New Flyer Announces Fourth Quarter and Fiscal Year 2016 Results
New Flyer Industries Inc. (the Company) has announced its results for the 13-week period ended January 1, 2017 ("2016 Q4") and the 53-week period ended January 1, 2017 ("Fiscal 2016").
Fiscal 2015 results include acquisition of Motor Coach Industries (MCI) from December 18, 2015 to December 27, 2015 only.
Operating Results
Revenue from transit bus and coach manufacturing operations for 2016 Q4 increased by 53.1 percent compared to the 13- week period ended December 27, 2015 ("2015 Q4"). The increase in 2016 Q4 revenue primarily resulted from a 44.1 percent increase in total transit bus and coach deliveries compared to 2015 Q4 deliveries and a 4.4 percent increase in the average selling price of new transit buses and coaches resulting from a favorable sales mix (which now includes coaches). The deliveries increased primarily as a result of the inclusion of MCI's new and pre-owned coaches. The 2016 Q4 new deliveries increased by 216 EUs compared to the previous quarter, primarily as a result of being able to deliver motor coaches to New Jersey Transit (with the temporary contract suspension lifted) and the increased coach deliveries that typically occur at the end of the year due to favorable tax treatment of depreciation for private customers. Similarly, the transit bus and coach revenue for Fiscal 2016 increased by 53.3 percent compared to 52-week period ended December 27, 2015 ("Fiscal 2015"), primarily as a result of an increase in transit bus and coach deliveries of 41.6 percent, and a 5.6 percent increase in average selling price of new transit buses and coaches. Fiscal 2016 also had an extra week compared to Fiscal 2015. The extra week occurred in the first quarter of Fiscal 2016, during the last calendar week of 2015, a period of above average deliveries.Revenue from aftermarket operations in 2016 Q4 increased by 27.0 percent compared to 2015 Q4 and increased 27.0 percent in Fiscal 2016 compared to Fiscal 2015 primarily a result of aftermarket revenues generated by MCI. The pro forma aftermarket business revenue (which includes MCI) for 2015 Q4 was $98.1 million and $416.7 million for Fiscal 2015 when also excluding the revenue from the Chicago Transit Authority mid-life overhaul program. Therefore, the core aftermarket revenue in 2016 Q4 decreased 7.2 percent compared to the pro forma aftermarket revenue for the core business in 2015 Q4, but remained essentially flat in Fiscal 2016 compared to Fiscal 2015.
Consolidated Adjusted EBITDA increased by 72.2 percent and 90.8 percent during 2016 Q4 and Fiscal 2016 respectively, compared to their corresponding periods in the previous year, which is primarily a result of increased unit deliveries and improved margins. Contributors to the increase in margin in the period is a very favourable sales mix, cost savings synergies relating to the MCI acquisition, continued cost reductions achieved through the Company's operational excellence initiatives and integration of MCI and the full impact from the New Flyer and NABI product rationalization.
Margins vary significantly between orders due to factors such as pricing, order size, propulsion system and product type and components specified by the customer. Management cautions readers that quarterly Adjusted EBITDA can be volatile and should be considered over a period of several quarters.Consolidated Adjusted EBITDA increased by 72.2 percent and 90.8 percent during 2016 Q4 and Fiscal 2016 respectively, compared to their corresponding periods in the previous year, which is primarily a result of increased unit deliveries and improved margins. Contributors to the increase in margin in the period is a very favourable sales mix, cost savings synergies relating to the MCI acquisition, continued cost reductions achieved through the Company's operational excellence initiatives and integration of MCI and the full impact from the New Flyer and NABI product rationalization.
The 2016 Q4 aftermarket operations Adjusted EBITDA increased 34.3 percent compared to 2015 Q4 as a result of Adjusted EBITDA generated from MCI's aftermarket business. As well, the Fiscal 2016 aftermarket Adjusted EBITDA increased 30.9 percent compared to Fiscal 2015. The aftermarket Adjusted EBITDA as a percentage of revenue for 2016 Q4 has increased 1.2 percent as compared to 2015 Q4 and increased by 0.6 percent when comparing to Fiscal 2016 to Fiscal 2015.
