(TSX: NFI, OTC: NFYEF, TSX: NFI.DB) NFI Group Inc.
("NFI" or the "Company"), a leader in zero-emission electric
mobility solutions, today announced its unaudited consolidated
financial results for the first quarter of 2023.
Key financial metrics of the quarter and full
year are highlighted below:
|
in millions except deliveries and per Share amounts |
2023 Q1 |
Change1 |
2023 Q1LTM |
Change1 |
| |
|
|
|
|
|
Deliveries (EUs) |
|
792 |
|
20% |
|
3,171 |
|
(9)% |
| |
|
|
|
|
|
IFRS Measures3 |
|
|
|
|
|
Revenue |
$ |
524 |
|
14% |
$ |
2,119 |
|
(5)% |
|
Net earnings (loss) |
|
(46 |
) |
(65)% |
|
(294 |
) |
(497)% |
|
Net earnings (loss) per Share |
$ |
(0.60 |
) |
(67)% |
$ |
(3.80 |
) |
(476)% |
| |
|
|
|
|
|
Non-IFRS
Measures2,3 |
|
|
|
|
|
Adjusted EBITDA |
$ |
7 |
|
144 |
$ |
(33 |
) |
(136)% |
|
Adjusted Net Earnings (Loss) |
$ |
(38 |
) |
7.6 |
$ |
(157 |
) |
(166.8)% |
|
Adjusted Earnings (Loss) per Share |
$ |
(0.49 |
) |
7.5 |
$ |
(2.03 |
) |
(150.6)% |
|
Free Cash Flow |
$ |
(29 |
) |
28 |
$ |
(157 |
) |
(579)% |
|
Liquidity (minimum liquidity requirement of $25 million) |
$ |
124 |
|
(14)% |
$ |
124 |
|
(14)% |
Footnotes:
- Results noted herein are for the 13-week period ("2023 Q1”) and
the 52-week period ("LTM 2023 Q1”) ended April 2, 2023. The
comparisons reported in this press release compare 2023 Q1 to the
13-week period ("2022 Q1") and LTM 2023 Q1 to the 53-week period
("LTM 2022 Q1") ended April 3, 2022. Comparisons and comments are
also made to the 13-week period (“2022 Q4”) ended January 1, 2023.
The term "LTM" is an abbreviation for "Last Twelve Month
Period".
- Adjusted EBITDA, Adjusted Net Earnings (loss), and Free Cash
Flow represent non-IFRS measures, Adjusted Net Earnings (loss) per
Share and Return on Invested Capital ("ROIC") are non-IFRS ratios,
and Liquidity and Backlog are supplementary financial measures.
Such measures and ratios are not defined terms under IFRS and do
not have standard meanings, so they may not be a reliable way to
compare NFI to other companies. Adjusted Net Earnings (loss) per
Share is based on the non-IFRS measure Adjusted Net Earnings
(Loss). ROIC is based on net operating profit after tax and average
invested capital, both of which are non-IFRS measures. See
“Non-IFRS Measures” and detailed reconciliations of IFRS Measures
to Non-IFRS Measures in Appendix B of this press release. Readers
are advised to review the unaudited interim condensed consolidated
financial statements (including notes) (the “Financial Statements”)
and the related Management's Discussion and Analysis (the
"MD&A").
- The Company retrospectively adopted IFRS 17 - Insurance
Contracts on January 2, 2023. Refer to the section, "new and
amended standards adopted by the Company" for details of the impact
of the adoption on this MD&A. NFI's Financial Statements were
prepared on a going concern basis in accordance with IFRS. Readers
are recommended to read the section "capital allocation policy" in
the MD&A regarding the basis of preparation, the impact of
upcoming financial covenants, and the determination of application
of the going concern assumption.
"During the first quarter of 2023, we saw
significant improvements within overall supply chain performance
combined with an extremely strong order and bidding environment.
Total bus and coach deliveries increased, helping drive revenue
growth and improved margin performance; the Aftermarket segment
delivered revenue and margin growth that exceeded our expectations;
and it was another quarter of record demand for our products and
services. While there were many positives, our quarterly results
continued to reflect the impacts of supply disruption, associated
production inefficiencies, and the delivery of inflation impacted
legacy contracts originally bid in 2020 and 2021. As we move
throughout 2023, we expect that we will see improvement from
updated contract pricing, fewer legacy deliveries, higher new
vehicle production rates driving volume leverage, and better
on-time supply performance. This view allows us to reaffirm our
guidance for the current year, and our longer-term outlook for
significant growth and improved financial returns," said Paul
Soubry, President and Chief Executive Officer, NFI.
"Our team remains focused on finalizing
amendments to our credit agreements, lowering leverage, and
improving liquidity. During the quarter, we advanced discussions
with our senior banking syndicate partners to put in place an
amended multi-year agreement by the end of June. We are also
pursuing other opportunities to generate cash flows through the
reduction of excess spare parts inventory and delivery of offline
work-in-process vehicles, advance payments and deposits from
customers, and other capital market activities. We hope to announce
additional details on these efforts in the near-term," Soubry
concluded.
Liquidity and Credit Agreement
Discussions
The Company's liquidity2 position, which
combines cash on-hand plus available capacity under its credit
facilities, without consideration given to the minimum liquidity
requirement of $25 million under the Company's existing senior
revolving credit facility and its revolving UK credit facility
(collectively the Amended Facilities), was $124 million as at the
end of 2023 Q1, down $19 million from the end of 2022 Q4. The
decrease in liquidity is primarily due to increased letters of
credit being issued to support bus bids and customer prepayments,
and increased debt drawings to support heightened inventory
balances. These higher inventory balances primarily relate to the
timing of completing vehicles that require certain components and
from delays in delivering select North American battery-electric
buses that require the installation of new drain technology within
the battery energy enclosure system. Work on the drains began in
the second quarter, and NFI expects that the majority of the
vehicles impacted by these issues will commence delivery late in
the second quarter and continue to be delivered throughout the rest
of 2023.
NFI worked with customers in the second half of
2022 and the first quarter of 2023 to seek commercial relief,
and/or milestone payments, in response to rising input costs. As of
April 2, 2023, the Company had received $88 million in prepayments
and is continuing to work with other customers to help alleviate
some of NFI's working capital investments while it navigates
through supply chain challenges.
NFI and its banking syndicate partners are
focused on developing amended multi-year credit arrangements, and
NFI is pursuing agreements that provide appropriate capacity and
covenants matched to the Company’s anticipated financial
performance and recovery through 2025. The Company is targeting
completion of these changes prior to June 30, 2023.
Segment Results
Manufacturing segment revenue
for 2023 Q1 increased by $59 million, or 18%, compared to 2022 Q1.
The increase was driven by higher deliveries within motor coach and
medium-duty and low-floor cutaway vehicles. Quarterly and LTM
deliveries are down relative to pre-COVID-19 levels due to global
supply chain challenges and related production inefficiencies.
