New Flyer Announces Third Quarter 2011 Orders and Backlog
CORRECTION: This press release corrects the following errors made in the press release issued by New Flyer Industries Inc. on October 21, 2011: (i) total new orders were understated by four equivalent production units, and (ii) 264 equivalent production units of exercised options were not transferred from the option backlog to the firm order backlog. The press release has been amended and is reproduced in full below with such amendments. Corrected copy follows:
Winnipeg, Manitoba, Canada, October 21, 2011: (TSX:NFI, 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, announced order activity for the third fiscal quarter of 2011 ended October 2, 2011 (“Q3 2011”) of 242 buses or 430 equivalent production units (“EUs”), with a total value of $181.6 million. Deliveries in Q3 2011 were 442 EUs, an improvement of 11 EUs from the previous quarter.
The Q3 2011 order activity comprises new firm and new option orders of 53 buses (102 EUs) and exercised options of 189 buses (328 EUs) with approximately 84% of the EUs for cleanpropulsion vehicles (i.e., hybrid or CNG). The existing backlog position combined with the order intake over the last 12 months is expected to allow the Company to maintain the current production line entry rate of approximately 36 EUs per week through the balance of 2011 and into the first half of 2012. This production rate reflects six days during the winter holiday period when the Company does not plan to produce or deliver buses.
Order activity during Q3 2011 included:
- King County Metro of Seattle, WA exercised options for an additional 132 articulated diesel-hybrid buses (264 EUs).
- Brampton Transit of Brampton, ON, seeing rapid growth of ridership, has extended its contract with New Flyer for the provision of 60’ articulated Xcelsior buses through 2017. This has added 45 buses (90 EUs) to Brampton’s available options, with the first 60’ Xcelsior models to be shipped in 2012.
- Hamilton Street Railway of Hamilton, ON exercised 17, 40’ Xcelsior bus options under the previously announced Metrolinx contract. These diesel buses will augment
Hamilton’s extensive experience as a long-time New Flyer customer.
- London Transit of London, ON has also exercised 13, 40’ Xcelsior bus options (a combination of diesel and hybrid buses) under the Metrolinx contract. In addition,
London ordered four additional 60’ articulated buses (eight EUs) under a separate contract.
- Palm Tran of West Palm Beach, FL has converted options to order six articulated diesel buses (12 EUs). Palm Tran is a new customer to New Flyer.
Management continues to advise that order activity is inconsistent on a quarterly basis and therefore believes the ratio of orders received to deliveries is more meaningful when compared on an annual basis. Over the past four quarters the Company has delivered 1,840 EUs and received new orders (firm and options) totaling 880 EUs. This ratio of new orders received to deliveries, at 0.48 to 1, trails the approximately 1.0 to 1.0 ratio during the previous three quarters. Options exercised over the past four quarters total 1,133 EUs while the total volume of new orders and options exercised over this period was 2,013 EUs.
The total backlog at the end of Q3 2011 was 7,725 EUs, a decrease of 6.6% from the backlog at the end of the second fiscal quarter of 2011 (“Q2 2011”). The firm portion of the total backlog at the end of Q3 2011 was 1,785 EUs, compared with 1,887 EUs at the end of Q2 2011. The value of the order backlog at the end of Q3 2011 was $3.3 billion, compared with $3.5 billion at the end of Q2 2011. This reduction in total backlog was not unexpected, nor inconsistent with management’s expectations or with the current market conditions. New Flyer’s industry leading backlog includes the widest available range of bus models, lengths, and propulsion options for prospective customers allowing flexibility to maintain current production levels, flexibility that management believes most other transit bus manufacturers in the industry do not enjoy.
New Flyer’s current backlog consists of the following mix of products, with clean propulsion vehicles representing approximately 67% of the total:
|Firm EUs||Option EUs||Total|
|40 foot and under buses||1,101||2,994||4,095|
|60 foot buses||684||2,946||3,630|
During Q3 2011, one customer’s five-year contract expired, resulting in the reduction of options totaling 206 EUs. Year to date, a total of 296 EUs have expired or 3.5% of the total backlog. Remaining options included in the total backlog will expire, if not exercised, as follows:
|Expiry Year||Remaining Option EUs|
At the end of Q3 2011, there were approximately 11,400 EUs in New Flyer’s new potential pipeline or bid universe for heavy-duty transit buses, a moderate decrease from the approximately 11,800 EUs reported at the end of Q2 2011. The pipeline is expected to remain volatile as customers manage through fleet replacement planning and deal with funding uncertainty. So far in 2011 the total bid universe has fluctuated from a high of approximately 12,500 EUs, to a low of just under 10,000 EUs.
