NFI : announces third quarter 2020 results and schedules 2021 Investor Day
November 12, 2020 at 09:49 am EST
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NFI Group Inc. ('NFI' or the 'Company'), one of the world's leading independent bus manufacturers, today announced its financial results for 2020 Q3.
Manufacturing segment revenue for 2020 Q3 decreased by $49.9 million, or 8.1%, compared to 2019 Q3, but increased by 127.8% from 2020 Q2. The year-over-year decrease is primarily driven by the impact of lower production and deliveries of transit buses and motor coaches all attributable to the economic impacts of the COVID-19 pandemic. 2020 Q3 Manufacturing Adjusted EBITDA decreased by $16.9 million, or 27.5%, compared to 2019 Q3 as the Company successfully lowered its variable production costs, but results were impacted by reduced fixed cost absorption due to lower sales. Manufacturing Adjusted EBITDA was up by $77.0 million from 2020 Q2. At the end of 2020 Q3, the Company's total backlog (firm and options) was 8,882 EUs (valued at $4.5 billion) a decrease compared to 10,004 EUs (valued at $4.9 billion) at the end of 2020 Q2. The decrease was driven by deliveries in the quarter, delays in new awards within North American and UK transit operations, offset by some new orders. Aftermarket segment revenue for 2020 Q3 decreased by $11.6 million, or 10.6%, compared to 2019 Q3, but increased by 15.3% from 2020 Q2. The year-over-year decline in revenue was primarily driven by lower parts sales for both the NFI Parts and the ADL Parts businesses. 2020 Q3 Aftermarket adjusted EBITDA increased by $0.3 million compared to 2019 Q3, or 1.8%, with lower volumes offset by lower operating costs at ADL. Aftermarket Adjusted EBITDA was up by $4.6 million from 2020 Q2.
About NFI Group
With more than 8,000 team members operating from 50 facilities across ten countries, NFI is a leading independent global bus manufacturer providing a comprehensive suite of mass transportation solutions under brands: New Flyer (heavy-duty transit buses), Alexander Dennis Limited (single and double-deck buses), Plaxton (motor coaches), MCI (motor coaches), ARBOC (low-floor cutaway and medium-duty buses), and NFI Parts. NFI vehicles incorporate the widest range of drive systems available including: clean diesel, natural gas, dieselelectric hybrid, and zero-emission electric (trolley, battery, and fuel cell). In total, NFI now supports over 105,000 buses and coaches currently in service around the world.
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, liquidity, financial performance and results of operations and the Company's plans, business prospects and opportunities. The words 'believes', 'anticipates', 'plans', 'expects', 'intends', 'projects', 'forecasts', 'estimates', 'may', 'will' and similar expressions are intended to identify forward looking statements. These forward-looking statements reflect management's current expectations regarding future events (including the return of the Company's markets) and the Company's financial 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 events, 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. Actual results may differ materially and adversely from management expectations set forth in forward-looking statements for a variety of reasons and due to a number of factors, including, but not limited to those described below. With respect to forward-looking statements relating to the Company's 'NFI Forward' initiative, including the costs savings, cash flow improvement, reduction in working capital, deleveraging of the Company's balance sheet, reduction in the number of the Company's facilities, maximizing production capacity and the other benefits expected to be achieved and the costs and resources expected to be expended in implementing the initiative, such factors include: the Company's ability to successfully execute the initiative and to generate the planned savings in the expected time frame or at all; management may have overestimated the amount of savings and production efficiencies that can be generated or may have underestimated the amount of costs to be expended; the implementation of the initiative may take longer than planned to achieve the expected savings; further restructuring and cost-cutting may be required in order to achieve the objectives of the initiative; the estimated amount of savings generated under the initiative may not be sufficient to achieve the planned benefits; combining business units and/or reducing the number of production or parts facilities may not achieve the efficiencies anticipated and the impact of the continuing global COVID-19 pandemic. There can be no assurance that the Company will be able to achieve the anticipated financial and operational benefits, cost savings or other benefits of the initiative. With respect to all forward-looking statements, such factors relating to the global COVID-19 pandemic include: the magnitude and length of the global, national and regional economic and social disruption being caused as a result of the pandemic; the impact of national, regional and local governmental laws, regulations and 'shelter in place' or similar orders relating to the pandemic which may materially adversely impact the Company's ability