These challenges are largely the result of suppliers recovering
from impacts of the COVID-19 pandemic, which has created
bottlenecks in the supply chain and disruptions to certain parts
availability.
Manufacturing Adjusted EBITDA2 increased by $16
million, or 42%, compared to 2022 Q1.The increase was driven by
higher overall deliveries, favourable sales mix, and a lower number
of legacy inflation impacted contracts.
Aftermarket segment revenue for
2023 Q1 of $139 million increased by $6 million, or 5% compared to
2022 Q1, driven by increased volume in the North America region.
The Company continues to benefit from a multi-year retrofit program
in the Asia-Pacific region, which continued throughout 2023 Q1, but
at a lower run rate. 2023 Q1 Aftermarket Adjusted EBITDA2 was $29
million, a $7 million, or 29%, year-over-year increase, stemming
from improved sales volume and product mix. Economic conditions,
combined with NFI's pricing actions, also helped mitigate the
impact of freight and part costs, and freight surcharges.
Net Earnings, Adjusted Net Earnings and
Return on Invested Capital
2023 Q1 net loss of $46 million increased by $18
million from 2022 Q1, primarily due to increased interest costs and
financing costs, stemming from higher interest expense on long-term
debt as a result of elevated debt levels and higher interest rates
on components of the Company's debt. In addition, NFI reported a
fair market value loss on the adjustment to the Company's interest
rate swaps and a lower gain on the adjustment to the Company's cash
conversion option related to its convertible debt. The loss was
somewhat offset by favourable fair value adjustment to the
Company's convertible debenture cash conversion option.
2023 Q1 Adjusted Net Loss2 of $38 million
compared to 2022 Q1 Adjusted Net Loss of $41 million. The increase
in Adjusted Net Loss2 was driven by the same items that impacted
Adjusted EBITDA2 and net loss. Adjusted Net Loss2 was normalized
for the fair value adjustments mentioned above.
LTM 2023 Q1 ROIC2 increased by 1% from LTM 2023
Q4, due to the increase in Adjusted EBITDA and by a lower average
invested capital base. The increase in invested capital is
primarily due to an increase in senior unsecured debt partially
offset by a decrease in shareholders' equity.
Outlook
Since March 2020, NFI's global operations have
been dramatically impacted by the COVID-19 pandemic and resulting
macro trends including supply disruption that created production
inefficiencies, heightened and rapid inflation on parts, raw
materials and labour rates, higher interest rates, and volatile
foreign exchange movements. NFI continues to recover from these
impacts and has seen signs of significant improvement within supply
chains and contract pricing. These developments, combined with
record market demand, drive NFI's outlook for positive improvements
to revenue, gross profit, Adjusted EBITDA2, Free Cash Flow2, Net
Earnings and ROIC2.
NFI's positive outlook is based on its
multi-year backlog, growing demand for its buses, coaches, parts
and Infrastructure SolutionsTM services, and government funding
reaching record high levels in core markets. In 2023 Q1, NFI
received new firm and option orders for 1,873 EUs, an increase of
33% from 2022 Q1. These new orders included 1,091 EUs of ZEBs,
which equates to 58% of all new firm and option orders for the
quarter, an increase from 43% in 2022 Q4. NFI's closing backlog
(firm and options) for 2023 Q1 was 10,071 EUs with a record value
of $6.7 billion.
A high volume of active bus and motor coach
procurements continue in both North America and international
markets. As of 2023 Q1, the Company's North American active bids
were at a record 11,066 EUs, an increase of 99% year-over-year.
This bid activity is expected to drive additional backlog growth,
and revenue growth in the medium- and longer-term. The current
five-year demand within the Company's North American bid universe
is strong at 20,103 EUs, and, when combined with active bids,
provides a record total bid universe of 31,169 EUs.
While supply chain challenges continue and have
caused dislocation to NFI's operating and financial performance,
the Company has seen significant signs of improvement in 2023. The
number of moderate and high risk suppliers within NFI's supply base
has decreased, and, through the Company's actions, it has improved
on-time supplier delivery performance supporting higher production
volumes.
NFI is maintaining its plan to increase new bus
production rates in the second half of 2023, subject to continued
and sustained supply performance. The Company anticipates it will
hire an additional 150 to 200 direct labour team members before the
end of 2023, to support higher production rates and deliveries.
This will be a phased approach, with gradual headcount additions
throughout the second half of the year.
Financial Guidance and
Targets
NFI reaffirms its financial guidance for Fiscal
2023 and Fiscal 2024, and its 2025 targets, as presented on March
1, 2023:
|
|
2019 Pro-forma Results |
2023 Guidance |
2024 Guidance |
2025 Targets |
|
Revenue |
$3.2 billion |
$2.5 to $2.8 billion |
$3.2 to $3.6 billion |
~$4 billion |
|
ZEB (electric) as a percentage of manufacturing sales |
6% |
25% to 30% |
30% to 35% |
~40% |
|
Adjusted EBITDA2 |
$331 million |
$30 to $60 million |
$250 to $300 million |
~$400 million |
|
Cash Capital Expenditures – including NFI Forward 2.0 |
|
$35 to $40 million |
$50 to $60 million |
~$50 million |
|
Return on Invested Capital - provided for 2025 targets |
9.8% |
|
|
>12% |
Please review the Company's March 1, 2023 press
release and the 2022 Q4 and Fiscal Year MD&A for details on the
assumptions that drive Fiscal 2023 and Fiscal 2024 guidance, and
2025 targets, as well as certain applicable risks. Management's
expectations regarding financial guidance and targets above are
also subject to the risks and other factors referred to in Appendix
B.
Board Update
After 17 years and upon the completion of the
Company’s Annual and Special Meeting of Shareholders on Thursday,
May 4, 2023 (the “Shareholders’ Meeting”), the Honourable Brian
Tobin, O.C. P.C. will retire as Chair of NFI’s Board. Mr. Tobin had
originally reached the Director term limit under the Company’s
Board Mandate in 2021 but remained as Chair of the Board for two
one-year extensions at the request of his fellow Directors to
maintain the continuity of Board representation and leadership as
NFI navigated through the COVID-19 pandemic and the associated
supply chain disruptions.
NFI's Board and management would like to thank
Mr. Tobin for his outstanding contribution to NFI and wish him all
the best in future endeavours.
Ms. Wendy Kei who joined NFI’s Board in 2022,
will replace Mr. Tobin as Chair of the Board once elected at the
Shareholders’ Meeting. In addition, Ms. Jannet Walker-Ford has been
nominated to serve as a new independent Director on NFI’s Board.
Ms. Walker-Ford has more than two decades of diverse public and
private sector experience across multiple industries and is a
tireless advocate for equity in transportation and the power of
public transit to transform communities.
