Expected to generate over $75 million of annualized cost savings
WINNIPEG, MB, July 27, 2020 /PRNewswire/ - (TSX:
NFI) NFI Group Inc. ("NFI" or the "Company"), one
of the world's leading independent bus and motor coach
manufacturers, today announced "NFI Forward", a transformational
initiative expected to generate more than $75 million in annualized cost savings by the end
of fiscal 2022.
"NFI is the leader in all of our major markets and recognized as
the partner of choice for transit and coach operators, a position
established through a balanced combination of organic growth and
strategic acquisitions," said Paul
Soubry, President and CEO of NFI. "Since 2010, we've made
eight acquisitions that have generated significant synergies and we
have identified additional opportunities to remove overhead costs.
In fact, our strategic plan developed prior to COVID-19, set out an
aggressive vision to transform our organization by pivoting from a
holding company to an integrated operating business."
"We believe this transformation, called NFI Forward, will better
serve our customers and empower employees by leveraging our scale
and deep operating expertise. In aggregate, NFI Forward will
enhance our competitive positioning, drive sales recovery and
growth, and create a more efficient organization," Soubry
explained. "To assist in mitigating the impacts COVID-19 has had on
our end markets, we have decided to accelerate and extend the NFI
Forward initiative. The program will require difficult decisions
and impact some of our team members as we eliminate certain
positions and reduce headcount."
Focus on Integration and Standardization
The target of over $75
million in annualized cost savings is expected to come
primarily from the combination of the MCI and New Flyer business
units and facility rationalization. NFI Forward is expected to
deliver an 8% to 10% reduction to both manufacturing overhead and
general and administrative expenses(a).
Specifically, NFI Forward will achieve these targeted savings
from the following projects:
- Optimize capacity and consolidate operations
-
- Combine the New Flyer and MCI business units into one North
American bus and coach business;
- Integrate and standardize all NFI part fabrication capabilities
(including Carfair and KMG);
- Consolidate NFI Parts and the North American parts business of
Alexander Dennis into one
aftermarket parts company, allowing for the reduction of certain
warehouse and stocking locations and providing enhanced opportunity
for freight savings.
- Rationalize facilities
-
- Restructure at ADL's UK manufacturing sites to become leaner
and more efficient, with a corresponding expected overhead and
headcount reduction across the wider ADL business;
- Launch a dedicated team to assess the capacity and costs of all
NFI's North America facilities
with a plan to commence rationalizing certain facilities starting
in 2021.
- Drive operational excellence
-
- Streamline administrative and back-office functions into an
integrated shared services model;
- Formalize a Company-wide strategic sourcing program to leverage
purchasing scale and optimize product designs across vehicle models
and supply chains.
The primary initiative of NFI Forward will be the combination of
New Flyer and MCI, two companies with legacies of product
excellence dating back to the 1930's. The combined business unit
will retain both market-leading brands, continue offering New Flyer
transit buses and MCI motor coaches and operate under the
leadership of New Flyer President Chris
Stoddart.
A dedicated team of senior leaders and key personnel lead by
Ian Smart, now NFI Executive Vice
President ("EVP"), Business Transformation (former MCI President
and previously EVP New Flyer Parts), will implement and execute all
NFI Forward projects. Earlier in his career, Ian managed the
StandardAero business transformation team as part of the
significant and successful privatization of Kelly Air Force Base
located in San Antonio, TX, a
major U.S. Air Logistics Center.
Response to COVID-19 aligns with NFI Forward
Since the COVID-19 pandemic began to affect NFI and its
customers in March 2020, the Company
executed several initiatives to reduce costs and improve cash flow
and liquidity that are all aligned with the NFI Forward initiative.
These included:
- Permanent workforce reduction of over 400 positions at MCI,
Carfair and NFI Parts generating savings of $10 million in fiscal 2020,
- a reduction in planned 2020 capital expenditures from
$45 million to $25 million,
- securing successful covenant relief on the Company's
$1.25 billion revolving credit
facility,
- obtaining additional liquidity through a new $250 million sidecar credit facility,
- implementation of a £50 million revolving credit facility for
international operations, and
- positive working capital improvements of $100 million during April and May.
