(TSX: NFI, OTC: NFYEF, TSX: NFI.DB) NFI Group Inc.
(“NFI” or the “Company”), a leading independent bus and coach
manufacturer and a leader in electric mass mobility solutions,
today announced an update regarding “NFI Forward 2.0”, a series of
new projects that are part of the Company’s business optimization
and cost reduction initiatives. Today’s announcement includes the
closure of the Motor Coach Industries (“MCI”) coach manufacturing
facility in Pembina, North Dakota, anticipated to occur in the
fourth quarter of 2022.
Originally launched in July 2020, NFI Forward
included a number of major initiatives targeted to drive
approximately $67 million in annual overhead and sales, general and
administration savings by the end of 2023 from 2019 levels, plus an
additional $10 million in annualized Free Cash Flow generation. As
of the first quarter of 2022, NFI had achieved an annualized run
rate of approximately $63 million, well on its way to achieving its
$67 million target.
The original NFI Forward program included the
following initiatives, completed throughout 2020 and 2021:
- Streamlining of administrative and
back-office functions (human resources, finance, legal, treasury,
information technology), into an integrated shared services
model;
- The combination of New
Flyer and MCI into one consolidated North American
operating business;
- The rationalization of the
Alexander Dennis (“ADI”) North American parts business into the NFI
Parts™ business;
- The closure of ADI’s manufacturing
facilities in Nappanee and Peru, Indiana, and Vaughan,
Ontario;
- The cessation of chassis
manufacturing at Alexander Dennis Limited’s (“ADL”) Guildford, UK
facility; and
- The optimization of two
Winnipeg-based fiberglass part fabrication facilities.
With the majority of the original projects
complete, the Company is now implementing a series of additional
projects called “NFI Forward 2.0”, that are expected to generate
additional annualized Adjusted EBITDA savings in 2023 and beyond.
Within NFI Forward 2.0, the Company completed a detailed review of
its remaining North American footprint with a view to match
production capacity and facility investments to customer demand,
local labor availability and zero-emission fleet investment plans.
From this review, NFI made the decision to integrate its Delaware
parts distribution facility (a legacy parts warehouse of NABI that
NFI acquired in 2013) into its existing NFI Parts™ footprint, and
today announced the closure of an MCI coach manufacturing facility
in Pembina, North Dakota, anticipated to occur by the end of
2022.
“Over the past two years, we have been on a
journey to lower our fixed cost base and optimize operations as we
navigate through the COVID-19 pandemic and associated supply chain
disruptions. The closure of our Pembina facility follows a detailed
review of our manufacturing footprint, combined with the planned
cessation of a legacy motorcoach vehicle product, and prior
investments in expanded production and workforce development at our
Minnesota facilities,” said Brian Dewsnup, Acting President and
Chief Executive Officer, NFI. “It is never easy to close locations
and impact the lives and careers of our people, and we will do our
best to redeploy or assist them in finding alternative employment
where possible. These decisions, while difficult, best position NFI
to serve our coach customers, better match production capacity with
labor availability, and improve the flexibility of our overall
North American footprint on our path to achieving our 2025
financial targets.”
All dollar amounts herein are quoted in U.S.
currency, unless otherwise noted.
About NFI
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. NFI also
operates the Vehicle Innovation Center (“VIC”), the first and only
innovation lab of its kind dedicated to advancing bus and coach
technology and providing workforce development. Since opening late
2017, the VIC has hosted over 300 interactive events, welcoming
5,000 industry professionals for electric vehicle (“EV”) and
infrastructure training.
With 7,500 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 convertible unsecured debentures
(“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 media inquiries, please contact:Lindy
Norris P: 320.406.3386 Lindy_Norris@newflyer.com
For investor inquiries, please contact:Stephen
KingP: 204.224.6382Stephen.King@nfigroup.com
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 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, recovery of
currency transactions, prior year sales tax provision, COVID-19
costs and impairment loss on goodwill and non-operating
restructuring costs.
References to “Free Cash Flow” mean 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, 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.
Management believes Adjusted EBITDA and Free
Cash Flow are useful measures in evaluating the performance of NFI.
However, Adjusted EBITDA and Free Cash Flow are not recognized
earnings or cash flow measures under International Financial
Reporting Standards (“IFRS”) and do not have standardized meanings
prescribed by IFRS. Readers of this press release are cautioned
that 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. NFI’s method of calculating Adjusted
EBITDA and Free Cash Flow may differ materially from the methods
used by other issuers and, accordingly, may not be comparable to
similarly titled measures used by other issuers.
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 objectives and the Company’s strategic initiatives,
plans, business prospects and opportunities, including the expected
benefits to be obtained under its “NFI Forward 2.0” initiative. 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
expected benefits to be obtained through the “NFI Forward 2.0”
initiative) and the Company’s financial and operating outlook and
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 performance
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 and supply chain
disruptions, 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, employee absenteeism and inflationary
effects; the Company’s business, operating results, financial
condition and liquidity may be materially adversely impacted by the
Russian invasion of Ukraine due to factors including but not
limited to further supply chain issues and inflationary pressures
and supply chain disruptions; 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 securityholders 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. 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; 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 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 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, 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 labor disruptions and shortages of labor; 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; 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; 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 labor 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, which may also negatively impact the
ability of the Company to pay 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 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
2.0” initiative 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 projects included in 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 issues 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 savings,
Adjusted EBITDA and Free Cash Flow objectives 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, NFI’s
management in preparing the objectives and targets and the
Company’s ability to successfully execute the “NFI Forward 2.0”
initiative 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.
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