Environmental, Social &
Governance
NFI's Environmental Social Governance Report for
2022 will be released on the Company's website in May 2023.
First Quarter 2023 Results Conference
Call and Filing
NFI intends to release its first quarter 2023
financial results on Thursday, May 4, 2023, prior to market open. A
conference call for analysts and interested listeners will be held
on May 4, 2023, from 8:30 a.m. Eastern Time (ET) until
approximately 9:30 a.m. ET. An accompanying results presentation
will be available prior to market open on May 4, 2023 at
www.nfigroup.com.
For attendees who wish to join by webcast,
registration is not required; the event can be accessed at
https://edge.media-server.com/mmc/p/ez3pf99w. NFI encourages
attendees to join via webcast as the results presentation will be
presented and users can also submit questions to management through
the platform.
Attendees who wish to join by phone must visit
the following link and pre-register:
https://register.vevent.com/register/BIc80e16a943fa486687e2a2c5bbf2f44a.
An email will be sent to the user’s registered email address, which
will provide the call-in details. Due to the possibility of emails
being held up in spam filters, we highly recommend that attendees
wishing to join via phone register ahead of time to ensure receipt
of their access details.
A replay of the call will be accessible from about
12:00 p.m. ET on May 4, 2023, until 11:59 p.m. ET on May 3, 2024,
at https://edge.media-server.com/mmc/p/ez3pf99w. The replay will
also be available on NFI's website at: www.nfigroup.com.
Annual and Special Meeting of
Shareholders
NFI’s Shareholders’ Meeting will be held at
11:00 a.m. EST on Thursday, May 4, 2023, in Toronto, Ontario at
First Canadian Place, 100 King Street West, 24th Floor. A
listen-only webcast link is available at www.nfigroup.com for
interested parties.
About NFI Group
Leveraging 450 years of combined experience, NFI
is leading the electrification of mass mobility around the world.
With zero-emission buses and coaches, infrastructure, and
technology, NFI meets today’s urban demands for scalable smart
mobility solutions. Together, NFI is enabling more livable cities
through connected, clean, and sustainable transportation.
With 7,700 team members in nine countries, NFI
is a leading global bus manufacturer of mass mobility solutions
under the brands New Flyer® (heavy-duty transit
buses), MCI® (motor coaches), Alexander
Dennis Limited (single and double-deck buses),
Plaxton (motor coaches), ARBOC®
(low-floor cutaway and medium-duty buses), and NFI
Parts™. NFI currently offers the widest range of
sustainable drive systems available, including zero-emission
electric (trolley, battery, and fuel cell), natural gas, electric
hybrid, and clean diesel. In total, NFI supports its installed base
of over 105,000 buses and coaches around the world. NFI’s common
shares ("Shares") trade on the Toronto Stock Exchange (“TSX”) under
the symbol NFI and its Debentures trade on the TSX under the symbol
NFI.DB. News and information is available at www.nfigroup.com,
www.newflyer.com, www.mcicoach.com, www.nfi.parts,
www.alexander-dennis.com, www.arbocsv.com, and
www.carfaircomposites.com.
For investor inquiries, please contact:
Stephen KingP:
204.224.6382Stephen.King@nfigroup.com
Appendix A - Reconciliation
Tables
Reconciliation of Net Earnings (Loss) to Adjusted
EBITDA and Net Operating Profit after Taxes
Management believes that Adjusted EBITDA, and
net operating profit after taxes ("NOPAT") are important measures
in evaluating the historical operating performance of the Company.
However, Adjusted EBITDA and NOPAT are not recognized earnings
measures under International Financial Reporting Standards ("IFRS")
and do not have standardized meanings prescribed by IFRS.
Accordingly, Adjusted EBITDA and NOPAT may not be comparable to
similar measures presented by other issuers. Readers of this press
release are cautioned that Adjusted EBITDA should not be construed
as an alternative to net earnings or loss determined in accordance
with IFRS as an indicator of the Company's performance and NOPAT
should not be construed as an alternative to earnings or loss from
operations determined in accordance with IFRS as an indicator of
the Company's performance. See "Non-IFRS Measures" for the
definition of Adjusted EBITDA. The following table reconciles net
earnings (loss) to Adjusted EBITDA based on the historical
Financial Statements of the Company for the periods indicated.
The company defines NOPAT as Adjusted EBITDA less depreciation of
plant and equipment, depreciation of right-of-use assets and income
taxes at a rate of 31%.
|
(U.S. dollars in thousands) - unaudited |
2023 Q1 |
|
2022 Q1 |
|
|
52-WeeksEnded April 2,2023 |
|
53-WeeksEnded April 3,2022 |
|
|
Net (loss) |
(45,964 |
) |
(27,795 |
) |
|
(294,326 |
) |
(49,312 |
) |
|
Addback |
|
|
|
|
|
|
Income taxes |
(7,562 |
) |
(8,745 |
) |
|
(46,238 |
) |
(6,775 |
) |
|
Interest expense14 |
32,218 |
|
(9,335 |
) |
|
78,341 |
|
19,578 |
|
|
Amortization |
20,901 |
|
23,351 |
|
|
86,045 |
|
95,941 |
|
|
(Gain) loss on disposition of property, plant and equipment and
right of use assets |
(17 |
) |
(373 |
) |
|
(209 |
) |
94 |
|
|
Fair value adjustment for total return swap9 |
— |
|
952 |
|
|
— |
|
2,071 |
|
|
Unrealized foreign exchange (gain) loss on non-current monetary
items and forward foreign exchange contracts |
(424 |
) |
4,768 |
|
|
(5,790 |
) |
14,030 |
|
|
Costs associated with assessing strategic and corporate
initiatives7 |
— |
|
— |
|
|
— |
|
(106 |
) |
|
Past service costs and other pension costs11 |
4,764 |
|
— |
|
|
11,764 |
|
— |
|
|
Proportion of the total return swap realized10 |
— |
|
(275 |
) |
|
— |
|
(1,434 |
) |
|
Equity settled stock-based compensation |
409 |
|
285 |
|
|
1,470 |
|
1,373 |
|
|
Unrecoverable insurance costs and other12 |
— |
|
411 |
|
|
8,078 |
|
1,129 |
|
|
Expenses incurred outside of normal operations16 |
1,246 |
|
— |
|
|
5,007 |
|
— |
|
|
COVID-19 costs13 |
— |
|
— |
|
|
— |
|
3,670 |
|
|
Out of period costs15 |
— |
|
— |
|
|
(1,597 |
) |
3,230 |
|
|
Impairment loss on goodwill17 |
— |
|
— |
|
|
103,900 |
|
— |
|
|
Restructuring costs8 |
1,838 |
|
96 |
|
|
20,185 |
|
9,192 |
|
|
Adjusted EBITDA |
7,409 |
|
(16,660 |
) |
|
(33,370 |
) |
92,681 |
|
|
Depreciation of property, plant and equipment and right of use
assets |
(13,036 |
) |
(15,212 |
) |
|
(54,837 |
) |
(63,216 |
) |
|
Tax at 31% |
1,744 |
|
9,880 |
|
|
27,344 |
|
(9,134 |
) |
|
NOPAT |
(3,883 |
) |
(21,992 |
) |
|
(60,863 |
) |
20,331 |
|
| |
|
|
|
|
|
|
Adjusted EBITDA is comprised of: |
|
|
|
|
|
|
Manufacturing |
(23,093 |
) |
(39,459 |
) |
|
(132,798 |
) |
(23,675 |
) |
|
Aftermarket |
29,462 |
|
22,834 |
|
|
92,782 |
|
99,022 |
|
|
Corporate |
1,040 |
|
(35 |
) |
|
6,646 |
|
17,334 |
|
Free Cash Flow and Free Cash Flow per Share
Management uses Free Cash Flow and Free Cash
Flow per Share as non-IFRS measures to evaluate the Company’s
operating performance and liquidity and to assess the Company’s
ability to pay dividends on its Shares, service debt, and meet
other payment obligations. However, Free Cash Flow and Free Cash
Flow per Share are not recognized earnings measures under IFRS and
do not have standardized meanings prescribed by IFRS. Accordingly,
Free Cash Flow and the associated per Share figure may not be
comparable to similar measures presented by other issuers. Readers
of this press release are cautioned that Free Cash Flow should not
be construed as an alternative to cash flows from operating
activities determined in accordance with IFRS as a measure of
liquidity and cash flow. See "Non-IFRS Measures" for the definition
of Free Cash Flow. The following table reconciles net cash
generated by operating activities to Free Cash Flow.
