New Flyer Announces 2014 First Quarter Results

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

  • Revenue of $323.9 million increased by 32.1% compared to 2013 Q1.
  • Consolidated Adjusted EBITDA of $19.7 million increased by 27.9% compared to 2013 Q1.
  • Net earnings of $5.5 million in 2014 Q1 increased compared to $3.5 million in 2013 Q1 and earnings per share of $0.10 increased from $0.08 in 2013 Q1.
  • Liquidity improved by $7.7 million during 2014 Q1 primarily as a result of reduced investment in working capital.
  • Free Cash Flow was C$10.6 million and declared dividends were C$8.1 million.  The current dividend rate is expected to be maintained.
  • Fiscal 2014 average bus margins are expected be lower than margins achieved in Fiscal 2013.

WINNIPEG, May 7, 2014 /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 March 30, 2014 ("2014 Q1"). Full financial statements and Management's Discussion and Analysis (the "MD&A") are available at the Company's web site at: Unless otherwise indicated all monetary amounts in this press release are expressed in U.S. dollars.

Bus Deliveries     2014     2013      
(U.S. dollars in thousands)     Q1     Q1     Change
Number of equivalent units ("EUs") delivered     554     490     13.1%
Average EU selling price     $452.8     $424.1     6.8%

The number of EUs delivered in 2014 Q1 exceeded management's previous expectations by 19 EUs. However, WIP at the end of 2014 Q1 increased by 33 EUs over the WIP at the end of 13-week period ended December 29, 2013 ("2013 Q4"), which now includes five MiDi® buses.

Consolidated Revenue     2014     2013      
(U.S. dollars in millions)     Q1     Q1     change
Bus     $   250.9     $   207.8     20.7%
Aftermarket     73.0     37.3     95.4%
Total Revenue     323.9     $   245.1     32.1%

In order to gain a better understanding of the origin of the revenue growth, it is important to compare revenue of the business units during the respective reporting periods.  During 2014 Q1, 77.5% of the revenue was generated by the bus operations and 22.5% from the aftermarket operations, as compared to 13-week period ended March 31, 2013 ("2013 Q1") when 84.8% of the revenue was generated by the bus operations and 15.2% from the aftermarket operations. The aftermarket segment growth primarily resulted from the midlife overhaul program for Chicago Transit Authority ("CTA"), the Orion parts business subsequent to the March 1, 2013 acquisition date and the acquisition of the NABI Parts business subsequent to the June 21, 2013 acquisition date.

  • Bus manufacturing revenue increased primarily from the increase in deliveries and a sales mix with a higher than average bus selling price during the quarter.
  • The increase in aftermarket operations revenue is primarily a result of increased volumes including incremental revenue from the CTA midlife overhaul program, the Orion parts business and the NABI Parts business.
Consolidated Adjusted EBITDA     2014     2013      
(U.S. dollars in millions)     Q1     Q1     change
Bus     7.8     9.9     -21.7%
Aftermarket     11.9     5.5     117.6%
Total Adjusted EBITDA     19.7     15.4     27.9%
  • The decrease in 2014 Q1 bus manufacturing operations Adjusted EBITDA as compared to the 2013 Q1 was anticipated and is primarily due to a sales mix that included buses with lower than average bus contract margins. 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. However, management had anticipated and previously provided guidance that on average, margins on orders planned for production in Fiscal 2014 will be lower than the average margins achieved during Fiscal 2013.
  • 2014 Q1 aftermarket operations Adjusted EBITDA increased primarily due to the additional Adjusted EBITDA generated by the CTA midlife overhaul program and the acquisition of NABI Parts and the Orion parts businesses.  The aftermarket operations Adjusted EBITDA for 2014 Q1 was normalized for $0.4 million of non-recurring costs relating to business acquisition.
Net Earnings     2014     2013     $
(U.S. dollars in millions except per share figure)     Q1     Q1     change
Earnings from operations     10.4     6.5     3.9
Non-cash charges     (0.4)     (0.2)     (0.2)
Finance costs     (3.3)     (3.1)     (0.2)
Income tax (expense) recovered     (1.2)     0.3     (1.5)
Net earnings     5.5     3.5     2.0
Net earnings per share     $0.10     $0.08     $0.02

The Company reported net earnings of $5.5 million in 2014 Q1 representing an improvement compared to net earnings of $3.5 million in 2013 Q1, primarily as a result of improved earnings from operations offset by the increase in income tax expense.


Free Cash Flow     2014     2013      
(CAD dollars in millions)     Q1     Q1     Change
Free Cash Flow     10.6       7.0     50.1%
Declared dividends     8.1     7.0     -16.4%

Management believes that sufficient Free Cash Flow will be generated to maintain the current annual dividend rate of C$0.585 per common share.

