $15.6 million during the 13-week period ended January 1, 2012 ("2011 Q4"), primarily as a result of lower earnings from operations and higher non-cash charges offset by a decrease in income tax expense and finance costs. The decrease in earnings from operations in 2012 Q4 primarily relates to the one-time recognition of $29.3 million of ITCs in 2011 Q4 which also results in a corresponding decrease in income taxes when comparing the two periods.

Fiscal 2012 net earnings of $9.8 million decreased compared to Fiscal 2011 net earnings of $15.9 million, primarily due to a similar decrease in earnings from operations as a result of the one-time recognition of ITCs in Fiscal 2011 offset partially by a significant reduction in finance costs during Fiscal 2012.

Liquidity

Free Cash Flow	2012	2011		2012	2011
(CAD dollars in millions)	Q4	Q4	change	Fiscal	Fiscal	change
		(*restated)			(*restated)
Free Cash Flow	7.5	-3.2	1000%	27.8	7.8	256.4%
Declared dividends	6.5	9.5	-32.0%	33.1	26.0	27.0%

(*) Current income taxes Fiscal 2011 and 2011 Q4 have been restated to correct the previous recording of the benefit associated with utilizing loss carry forwards and deducting historical share issuance costs as a reduction of current income taxes. In order to conform to the Fiscal 2012 presentation and the requirements under IFRS, the Fiscal 2011 current income taxes have been increased by approximately $3.2 million instead of being credited directly through deficit. The correction of this immaterial error did not have an impact on Fiscal 2011 assets, liabilities or ending deficit of the Company. However, as a result of this correction, net earnings for Fiscal 2011 decreased from approximately $19 million to approximately $16 million and earnings per share decreased from $0.98 to $0.81.For details, see footnote 10 on page 15 of the MD&A and Note 7 of the Financial Statements.

The Fiscal 2011 Free Cash Flow was negatively impacted by the income tax charge of $13.4 million (C$13.1 million) that occurred in 2011 Q3, and as a result of a $6.8 million one-time tax expense on the realization of the ITC pool in 2011 Q4. The benefit of the $23.3 million of unused ITCs is expected to be realized as cash inflows in the future.

Liquidity Position	December 30	January 1	$
(in millions)	2012	2012	change
Cash	11.2	10.1	1.1
Available funds from revolving credit facility	35.8	81.0	-45.2
Total liquidity position	47.0	91.1	-44.1

As at December 30, 2012, there were $40.0 million of direct borrowings and $14.2 million of outstanding letters of credits related to the $90.0 million of secured revolving credit (the "Revolver"). The Revolver increased by $22.0 million during 2012 Q4 which funded working capital needs.

Backlog and Market Indicators

The total backlog at the end of 2012 Q4 was 6,325 EUs, an increase of 1.9% from the backlog at the end of 2012 Q3. The firm portion of the total backlog at the end of 2012 Q4 was 1,672 EUs, compared with 1,462 EUs at the end of 2012 Q3.  The value of the order backlog at the end of 2012 Q4 was $2.7 billion, compared with $2.6 billion at the end of 2011 Q3.

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 the 52-week period ended December 29, 2013; however, as always, management cautions that this rate will vary quarter to quarter due to the mix of 40-foot and 60-foot buses.

Procurement activity has increased significantly throughout Fiscal 2012, as evidenced by the total "pipeline" or "bid universe" of 19,453 EUs at December 30, 2012, representing an increase of 46% compared to at January 1, 2012.  This increase is a result of solicitations being released in the period by some large transit agencies seeking replacement and expansion buses, but not yet been awarded. The bid universe as at December 30, 2012 was at its highest level since New Flyer began tracking it in 2008.

Diversification and Growth

Recently New Flyer completed the following strategic transactions that management believes are critical to achieving the objective of continued long-term growth and diversification:

1. On December 31, 2012, the Company signed a license and service agreement with Power Brake, LLC. The worldwide license grants New Flyer the exclusive right to sell brakes and brake components for transit bus aftermarket application that have been treated with Power Brake's technology designed to extend brake life and reduce maintenance costs. Brakes and brake components treated with the Power Brake technology will be sold by New Flyer under its Xtended Life™ branded product line.
   
   
2. On January 23, 2013, the Company announced that Marcopolo S.A. ("Marcopolo") agreed to make a strategic investment of C$116.0 million to acquire a 19.99% stake in the Company. 4,925,530 common shares of the Company (the "Shares") were issued to Marcopolo on February 15, 2013 for aggregate consideration of C$51.7 million. The remainder of the Shares will be issued at the same price per Share in one tranche over a 12-month period.
   
   The two companies also signed a Memorandum of Understanding to explore strategic and commercial opportunities to cooperate on engineering, technical, purchasing and operational matters, with a focus on reducing the Company's bus manufacturing and aftermarket part costs and enhancing the Company's competitiveness.  The companies further agreed to assess Marcopolo's technology and products for possible introduction into the Canadian and U.S. markets through the Company, as well as the Company's technology and products for potential distribution into global markets.
   
   
3. On March 1, 2013, the Company announced that its Canadian subsidiary acquired from Daimler Buses North America, Inc. certain assets and assumed customer and supplier contracts relating to the Orion aftermarket parts business for heavy-duty transit buses. The cash acquisition price was approximately $26.5 million (including an estimated $5.9 million for the purchase of accounts receivable) which reflects the post-closing working capital adjustments.

Conference Call

A conference call for analysts and interested listeners will be held on Friday March 22, 2013 at 9:00 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:

http://www.newswire.ca/en/webcast/detail/1119277/1220377

A replay of the call will be available from 10:00 a.m. (ET) on March 22, 2013 until 11:59 p.m. (ET) on March 29, 2013.  To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 15763503. The replay will also be available on New Flyer's web site at www.newflyer.com.

Non-GAAP Measures

"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 2,200 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".

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", "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, 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 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.

Jon Koffman
Investor Relations
Tel: [phone]
E-mail: [email protected]