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Press release from CNW Group

New Flyer Announces 2013 First Quarter Results

Wednesday, May 08, 2013

New Flyer Announces 2013 First Quarter Results

22:43 EDT Wednesday, May 08, 2013

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

  • Revenue of $247.4 million increased by 8.7% compared to 2012 Q1 primarily due to the number of EUs delivered in 2013 Q1 increased by 10.9% compared to 2012 Q1.  Further there was $5.0 million of incremental revenue associated with the newly acquired Orion aftermarket parts business.
  • Consolidated Adjusted EBITDA of $15.4 million decreased by 3.5% compared to 2012 Q1, consistent with management expectations when considering product margin mix in the quarter.
  • Net earnings were $3.5 million in 2013 Q1 compared to $0.4 million in 2012 Q1.
  • Free Cash Flow was C$7.0 million and declared dividends were C$7.0 million compared to Free Cash Flow of C$8.0 million and declared dividends of C$9.5 million in 2012 Q1.  The current dividend rate is expected to be maintained.
  • Book-to-Bill ratio for the last twelve months ending March 31, 2013 was 211% as compared to only 31% for the last twelve months ended April 1, 2012. As a result, total backlog at the end of 2013 Q1 was 7,527 EUs ($3.3 billion), an increase of 19% from the backlog at the end of 2012 Q4.

WINNIPEG, May 8, 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 March 31, 2013 ("2013 Q1"). 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.

       
Bus Deliveries 2013 2012  
(U.S. dollars in thousands) Q1 Q1 Change
Number of equivalent units delivered (EUs) 490 442 10.9%
Average EU selling price $428.6 $444.0 -3.5%

The increased deliveries were as result of the Company being able to reduce the work in process ("WIP") levels by 22 equivalent units  (or "EUs") by delivering buses that were temporarily delayed at the end of 13-week period ended December 30, 2012 ("2012 Q4") due to a supplier quality issue. This resulted in WIP at the end of 2013 Q1 totaling 203 EUs as compared to 225 EUs at the end of 2012 Q4. The delivery increase was also impacted by a higher production rate (468 EUs line entered in 2013 Q1 vs. 428 EUs line entered in the first quarter of 2012) which had significant 60' articulated bus content.

       
Consolidated Revenue 2013
Q1
2012
Q1
 
(U.S. dollars in millions) change
Bus $   210.0 $   196.2 7.0%
Aftermarket 37.3 31.4 18.9%
Total Revenue 247.4 $   227.6 8.7%
  • Bus manufacturing revenue increased in 2013 Q1 primarily from the increase in deliveries. This was offset by a sales mix with a lower than average bus selling price during the quarter.
  • The increase in aftermarket operations revenue is primarily a result of increased volumes including incremental revenue of $5.0 million from the Orion parts business subsequent to the March 1, 2013 acquisition date.

       
Consolidated Adjusted EBITDA 2013 2012  
(U.S. dollars in millions) Q1 Q1 change
Bus 9.9 10.2 -2.9%
Aftermarket 5.5 5.7 -4.7%
Total Adjusted EBITDA 15.4 15.9 -3.5%
  • The decrease in 2013 Q1 bus manufacturing operations Adjusted EBITDA as compared to the 13-week period ending April 1, 2012 ("2012 Q1") was anticipated and is primarily due to a sales mix that included buses with lower than average bus contract margins.
  • 2013 Q1 aftermarket operations Adjusted EBITDA decreased by 4.7% primarily resulting from lower profit margins due to continued pricing pressure. The 2013 Q1 aftermarket operations Adjusted EBITDA normalized to exclude Orion parts business contribution was $4.6 million, a decrease of 19.5% from 2012 Q1. The 2013 Q1 aftermarket operations Adjusted EBITDA included $0.8 million generated from the first 30 days of operating the Orion parts business after normalizing EBITDA for $0.2 million of non-recurring transitional costs. Readers are cautioned that March results may not be representative of every month and therefore should not be linearly extrapolated to forecast the entire year.
       
Net Earnings 2013 2012 $
(U.S. dollars in millions) Q1 Q1 change
Earnings from operations 6.5 7.3 (0.8)
Non-cash charges (0.2) (2.4) 2.2
Finance costs (3.1) (3.7) 0.6
Income tax (expense) recovered 0.4 (0.8) 1.2
Net earnings 3.5 0.4 3.1

The Company reported net earnings of $3.5 million in 2013 Q1 representing an improvement compared to net earnings of $0.4 million in 2012 Q1, primarily as a result of lower non-cash charges, decrease in income taxes and a decrease of finance costs, offset by the decrease in earnings from operations.

