New Flyer Announces Fourth Quarter 2016 Orders and Backlog
Winnipeg, Manitoba, Canada, January 11, 2017: (TSX:NFI) (TSX:NFI.DB.U) New Flyer Industries Inc. (the “Company”), 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 fourth fiscal quarter ended January 1, 2017 (“Q4 2016”).
The order and delivery activity and backlog for Q4 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 Inc. (together, “MCI”).
The order and delivery activity and backlog as reported excludes pre-owned transit buses and motor coaches.
Deliveries, Order Activity, and Option Expiry
The Company delivered 993 equivalent units (“EUs”) in Q4 2016, an increase of 304 EUs compared to 689 EUs in the fourth fiscal quarter ended December 27, 2015 (“Q4 2015”). The Q4 2016 deliveries increased 216 EUs compared to the third fiscal quarter of 2016 (“Q3 2016”), as a result of the timing of the New Jersey Transit coach deliveries combined with the seasonality of private market coach deliveries. Total bus and coach inventory at January 1, 2017 was 495 EUs, a decrease of 137 EUs from the previous quarter.
The Company’s new transit bus and coach orders (firm and options) in Q4 2016 totaled 1,522 EUs. Order activity in the period included:
- New firm orders for 1,018 EUs (valued at $475.2 million)
- New option orders for 504 EUs (valued at $236.6 million)
- Options for 597 EUs converted to firm orders (valued at $349.2 million)
(Firm and Option EUs)
|LTM New Orders
(Firm and Option EUs)
|Option EUs Converted
|Option EUs Converted
The last twelve months (“LTM”) Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 131% and has been greater than 100% for fifteen of the last sixteen quarters, demonstrating overall growth in the Company’s total backlog.
In addition, 714 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.
In Q4 2016, 150 option EUs expired and remaining options in the current backlog will expire if not exercised, as follows:
|Remaining Options (EUs)||597||1,009||1,276||1,335||2,528||6,745|
In 2013, the Federal Transit Administration (“FTA”) issued a Dear Colleague or guidance letter to the transportation industry providing guidance on joint procurements and the assignment of options to purchase buses (referred to as “piggybacking”). The FTA encourages its grantees (such as transit agencies) to issue joint procurements, but limits the amount of goods and services an agency can specify under a procurement to that amount required to meet its expected needs. The FTA continue to remind grantees that they are prohibited from improperly expanding procurements to include excess goods simply for the purpose of assigning options to other agencies at a later date. As a result of this FTA guidance letter, the industry has seen a greater number of procurements issued by agencies, but with a lower average number of total options specified under each procurement.
At the end of Q4 2016, the Company’s total backlog increased to 10,187 EUs (valued at $5.23 billion) compared to 9,808 EUs (valued at $5.08 billion) at the end Q3 2016, and 9,664 EUs (valued at $4.95 billion) at the end of Q4 2015.
|Total Backlog||Firm Orders
|Ending backlog at Q3 2016
New orders in Q4 2016
Deliveries in Q4 2016
Cancelled/expired options in Q4 2016
|Ending Backlog at Q4 2016||3,442||6,745||10,187|
The Company’s backlog consists of 30’, 35’, 40’ and 60-foot medium and heavy duty transit buses, and 45’ motor coaches primarily for public customers. Buses incorporating clean propulsion systems (such as natural gas, diesel-electric hybrid, electric-trolley, and battery-electric) represent approximately 42% of the total backlog. Zero-emission buses (battery-electric and electric-trolley) represent approximately 4.2% of total backlog.
The Company’s Bid Universe metric reports active public sector competitions in Canada and the United States, and provides an overall indicator of active bid activity and 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 based on public customer projection of all expected EUs to be placed out for competition over the next five years.