Liquidity Position     March 30     December 29     $
(U.S. dollars in millions)     2014     2013     change
Cash                 14.2     11.9     2.3
Available funds from revolving credit facility                62.7     57.3               5.4
Total liquidity position                76.9     69.2             7.7

As at March 30, 2014, there were $30.0 million of direct borrowings and $22.3 million of outstanding letters of credit related to the $115.0 million revolving credit facility ("Revolver").

During 2014 Q1, the Company increased its liquidity position primarily as a result of increased cash flows from the change in non-cash working capital, primarily made up of a decrease in accounts receivables from the elevated levels at December 29, 2013 and an increase in accounts payables due to timing of payments after year-end.

Backlog and Market Indicators

The number of EUs in the total bid universe at the end of 2014 Q1 was 21,328 EUs compared to 15,235 EUs at the end of 2013 Q1 an increase of 40.0%. While the number of EUs included in RFPs received by New Flyer increased by 298.9% compared to the end of 2013 Q1, the total number of Active EUs (defined as RFPs received and in process of review by New Flyer, and bids or proposals submitted by New Flyer awaiting customer action) at the end of 2014 Q1 decreased 9.1%, to 5,671 EUs.

Management remains encouraged with the general improvement in the economic health of the U.S. and of the individual states. The latest ridership and U.S. state tax statistics both show increases during the fourth quarter of 2013 compared to the same quarter in the prior year

New Flyer's 2014 Q1 LTM Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 170%, compared to 211% last year. This is the fifth consecutive quarter with a LTM Book-to-Bill ratio greater than 100%. A ratio above 100% implies that more orders were received than filled, indicating increasing demand for New Flyer products.


As management has noted several times previously, the number of active heavy-duty transit bus procurements dropped noticeably following the recession. In order to fill production slots and to stabilize facilities and operations, the Company built a greater portion of buses from the awards in the backlog than from new contracts awarded which reduced the total backlog. In order to replenish the decreasing backlog in an environment of fewer procurements, prices offered by all bus builders for new contracts declined dramatically. As a result, management expects that on average, bus margins on orders planned for production in Fiscal 2014 will be lower than the average margins achieved during Fiscal 2013.

The depreciation of the Canadian dollar against the U.S. dollar has reduced the value of the total bus order backlog which is reported in U.S. dollars. New Flyer enters into fixed price contracts with customers in both Canadian and U.S. dollars. As a result, Canadian dollar contracts priced in a period of a stronger Canadian dollar relative to the U.S. dollar, decreased in value as a result of the depreciation of the Canadian dollar during 2014 Q1. The Company has adjusted the Canadian exchange rate used for new bids to reflect the current foreign exchange environment. Canadian contracts included in the backlog that were priced in prior periods however, have depreciated in value.  As at the end of 2014 Q1, 9.1% of the firm order backlog and 5.6% of the option backlog have been priced in Canadian dollars.

Despite the ongoing pressure on margins, management believes pricing in certain types of bus competitions has begun to normalize. In addition, management continues to pursue cost and overhead savings in daily operations through its Operational Excellence initiatives. Management expects the total backlog, combined with the recent order intake, will enable the Company to operate during Fiscal 2014 at an average line entry rate of approximately 49 EUs (at both New Flyer and NABI Bus production facilities). The average line entry rate reflects the addition of MiDi®.

On April 29, 2014, the U.S. Secretary of Transportation Anthony Foxx submitted a new surface transportation authorization legislation proposal to the U.S. Congress.   The bill, known as the Grow America Act, is a four-year, $302 billion bill that authorizes highway, public transportation and passenger rail programs from 2015 through 2018.  A one-time infusion of $150 billion into the Highway Trust Fund would eliminate the shortfall during the authorization period.  The legislation provides $72 billion for public transportation, a nearly 70% increase over 2014 authorized amounts.  The Grow America Act includes increases to address the bus and rail state of good repair backlog.   The proposed bill also highlights changes to Buy America and local hiring rules.  Management has not assessed the impact of the proposed new legislation, if passed in its current form, on the Company.

Conference Call

A conference call for analysts and interested listeners will be held on Friday May 9, 2014 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:

A replay of the call will be available from 12:00 p.m. (ET) on May 9 2014 until 11:59 p.m. (ET) on May 16, 2014.  To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 36044257. The replay will also be available on New Flyer's web site at

Non-IFRS Measures

"Earnings from Operations" refer to earnings before finance costs, income taxes, losses or gains on disposal of property, plant and equipment, unrealized foreign exchange losses or gains on non-current monetary items and fair value adjustment to embedded derivatives. Adjusted EBITDA consists of earnings before finance costs, 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 cash flows from operations adjusted for changes in non-cash working capital items, effect of foreign currency rate on cash, defined benefit funding, non-recurring transitional costs relating to business acquisition, costs associated with assessing strategic and corporate initiatives, past service pension costs and decreased for defined benefit expense, capital expenditures 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, 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 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, with its recently acquired NABI Bus, LLC subsidiary, 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 and its subsidiary NABI Parts, LLC also operate 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 3,000 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

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, 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 convertible 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 no demand for such new products 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 available on SEDAR at

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

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