New Flyer Industries Inc., the leading manufacturer of heavy-duty transit buses, motor coaches and parts distribution in Canada and the United States, announced its order activity and backlog update for the first fiscal quarter ended April 3, 2016 (Q1 2016).
The order and delivery activity and backlog for Q1 2016 reported in this release includes activity for heavy-duty transit buses manufactured by the company’s subsidiaries, New Flyer Industries Canada ULC and New Flyer of America Inc. (together New Flyer), and motor coaches manufactured by its subsidiaries, Motor Coach Industries Limited and Motor Coach Industries International Inc. (together MCI).
The order and delivery activity and backlog as reported excludes pre-owned coaches and transit buses.
Deliveries, Order Activity, and Option Expiry
The company delivered 829 equivalent units (EUs) in Q1 2016, an increase of 257 EUs compared to 572 EUs in the first fiscal quarter ended March 29, 2015 (Q1 2015). Work-in- process (WIP) at April 3, 2016 was 499 EUs, an increase of 70 EUs from the previous quarter.
The company’s new transit bus and coach orders (firm and options) in Q1 2016 totaled 1,059 EUs. Order activity in the period included:
- New firm orders for 898 EUs (valued at $439.3 million)
- New option orders for 161 EUs (valued at $93.9 million)
- Options for 582 EUs converted to firm orders (valued at $329.2 million)
In addition, 793 EUs of new firm and option orders were pending from customers at the end of the period, where approval of the award to the company had been made by the customer’s board, council, or commission, as applicable, but purchase documentation had not yet been received by the company and therefore not yet included in the backlog.
The last 12 months (LTM) Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 147% and has been greater than 100% for 12 of the last 13 quarters, demonstrating overall growth in the company’s total backlog.
In Q1 2016, 176 option EUs expired, compared to 309 option EUs that expired in the fourth fiscal quarter of 2015 (Q4 2015). Remaining options in the current backlog will expire if not exercised.
Total Backlog
At the end of Q1 2016, the company’s total backlog was 9,718 EUs (valued at $5.03 billion) compared to 9,664 EUs (valued at $4.95 billion) at the end Q4 2015 and 7,193 EUs (valued at $3.57 billion) at the end of Q1 2015.
The company’s backlog consists of 30-, 35-, 40- and 60-ft. heavy-duty transit buses, and 45-ft. motor coaches. Buses incorporating clean propulsion systems (such as natural gas, diesel-electric hybrid, electric-trolley, and battery-electric) represent approximately 51% of the total backlog.
Market Demand
The company’s Bid Universe metric reports active competitions in Canada and the United States, and provides an overall indicator of expected 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 of all expected EUs to be placed out for competition over the next 5 years.
Procurement of transit buses and coaches by the public sector is typically accomplished through formal multi-year contracts, while procurement of transit buses and coaches by the private sector is typically accomplished through transactional sales of small orders of vehicles. As a result, the company is unable to develop longer range forecasts for private sector buses and coaches.
The total number of active EUs at the end of Q1 2016 was 7,286 EUs which is an increase of 81 EUs over the previous quarter, largely as a result of the consolidation of the New Flyer and MCI sales activity. The number of EUs in the total Bid Universe at the end of Q1 2015 was 22,918 EUs, which is an increase of 2,304 EUs over Q4 2015.
Management continues to anticipate that bus procurement activity by public transit agencies throughout the U.S. and Canada should remain robust based on expected customer fleet replacement plans and active or anticipated procurements.
Management also anticipates stable private sector demand for motor coaches through 2016 given the stability of main market dynamics including the general economy, travel trends and credit markets.
The master production schedule combined with current backlog and orders anticipated to be awarded by customers under new procurements is now expected to enable the company to continue to deliver approximately 3,450 EUs in fiscal 2016. Production rates will vary from quarter to quarter due to sales mix and award timing.
Aftermarket
Gross orders received by the company’s aftermarket business in Q1 2016 increased 58% compared to Q4 2015, and increased 58% in Q1 2016 compared to the same quarter in 2015. The increase in year-over-year gross orders is primarily attributed to the acquisition of MCI.
Q1 2016 total shipments increased 50% compared to Q4 2015, and declined by 24% compared to the same quarter in 2015. The increase in total shipments year over year due to the acquisition of MCI was partially offset by the completion of the Chicago Transit Authority midlife upgrade program.