to continue operations; partial or complete closures of one, more or all of the Company's facilities and work locations or the reduction of production rates (including to protect the health and safety of the Company's employees or as a result of employees being unable to come to work due to COVID-19 infections with respect to them or their family members); production rates may be further decreased as a result of the pandemic; supply delays and shortages of parts and components and disruption to labour supply as a result of the pandemic; the pandemic will likely adversely affect operations of customers and reduce and delay, for an unknown period, customers' purchases of the Company's products; the anticipated return of the Company's markets at some future date may be delayed or increase in demand may be lower than expected as a result of the continuing effects of the pandemic; the Company's ability to obtain access to additional capital; the Company's financial performance and condition, obligations, cash flow and liquidity and its ability to maintain compliance with the covenants under its credit facilities, which may also negatively impact the ability of the Company to fund dividends. There can be no assurance that the Company will be able to maintain sufficient liquidity for an extended period, obtain satisfactory covenant relief under its credit facilities or access to additional capital or access to government financial support or as to when production operations will return to previous production rates. There is also no assurance that governments will provide stimulus funding after the pandemic for public transit agencies to purchase transit vehicles or that public or private demand for the Company's vehicles will return to pre-pandemic levels in the anticipated period of time. The Company cautions that due to the dynamic, fluid and highly unpredictable nature of the pandemic and its impact on global and local economies, businesses and individuals, it is impossible to predict the severity of the impact on the Company's business, operating performance and financial condition and any material adverse effects could very well be rapid, unexpected and may continue for an extended and unknown period of time. A number of other factors that may cause actual results to differ materially from the results discussed in the forward-looking statements include: funding may not continue to be available to the Company's customers at current levels or at all; the Company's business is affected by economic factors and adverse developments in economic conditions could have an adverse effect on the for the Company's products and the results of its operations; currency fluctuations could adversely affect the Company's financial results or competitive position; interest rates could change substantially, materially impacting the Company's revenue and profitability; an active, liquid trading market for the Shares may cease to exist, which may limit the ability of shareholders to trade Shares; the market price for the Shares may be volatile; if securities or industry analysts do not publish research or reports about the Company and its business, if they adversely change their recommendations regarding the Shares or if the Company's results of operations do not meet their expectations, the Share price and trading volume could decline; in addition, if securities or industry analysts publish inaccurate or unfavorable research about the Company or its business, the Share price and trading volume of the Shares could decline; competition in the industry and entrance of new competitors; current requirements under 'Buy America' regulations may change and/or become more onerous or suppliers' 'Buy America' content may change; failure of the Company to comply with the U.S. Disadvantaged Business Enterprise ('DBE') program requirements or the failure to have its DBE goals approved by the U.S. Federal Transit Administration; absence of fixed term customer contracts, exercise of options and customer suspension or termination for convenience; local content bidding preferences in the United States may create a competitive disadvantage; uncertainty resulting from the exit of the UK from the European Union; requirements under Canadian content policies may change and/or become more onerous; operational risk resulting from inadequate or failed internal processes, people and/or systems or from external events, including fiduciary breaches, regulatory compliance failures, legal disputes, business disruption, pandemics, floods, technology failures, processing errors, business integration, damage to physical assets, employee safety and insurance coverage; international operations subject the Company to additional risks and costs and may cause profitability to decline; dependence on limited sources or unique sources of supply; dependence on supply of engines that comply with emission regulations; a disruption, termination or alteration of the supply of vehicle chassis or other critical components from third-party suppliers could materially adversely affect the sales of certain of the Company's products; the Company's profitability can be adversely affected by increases in raw material and component costs; the Company may incur material losses