The Company defines Free Cash Flow per Share as
Free Cash Flow divided by the average number of Shares
outstanding.
|
(U.S. dollars in thousands, except per Share figures) -
unaudited |
2023 Q1 |
|
2022 Q1 |
|
|
52-Weeks Ended April 2, 2023 |
|
53-Weeks Ended April 3, 2022 |
|
|
Net cash generated by (used in) operating activities |
(66,379 |
) |
(132,547 |
) |
|
(174,020 |
) |
70,351 |
|
|
Changes in non-cash working capital items3 |
41,744 |
|
101,209 |
|
|
36,704 |
|
(58,833 |
) |
|
Interest paid3 |
29,246 |
|
14,536 |
|
|
73,058 |
|
60,106 |
|
|
Interest expense3 |
(25,920 |
) |
(16,301 |
) |
|
(87,469 |
) |
(70,055 |
) |
|
Income taxes paid (recovered)3 |
(1,367 |
) |
(884 |
) |
|
(1,905 |
) |
9,535 |
|
|
Current income tax (expense) recovery3 |
(973 |
) |
2,613 |
|
|
16,223 |
|
(7,537 |
) |
|
Repayment of obligations under lease |
(5,078 |
) |
(4,842 |
) |
|
(24,771 |
) |
(15,989 |
) |
|
Cash capital expenditures |
(2,987 |
) |
(6,208 |
) |
|
(18,150 |
) |
(34,023 |
) |
|
Acquisition of intangible assets |
(1,461 |
) |
(1,315 |
) |
|
(10,358 |
) |
(4,063 |
) |
|
Proceeds from disposition of property, plant and equipment |
139 |
|
1,085 |
|
|
741 |
|
4,953 |
|
|
Costs associated with assessing strategic and corporate
initiatives7 |
— |
|
— |
|
|
— |
|
(106 |
) |
|
Defined benefit funding4 |
817 |
|
1,035 |
|
|
4,047 |
|
3,638 |
|
|
Defined benefit expense4 |
(613 |
) |
(808 |
) |
|
(3,302 |
) |
(5,333 |
) |
|
Past service costs and other pension costs11 |
— |
|
— |
|
|
7,000 |
|
— |
|
|
Expenses incurred outside of normal operations17 |
1,246 |
|
— |
|
|
5,008 |
|
— |
|
|
Equity Hedge |
692 |
|
— |
|
|
(311 |
) |
— |
|
|
Proportion of the total return swap realized10 |
— |
|
(275 |
) |
|
— |
|
(1,434 |
) |
|
Unrecoverable insurance costs and other12 |
— |
|
411 |
|
|
8,077 |
|
3,125 |
|
|
Out of period costs16 |
— |
|
1,264 |
|
|
(1,597 |
) |
2,498 |
|
|
Prior year sales tax provision13 |
— |
|
— |
|
|
— |
|
— |
|
|
Restructuring costs8 |
1,836 |
|
96 |
|
|
13,422 |
|
9,032 |
|
|
COVID-19 costs14 |
— |
|
— |
|
|
— |
|
3,670 |
|
|
Foreign exchange gain (loss) on cash held in foreign currency5 |
185 |
|
564 |
|
|
392 |
|
(2,300 |
) |
|
Free Cash Flow1 |
(28,873 |
) |
(40,367 |
) |
|
(157,211 |
) |
(32,765 |
) |
|
U.S. exchange rate2 |
1.3515 |
|
1.2518 |
|
|
1.3437 |
|
1.2649 |
|
|
Free Cash Flow (C$)1 |
(39,022 |
) |
(50,531 |
) |
|
(211,244 |
) |
(41,444 |
) |
|
Free Cash Flow per Share (C$)6 |
(0.5057 |
) |
(0.6551 |
) |
|
(2.7305 |
) |
(0.5677 |
) |
|
Declared dividends on Shares (C$) |
— |
|
4,096 |
|
|
8,192 |
|
50,657 |
|
|
Declared dividends per Share (C$)6 |
— |
|
0.0531 |
|
|
0.1068 |
|
0.6906 |
|
-
Free Cash Flow is not a recognized measure under IFRS and does not
have a standardized meaning prescribed by IFRS.
-
U.S. exchange rate (C$ per US$) is the weighted average exchange
rate applicable to dividends declared for the period.
-
Changes in non-cash working capital are excluded from the
calculation of Free Cash Flow as these temporary fluctuations are
managed through the credit facilities which are available to fund
general corporate requirements, including working capital
requirements, subject to borrowing capacity restrictions. Changes
in non-cash working capital are presented on the consolidated
statements of cash flows net of interest and income taxes
paid.
-
The cash effect of the difference between the defined benefit
expense and funding is included in the determination of cash from
operating activities. This cash effect is excluded in the
determination of Free Cash Flow as management believes that the
defined benefit expense amount provides a more appropriate measure,
as the defined benefit funding can be impacted by special payments
to reduce the unfunded pension liability.
-
Foreign exchange gain (loss) on cash held in foreign currency is
excluded in the determination of cash from operating activities
under IFRS; however, because it is a cash item, management believes
it should be included in the calculation of Free Cash Flow.
