New Flyer Announces Record Results for the Fourth Quarter and 2007 Fiscal Year
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Highlights:
Total order backlog of $2.8 billion (representing 6,916 equivalent units) increased by 54.5% compared to December 31, 2006 total order backlog of $1.8 billion (representing 5,313 equivalent units).
WINNIPEG, March 17, 2008 - New Flyer Industries Inc.
(TSX:NFI.UN) ("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 Q4") and for the 52-week period ended December 30, 2007 (“Fiscal 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 record highs in consolidated revenue and Adjusted EBITDA both for 2007 Q4 and Fiscal 2007. During 2007 Q4 the Company recorded revenue of $235.2 million which represents an increase of 34.7% compared to consolidated revenue for the fourth quarter of 2006 (“2006 Q4”) of $174.6 million. 2007 Q4 Adjusted EBITDA of $25.9 million increased by 30.7% compared to $19.8 million in 2006 Q4.
During Fiscal 2007, the Company’s consolidated revenue of $887.1 million increased by 46.0% compared to consolidated revenue for the 52-week period ended December 31, 2006 (“Fiscal 2006”) of $607.7 million. Fiscal 2007 bus manufacturing revenue contributed to the majority of this increase as a result of higher production levels in Fiscal 2007 compared to Fiscal 2006 and the negative impact of the labour strike at the Winnipeg production plant on Fiscal 2006 results. Bus manufacturing revenue during Fiscal 2007 totaled $804.4 million compared to $540.3 million in Fiscal 2006, representing an increase in bus manufacturing revenue of 48.9%. Bus deliveries in Fiscal 2007 were 2,003 equivalent units, which represents an increase of 38.9% compared to Fiscal 2006 bus deliveries of 1,442 equivalent units. This increase in delivery volumes is due to the significant improvement in firm order position throughout 2006 and 2007, which resulted in the Company increasing production rates. The remainder of the increase in Fiscal 2007 bus manufacturing revenue is attributable to higher selling prices as a result of changes in product sales mix and passing cost increases through to customers. The average selling price during Fiscal 2007 of $401.6 thousand per equivalent unit represents an increase of 7.2% compared to the average selling price of $374.7 thousand during Fiscal 2006. Similar to the results for 2007 Q4, Fiscal 2007 aftermarket revenue of $82.7 million increased by 22.7% compared to Fiscal 2006 aftermarket revenue of $67.4 million. The continued strong growth in aftermarket operations is a result of an increase 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.
Fiscal 2007 consolidated Adjusted EBITDA of $95.9 million increased by 61.3% compared to Fiscal 2006 consolidated Adjusted EBITDA of $59.4 million. This increase in consolidated Adjusted EBITDA is a result of sustaining higher production and delivery levels in Fiscal 2007 due to the improved bus order backlog position, favourable bus manufacturing operations sales mix and continued growth of the Company’s aftermarket operations. Bus manufacturing operations Adjusted EBITDA of $86.9 million for Fiscal 2007 increased 92.0% compared to $45.3 million for Fiscal 2006 bus manufacturing operations Adjusted EBITDA. This improvement is a result of increased delivery levels in Fiscal 2007 to meet the increased customer demand and the negative impact of a strike included in Fiscal 2006 results. Aftermarket operations Adjusted EBITDA for Fiscal 2007 of $17.4 million represents an increase of 25.0% over Fiscal 2006 aftermarket operations Adjusted EBITDA of $14.0 million, which exceeds the increase in aftermarket sales as a result of increasing gross profit margins. Unallocated Adjusted EBITDA is comprised primarily of realized foreign exchange losses of $8.5 million in Fiscal 2007 compared to a realized gain of $0.2 million in Fiscal 2006. The Fiscal 2007 loss relates primarily to realized losses on settlement of forward foreign exchange contracts for U.S. dollars which offsets gains included in bus manufacturing and aftermarket operations resulting from the Company generating excess Canadian dollars. This resulted in no material impact to Adjusted EBITDA as the Company effectively hedged its foreign exchange exposure.
