New Flyer Announces Fourth Quarter and Fiscal Year 2014 Results
Summary (U.S. Dollars except as noted):
- Fiscal 2014 revenue, Adjusted EBITDA and net earnings were $1.45 billion, $107.4 million and $26.7 million, respectively, compared to the same measures in Fiscal 2013 of $1.20 billion, $94.7 million and $26.8 million, respectively.
- Estimated bus market share of EUs delivered for Fiscal 2014 was approximately 48%, an increase from 43% for Fiscal 2013. For the aftermarket parts segment, estimated market share in Fiscal 2014 increased to approximately 33% from 28% in Fiscal 2013.
- Fiscal 2014 earnings per share of $0.48 decreased compared to $0.52 in Fiscal 2013 as a result of having more Shares outstanding after issuing 11.1 million Shares throughout Fiscal 2013.
- The Free Cash Flow earned in Fiscal 2014 increased 45.3% compared to Fiscal 2013 which positively impacted the Fiscal 2014 Free Cash Flow payout ratio of 49.6% compared to 68.1% during Fiscal 2013.
WINNIPEG, March 18, 2015 /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 28, 2014 ("2014 Q4") and the 52-week period ended December 28, 2014 ("Fiscal 2014"). Full unaudited 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 |
2014 |
2013 |
2014 |
2013 |
||
(U.S. dollars in thousands) |
Q4 |
Q4 |
change |
Fiscal |
Fiscal |
change |
Number of equivalent units ("EUs") |
680 |
635 |
7.1% |
2,437 |
2,191 |
11.2% |
Average EU selling price |
$495.0 |
$493.3 |
0.3% |
$464.5 |
$449.3 |
3.4% |
Bus deliveries increased during 2014 Q4 as compared to 621 EUs delivered during the previous quarter. The total bus inventory for the Company at December 28, 2014 of 358 EUs, decreased 41 EUs from the previous quarter.
Consolidated Revenue |
2014 |
2013 |
2014 |
2013 |
||
(U.S. dollars in millions) |
Q4 |
Q4 |
change |
Fiscal |
Fiscal |
change |
Bus |
$336.6 |
$313.2 |
7.5% |
$1,132.1 |
$984.4 |
15.0% |
Aftermarket |
83.4 |
68.0 |
22.6% |
319.0 |
215.0 |
48.4% |
Total Revenue |
$420.0 |
$381.2 |
10.2% |
$1,451.1 |
$1,199.4 |
21.0% |
- The increase in 2014 Q4 bus revenue resulted from a 7.1% increase in total bus deliveries and a 0.3% increase in average selling price.
- Revenue from bus manufacturing operations for Fiscal 2014 increased 15.0% compared to the 52-week period ended December 29, 2013 ("Fiscal 2013"). The increased deliveries during Fiscal 2014 were primarily as a result of the acquisition of NABI-Optima Holdings Inc. ("NABI") effective June 21, 2013 and the resulting increased number of EUs produced per week in 2014 Q4 versus the 13-week period ended December 29, 2013 ("2013 Q4"). The increase in average selling price is the result of changes in the product sales mix. The average selling price can be volatile when comparing quarters as a result of sales mix and propulsion type.
- The increase in revenue from aftermarket operations during 2014 Q4 of 22.6% is primarily a result of increased volumes and the incremental revenue from the Chicago Transit Authority ("CTA") mid-life overhaul program. The increase in aftermarket operations revenue during Fiscal 2014 is primarily a result of increased volumes, CTA mid-life overhaul program and the acquisitions of both the Orion and NABI aftermarket parts businesses in 2013.
Consolidated Adjusted EBITDA |
2014 |
2013 |
2014 |
2013 |
||
(U.S. dollars in millions) |
Q4 |
Q4 |
change |
Fiscal |
Fiscal |
change |
Bus |
$23.2 |
$27.3 |
-15.1% |
$57.4 |
$63.6 |
-9.9% |
Aftermarket |
11.9 |
9.5 |
24.6% |
50.0 |
31.0 |
61.1% |
Total Adjusted EBITDA |
$35.0 |
$36.8 |
4.9% |
$107.4 |
$94.7 |
13.4% |
Adjusted EBITDA as a % of revenue |
||||||
Bus |
6.9% |
8.7% |
-1.8% |
5.1% |
6.5% |
-1.4% |
Aftermarket |
14.2% |
14.0% |
0.2% |
15.7% |
14.4% |
1.3% |
Total |
8.3% |
9.7% |
-1.4% |
7.4% |
7.9% |
-0.5% |
- The 2014 Q4 bus manufacturing operations Adjusted EBITDA decrease was expected as management had previously provided guidance about lower than average margins. 2014 Q4 Adjusted EBITDA also decreased as a result of an accounting provision made for the expected payment of $2.4 million regarding performance share units.
