New Flyer Reports Second Quarter 2017 Results

New Flyer's second quarter revenue from transit bus and coach manufacturing operations increased by 6.6% due to an increase in new bus deliveries.

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New Flyer Industries Inc., the largest transit bus and motor coach manufacturer and parts distributor in North America, announces its results for the 13-week period ended July 2, 2017 (2017 Q2). The unaudited interim condensed consolidated financial statements and Management's Discussion and Analysis (the MD&A) are available at the company's website. Unless otherwise indicated, all monetary amounts in this press release are expressed in U.S. dollars.

2017 Second Quarter Financial Results

Year-over-year comparisons reported in the MD&A compare the 26-week period ended July 2, 2017 to the 27-week period ended July 3, 2016 (2016 YTD). Also, as a result of the organizational changes effective January 2, 2017, the service function, which was previously managed as part of the aftermarket operations, is now the responsibility of the transit bus and coach manufacturing operations.

Revenue from transit bus and coach manufacturing operations for 2017 Q2 increased by 6.6% compared to the 13-week period ended July 3, 2016 (2016 Q2). The increase in 2017 Q2 revenue primarily resulted from an 8.7% increase in total new bus and coach deliveries and a 1.8% decrease in the average selling price of new transit buses and coaches due to change in sales mix. Similarly, revenue from transit bus and coach manufacturing operations for the 26-week period ended July 2, 2017 (2017 YTD) increased 6.5% compared to 2016 YTD primarily resulting from increased new transit bus and coach deliveries of 8.2% offset by a 0.7% decrease in the average selling price.

Revenue from aftermarket operations in 2017 Q2 decreased 5.7% compared to 2016 Q2. The decrease in 2017 Q2 aftermarket operations revenue is primarily a result of customers' inventory reduction, budgetary constraints and fleet modernization impacts. The decrease in 2017 YTD aftermarket operations revenue was also impacted by an extra week in 2016 as compared to 2017.

Consolidated Adjusted EBITDA increased by 6.0% and 5.4% during 2017 Q2 and 2017 YTD respectively, compared to their corresponding periods in the previous year, primarily as a result of increased unit deliveries and improved margins. Contributors to the increase in margin in the period is a favorable sales mix, cost savings synergies relating to the MCI acquisition, continued cost reductions achieved through the company's operational excellence (OpEx) initiatives and integration of MCI and the full impact from the New Flyer and NABI product rationalization.

Margins vary significantly between orders due to factors such as pricing due to competitive intensity, order size, propulsion system, product type and components specified by the customer. Management cautions readers that quarterly transit bus and coach manufacturing Adjusted EBITDA can be volatile and should be considered over a period of several quarters. The 2017 Q2 aftermarket operations Adjusted EBITDA decreased 8.7% compared to 2016 Q2, primarily a result of lower sales volumes. As well, the 2017 YTD aftermarket Adjusted EBITDA decreased 6.1% compared to 2016 YTD. However, the Adjusted EBITDA as a percentage of aftermarket revenue during 2017 YTD increased 0.3% when compared to 2016 YTD, primarily as a result of reduced costs and a focus on higher margin opportunities.

Net earnings during 2017 Q2 increased by 23.1% compared to 2016 Q2, primarily as a result of improved Earnings from Operations and interest and finance costs offset by the increase in income tax expense. This resulted in net earnings per common share (Share) in 2017 Q2 of $0.69, which increased 19.0% compared to $0.58 per Share generated during 2016 Q2. Similarly during 2017 YTD, net earnings increased by 40.7% and net earnings per Share increased 31.3%, compared to 2016 YTD.


The Free Cash Flow of C$52.9 million generated by the company during 2017 Q2 decreased 13.0% compared to C$60.8 million in 2016 Q2, primarily as a result of the increased cash capital expenditures and timing of current income tax expense when comparing the two periods. The dividends declared by the company in 2017 Q2 of C$20.4 million increased 43.7% compared to C$14.2 million in 2016 Q2. The amount of declared dividends increased in 2017 Q2 primarily as a result of the conversion of the company's convertible debentures into Shares and the 36.8% annual dividend rate increase announced by the company in May 2017.

The Free Cash Flow of C$106.6 million generated by the company during 2017 YTD decreased compared to C$122.3 million in 2016 YTD. The dividends declared by the company in 2017 YTD of C$35.2 million increased 42.5% compared to C$24.7 million in 2016 YTD. 

Property, Plant and Equipment (PPE) cash expenditures in 2017 Q2 have increased by 37.3% compared to 2016 Q2 primarily as a result of investments in facilities to fund a variety of OpEx, insourcing and continuous improvement programs.

The July 2, 2017 liquidity position of $366.3 million is comprised of available cash of $32.1 million and $334.2 million available under the revolving portion of the company's credit facility (Credit Facility) as compared to a liquidity position of $268.1 million at January 1, 2017. The increased liquidity relates to improved cash flow from operations.

There are certain financial covenants under the Credit Facility that must be maintained. At July 2, 2017, the Company was in compliance with all the ratios.

Management believes that return on invested capital (ROIC) is an important ratio and tool that can be used to assess possible investments against their related earnings and capital utilization. The ROIC during the last 12 months ended July 2, 2017 of 14.9% increased compared to 14.0% earned during the last 12 months ended July 3, 2016.


The company’s annual operating plan for the 52-weeks ended December 31, 2017 (Fiscal 2017) is focused on maintaining and growing its leading market position in the North American heavy-duty transit bus and motor coach markets and aftermarket parts distribution through enhanced competitiveness.

The company now expects to deliver approximately 3,800 EUs of new transit buses and motor coaches during Fiscal 2017, an increase of 8.2% from the 53-weeks ended January 1, 2017 (Fiscal 2016), based on a solid production schedule for Fiscal 2017.

The company continues to invest in MCI's facilities and to harmonize MCI's information technology systems with those of New Flyer, along with a transformation to enhance MCI's Quality-at-the-Source, "zero defect" production culture. In addition to the continued focus on investing capital for insourcing projects at the manufacturing plants, the company plans to make further PPE investment with respect to: the launch of a new vehicle innovation center in Anniston, AL, that will be focused on electric and autonomous buses; service centers and support infrastructure and next generation product development (such as a battery-electric coach and a 35-ft. J-model coach). During Fiscal 2017, the company plans to invest in total PPE expenditures, in the range of approximately $55 million to $65 million.

On June 1, 2017, New Flyer acquired Carlson Engineered Composite Inc. (Carlson) and the assets of its affiliated U.S. companies. Carlson was a privately-owned composites company headquartered in Winnipeg, Manitoba with facilities in Minnesota and Alabama. The acquisition of Carlson, together with the company's ownership of Frank Fair Industries Ltd., the Winnipeg composite business owned by MCI, permits the company to now have control over 90% of the company's fiberglass reinforced polymer requirements. The company is now exploring sharing best practices in composite part manufacturing, optimizing processes, and pursuing new technologies. Carlson’s U.S. facilities will also contribute to the company complying with the increasing U.S. content requirements under Buy America regulations resulting from the 2015 FAST Act for the purchase of transit buses and motor coaches by U.S. federally-funded transit agencies.