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NFI Group Announces First Quarter 2019 Deliveries, Orders and Backlog

Canada Newswire - Mon Apr 15, 4:57PM CDT

WINNIPEG, April 15, 2019 /CNW/ - (TSX:NFI.TO) NFI Group Inc. ("NFI" or "the Company"), the leading bus and motor coach manufacturer and parts distributor in North America, today announced its deliveries, order activity and backlog update for the 13-week period ended March 31, 2019 ("Q1 2019"). Year-over-year comparisons reported in this release compare Q1 2019 to the 13-week period ended April 1, 2018 ("Q1 2018") and previous quarter comparisons compare Q1 2019 to the 13-week period ended December 30, 2018 ("Q4 2018").

In its March 13, 2018 results press release, NFI advised that Q1 2019 production throughput and deliveries were negatively impacted by abnormal factors including: adverse winter weather conditions which caused missed production days and delayed customer inspections, new model launches, which impacted production line efficiencies, and chassis supply disruption for select ARBOC vehicles

Deliveries, Order Activity, and Option Expiry

NFI delivered 903 equivalent units ("EUs") in Q1 2019, a decrease of 90 EUs compared to Q1 2018. For the 52-week period from April 2, 2018 to March 31, 2019 ("LTM Q1 2019") NFI delivered 4,224 EUs, an increase of 294 EUs from the 52-week period April 3, 2017 to April 1, 2018 ("LTM Q1 2018"). Total inventory at March 31, 2019 increased 165 EUs from the previous quarter to 688 EUs.

NFI Deliveries (EUs)
            Heavy-Duty  Motor   Cutaway and Total
            Transit     Coaches Medium-Duty
            (New Flyer) (MCI)   (ARBOC)
Q1 2018     671         187     135         993
Q1 2019     693         140     70          903
LTM Q1 2018 2,749       1,018   162         3,929
LTM Q1 2019 2,803       983     437         4,223
* Heavy-Duty Transit Q1 2018 and LTM Q1 2018 deliveries include 17 EUs from MiDi bus sales under the terminated joint venture with Alexander Dennis Limited.

NFI's new orders in Q1 2019 totaled 909 EUs, which included firm orders of 708 EUs (valued at $284.1 million) and option orders of 201 EUs (valued at $78.4 million). In addition, 126 option EUs were converted to firm orders (valued at $53.7 million).

Total reported orders do not include 106 EUs of new firm and option orders that were pending at the end of Q1 2019, where approval of the award to NFI had been made by the customer's board, council, or commission, as applicable, but purchase documentation had not yet been received by NFI and are therefore not yet included in the backlog.

NFI's LTM Q1 2019 Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 93%, an increase of 6% from LTM Q4 2018.

New Orders       New Orders      Option EUs      Option EUs
        in Quarter (Firm LTM (Firm       Converted in    Converted LTM
        and Option EUs)  and Option EUs) Quarter to Firm to Firm
Q1 2018 736              5,848           441             1,627
Q2 2018 1,413            6,303           505             1,743
Q3 2018 757              5,426           274             1,458
Q4 2018 857              3,763           575             1,795
Q1 2019 909              3,936           126             1,480
Note: LTM refers to the last twelve months ended at the end of the quarterly period indicated

The majority of public transit contracts bid by both New Flyer and MCI, have a term of five years and include both firm orders and options. The following table shows the number of option EUs that have been exercised or expired annually over the past five years, as well as the current backlog of options that will expire each year, if not exercised.

In EUs               2014  2015  2016  2017  2018  2019 2020  2021  2022  2023
A. Options Expired   965   504   550   331   741   248
B. Options Exercised 1,149 1,339 2,064 1,404 1,795 126
C. Remaining Options                               925  1,189 1,630 2,334 933
by year of expiry
D. Conversion Rate % 54%   73%   79%   81%   71%
= B / (A+B)

NFI's option conversion rate can vary significantly from quarter-to-quarter and should be looked at on an annual or LTM basis.

Backlog and Production

At the end of Q1 2019, NFI's total backlog was 10,587 EUs (valued at $5.16 billion) compared to 10,833 EUs (valued at $5.35 billion) at the end of Q4 2018.

Total Backlog (EUs)          Firm Orders Options Total
Ending backlog at Q4 2018    3,649       7,184   10,833
New orders in Q1 2019        708         201     909
Options exercised in Q1 2019 126         (126)   -
Deliveries in Q1 2019        (903)       -       (903)
Cancelled/expired in Q1 2019 (4)         (248)   (252)
Ending Backlog at Q1 2019    3,576       7,011   10,587
Total Backlog (EUs)           Firm Orders Options Total  $B US
Heavy-Duty Transit Buses      2,878       6,035   8,913  $4.34
Motor Coaches                 516         976     1,492  $0.79
Cutaway and Medium-Duty Buses 182         -       182    $0.03
Ending Backlog at Q1 2019     3,576       7,011   10,587 $5.16

The majority of NFI's backlog relates to New Flyer transit buses for public clients with some of the backlog consisting of units from MCI and ARBOC. Customer options for ARBOC vehicles are held by dealers, and therefore are not included in the NFI backlog, but are converted to firm backlog when vehicles are ordered by the dealer.