The availability of funding for transit agencies in the United States continues with uncertainty. While federal capital funding provisions were recently extended through March 2012 at current authorization levels, many experts consider this a temporary measure. The Chairperson of the House Transportation and Infrastructure Committee has stated that it is his intention to complete a comprehensive reauthorization prior to the new expiry date. The leadership of the Committee has indicated that it wishes to reauthorize at lower levels than the current provision, but there appears to be little consensus at this time among the House, Senate, and the President of the
United States regarding the level of funding that transit will ultimately receive.
On a positive note, on October 18, 2011, US Department of Transportation Secretary Ray LaHood announced federal grants totaling $928.5 million to fund more than 300 public transportation projects. The Department of Transportation indicated that these grants will help in a number of areas, including replacing or refurbishing aging buses; building or improving bus terminals, garages and other transit facilities; installing bus-related equipment and conducting studies to help communities choose the best transit options. The grants were available through the Federal Transit Administration’s 2011 fiscal year Alternatives Analysis, Bus Livability, and State of Good Repair programs. New Flyer is actively reviewing the grant to assess implications to the Company’s total backlog and order position.
From a ridership perspective, the American Public Transportation Association (“APTA”) reported this month that US ridership in Q2 2011 grew by a moderate 0.22% over the same quarter of the previous year. This is an improvement following flat ridership (-0.02%) year-over-year for the respective first quarter periods. Transit ridership in all modes grew in the US by 1.55% in the second quarter of 2011 compared to the same quarter in the prior year, while in Canada overall ridership increased by 4.2% over the same period.
In aftermarket operations, New Flyer received gross orders during Q3 2011 that were $1.3 million higher compared to the level of gross orders received during the third fiscal quarter of 2010. The value of the Q3 2011 orders does not include the previously announced vendormanaged inventory contract awards for Maryland Transit Administration and Washington Metropolitan Area Transit Authority as the Company calculates gross orders based on PO’s received, not contract awards.
Finally, the Company is pleased to announce the successful opening of the previously announced Eastern Canadian Parts Distribution Center (“PDC”) in Brampton, Ontario on schedule and on budget, bringing the total regional PDCs to four (two in Canada and two in the US). The first shipments from the Ontario PDC were made to customers on October 3, 2011.
NOTE: All dollar amounts are stated in US currency based on an exchange rate of US $1.00 = CAD $1.0482 to calculate the value of the Canadian contracts in this release.
About New Flyer
New Flyer is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company’s three manufacturing facilities – in Winnipeg, MB; St. Cloud, MN; and Crookston, MN – are all ISO 9001, ISO 14001 and OHSAS 18001 certified. The Company currently operates a parts fabrication facility in Elkhart, IN and four PDCs in Winnipeg, MB; Erlanger, KY; Fresno, CA and since the beginning of October, 2011, in Brampton, ON.
With a skilled workforce of over 2,000 employees, New Flyer is a technology leader, 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 diesel-electric hybrid vehicles. All products are supported with an industry-leading, comprehensive parts and service network. Further information is available on New Flyer’s web site at www.www.newflyer.com.
The common shares of New Flyer are traded on the Toronto Stock Exchange (“TSX”) under the symbol NFI and the income deposit securities are traded on the TSX under the symbol NFI.UN.
This press release may contain forward-looking statements relating to expected future events and financial and operating results of New Flyer and New Flyer Industries Canada ULC (“NFI ULC”) that involve risks and uncertainties. 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. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including market and general economic conditions and economic conditions of and funding availability for transit agencies to purchase buses, parts and services and the other risks and uncertainties discussed in the materials filed with the Canadian securities regulatory authorities and available on SEDAR at www.sedar.com. Due to the potential impact of these factors, New Flyer and NFI ULC disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
For further information, please contact:
New Flyer Industries Inc.
Chief Financial Officer