Liquidity

       
Free Cash Flow 2013 2012  
(CAD dollars in millions) Q1 Q1 Change
Free Cash Flow 7.0   8.0 -12.5%
Declared dividends 7.0 9.5 -26.3%


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 31 December 30 $
(U.S. dollars in millions) 2013 2012 change
Cash             6.6 11.2 (4.6)
Available funds from revolving credit facility            26.8 35.8           (9.0) 
Total liquidity position            33.4 47.0         (13.6)

During 2013 Q1, cash decreased by $4.6 million primarily due to increased investment in non-cash working capital items, such as increased accounts receivable and income taxes recoverable, which offset the net cash retained after investing in Orion's parts business with a portion of the cash received from Marcopolo's investment in New Flyer.

Backlog and Market Indicators

Management believes that the transit market continues to show positive signs of recovery.  A number of large bids were awarded in 2013 Q1, as New Flyer was awarded new orders of 2,004 EUs. As well, the total number of request for proposals received and in process of review at New Flyer, and bids or proposals submitted by New Flyer awaiting customer action at the end of 2013 Q1 remains high at 7,318 EUs, compared to 5,497 EUs at April 1, 2012 and 4,034 EUs at January 1, 2012.

New Flyer's Book-to-Bill ratio (defined as new order intake - both firm and options - divided by deliveries in the quarter) for the last twelve months ("LTM") ending March 31, 2013 was 211% as compared to a Book-to-Bill ratio of only 31% for the LTM ended April 1, 2012. This is the first time since the third quarter of 2009 where the Book-to-Bill ratio was equal to or greater than 100%.

The total backlog at the end of 2013 Q1 was 7,527 EUs, an increase of 19% from the backlog at the end of 2012 Q4. The firm portion of the total backlog at the end of 2013 Q1 is made up of 1,899 EUs which has increased 14%  compared with 1,672 EUs at the end of 2012 Q4.  The total value of the order backlog at the end of 2013 Q1 was $3.3 billion, compared with $2.7 billion at the end of 2012 Q4. This increase in total backlog was not unexpected, nor inconsistent with current market conditions or management's expectations.

Outlook

New Flyer plans for its average production line entry rate in Fiscal 2013 to average approximately 36 EUs per week, however, the actual production rate in any quarter will vary based on the order mix between 40 foot and 60 foot buses and the timing required to place orders into productions. Management currently expects the line entry rate to be on average less than 36 EUs per production week in the third quarter of 2013 due to a company-wide planned vacation during the first week. Management estimates that the level of WIP at each of the Fiscal 2013 reporting periods will range between approximately 200 to 230 EUs.

As a result of the strategic investment and working relationship that has been recently established with Marcopolo, management has begun to explore activities that it hopes will expand the Company's strength through the sourcing of new products for the North American transit bus market, cost reduction opportunities and possible further business acquisitions aimed at achieving the Company's goal for diversification and growth. The first tranche of the Marcopolo investment was used to acquire the Orion aftermarket parts business in March 2013 from Daimler Bus North America.

The Company and the union of members of the Communication Workers of America ("CWA") collective bargaining unit at New Flyer's St. Cloud facility failed to ratify the negotiated new four-year collective bargaining agreement on the first vote.  The current collective bargaining agreement expired on March 31, 2013, and will continue in effect as is unless terminated by action of either party. Management and leadership representing these CWA production unit employees continue to negotiate a new collective agreement. The St. Cloud's unionized workforce represents approximately 19 percent of New Flyer's total workforce.

Conference Call

A conference call for analysts and interested listeners will be held on Friday May 10, 2013 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:

http://www.newswire.ca/en/webcast/detail/1154773/1260847

A replay of the call will be available from 2:00 p.m. (ET) on May 10, 2013 until 11:59 p.m. (ET) on May 17, 2013.  To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 60352845. 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, non-recurring costs related to Orion parts business acquisition, 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 and/or the Issuer. However, Adjusted EBITDA and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by IFRS. Readers of this MD&A 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 and/or the Issuer'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 common shares of the Company are traded on the Toronto Stock Exchange ("TSX") under the symbol NFI and the IDSs of NFI and New Flyer Industries Canada ULC ("NFI ULC") are traded on the TSX under the symbol NFI.UN.

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, 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, 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 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.

For further information:

Jon Koffman
Investor Relations
Tel: (204) 224-6672
E-mail: investor@newflyer.com

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