Transit buses and motor coaches incorporating clean propulsion systems, including compressed natural gas, diesel-electric hybrid, and zero-emission buses and motor coaches ("ZEBs", which consist of trolley-electric, fuel cell-electric and battery-electric buses), represent approximately 40% of the total backlog. ZEBs alone represent approximately 4% of total backlog.

Parts Activity

Total shipments by NFI Parts for Q1 2019 increased by 7.2% compared to the previous quarter and decreased by 8.4% compared to Q1 2018. The lower shipments in Q1 2019 compared to Q1 2018 was largely due to lower bid activity during the period, primarily from the motor coach market. ARBOC aftermarket parts orders and shipments are not included in these figures as they are not material.

Market Demand and Outlook

NFI's Bid Universe metric attempts to reflect active public-sector competitions in Canada and the United States and to provide an overall indicator of active bid activity and anticipated heavy-duty transit bus and motor coach market demand. It is a point-in-time snapshot of: (i) EUs in active competitions, defined as all requests for proposals received and in process of review plus bids submitted and awaiting customer action, and (ii) management's forecast based on public customer projections of expected EUs to be placed out for competition over the next five years.

At the end of Q1 2019, the total Bid Universe was 24,532 EUs, an increase of 4.7% from Q4 2018, while the active Bid Universe increased by 24.1% in the quarter. The Bid Universe EUs fluctuate significantly from quarter-to-quarter based on public tender activity procurement and award processes.

In EUs                           Forecast New
        Bids in Bids      Total  Procurements      Total Bid
        Process Submitted Active over next 5 Years Universe
Q1 2018 2,974   3,479     6,453  17,186            23,639
Q2 2018 1,319   2,391     3,710  18,440            22,150
Q3 2018 955     2,323     3,278  18,084            21,362
Q4 2018 670     2,061     2,731  20,694            23,425
Q1 2019 1,350   2,039     3,389  21,143            24,532

The number of active bids in Q1 2019 and ongoing discussions with public transit agencies throughout the U.S. and Canada supports management's belief that there will be an increase in the number of requests for proposals and public tenders issued in Fiscal 2019 and 2020, when compared to 2018 activity. While management anticipates increased bid activity, it cautions that the individual awards may be smaller in size with fewer options or shorter contract terms while transit agencies develop plans for future battery-electric vehicle adoption.

Procurement of heavy-duty transit buses and motor coaches by the public sector is typically accomplished through formal multi-year contracts, while procurement by the private sector is typically made on a transactional basis. As a result, NFI is unable to create a Bid Universe metric for private sector buses or motor coaches. Cutaway and medium-duty buses manufactured by ARBOC are also typically sold on a transactional basis through third party dealers who hold contracts directly with the operators. Bids are submitted by and contracts are held with non-exclusive dealers and therefore there is no NFI Bid Universe metric for cutaways and medium-duty buses.

Management believes the significant investments the Company has made in new product models, ZEBs, facility upgrades and LEAN manufacturing processes, parts fabrication, and IT harmonization will permit NFI to defend its leading positions in core markets.

Based on the Q1 2019 chassis supply disruption for select ARBOC low-floor cutaway vehicles, management is updating its Fiscal 2019 delivery guidance to reflect lower anticipated ARBOC deliveries. ARBOC continues to focus on its higher medium-duty bus offering which has been performing well with customers and is expected to make-up 10% to 15% of ARBOC's total deliveries. The higher margin medium-duty deliveries will help offset some of the impact felt from decreased low-floor cutaway deliveries. No changes have been made to heavy-duty transit or motor coach delivery guidance. Management's Fiscal 2019 guidance is now revised to 4,410 EUs, a decrease of 45 EUs from previously reported expected deliveries, and is expected to comprise the following vehicle types:

Heavy-Duty Motor Coach Cutaway and Total
Transit                Medium-Duty
2,845 EU   1,065 EU    500 EU      4,410 EU

NFI Parts continues to focus on strategic initiatives to counter competitive intensity including: additional focus on vendor managed inventory ("VMI") programs, an enhanced product offering, increasing parts sales for cutaway vehicles and capitalizing on the implementation of a common IT platform. Due to the nature of the aftermarket parts business, parts sales remain difficult to forecast resulting in quarter-to-quarter volatility which at times can be material.