-
Per Share calculations for Free Cash Flow (C$) are determined by
dividing Free Cash Flow by the total number of all issued and
outstanding Shares using the weighted average over the period. The
weighted average number of Shares outstanding for 2023 Q1 was
77,161,510 and 77,135,057 for 2022 Q1. The weighted average number
of Shares outstanding for 2023 Q1 LTM and 2022 Q1 LTM are
77,362,993 and 73,007,524, respectively. Per Share calculations for
declared dividends (C$) are determined by dividing the amount of
declared dividends by the number of outstanding Shares at the
respective period end date.
-
Normalized to exclude non-operating expenses and recoveries related
to the costs of assessing strategic and corporate initiatives.
-
Normalized to exclude non-operating restructuring costs. Costs
primarily relate to severance costs, inefficient labour costs,
increased medical costs and right-of-use asset impairments and
inventory impairments associated with NFI Forward and other
restructuring initiatives. Free Cash Flow reconciling amounts are
net of right-of-use asset and property, plant and equipment
impairments.
-
The fair value adjustment of the total return swap is a non-cash
(gain) loss that is excluded from the definition of Adjusted
EBITDA. Beginning in Q2 2022, hedge accounting was applied to the
total return swap derivative and therefore, the portion of the
(gain) loss on the fair value adjustment, which does not apply to
the current period is recognized in other comprehensive
income.
-
A portion of the fair value adjustment of the total return swap is
added to Adjusted EBITDA and Free Cash Flow to match the equivalent
portion of the related deferred compensation expense recognized.
Beginning in Q2 2022, hedge accounting was applied to the total
return swap derivative and therefore, the portion of the (gain)
loss on the fair value adjustment, which does not apply to the
current period is recognized in other comprehensive income.
-
Costs and recoveries associated with amendments to, and closures
of, the Company's pension plans. Q2 2022 includes $7.0 million for
the liability related to the closure of the Pembina facility and
withdrawal from the multi-employer pension plan. Also included is
$4.8 million of pension past service costs.
-
Normalized to exclude non-operating costs related to an insurance
event that are not recoverable, or are related to the
deductible.
-
Normalized to exclude COVID-19 related costs. Costs primarily
relate to asset impairments, medical costs directly related to
COVID-19 and miscellaneous operating costs associated with
COVID-19. Asset impairments are primarily attributable to pre-owned
coach inventory. During 2022, management determined costs related
to sanitization and masks were an operating cost and would no
longer be included in the definition.
-
Includes fair market value adjustments to interest rate swaps and
the cash conversion option on the Convertible Debentures. 2023 Q1
includes a loss of $5.6 million and 2022 Q1 includes a gain of
$22.5 million for the interest rate swaps. 2023 Q1 includes a gain
of $2.6 million and 2022 Q1 includes a gain of $5.4 million on the
cash conversion option.
-
Includes adjustments made related to expenses that pertain to prior
years. 2022 Q1 includes expenses related to amounts that should
have been capitalized from Fiscal years 2010 - 2021.
-
Includes adjustments made related to items that occurred outside of
normal operations. This includes specified items purchased in
broker markets at a premium and associated broker fees, which the
Company provided to suppliers, and does not normally directly
purchase. Also included is the additional labour costs associated
with the shortage of the specified item.
-
Includes 2022 Q4 impairment charges with respect to ARBOC's
goodwill of $23.2 million and the ADL manufacturing cash generating
unit ("CGU")'s goodwill of $80.7 million.
Reconciliation of Net Earnings (Loss) to Adjusted
Net Earnings (Loss)
Adjusted Net Earnings and Adjusted Earnings per
Share are not recognized measures under IFRS and do not have a
standardized meaning prescribed by IFRS. Accordingly, Adjusted Net
Earnings and Adjusted Earnings per Share may not be comparable to
similar measures presented by other issuers. Readers of this press
release are cautioned that Adjusted Net Earnings and Adjusted
Earnings per Share should not be construed as an alternative to net
earnings, or net earnings per Share, determined in accordance with
IFRS as indicators of the Company's performance. See Non-IFRS
Measures for the definition of Adjusted Net Earnings and Adjusted
Earnings per Share. The following table reconcile net earnings to
Adjusted Net Earnings based on the historical Financial Statements
of the Company for the periods indicated.
|
(U.S. dollars in thousands, except per Share figures) -
unaudited |
2023 Q1 |
|
2022 Q1 |
|
|
52-Weeks Ended April 2, 2023 |
|
53-Weeks Ended April 3, 2022 |
|
|
Net (loss) |
(45,964 |
) |
(27,795 |
) |
|
(294,326 |
) |
(49,312 |
) |
| |
|
|
|
|
|
|
Adjustments, net of tax1, 7 |
|
|
|
|
|
|
Fair value adjustments of total return swap4 |
— |
|
657 |
|
|
— |
|
1,166 |
|
|
Unrealized foreign exchange loss (gain) |
(293 |
) |
3,289 |
|
|
(3,995 |
) |
7,503 |
|
|
Unrealized loss (gain) on interest rate swap |
3,827 |
|
(15,533 |
) |
|
(6,659 |
) |
(22,580 |
) |
|
Unrealized gain on Cash Conversion Option |
(1,793 |
) |
(3,703 |
) |
|
(9,529 |
) |
(8,668 |
) |
|
Portion of the total return swap realized5 |
— |
|
(190 |
) |
|
— |
|
(717 |
) |
|
Costs associated with assessing strategic and corporate
initiatives2 |
— |
|
— |
|
|
— |
|
(106 |
) |
|
Equity settled stock-based compensation |
282 |
|
197 |
|
|
1,014 |
|
692 |
|
|
(Gain) loss on disposition of property, plant and equipment |
(12 |
) |
(257 |
) |
|
(145 |
) |
(44 |
) |
|
Past service costs and other pension costs6 |
3,287 |
|
— |
|
|
8,117 |
|
— |
|
|
Unrecoverable insurance costs and other12 |
— |
|
284 |
|
|
5,574 |
|
1,519 |
|
|
Expenses incurred outside of normal operations13 |
859 |
|
— |
|
|
3,454 |
|
— |
|
|
Prior year sales tax provision8 |
— |
|
— |
|
|
— |
|
|
|
Other tax adjustments10 |
(246 |
) |
(180 |
) |
|
18,918 |
|
2,489 |
|
|
COVID-19 costs9 |
— |
|
— |
|
|
— |
|
1,670 |
|
|
Out of period costs11 |
— |
|
1,264 |
|
|
(2,366 |
) |
1,826 |
|
|
Accretion in carrying value of convertible debt and cash conversion
option |
1,269 |
|
1,300 |
|
|
5,241 |
|
1,574 |
|
|
Impairment loss on goodwill14 |
— |
|
— |
|
|
103,900 |
|
— |
|
|
Restructuring costs3 |
1,268 |
|
66 |
|
|
13,928 |
|
4,205 |
|
|
Adjusted Net Earnings (Loss) |
(37,516 |
) |
(40,601 |
) |
|
(156,874 |
) |
(58,783 |
) |
| |
|
|
|
|
|
|
Net Earnings (Loss) per Share (basic) |
(0.60 |
) |
(0.36 |
) |
|
(3.80 |
) |
(0.68 |
) |
|
Net Earnings (Loss) per Share (fully diluted) |
(0.60 |
) |
(0.36 |
) |
|
(3.80 |
) |
(0.68 |
) |
| |
|
|
|
|
|
|
Adjusted Earnings (Loss) per Share (basic) |
(0.49 |
) |
(0.53 |
) |
|
(2.03 |
) |
(0.81 |
) |
|
Adjusted Earnings (Loss) per Share (fully diluted) |
(0.49 |
) |
(0.54 |
) |
|
(2.03 |
) |
(0.81 |
) |
- Addback items are derived from the historical financial
statements of the Company.
