New Flyer Industries Inc., the leading manufacturer of heavy-duty transit buses, motor coaches and parts distribution in Canada and the United States, announces its order activity and backlog update for the second fiscal quarter ended July 3, 2016 (Q2 2016).
The order and delivery activity and backlog for Q2 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 912 equivalent units (EUs) in Q2 2016, an increase of 318 EUs compared to 594 EUs in the second fiscal quarter ended June 28, 2015 (Q2 2015). Total bus and coach inventory at July 3, 2016 was 559 EUs, a decrease of 12 EUs from the previous quarter.
The Company’s new transit bus and coach orders (firm and options) in Q2 2016 totaled 1,428 EUs. Order activity in the period included:
- ● New firm orders for 247 EUs (valued at $147.6 million)
- ● New option orders for 1,181 EUs (valued at $666.9 million)
- ● Options for 597 EUs converted to firm orders (valued at $274.6 million)
In addition, 1,071 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 159% and has been greater than 100% for 13 of the last 14 quarters, demonstrating overall growth in the Company’s total backlog.
In Q2 2016, 214 option EUs expired, compared to 176 option EUs that expired in the first fiscal quarter of 2016 (Q1 2016). Remaining options in the current backlog will expire if not exercised.
Total Backlog
At the end of Q2 2016, the company’s total backlog was 10,010 EUs (valued at $5.24 billion) compared to 9,718 EUs (valued at $5.00 billion) at the end Q1 2016 and 7,011 EUs (valued at $3.49 billion) at the end of Q2 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, dieselelectric hybrid, electric-trolley, and battery-electric) represent approximately 64% of the total
backlog.
Market Demand
The company’s Bid Universe metric reports active public sector 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 five 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 Q2 2016 was 4,198 EUs which is a decrease of 3,088 EUs over the previous quarter, largely as a result of orders awarded during the quarter. The number of EUs in the total Bid Universe at the end of Q2 2016 was 19,332 EUs, which is a decrease of 3,586 EUs over Q1 2016.
Management continues to anticipate that bus procurement activity by public transit agencies throughout the U.S. and Canada should remain robust based on an aging fleet, improved overall economic conditions, 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 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.
On July 11, 2016, MCI received notice that required an immediate and orderly shutdown of all ongoing work under a contract to build commuter coaches for New Jersey Transit (NJT), however the company has insufficient information to determine if the company needs to adjust its annual delivery guidance.
Aftermarket
Gross orders received by the company’s aftermarket business in Q2 2016 decreased 5% compared to Q1 2016, primarily due to the impact of five fewer workdays in the fiscal calendar in Q2. Gross orders increased 52% in Q2 2016 compared to the same quarter in 2015. The increase in year over year gross orders is attributed to the acquisition of MCI.
Q2 2016 total shipments decreased 5% compared to Q1 2016, primarily due to the impact of five fewer workdays in the fiscal calendar in Q2. Total shipments increased by 16% compared to the same quarter in 2015. The increase in total shipments year over year due is primarily attributed to the acquisition of MCI, offset by the completion of the CTA midlife program.