NFI's Q1 2019 earnings are expected to continue to be negatively impacted by several factors, including: the previously mentioned abnormal factors impacting production and deliveries, ongoing start-up expenses of KMG Fabrication, (NFI's new Shepherdsville, KY parts fabrication facility), margin pressure in the private motor coach segment and decreased overhead absorption from lower deliveries. The Company's annual delivery schedule has an element of seasonality due to the nature of each market segment and the annual production and vacation shut-downs of each manufacturing facility. As a result, deliveries are expected to trend higher in the second quarter and the fourth quarter of the year as compared to the first and third quarters.

As previously noted, extreme winter weather during Q1 2019 negatively impacted the timing of several New Flyer and MCI deliveries. There is also the potential for spring flooding in Manitoba, North Dakota and Minnesota in Q2 2019 that could impact deliveries. Management is monitoring the potential flood risk carefully and will advise the market if a material operational impact occurs.

NFI's Commitment to Environmental Social Governance

As part of NFI's ongoing commitment to transparent reporting and governance it recently published its inaugural Environmental Social Governance report. The report provides details on numerous employee programs at NFI as well as performance metrics related to health and safety, diversity and inclusion and environmental impact. The full report can be found at https://www.nfigroup.com/site-content/uploads/2019/03/Environmental-Social-Governance-Report-2019-web.pdf

NFI's Q1 2019 Financial Results Announcement and Conference Call Details

NFI intends to release its Q1 2019 financial results after market close on May 8, 2019. A conference call for analysts and interested listeners will be held on May 9, 2019 at 8:00 a.m. (ET). The call-in number for listeners is 888-231-8191, 647-427-7450 or 403-451-9838. A live audio feed of the call will also be available at:

https://event.on24.com/wcc/r/1978226/70EB3F20598D871CFAC433424E608451

A replay of the call will be available from 11:00 a.m. (ET) on May 9, 2098 until 11:59 p.m. (ET) on May 16, 2019. To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 7840939. The replay will also be available on NFI Group's web site at www.nfigroup.com.

NOTE: All dollar amounts in this release are stated in U.S. currency. Canadian dollar amounts have been converted based on an exchange rate of U.S. $1.00 = CAD $1.3363 to calculate the value of the Canadian contracts in this release. One EU represents one 30-foot, 35-foot or 40-foot heavy-duty transit bus, one medium-duty bus, one low-floor cutaway bus or one motor coach. An articulated transit bus, which is an extra long transit bus (approximately 60-feet in length), composed of two passenger compartments connected by a joint mechanism represents two EUs.

About NFI Group Inc.

With over 6,300 team members, operating from 31 facilities across Canada and the United States, NFI is North America's largest bus manufacturer providing a comprehensive suite of mass transportation solutions under brands: New Flyer® (heavy-duty transit buses), ARBOC® (low-floor cutaway and medium-duty buses), MCI® (motor coaches), and NFI Parts (parts, support, and service). NFI buses incorporate the widest range of drive systems available including: clean diesel, natural gas, diesel-electric hybrid, and zero-emission electric (trolley, battery, and fuel cell) on proven bus platforms. It also supports infrastructure development through New Flyer Infrastructure Solutions, a service dedicated to providing safe and reliable charging and mobility solutions. In total, NFI supports over 74,000 buses and coaches currently in service across North America. For the fiscal year ended December 30, 2018, NFI posted revenues of US $2.5 billion.

Further information is available at www.nfigroup.com, www.newflyer.com, www.mcicoach.com and www.arbocsv.com. The common shares of NFI are traded on the Toronto Stock Exchange under the symbol NFI.

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 and the market outlook for the Company's products and services. 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 release. Such forward-looking statements include statements with respect to customer demand for buses, motor coaches and parts; management's forecasted outlook for the bus, motor coach and parts businesses; management's expectations regarding future heavy-duty bus and motor coach procurement and bid activity.

Forward-looking statements involve significant risks and uncertainties, and are not to 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, customer demand and availability of funding to the Company's customers to purchase transit buses and coaches and to exercise options and to purchase parts or services at current levels or at all; the Company may have difficulty selling preowned coaches and realizing expected resale values; aggressive competition and reduced pricing in the industry; the absence of fixed term customer contracts and the suspension or the termination of contracts by customers for convenience; production delays may result in liquidated damages under the Company's contracts with its customers; inability of the Company 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; inability of the Company to successfully execute strategic plans on time and on budget and maintain profitability, development of competitive products or technologies; a disruption, termination or alteration of the supply of vehicle chassis or other critical components from third-party suppliers; risks related to acquisitions and other strategic relationships with third parties; inability 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. NFI cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in NFI's press releases and materials filed with the Canadian securities regulatory authorities which 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 NFI assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.

SOURCE NFI Group Inc.

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/April2019/15/c7390.html

Stephen King, Group Director, Corporate Development and Investor Relations,
NFI Group Inc., Ph: 204-224-6382, Stephen_King@NewFlyer.com

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