- Normalized to exclude non-operating expenses and recoveries
related to the costs of assessing strategic and corporate
initiatives.
- Normalized to exclude non-operating restructuring costs. Costs
primarily relate to severance costs, inefficient labour costs,
increased medical costs and right-of-use asset impairments and
inventory impairments associated with NFI Forward and other
restructuring initiatives. Free Cash Flow reconciling amounts are
net of right-of-use asset and property, plant and equipment
impairments.
- The fair value adjustment of the total return swap is a
non-cash (gain) loss that is excluded from the definition of
Adjusted EBITDA. Beginning in Q2 2022, hedge accounting was applied
to the total return swap derivative and therefore, the portion of
the (gain) loss on the fair value adjustment, which does not apply
to the current period is recognized in other comprehensive
income.
- A portion of the fair value adjustment of the total return swap
is added to Adjusted EBITDA and Free Cash Flow to match the
equivalent portion of the related deferred compensation expense
recognized. Beginning in Q2 2022, hedge accounting was applied to
the total return swap derivative and therefore, the portion of the
(gain) loss on the fair value adjustment, which does not apply to
the current period is recognized in other comprehensive
income.
- Costs and recoveries associated with amendments to, and
closures of, the Company's pension plans. Q2 2022 includes $7.0
million for the liability related to the closure of the Pembina
facility and withdrawal from the multi-employer pension plan. Also
included is $4.8 million of pension past service costs.
- The Company has utilized a rate of 54.5% to tax effect the
adjustments in periods related to Fiscal 2021. A rate of 31.0% has
been used to tax effect the adjustments for all other periods.
- Normalized to exclude COVID-19 related costs. Costs primarily
relate to asset impairments, medical costs directly related to
COVID-19 and miscellaneous operating costs associated with
COVID-19. Asset impairments are primarily attributable to pre-owned
coach inventory. During 2022, management determined costs related
to sanitization and masks were an operating cost and would no
longer be included in the definition.
- Includes the impact of changes in deferred tax balances as a
result of substantively enacted tax rate changes. The 2021 and 2022
amounts include the impact of the revaluation of deferred tax
balances due to the enacted increase in the UK corporate tax rate
from 19% to 25% in 2021 Q3. Also included in 2022 Q4 is the impact
of the reduction of deferred tax assets related to the
derecognition of loss carry forwards in Canada, and restricted
interest in the UK.
- Includes adjustments made related to expenses that pertain to
prior years. 2022 Q1 includes expenses related to amounts that
should have been capitalized from Fiscal years 2010 - 2021.
- Normalized to exclude non-operating costs related to an
insurance event that are not recoverable, or are related to the
deductible.
- Includes adjustments made related to items that occurred
outside of normal operations. This includes specified items
purchased in broker markets at a premium and associated broker
fees, which the Company provided to suppliers, and does not
normally directly purchase. Also included is the additional labour
costs associated with the shortage of the specified item.
- Includes 2022 Q4 impairment charges with respect to ARBOC's
goodwill of $23.2 million and the ADL manufacturing CGU's goodwill
of $80.7 million.
Reconciliation of Shareholders' Equity to
Invested Capital
The following table reconciles Shareholders'
Equity to Invested Capital. The average invested capital for the
last twelve months is used in the calculation of ROIC. ROIC is not
a recognized measure under IFRS and does not have a standardized
meaning prescribed by IFRS. Accordingly, ROIC may not be comparable
to similar measures presented by other issuers. See Non-IFRS
Measures for the definition of ROIC.
|
(U.S. dollars in thousands) - unaudited |
2023 Q1 |
|
2022 Q4 |
|
2022 Q3 |
|
2022 Q2 |
|
|
Shareholders' Equity |
$ |
533,756 |
|
577,575 |
|
710,984 |
|
783,905 |
|
| |
|
|
|
|
|
Addback |
|
|
|
|
|
Long term debt |
|
911,203 |
|
896,626 |
|
859,297 |
|
718,139 |
|
|
Obligation under lease |
|
127,247 |
|
131,625 |
|
122,666 |
|
131,077 |
|
|
Convertible Debentures |
|
218,719 |
|
217,516 |
|
211,281 |
|
224,947 |
|
|
Senior unsecured debt |
|
86,431 |
|
— |
|
— |
|
— |
|
|
Derivatives |
|
(17,164 |
) |
(21,620 |
) |
(18,904 |
) |
(8,179 |
) |
|
Cash |
|
(59,375 |
) |
(49,987 |
) |
(39,832 |
) |
(50,274 |
) |
|
Bank indebtedness |
|
— |
|
— |
|
— |
|
— |
|
|
Invested Capital |
|
1,800,817 |
|
1,751,735 |
|
1,845,492 |
|
1,799,615 |
|
|
Average of invested capital over the quarter |
|
1,776,276 |
|
1,798,614 |
|
1,822,554 |
|
1,838,086 |
|
|
|
|
|
|
|
|
|
2022 Q1 |
|
2021 Q4 |
|
2021 Q3 |
|
2021 Q2 |
|
|
Shareholders' Equity |
|
850,323 |
|
871,772 |
|
787,010 |
|
814,502 |
|
| |
|
|
|
|
|
Addback |
|
|
|
|
|
Long term debt |
|
677,996 |
|
586,411 |
|
1,049,273 |
|
963,630 |
|
|
Obligations under lease |
|
139,129 |
|
143,675 |
|
150,212 |
|
153,967 |
|
|
Convertible Debentures |
|
229,673 |
|
225,768 |
|
— |
|
— |
|
|
Senior unsecured debt |
|
— |
|
— |
|
— |
|
— |
|
|
Derivatives |
|
4,806 |
|
31,883 |
|
20,920 |
|
21,609 |
|
|
Cash |
|
(26,604 |
) |
(77,318 |
) |
(64,822 |
) |
(47,698 |
) |
|
Bank indebtedness |
|
1,233 |
|
— |
|
— |
|
— |
|
|
Invested Capital |
|
1,876,556 |
|
1,782,191 |
|
1,942,593 |
|
1,906,010 |
|
|
Average of invested capital over the quarter |
|
1,829,374 |
|
1,862,392 |
|
1,924,302 |
|
1,945,438 |
|
Appendix B - Non-IFRS Measures and
Forward-Looking Statements
Non-IFRS Measures
References to “Adjusted EBITDA” are to earnings
before interest, income taxes, depreciation and amortization after
adjusting for the effects of certain non-recurring and/or
non-operations related items and expenses incurred outside the
normal course of operations that do not reflect the current ongoing
cash operations of the Company. These adjustments include gains or
losses on disposal of property, plant and equipment, fair value
adjustment for total return swap, unrealized foreign exchange
losses or gains on non-current monetary items and forward foreign
exchange contracts, costs associated with assessing strategic and
corporate initiatives, past service costs and other pension costs
or recovery, non-operating costs or recoveries related to business
acquisition, fair value adjustment to acquired subsidiary company's
inventory and deferred revenue, proportion of the total return swap
realized, equity settled stock-based compensation, expenses
incurred outside the normal course of operations, recovery of
currency transactions, prior year sales tax provision, COVID-19
costs and impairment loss on goodwill and non-operating
restructuring costs.