The total number of active EUs at the end of Q4 2016 was 6,600 EUs, which is consistent with the previous quarter. The number of EUs in the total Bid Universe at the end of Q4 2016 was 21,138 EUs, which is a decrease of 2,597 EUs over Q3 2016.
|Bids in Process
|Bids Submitted (EUs)||Total Active (EUs)||Forecasted New Procurements over the next
5 Years (EUs)
|Total Bid Universe (EUs)|
* Q4 2015 includes New Flyer Bid Universe only (excludes MCI)
Procurement of transit buses and motor coaches by the public sector is typically accomplished through formal multi-year contracts, while procurement by the private sector is typically accomplished through transactional sales. As a result, the Company does not publish a forecast metric for private sector buses and motor coaches.
Management continues to anticipate that transit bus and motor coach 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 2017 given healthy market dynamics including the general economy, travel trends and credit markets. The Company’s master production schedule combined with current backlog and orders anticipated to be awarded by customers under new procurements is expected to enable the Company to deliver approximately 3,650 EUs in fiscal 2017 with production rates increasing over 2016 for both heavy-duty transit buses and motor coaches. Production rates will vary from quarter to quarter due to sales mix and award timing.
New Jersey Transit Commuter Coach Contract
On October 2015, NJ Transit awarded a six-year contract to MCI for 772 commuter coaches and options for an additional 450 coaches. In April 2016, a purchase order was issued for the first fiscal year’s production of 184 coaches, of which 142 were scheduled to be delivered in 2016.
On July 7, 2016, after the first five coaches were accepted, NJ Transit advised MCI that the replenishment of the New Jersey Transportation Trust Fund Account (the “TTFA”) had been delayed and that New Jersey Governor had issued Executive Order No. 210 directing the immediate and orderly shutdown of all ongoing work funded under the TTFA.
Following the enactment of legislation on October 14, 2016 to provide funding to the TTFA, the New Jersey Governor issued Executive Order No. 216 lifting the suspension of all work funded under the TTFA. MCI has completed 108 coaches for New Jersey Transit to date, with 96 coaches sold in 2016.
Gross orders received by the Company’s aftermarket business increased by 30% in Q4 2016 compared to Q4 2015, and decreased slightly by 6.3% compared to Q3 2016. Total shipments for the quarter increased by 32% compared to Q4 2015 and decreased by 4.2% compared to Q3 2016. Year-over-year increases in the aftermarket business are primarily related to the acquisition of MCI.
NOTE: All dollar amounts are stated in U.S. currency based on an exchange rate of U.S. $1.00 = CAD $ 1.3427 to calculate the value of the Canadian contracts in this release.
About the Company
The Company employs over 5,000 team members and is the largest transit bus and motor coach manufacturer and parts distributor in North America with fabrication, manufacturing, distribution and service centers in Canada and the United States.
Through its Canadian and U.S. subsidiaries, New Flyer Industries Canada ULC and New Flyer of America Inc., the Company is North America’s heavy-duty transit bus leader and offers the broadest transit bus product line (Xcelsior® and MiDi® models), incorporating the broadest range of drive systems available, including: clean diesel, natural gas, diesel-electric hybrid, electric-trolley and now battery-electric. New Flyer actively supports over 42,000 heavy-duty transit buses (New Flyer, NABI and Orion) currently in service.
Through its Canadian and U.S. subsidiaries, Motor Coach Industries Limited and Motor Coach Industries, Inc., the Company is the leader in motor coaches in Canada and the U.S., offering the MCI J4500, which is the industry’s best-selling intercity coach for 11 consecutive years, and the MCI D-Series, the industry’s best-selling coach line in North American motor coach history. MCI is also the exclusive distributor of Setra S417 and S407 in the United States and Canada. MCI actively supports over 28,000 motor coaches currently in service and offers 24-hour roadside assistance 365 days a year.
The Company also operates North America’s most comprehensive aftermarket parts organization providing support for all types of transit buses and motor coaches. All buses and coaches are supported by an industry-leading comprehensive warranty, service and support network.
The common shares and convertible unsecured subordinated debentures of the Company are traded on the Toronto Stock Exchange under the symbols NFI and NFI.DB.U, respectively.
This press release may contain forward-looking statements relating to expected future events and financial and operating results of the Company 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 customers to purchase buses and to purchase parts or services, customers may not exercise options to purchase additional buses, the ability of customers to suspend or terminate contracts for convenience 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, the Company disclaims 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.
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