WINNIPEG, April 15, 2014 /CNW/ - (TSX:NFI) (TSX:NFI.DB.U) New Flyer Industries Inc. ("New Flyer" or the "Company"), the leading manufacturer of heavy-duty transit buses in Canada and the United States, announced its order activity and backlog update for the first fiscal quarter ended March 30, 2014 ("Q1 2014").
Bus Deliveries, Work in Process, Order Activity and Option Expiry
New Flyer delivered 554 equivalent units ("EUs") in Q1 2014, an increase of 64 EUs when compared to deliveries in the first quarter ended March 31, 2013 ("Q1 2013").
The total work in process ("WIP") at March 30, 2014 was 306 EUs, which represents an increase in WIP of 33 EUs during Q1 2014 over the WIP at the end of the fourth quarter ended December 29, 2013 ("Q4 2013"), and which included five MiDi®.
The following was the order activity in Q1 2014:
- New firm orders received for 380 EUs (valued at approximately $180.8 million)
- New option orders received for 179 EUs (valued at approximately $69.2 million)
- Successful option conversions of 506 EUs (valued at approximately $276.5 million)
| New Orders
(Firm and Option EUs)
| New Orders
| Option EUs
| Option EUs
New Flyer's last twelve months ("LTM") Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 170%, compared to 211% just one year ago. 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.
In Q1 2014, no option EUs expired. Remaining options included in the New Flyer backlog will expire, if not exercised, as follows:
|Year of option expiry||2014||2015||2016||2017||2018|| Total Option
|Remaining Option (EUs)||1,312||1,015||351||570||1,827||5,075|
At the end of Q1 2014, New Flyer's total backlog was 7,683 EUs (for a total value of approximately $3.69 billion) compared to 7,678 EUs (for a total value of approximately $3.66 billion) at the end of Q4 2013. Effective Q1 2014, the New Flyer Backlog now includes MiDi®.
The total backlog includes firm orders and options for 462 EUs awarded by 13 different customers, where orders and contract documentation were received and executed by New Flyer prior to the end of Q1 2014, but public announcements outlining the details of these contracts are awaiting customer approval to release.
|Backlog Activity|| Firm Orders
| Ending backlog at Q4 2013
+ New orders in Q1 2014
+ Options exercised in Q1 2014
- Deliveries in Q1 2014
- Cancelled/expired options in Q1 2014
|Ending Backlog at Q1 2014||2,608||5,075||7,683|
|Increase (decrease) during Q1 2014||12.7%||(6.1%)||0.1%|
|Backlog Mix|| Firm Orders
|30 and 35 foot MiDi® buses||39||0||39|
|30,35 and 40 foot heavy-duty buses||2,082||3,377||5,459|
|60 foot articulated heavy-duty buses||526||1,698||2,224|
|Total Backlog at Q1 2014||2,608||5,075||7,683|
New Flyer's backlog consists of a number of bus lengths, with a variety of clean propulsion systems such as: electric-hybrid, electric-trolley, natural gas and all-electric, representing approximately 70% of the total backlog.
At the end of the period, new firm and option orders of 57 buses (74 EUs) were pending from customers where approval of the award had been made by the customer's board, council, or commission, as applicable, but purchase documentation had not yet been received by the Company. These firm and option orders are not yet included in the New Flyer backlog.
New Flyer Bid Universe
The bid universe was created by New Flyer in 2008 as an indicator for overall transit bus market demand and active bids in Canada and the United States. The bid universe is a point-in-time snapshot of the estimated EUs for: all requests for proposals ("RFPs") received and in process of review at New Flyer, bids or proposals already submitted by New Flyer awaiting customer action, and management's forecast of all expected EUs to be placed for competition by operators over the next five years. Effective Q1 2014, the bid universe now includes MiDi® opportunities.
A brief reduction in procurement activity was experienced in late 2013 and early 2014, followed by a significant volume of new RFPs being issued. The number of EUs in the total bid universe at the end of Q1 2014 was 21,328 EUs compared to 15,235 EUs at the end of Q1 2013 an increase of 40.0%. While the number of EUs included in RFPs received by New Flyer increased by 298.9% in the quarter, 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 Q1 2014 dropped slightly to 5,671 EUs.