The transit bus and coach manufacturing Adjusted EBITDA per EU delivered in 2016 Q4 has increased by $13.9 thousand compared to 2015 Q4. The pro forma Adjusted EBITDA per EU delivered in 2015 Q4 was $56.3 thousand, the acquisition of MCI having increased Adjusted EBITDA per EU by $11.0 thousand. The remaining increase of $2.9 thousand of Adjusted EBITDA per EU delivered in 2016 Q4 compared to 2015 Q4 is a result of margin enhancements.Pre-owned coaches are sold effectively at break even and therefore the related deliveries are not included in the calculation of transit bus and coach Adjusted EBITDA per new EU delivered.
Similarly, the transit bus and coach manufacturing Adjusted EBITDA per EU delivered in Fiscal 2016 has increased by $23.1 thousand compared to Fiscal 2015. The pro forma Adjusted EBITDA per EU delivered in Fiscal 2015 was $44.4 thousand, the acquisition of MCI having increased Adjusted EBITDA per EU by $8.1 thousand. The remaining increase of $15.0 thousand of Adjusted EBITDA per EU delivered in Fiscal 2016 compared to Fiscal 2015 is a result of margin enhancements, contributed by higher sales price, cost savings synergies relating to the acquisition and integration of MCI, cost reductions as a result of the full impact from the New Flyer and NABI rationalization, on-going continuous improvement efforts and a favourable sales mix.
$0.68 compared to $0.25 per Share generated during 2015 Q4. Similarly, net earnings for Fiscal 2016 increased by 131.7 percent compared to Fiscal 2015.Net earnings during 2016 Q4 increased by 194.5 percent compared to 2015 Q4, primarily as a result of improved Earnings from Operations offset by the increase in income tax expense. This resulted in net earnings per Share in 2016 Q4 of
Liquidity
The Company generated Free Cash Flow of C$216.3 million during Fiscal 2016 which increased 99.7 percent compared to C$108.3 ($81.16) million in Fiscal 2015. The Company's declared dividends in Fiscal 2016 of C$54.0 ($40.47) million increased 59.8 percent compared to C$33.8 million ($25.33) in Fiscal 2015. The Fiscal 2016 Free Cash Flow payout ratio (declared dividends divided by Free Cash Flows) is 25.0 percent compared to 31.2 percent in Fiscal 2015.The Company generated Free Cash Flow of C$45.1 ($33.80) million during 2016 Q4, a decrease of 4.9 percent compared to C$47.4 ($35.52) million in 2015 Q4. The Company declared dividends in 2016 Q4 of C$14.9 ($11.17) million, an increase of 73.3 percent compared to C$8.6 ($6.44) million in 2015 Q4 primarily as a result of conversion of the 6.25 percent convertible unsecured subordinated debentures of the Company ("Debentures") by the holders to common shares of the Company ("Shares") and the 53 percent cumulative increase in the annual dividend rate during Fiscal 2016. There were 5.6 million Shares issued as a result of Debenture conversions during Fiscal 2016. As at January 1, 2017, approximately 88 percent of the original $65 million of Debentures issued had been converted to Shares at a conversion price of $10 per Share. The remaining Debentures will mature on June 30, 2017.
The January 1, 2017 liquidity position of $268.1 million is comprised of $255.1 million available under the revolving portion of the Credit Facility (the "Revolver") and $13.0 million of cash, compared to a liquidity position of $255.6 million at October 2, 2016. The liquidity has improved $12.5 million or 4.9 percent during 2016 Q4. The increased liquidity during 2016 Q4 relates to improved cash flow from operations during the period. As at January 1, 2017 there were $77.0 million of direct borrowings and $10.9 million of outstanding letters of credit related to the $343.0 million Revolver.
The Company's total leverage ratio (defined as net indebtedness excluding Debentures, divided by Adjusted EBITDA) of 1.94 at January 1, 2017 improved from the pro forma ratio of 2.91 at December 27, 2015. The pro forma adjustment represents MCI's full year Adjusted EBITDA for Fiscal 2015. As at January 1, 2017, the Company was in compliance with its covenant that requires the total leverage ratio to be less than 4.00.
