WINNIPEG, Manitoba, Canada - November 12, 2007
(TSX:NFI.UN) New Flyer Industries Inc. ("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 ("2007 Q3") and for the 39-week period (“2007 YTD”) ended September 30, 2007. Full 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.
Higher bus production and delivery levels in response to the Company’s growing bus order backlog and continued strong growth in aftermarket operations resulted in consolidated revenue for 2007 Q3 of $202.6 million, which represents an increase of 26.2% compared to consolidated revenue for the third quarter of 2006 (“2006 Q3”) of $160.5 million. Bus manufacturing revenue in 2007 Q3 of $181.3 million increased by 26.8% compared to bus manufacturing revenue of $143.1 million in 2006 Q3. Total bus deliveries in 2007 Q3 were 466 equivalent units, which represents a volume increase of 18.9% compared to 2006 Q3 deliveries of 392 equivalent units. This increase in delivery volumes is due to the significant improvement in firm order position throughout 2006 and 2007 YTD, which resulted in the Company increasing production rates. The balance of the increase in bus manufacturing revenue is primarily attributable to product sales mix and passing cost increases through to customers. 2007 Q3 aftermarket operations revenue of $21.3 million increased by 21.9% compared to $17.4 million in 2006 Q3. The growth in aftermarket operations is a result of growth in market share as New Flyer buses continue to represent a larger share of the active installed fleet in the combined United States and Canadian market.
Consolidated Adjusted EBITDA for 2007 Q3 totaled $23.8 million compared to $17.2 million in 2006 Q3, which represents an increase of 38.4%. The reported consolidated Adjusted EBITDA is a result of sustaining the higher production and delivery levels attained in 2007 due to the improved bus order backlog position, favourable bus manufacturing operations sales mix and continued growth of the Company’s aftermarket operations. 2007 Q3 bus manufacturing operations Adjusted EBITDA of $19.4 million increased by 43.1% compared to bus manufacturing operations Adjusted EBITDA of $13.6 million in the corresponding period of 2006. The improvement in bus manufacturing operations performance is the result of higher deliveries and higher contract margins related to product sales mix. 2007 Q3 aftermarket Adjusted EBITDA of $4.6 million increased by 29.6% compared to $3.5 million in 2006 Q3, which exceeds the increase in aftermarket sales as a result of higher gross profit margins.
The Company reported a net loss of $14.0 million and $0.8 million in 2007 Q3 and 2006 Q3, respectively. With 2007 Q3 earnings from operations increasing by $8.2 million and interest costs increasing by $0.8 million, the decrease in net earnings is attributable to non-cash charges to earnings and increased income tax provisions. In 2007 Q3, non-cash charges to earnings totaled $15.5 million compared to non-cash charges included in 2006 Q3 earnings of $3.0 million. This change in non-cash items included in earnings related to fair value adjustments to assets and liabilities, unrealized foreign exchange losses, and amortization. Fair value adjustments to other liabilities for Class B and Class C common shares resulted in a non-cash gain to earnings of $4.6 million in 2007 Q3 compared to a non-cash gain of $2.2 million in 2006 Q3. Gains credited to earnings for the fair value adjustment to other liabilities for Class B and Class C common shares reflect the decrease in the value of those shares, which has decreased together with the value of New Flyer’s IDSs during 2007 Q3 and 2006 Q3. Unrealized foreign exchange losses charged to earnings in 2007 Q3 were $15.7 million compared to a gain of $0.5 million in 2006 Q3 and relate to unrealized foreign exchange losses on IDS notes, subordinated notes issued separately from IDS notes and forward foreign exchange contracts. Interest charges (including distributions on Class B and Class C shares) have increased primarily due to the increase in the rate of distributions declared in 2007.
On July 12, 2007, the Company and New Flyer Industries Canada ULC (collectively, the “Issuer”) issued an additional 9,410,000 IDSs at a price of C$11.70 each to raise gross proceeds of C$110.1 million. Proceeds from the offering (net of certain costs) were used to purchase for cancellation 10,490,293 Class C common shares of New Flyer Holdings, Inc. (“NFL Holdings”). After closing of the offering and this repurchase, NFI holds an approximate 55.3% voting and economic interest in NFL Holdings. Management expects this change in the outstanding capital to have a neutral impact on the after-tax cash flow of the Company.
During 2007 Q3 the Company generated Distributable Cash of C$18.4 million and declared total distributions of C$13.2 million resulting in Distributable Cash exceeding total distributions by C$5.1 million. In comparison, 2006 Q3 Distributable Cash totaled C$16.6 million and the Company declared total distributions of C$12.1 million resulting in a surplus of $4.6 million.
Cumulatively, since the Issuer’s initial public offering on August 19, 2005, the Company has generated Distributable Cash of C$126.0 million and declared distributions of $104.8 million resulting in a cumulative surplus of C$21.2 million.