References to "NOPAT" are to Adjusted EBITDA
less depreciation of plant and equipment, depreciation of
right-of-use assets and income taxes at a rate of 31%.
“Free Cash Flow” means net cash generated by or
used in operating activities adjusted for changes in non-cash
working capital items, interest paid, interest expense, income
taxes paid, current income tax expense, repayment of obligation
under lease, cash capital expenditures, acquisition of intangible
assets, proceeds from disposition of property, plant and equipment,
costs associated with assessing strategic and corporate
initiatives, fair value adjustment to acquired subsidiary company's
inventory and deferred revenue, defined benefit funding, defined
benefit expense, past service costs and other pension costs or
recovery, expenses incurred outside the normal course of
operations, proportion of total return swap, unrecoverable
insurance costs, prior year sales tax provision, non-operating
restructuring costs, extraordinary COVID-19 costs, foreign exchange
gain or loss on cash held in foreign currency.
References to "ROIC" are to NOPAT divided by
average invested capital for the last twelve month period
(calculated as to shareholders’ equity plus long-term debt,
obligations under leases, other long-term liabilities and
derivative financial instrument liabilities less cash).
References to "Adjusted Net Earnings (Loss)" are
to net earnings (loss) after adjusting for the after tax effects of
certain non-recurring and/or non-operational related items that do
not reflect the current ongoing cash operations of the Company
including: fair value adjustments of total return swap, unrealized
foreign exchange loss or gain, unrealized gain or loss on the
interest rate swap, impairment loss on goodwill, portion of the
total return swap realized, costs associated with assessing
strategic and corporate initiatives, fair value adjustment to
acquired subsidiary company's inventory and deferred revenue,
equity settled stock-based compensation, gain or loss on disposal
of property, plant and equipment, past service costs and other
pension costs or recovery, recovery on currency transactions,
expenses incurred outside the normal course of operations prior
year sales tax provision, COVID-19 costs and non-operating
restructuring costs .
References to "Adjusted Earnings (Loss) per
Share" are to Adjusted Net Earnings (Loss) divided by the average
number of Shares outstanding.
Management believes Adjusted EBITDA, ROIC, Free
Cash Flow, Adjusted Net Earnings and Adjusted Earnings per Share
are useful measures in evaluating the performance of the Company.
However, Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net
Earnings and Adjusted Earnings per Share are not recognized
earnings or cash flow measures under IFRS and do not have
standardized meanings prescribed by IFRS. Readers of this press
release are cautioned that ROIC, Adjusted Net Earnings and Adjusted
EBITDA should not be construed as an alternative to net earnings or
loss or cash flows from operating activities determined in
accordance with IFRS as an indicator of NFI’s performance, and Free
Cash Flow should not be construed as an alternative to cash flows
from operating, investing and financing activities determined in
accordance with IFRS as a measure of liquidity and cash flows. A
reconciliation of net earnings to Adjusted EBITDA, based on the
Financial Statements, has been provided under the headings
“Reconciliation of Net Earnings to Adjusted EBITDA”. A
reconciliation of net earnings to Adjusted Net Earnings is provided
under the heading “Reconciliation of Net Earnings (Loss) to
Adjusted Net Earnings (Loss)”.
NFI's method of calculating Adjusted EBITDA,
ROIC, Free Cash Flow, Adjusted Net Earnings and Adjusted Earnings
per Share may differ materially from the methods used by other
issuers and, accordingly, may not be comparable to similarly titled
measures used by other issuers. Dividends paid from Free Cash Flow
are not assured, and the actual amount of dividends received by
holders of Shares will depend on, among other things, the Company's
financial performance, debt covenants and obligations, working
capital requirements and future capital requirements, all of which
are susceptible to a number of risks, as described in NFI’s public
filings available on SEDAR at www.sedar.com.
"Liquidity" is not a recognized measure under
IFRS and does not have a standardized meaning prescribed by IFRS.
The Company defines liquidity as cash on-hand plus available
capacity under its credit facilities.
"Backlog" value is not a recognized measure
under IFRS and does not have a standardized meaning prescribed by
IFRS.
References to NFI's geographic regions for the
purpose of reporting global revenues are as follows: "North
America" refers to Canada, United States, and Mexico; United
Kingdom and Europe refer to the United Kingdom and Europe; "Asia
Pacific" or "APAC" refers to Hong Kong, Malaysia, Singapore,
Australia, and New Zealand; and the "Other" category includes any
sales that do not fall into the categories above.
Forward-Looking Statements
This press release contains “forward-looking
information” and “forward-looking statements” within the meaning of
applicable Canadian securities laws, which reflect the expectations
of management regarding the Company’s future growth, financial
performance, and liquidity and objectives and the Company’s
strategic initiatives, plans, business prospects and opportunities,
including the duration, impact of and recovery from the COVID-19
pandemic, supply chain disruptions and plans to address them, and
the Company's expectation of obtaining long-term credit
arrangements and sufficient liquidity. The words “believes”,
“views”, “anticipates”, “plans”, “expects”, “intends”, “projects”,
“forecasts”, “estimates”, “guidance”, “goals”, “objectives” and
“targets” and similar expressions of future events or conditional
verbs such as “may”, “will”, “should”, “could”, “would” are
intended to identify forward-looking statements. These
forward-looking statements reflect management’s current
expectations regarding future events (including the temporary
nature of the supply chain disruptions and operational challenges,
production improvement, labour supply shortages, the recovery of
the Company’s markets and the expected benefits to be obtained
through its “NFI Forward” initiatives) and the Company’s financial
and operating performance and speak only as of the date of this
press release. By their very nature, forward-looking statements
require management to make assumptions and involve significant
risks and uncertainties, should not be read as guarantees of future
events, performance or results, and give rise to the possibility
that management’s predictions, forecasts, projections, expectations
or conclusions will not prove to be accurate, that the assumptions
may not be correct and that the Company’s future growth, financial
condition, ability to generate sufficient cash flow and maintain
adequate liquidity, obtain long-term credit arrangements, and the
Company’s strategic initiatives, objectives, plans, business
prospects and opportunities, including the Company’s plans and
expectations relating to the duration, impact of and recovery from
the COVID-19 pandemic, supply chain disruptions, operational
challenges, labour supply shortages and inflationary pressures,
will not occur or be achieved.