Solid Liquidity
NFI currently has approximately $440
million in available liquidity following a $100 million working capital investment made to
resume operations at the Company's manufacturing facilities in May
and June. Based on the Company's financial position and anticipated
cash flow generation the Company expects to maintain its current
dividend rate and does not expect to utilize the incremental
sidecar credit facility.
NFI Forward will further enhance the Company's financial
position to fund strategic investments in its employees, products
and technology, while also seeking additional acquisition
opportunities to drive the future of mobility. The Company also
expects to reduce its total leverage over time as the recovery from
COVID-19 continues and it achieves the benefits of NFI Forward.
"We are committed to the vision of NFI Forward to create
efficiencies, drive process standardization, streamline
manufacturing facilities, and optimize our aftermarket business.
The NFI Board of Directors fully supports our plan and the decision
to accelerate NFI Forward. This will well position NFI to fully
benefit from the anticipated economic recovery after the COVID-19
pandemic ends, while driving the transition to a zero-emission
future," Soubry concluded.
NFI Forward Update with Q2 2020 Results
Management will provide an update on the market impact of
COVID-19, the Company's outlook and further insights on the NFI
Forward framework, targets and expected restructuring costs in the
Company's second quarter MD&A and during the accompanying
investor conference call on August 6,
2020.
Note: All amounts are in U.S. dollars.
About NFI Group
With more than 9,000 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, diesel-electric 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. NFI common shares are traded on the Toronto Stock
Exchange under the symbol NFI.
Further information is available at:
www.nfigroup.com, www.newflyer.com, www.mcicoach.com, www.arbocsv.com, www.nfi.parts, www.alexander-dennis.com,
and www.carfaircomposites.com.
(a)
|
See below under
"Forward Looking Statements" for information relating to certain
risks relating to the outcome of the transformation
initiatives.
|
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, results of operations,
performance and business prospects and opportunities, such as the
estimated amount of savings to be generated and the efficiencies to
be produced by the implementation of management's "transformational
initiative" and management's expectations regarding the dividend
rate, leverage reduction or use of the sidecar facility. 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 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.
Actual results may differ materially and adversely from
management expectations as projected in such forward-looking
statements for a variety of reasons, including, but not limited to,
the Company's ability to successfully execute its transformational
initiative and to generate the planned savings in the expected time
frame or at all; management may have overestimated the amount of
savings that can be generated from the implementation of the
planned actions; the implementation of the transformational
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 set out in the transformational
initiative; the estimated amount of savings generated under the
transformation initiative may not be sufficient to achieve the
planned benefits, such as enhancing competitive positioning,
driving sales recovery and growth, improving margins, generating
stronger free cash flow, enabling the Company to continue making
strategic investments in products and technology, or enabling the
Company to seek additional acquisitions to drive future growth;
combining business units and/or the reduction of production or
parts facilities may not achieve the efficiencies anticipated by
management; the magnitude and length of the global, national and
regional economic and social disruption being caused as a result of
the global COVID-19 pandemic could materially adversely impact the
Company's ability to continue operations and may require further
initiatives to reduce variable and overhead costs; and the other
risks and uncertainties detailed in the disclosure documents filed
with the Canadian securities regulatory authorities and available
on SEDAR at www.sedar.com. These above risks relating to the
ability to successfully implement the transformation initiative,
which if they occur, may materially adversely impact the Company's
business, operating performance and financial condition, including
a reduction to the Company's cashflow, liquidity and its ability to
maintain compliance with covenants under its credit facilities.
The Company cautions that due to the dynamic, fluid and highly
unpredictable nature of the COVID-19 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. The
extent of such impact will depend on future developments, which are
unpredictable, including new information which may emerge
concerning the spread and severity of COVID-19 and actions taken by
governments and health organizations around the world to address
its impact, among others.
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.
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SOURCE NFI Group Inc.