- Bus manufacturing operations Adjusted EBITDA for Fiscal 2014 was 5.1% of bus revenue, a decrease compared to 6.5% of bus revenue during Fiscal 2013. Management has continued its efforts to recover margins through cost reductions and improved labour efficiency to mitigate the impact of the lower margins on planned production throughout Fiscal 2014. As well, the Company recognized $11.7 million of investment tax credits ("ITCs") in Fiscal 2014 as compared to $8.1 million in Fiscal 2013. At December 28, 2014 only $0.2 million of ITCs remain unapplied. The related tax credit program has ended and has not been renewed.
- 2014 Q4 and Fiscal 2014 aftermarket operations Adjusted EBITDA increased compared to the 2013 respective periods, primarily a result of increased volumes and margins which have more than offset lower than average margins generated by the CTA midlife overhaul program. Also, Fiscal 2014 Adjusted EBITDA increased due to a full year of earnings from the acquisition of the NABI and the Orion aftermarket parts businesses when compared to Fiscal 2013.
Net earnings |
2014 |
2013 |
$ |
2014 |
2013 |
$ |
(U.S. dollars in millions) |
Q4 |
Q4 |
change |
Fiscal |
Fiscal |
change |
Earnings from operations |
$15.6 |
$24.0 |
-8.4 |
$50.6 |
$51.1 |
-0.5 |
Non-cash gain (loss) |
0.3 |
(1.8) |
2.1 |
0.8 |
(2.1) |
2.9 |
Interest expense |
(3.5) |
(3.3) |
-0.2 |
(13.9) |
(14.3) |
0.4 |
Income tax expense |
(5.0) |
(5.2) |
0.2 |
(10.8) |
(7.9) |
-2.9 |
Net earnings |
7.4 |
13.7 |
-6.3 |
26.7 |
26.8 |
-0.1 |
The Company reported net earnings of $7.4 million in 2014 Q4 representing a decrease compared to net earnings of $13.7 million during 2013 Q4. Earnings from operations decreased in 2014 Q4 compared to 2013 Q4 primarily as a result of lower than average bus margins and $1.0 million of accelerated amortization expense, as a consequence of the Company's plan to rationalize NABI's products to a common Xcelsior® platform. The estimated useful lives of the related equipment and intangible assets have been adjusted to align with the final production dates and depreciation and amortization has been accelerated accordingly. The Company's net earnings per common share ("Share") in 2014 Q4 were $0.13, a decrease from net earnings per Share of $0.25 generated during 2013 Q4.
Fiscal 2014 net earnings of $26.7 million remained substantially unchanged from Fiscal 2013, however Fiscal 2014 net earnings were negatively impacted by the $4.8 million impairment loss and the $7.8 million increase in amortization. Net earnings per Share in Fiscal 2014 of $0.48 decreased compared to $0.52 generated during Fiscal 2013 primarily as a result of having more Shares outstanding after issuing 11.1 million Shares throughout Fiscal 2013.
Liquidity
Free Cash Flow |
2014 |
2013 |
2014 |
2013 |
||
(CAD dollars in millions) |
Q4 |
Q4 |
change |
Fiscal |
Fiscal |
change |
Free Cash Flow |
21.1 |
15.7 |
34.5% |
65.5 |
45.1 |
45.3% |
Declared dividends |
8.1 |
8.1 |
0.0% |
32.5 |
30.7 |
5.7% |
Management believes that sufficient Free Cash Flow will be generated to maintain the current annual dividend rate of $0.585 per Share. The Free Cash Flow payout ratio was 49.6% in Fiscal 2014 compared to 68.1% during Fiscal 2013.
Liquidity Position |
December 28 |
September 28 |
$ |
(U.S. dollars in millions) |
2014 |
2014 |
change |
Cash |
17.5 |
8.7 |
8.8 |
Available funds from revolving credit facility |
55.7 |
50.1 |
5.6 |
Total liquidity position |
73.2 |
58.8 |
14.4 |
As at December 28, 2014, there were $40.0 million of direct borrowings and $19.3 million of outstanding letters of credit related to the $115.0 million revolving credit facility.
Market Size and Share
Management estimates that heavy-duty bus manufacturers delivered approximately 5,100 EUs in 2014 to Canadian and U.S. transit operators, which is a slight increase from the total number of estimated EUs delivered in 2013. This is consistent with the estimated range of deliveries over the last 15 years (from 4,000 EUs to 6,000 EUs).
Management estimates that New Flyer's actual market share of EUs delivered in Canada and the United States for Fiscal 2014 was approximately 48%, an increase from its estimated market share of 43% for Fiscal 2013. The increase was primarily as a result of the acquisition of NABI in June 2013 and the introduction of MiDi®.