The Company’s positive cash flow from operations before working capital has been offset by an increased investment in working capital. As a result, the Company’s liquidity position as at September 30, 2007 totaled $43.6 million comprised of cash balances of $3.6 million and a $40 million revolving credit facility, which was undrawn as at September 30, 2007. In comparison, the Company began the current fiscal year with total liquidity of $44.0 million. Management expects to reduce the investment in working capital through a reduction in work-in-process and accounts receivable during the remainder of the year and early 2008.
In the event that there is any excess cash, the board of directors of the Company will consider utilizing such excess cash for future redemptions of Class B shares and Class C shares of NFL Holdings, subject to the provisions of the Company’s senior credit agreement and IDS note indenture. Based on current exchange rates and the foreign exchange provisions in the securityholders’ agreement of NFL Holdings, further redemptions are expected to be accretive to the after-tax cash flow of the Company.
The total order backlog (including firm orders and options) of approximately $2.5 billion (representing 6,641 equivalent units) as at September 30, 2007 increased by 36.8% compared to the total order backlog of approximately $1.8 billion (representing 5,313 equivalent units) as at December 31, 2006. Based on the significant increase in order activity in 2006 and 2007, and the current strong bid activity in the U.S. heavy-duty transit bus market, management believes that the U.S. market demand is continuing to improve following a period of reduced demand from 2004 to early 2006.
During 2007 Q3 our customers awarded New Flyer firm orders of $386.1 million (2007 YTD - $795.5 million) compared to 2006 Q3 awarded firm orders of $171.7 million (2006 YTD - $561.9 million), which represents an increase of 124.9% (YTD increase of 41.6%). As a result of new order activity and deliveries during 2007 Q3, the firm order backlog as of September 30, 2007 is $1.1 billion, which represents 44.6% of the total backlog. The firm order backlog, which represents 2,703 equivalent units of production, provides the order visibility to allow the Company to efficiently plan the production schedule, thereby minimizing expenses and working capital requirements and is supportive of the current levels of production.
Conference Call
A conference call for analysts and interested listeners will be held on Tuesday, November 13th, at 9:00 a.m. (ET). The call-in number for listeners is 800-732-6179. A live audio feed of the call will also be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2052820
A replay of the call will be available from 11:00 a.m. (ET) on November 13th until 11:59 p.m. (ET) on November 20th. To access the replay, call 416-640-1917 or 877-289-8525, enter pass code number 21250908, and then press the pound # sign. The replay will also be available on the Company's web site at www.newflyer.com.
Non-GAAP Measures
Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges, adjusted for IPO related costs and certain other non-recurring charges as set out in the MD&A. Management believes Adjusted EBITDA and Distributable Cash (as defined below) are useful measures in evaluating the performance of the Company. “Distributable Cash” means cash flows from operations adjusted for changes in non-cash working capital items, and effect of foreign currency rate on cash and cash equivalents and increased for withholding taxes, defined benefit funding, distributions on Class B and Class C common shares, follow-on offering related costs, fair market value adjustment to inventory, fair market value adjustment to prepaid expenses, proceeds on sale of redundant assets, and interest on subordinated notes forming part of IDSs and decreased for defined benefit expense, maintenance capital expenditures, and principal payments on capital leases. Adjusted EBITDA and Distributable Cash are not earnings measures recognized under GAAP and do not have standardized meanings as prescribed by GAAP. Therefore, Adjusted EBITDA and Distributable Cash may not be comparable to similar measures presented by other entities. Investors are cautioned that Adjusted EBITDA and Distributable Cash should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of New Flyer's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.
About New Flyer
New Flyer is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company's three facilities - in Winnipeg, MB, St. Cloud, MN and Crookston, MN - are all ISO 9001, ISO 14001 and OHSAS 18001 certified. With a skilled workforce of approximately 2,200 employees, New Flyer is a technology leader in the heavy-duty transit market, offering the broadest product line in the industry, including drive systems powered by clean diesel, LNG, CNG and electric trolley, as well as energy-efficient gasoline-electric and diesel-electric hybrid vehicles. All of New Flyer's products are supported by an industry-leading, comprehensive parts and service network. New Flyer's Income Deposit Securities are listed on the Toronto Stock Exchange under the symbol NFI.UN.
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", "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, competition in the heavy-duty transit bus industry, availability of funding to the Company's customers at current levels or at all, 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 Company's success depends on a limited number of key executives who the Company may not be able to adequately replace in the event that they leave the Company, the absence of fixed term customer contracts and the termination of contracts by customers for convenience, the current "Buy-America" legislation may change and/or become more onerous, production delays may result in liquidated damages under the Company's contracts with its customers, 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 contracts, third party debt service obligations may have important consequences to the Company, interest rates could change substantially and materially impact the Company's profitability, the dependence on limited sources of supply, the Company's profitability and performance can be adversely affected by increases in raw material and component costs, and the availability of labour could have an impact on production levels. The Company cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities and 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 the Company assumes no obligation to update or revise them to reflect new events or circumstances.
For further information:
Glenn Asham
Chief Financial Officer
Tel: (204) 224-1251
E-mail: investor@newflyer.com