A number of factors that may cause actual
results to differ materially from the results discussed in the
forward-looking statements include: the Company’s business,
operating results, financial condition and liquidity may be
materially adversely impacted by the ongoing COVID-19 pandemic and
related supply chain and operational challenges, inflationary
effects and labour supply challenges; the Company’s business,
operating results, financial condition and liquidity may be
materially adversely impacted by the ongoing Russian invasion of
Ukraine due to factors including but not limited to further supply
chain disruptions, inflationary pressures and tariffs on certain
raw materials and components that may be necessary for the
Company’s operations; 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 which could have an adverse effect on the
demand 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 and/or the Debentures may cease to exist, which may limit
the ability of security holders to trade Shares and/or Debentures;
the market price for the Shares and/or the Debentures 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 U.S. “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. FTA; 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;
requirements under Canadian content policies may change and/or
become more onerous; the Company’s business may be materially
impacted by climate change matters, including risks related to the
transition to a lower-carbon economy; 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;
compliance with international trade regulations, tariffs and
duties; dependence on unique or limited sources of supply (such as
engines, components containing microprocessors or, in other cases,
for example, the supply of transmissions, batteries for
battery-electric buses, axles or structural steel tubing) resulting
in the Company’s raw materials and components not being readily
available from alternative sources of supply, being available only
in limited supply, a particular component may be specified by a
customer, the Company’s products have been engineered or designed
with a component unique to one supplier or a supplier may have
limited or no supply of such raw materials or components or sells
such raw materials or components to the Company on less than
favorable commercial terms; the Company’s vehicles and certain
other products contain electrical components, electronics,
microprocessors control modules, and other computer chips, for
which there has been a surge in demand, resulting in a worldwide
supply shortage of such chips in the transportation industry, and a
shortage or disruption of the supply of such microchips could
materially disrupt the Company’s operations and its ability to
deliver products to customers; 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,
failure to comply with motor vehicle manufacturing regulations and
standards and the remediation of transit buses and motor coaches;
production delays may result in liquidated damages under the
Company’s contracts with its customers; catastrophic events,
including those related to impacts of climate change, 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
and other 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 Company’s
substantial consolidated indebtedness could negatively impact the
business; the restrictive covenants in the Company’s credit
facilities could impact the Company’s business and affect its
ability to pursue its business strategies; in December 2022, the
Board made the decision to suspend the payment of dividends given
credit agreement constraints and to support the Company’s focus on
improving its liquidity and financial position and the resumption
of dividend dividends is not assured or guaranteed; a significant
amount of the Company’s cash may be distributed, which may restrict
potential growth; the Company is dependent on its subsidiaries for
all cash available for distributions; the Company may not be able
to make principal payments on the Debentures; redemption by the
Company of the Debentures for Shares will result in dilution to
holders of Shares; Debentures may be redeemed by the Company prior
to maturity; the Company may not be able to repurchase the
Debentures upon a change of control as required by the trust
indenture under which the Debentures were issued (the “Indenture”);
conversion of the Debentures following certain transactions could
lessen or eliminate the value of the conversion privilege
associated with the Debentures; future sales or the possibility of
future sales of a substantial number of Shares or Debentures may
impact the price of the Shares and/or the Debentures and could
result in dilution; payments to holders of the Debentures are
subordinated in right of payment to existing and future Senior
Indebtedness (as described under the Indenture) and will depend on
the financial health of the Company and its creditworthiness; if
the Company is required to write down goodwill or other intangible
assets, its financial condition and operating results would be
negatively affected; and income and other tax risk resulting from
the complexity of the Company’s businesses and operations and the
income and other tax interpretations, legislation and regulations
pertaining to the Company’s activities being subject to continual
change.
Factors relating to the global COVID-19 pandemic
include: the magnitude and duration 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
due to government mandates and 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 or having to isolate or quarantine as a result
of coming into contact with infected individuals); production rates
may be further decreased as a result of the pandemic; ongoing and
future supply delays and shortages of parts and components, and
shipping and freight delays, and disruption to or shortage of
labour supply as a result of the pandemic; the pandemic will likely
adversely affect operations of suppliers and customers, and reduce
and delay, for an unknown period, customers’ purchases of the
Company’s products and the supply of parts and components by
suppliers; the anticipated recovery of the Company’s markets in the
future 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 if
required; and 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. There
can be no assurance that the Company will be able to maintain
sufficient liquidity for an extended period, obtain long-term
credit arrangements, 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 continued or adequate
stimulus funding during or 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, supply
chains, businesses and individuals, it is impossible to predict the
severity of the impact on the Company’s business, operating
performance, financial condition and ability to generate sufficient
cash flow and maintain adequate liquidity and any material adverse
effects could very well be rapid, unexpected and may continue for
an extended and unknown period of time.
Factors relating to the Company's “NFI Forward”
initiatives 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, supply
chain challenges and inflationary pressures. 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.
Factors relating to the Company’s financial
guidance and targets disclosed in this press release include, in
addition to the factors set out above, the degree to which actual
future events accord with, or vary from, the expectations of, and
assumptions used by, the Company’s management in preparing the
financial guidance and targets and the Company’s ability to
successfully execute the “NFI Forward” initiatives and to generate
the planned savings in the expected time frame or at all.
Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that could
cause actions, events or results not to be as anticipated,
estimated or intended or to occur or be achieved at all. Specific
reference is made to “Risk Factors” in the Company’s Annual
Information Form for a discussion of the factors that may affect
forward-looking statements and information. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in forward-looking statements and information.
The forward-looking statements and information contained herein are
made as of the date of this press release (or as otherwise
indicated) and, except as required by law, the Company does not
undertake to update any forward-looking statement or information,
whether written or oral, that may be made from time to time by the
Company or on its behalf. The Company provides no assurance that
forward-looking statements and information will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers and investors should not place undue reliance on
forward-looking statements and information.
NFI (TSX:NFI)
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NFI (TSX:NFI)
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