New Flyer's aftermarket segment market share is believed to have grown to an estimated 33% in Fiscal 2014 from an estimated 28% from Fiscal 2013. Management is currently engaged in a strategic review of New Flyer's aftermarket business to identify efficiencies through business and system synchronization to enhance performance and customer support.
Transit Bus Demand
The bid universe consists of the pipeline of Active EUs and solicitations that management expects to be released by U.S. and Canadian transit agencies over a five-year horizon and is based on discussions directly with certain individual U.S. and Canadian transit authorities.
The bid universe is as follows:
Period |
Bids in Process (EUs) |
Bids Submitted (EUs) |
Active EUs |
Forecasted Future Industry Procurement over 5 Years (EUs) |
Total Bid Universe (EUs) |
2013 Q4 |
909 |
5,329 |
6,238 |
12,354 |
18,592 |
2014 Q1 |
3,626 |
2,045 |
5,671 |
15,567 |
21,238 |
2014 Q2 |
2,772 |
1,926 |
4,698 |
15,030 |
19,728 |
2014 Q3 |
2,864 |
3,419 |
6,283 |
15,490 |
21,773 |
2014 Q4 |
3,335 |
3,394 |
6,729 |
14,727(1) |
21,456(1) |
(1) |
In order to more accurately reflect current information and estimates, management has revised its previously disclosed 2014 Q4 forecast of future industry procurements over the next five years by decreasing the bid universe by 1,612 EUs from the original forecast that was described in the Company's press release issued on January 13, 2015. |
Market and Business Outlook
The Company's Fiscal 2015 annual operating plan is focused on executing the phase out production of the NABI bus models from the Anniston, AL facility and transition to the Xcelsior® bus platform. The transition is proceeding in accordance with management's plans and is targeted to be completed during the second half of 2015. Management expects the transition to allow for improvement in competiveness by leveraging combined bus volume, production, and purchasing for greater efficiencies. Management further expects to streamline design, sourcing, and overhead for better product control. The transition is also anticipated to enable product enhancements and optimize aftermarket support to better serve customer needs and involves a transition to common information technology infrastructure. The Company believes customers will benefit from the enhancements that result from its focus on a single heavy-duty platform.
Throughout the transition process, management expects to invest approximately $20.0 million in direct operating costs and capital expenditures to complete the transition, utilizing operating cash flow and current credit facilities. As of December 28, 2014, the Company had incurred $3.1 million of costs. Management anticipates these direct operating and capital expenditures will be paid back through captured cost reductions and synergies within approximately two to three years. Currently, the annualized savings are $11.9 million.
Management believes pricing in certain types of bus competitions has normalized and expects that bus margins realized during Fiscal 2015 will be on average higher than those realized during Fiscal 2014. Management continues to pursue cost and overhead savings as a result of its decision to focus exclusively on the Xcelsior® platform and its Operational Excellence initiatives. Management anticipates that bus margins for Fiscal 2015 should mitigate the loss of Adjusted EBITDA derived from the Company's ITCs, which were substantially all realized during Fiscal 2014.
The aftermarket parts revenue generated from CTA mid-life upgrade program represented 14.8% of the total aftermarket revenue during Fiscal 2014. This stream of revenue is expected to conclude by June 2015. Management forecasts core aftermarket parts revenue growth at approximately 5% during Fiscal 2015.
As at the date of this release, the Company has filled approximately 80% of its Fiscal 2015 planned production schedule, which is similar to last year at this time. Fiscal 2015 however, has a higher production rate than the previous year. The New Flyer backlog and orders anticipated to be awarded by customers under new procurements are expected to enable the Company to continue to operate at a corporate average line entry rate of approximately 51 EUs (including MiDi®) per production week for Fiscal 2015 as the Company executes on the rationalization of the NABI Bus product lines to the Xcelsior® platform. Production rates may vary from quarter to quarter due to sales mix and the introduction of the Xcelsior® in the Anniston, AL facility.
Conference Call
A conference call for analysts and interested listeners will be held on Thursday March 19, 2015 at 3 p.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/1494485/1664763
A replay of the call will be available from 6:00 p.m. (ET) on March 19, 2015 until 11:59 p.m. (ET) on March 26, 2015. To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 97629546. The replay will also be available on New Flyer's web site at www.newflyer.com.
Non-IFRS Measures
"Earnings from Operations" refer to earnings before interest, income taxes and unrealized foreign exchange losses or gains on non-current monetary items. "Adjusted EBITDA" consists of earnings before interest, 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, product rationalization 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 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 also operates 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 3,300 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.
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 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 to successfully complete the product rationalization of the NABI bus platform, on budget and on schedule, 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 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.
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Jon Koffman, Investor Relations, Tel: (204) 224-6672, E-mail: [email protected]
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