A number of active procurements were awarded in Q1 2014 where purchase documentation was received from the customer for the base volume of EUs, but the customer indicated that an RFP for the option quantities would be issued at a later date. As a result, a total of 2,450 EUs were taken out of the Active EUs category in Q1 2014 and placed back into the Forecasted New Procurements category.
|Bid Universe|| RFPs
| Bids or
| Total Active
next 5 years
| Total EUs
Management however, still anticipates that the amount of procurement activity by public transit agencies throughout the United States and Canada will remain robust throughout 2014 based on expected customer fleet replacement plans and the expiry of current customer contracts during the next few years.
Ridership and Funding Environment
The latest data from the American Public Transportation Association's (APTA) ridership report indicated an increase of 3.8% in all modes of U.S. transit ridership during the fourth quarter of 2013 compared with the previous year; including an increase in bus specific ridership of 0.6%. The same report indicates Canadian ridership decreased by 1.1% in all modes of transit ridership during the fourth quarter of 2013 as compared to the previous year, however, specific data on bus ridership is not available.
The U.S. Congress is drafting legislation for funding reauthorization as the current funding bill, MAP-21, expires on September 30, 2014.
Management remains encouraged with the general improvement in the economic health of the U.S. and of the individual states. A preliminary report released on March 11, 2014, from the Rockefeller Institute reported state tax collections have increased by 3.0% in the fourth quarter of 2013 over the same quarter in the prior year - for the 16th consecutive quarter.
New Flyer Aftermarket
Gross parts orders received by New Flyer's aftermarket business during Q1 2014 (inclusive of NABI Parts and the integrated Orion parts business) increased 131% compared to Q1 2013. Parts shipments in Q1 2014 also increased 123% over Q1 2013.
Quarter-over-quarter (Q1 2014 vs. Q4 2013) gross parts orders rose 3.4%, while parts shipments were up 7.5% (inclusive of NABI Parts and the integrated Orion parts business).
The Company continues to experience a challenging price environment and is experiencing some pricing challenges related to fluctuations in Canadian and US currency exchange rates.
As management has noted several times previously, the number of active heavy-duty transit bus procurements dropped noticeably during the period from 2009 to 2011. 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, 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 Q1 2014.
The Company has adjusted the Canadian exchange rate 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 Q1 2014, 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.
Although the Company has not yet completed the preparation of its financial results for Q1 2014, management believes that while Q1 2014 Adjusted EBITDA will be significantly less than Q4 2013, it is now likely to be better than the Adjusted EBITDA reported in Q1 2013. Management believes it is more meaningful to evaluate performance of the Company by comparing the LTM results at the end of the current period against the results of the previous period's LTM.
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®.
NOTE: All dollar amounts are stated in US currency based on an exchange rate of US $1.00 = CAD $1.1060 to calculate the value of the Canadian contracts in this release.
Adjusted EBITDA consists of earnings before finance cost, income taxes, depreciation, amortization and other non-cash charges and certain other non-recurring charges as set out in the Company's management discussion and analysis dated March 19, 2014. Management believes Adjusted EBITDA is a useful measure in evaluating the performance of the Company. However, Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and may not be comparable to similarly titled measure used by other issuers. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings 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.
About New Flyer
New Flyer, with its subsidiary NABI Bus, LLC, 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 including drive systems powered by: clean diesel, natural gas and electric trolley as well as energy-efficient diesel-electric hybrid vehicles. 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 transit 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 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.
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 and should not be read as guarantees of future performance or results. Actual performance or results may not be consistent with these forward-looking statements, and the differences may be material for a variety of reasons, including market and general economic conditions and economic conditions of and funding availability for customers to purchase buses and to purchase parts or services, customers may not exercise options to purchase additional buses, aggressive competition and reduced pricing exist in the industry, the ability of customers to terminate contracts for convenience, 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 condition and impact the amount of cash available for distribution, 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, 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 the Company's press releases and materials filed with the Canadian securities regulatory authorities and available on SEDAR at www.sedar.com. Due to the potential impact of these factors, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
SOURCE: New Flyer Industries Inc.
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