Fiscal 2007 net loss of $130.7 million increased compared to Fiscal 2006 net loss of $5.2 million. The increase in net loss is attributable to improved consolidated Adjusted EBITDA of $36.5 million for Fiscal 2007, offset by increased non-cash charges of $130.9 million, increased interest of $5.5 million and increased income tax provisions of $25.4 million. Fiscal 2007 results include non-cash charges to earnings of $145.9 million compared to non-cash charges of $15.0 million included in Fiscal 2006 earnings. The increase in non-cash charges is primarily attributable to a fair value adjustment to other liabilities, Class B and Class C common shares, the impact of the fair value adjustments to assets and liabilities resulting from the July 12, 2007 transaction, and unrealized foreign exchange losses. Fair value adjustments to other liabilities for Class B and Class C common shares resulted in a charge to earnings of $90.2 million in Fiscal 2007 compared to a gain of $8.1 million in Fiscal 2006. Losses charged to earnings for the fair value adjustment to other liabilities for Class B and Class C common shares reflect the increase in the value of those shares, which has increased together with the market value of the Income Deposit Securities (“IDSs”) of New Flyer and New Flyer Industries ULC (together, the “Issuer”) during 2007. The Class B and Class C common shares in NFI’s subsidiary, New Flyer Holdings, Inc. are held indirectly by the former owners of the business and management. Unrealized foreign exchange losses charged to earnings in Fiscal 2007 were $26.5 million, which are comprised primarily of unrealized losses on long-term debt that matures in 2020, compared to a gain of $0.2 million in Fiscal 2006.
During Fiscal 2007 the Company generated Distributable Cash of C$66.1 million and the Issuer declared distributions of C$50.9 million, which represents a Fiscal 2007 payout ratio of 77.0%. As previously reported on February 25, 2008, the Company’s calculation of Distributable Cash for 2007 Q4 was adversely affected by increased provisions for withholding taxes and current income taxes. During 2007 Q4 the Company incurred withholding taxes of $2.1 million related to an inter-company dividend, of which $1.7 million represents a non-recurring charge and the remaining $0.4 million charge is expected to continue on a quarterly basis, based on current distribution levels. In addition, current income taxes during 2007 Q4 included a charge of $2.2 million which reverses the current income tax benefits accrued during the second and third quarter of 2007 related to unrealized losses on forward foreign exchange contracts. During Fiscal 2006, the Company generated Distributable Cash of C$52.6 million and the Issuer declared Distributions of C$48.6 million, resulting in a payout ratio of 92.3%. The 16.6% improvement in Fiscal 2007 payout ratio includes an increase in distributions of 4.8% compared to Fiscal 2006 distributions.
Cumulatively, since the Issuer’s initial public offering on August 19, 2005, the Company has generated Distributable Cash of C$139.0 million and the Issuer has declared distributions of $117.8 million, resulting in a cumulative surplus of C$21.2 million.
The Company’s positive cash flow from operations and the reduction in working capital has resulted in a net cash inflow of $21.1 million during Fiscal 2007. As a result, the Company’s liquidity position as at December 30, 2007 totaled $65.3 million comprised of cash balances of $25.3 million and a $40.0 million revolving credit facility, which was undrawn as at December 30, 2007. In comparison, the Company began Fiscal 2007 with total liquidity of $44.0 million.
In the event that there is any excess cash as determined pursuant to the provisions of the Company’s senior credit agreement and IDS note indenture, the board of directors of the Company will consider utilizing such excess cash for future redemptions of Class B and Class C common shares as such 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 $2.8 billion (representing 6,916 equivalent units) as at December 30, 2007 increased by 54.5% 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 Q4 our customers awarded New Flyer firm orders of $339.6 million (Fiscal 2007 - $1.1 billion) compared to 2006 Q4 awarded firm orders of $210.0 million (Fiscal 2006 - $771.9 million), which represents an increase of 61.8% (Fiscal 2007 increase of 47.1%). Included in 2007 Q4 total firm bus orders are exercised options of $36.7 million compared to exercised options of $169.4 million in 2006 Q4. As a result of new order activity and deliveries during 2007 Q4, the firm order backlog as of December 30, 2007 is $1.2 billion, which represents 43.9% of the total backlog. The firm order backlog, which represents 2,844 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, March 18th, 2008 at 4:30 p.m. (Toronto time). The call-in number for listeners is 800-732-9307. A live audio feed of the call will also be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2179100.
A replay of the call will be available from 6:30 p.m. (ET) on March 18th, 2008 to 11:59 p.m. on March 25th, 2008. To access the replay, call 416-640-1917 or 877-289-8525, enter the pass code number 21264187, and then press the pound number sign (“#”). The replay will also be available on the Company's website 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 certain costs related to the July 12, 2007 transaction 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 related to capital transactions, 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, fair market value adjustment to deferred revenue, fair market value adjustment to accounts payable and accrued liabilities 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 Issuer's and 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 existing contracts or obtain performance bonds and letters of credit required for new 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 Issuer cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the Issuer’s materials filed with the Canadian securities regulatory authorities and 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 Issuer and the Company assume no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.
For further information:
Glenn Asham
Chief Financial Officer
Tel: (204) 224-1251
E-mail: investor@newflyer.com
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