and costs as a result of product warranty costs, recalls and remediation of transit buses and motor coaches; production delays may result in liquidated damages under the Company's contracts with its customers; catastrophic events may lead to production curtailments or shutdowns; the Company may not be able to successfully renegotiate collective bargaining agreements when they expire and may be adversely affected by labour disruptions and shortages of labour; the Company's operations are subject to risks and hazards that may result in monetary losses and liabilities not covered by insurance or which exceed its insurance coverage; the Company may be adversely affected by rising insurance costs; the Company may not be able to maintain performance bonds or letters of credit required by its contracts or obtain performance bonds and letters of credit required for new contracts; the Company is subject to litigation in the ordinary course of business and may incur material losses and costs as a result of product liability claims; the Company may have difficulty selling pre-owned coaches and realizing expected resale values; the Company may incur costs in connection with regulations relating to axle weight restrictions and vehicle lengths; the Company may be subject to claims and liabilities under environmental, health and safety laws; dependence on management information systems and cyber security risks; the Company's ability to execute its strategy and conduct operations is dependent upon its ability to attract, train and retain qualified personnel, including its ability to retain and attract executives, senior management and key employees; the Company may be exposed to liabilities under applicable anti-corruption laws and any determination that it violated these laws could have a material adverse effect on its business; the Company's risk management policies and procedures may not be fully effective in achieving their intended purposes; internal controls over financial reporting, no matter how well designed, have inherent limitations; there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures; ability to successfully execute strategic plans and maintain profitability; development of competitive or disruptive products, services or technology; development and testing of new products or model variants; acquisition risk; reliance on third-party manufacturers; third-Party Distribution/Dealer Agreements; availability to the Company of future financing; the Company may not be able to generate the necessary amount of cash to service its existing debt, which may require the Company to refinance its debt; the restrictive covenants in the credit facilities could impact the Company's business and affect its ability to pursue its business strategies; payment of dividends is not guaranteed; a significant amount of the Company's cash is distributed, which may restrict potential growth; the Company is dependent on its subsidiaries for all cash available for distributions; future sales or the possibility of future sales of a substantial number of Shares may impact the price of the Shares and could result in dilution; if the Company is required to write down goodwill or other intangible assets, its financial condition and operating results would be negatively affected; income tax risk due to the Company's operations being complex and income tax interpretations, regulations and legislation that pertain to its activities are subject to continual change; investment eligibility and Canadian federal income tax risks; certain U.S. tax rules may limit the ability of NF Holdings and its U.S. subsidiaries (the 'NF Group') to deduct interest expense for U.S. federal income tax purposes and may increase the NF Group's tax liability and certain financing transactions could be characterized as 'hybrid transactions' for U.S. tax purposes, which could increase the NF Group's tax liability. NFI cautions that the foregoing factors are not exhaustive of all potential risks. These factors and other risks and uncertainties are discussed in NFI's press releases, Annual Information Form and materials filed with the Canadian securities regulatory authorities which are available on SEDAR at www.sedar.com. Due to the potential impact of these and other 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.
NFI Group Inc. is a Canada-based independent global bus manufacturer. The Company provides a suite of mass transportation solutions under brands: New Flyer (heavy-duty transit buses), Alexander Dennis (AD) (single and double-deck buses), Plaxton (motor coaches), MCI (motor coaches), ARBOC (low-floor cutaway and medium-duty buses) and NFI Parts (aftermarket parts sales). It operates through two segments: Manufacturing Operations and Aftermarket Operations. The Manufacturing Operations segment manufactures, services and supports transit buses, coaches, medium-duty, and cutaway buses. The Aftermarket Operations segment is engaged in the sale of aftermarket parts for transit buses, coaches and medium- duty/cutaway buses, both for the Company's and third-party products. Its product type includes Heavy-duty transit buses, Single deck buses, Double-deck buses, Articulated buses, motor coaches, low floor cutaway, and medium-duty buses.
NFI GROUP INC. 
