New Flyer Industries reports increased deliveries in the first quarter compared to the previous year.
New Flyer Industries Inc. (NFI Group), the largest bus and motor coach manufacturer and parts distributor in North America, announces its order activity and backlog update for the 13-week period ended April 1, 2018 (Q1 2018). Year-over-year comparisons reported in this release compare Q1 2018 to the 13-week period ended April 2, 2017 (Q1 2017).
Deliveries, Order Activity, and Option Expiry
NFI Group delivered 993 equivalent units (EUs) in Q1 2018, an increase of 101 EUs compared to Q1 2017. Total inventory at April 1, 2018 increased 151 EUs from the previous quarter to 633 EUs, which reflects typically historically slower sales of motor coaches in the first quarter.
NFI Group’s total new orders in Q1 2018 totaled 736 EUs, which included firm orders of 365 EUs (valued at $160.1 million) and option orders of 371 EUs (valued at $177.6 million). In addition, 441 option EUs were converted to firm orders (valued at $240.7 million).
Total reported orders do not include 904 EUs of new firm and option orders that were pending from customers at the end of the quarter, where approval of the award to New Flyer had been made by the customer’s board, council, or commission, as applicable, but purchase documentation had not yet been received by the company and are therefore not yet included in the backlog.
NFI Group’s last 12 months (LTM) Book-to-Bill ratio (defined as new firm and option orders divided by deliveries) was 149% and has been greater than 100% for 15 consecutive quarters.
The majority of public transit contracts have a term of 5 years and include both firm orders and options. The following table shows the number of option EUs that have either expired or been exercised annually over the past 5 years, as well as the current backlog of options that will expire each year if not exercised.
Total Backlog and 2018 Production
At the end of Q1 2018, NFI Group’s total backlog was 11,548 EUs (valued at $5.8 billion) compared to 12,157 EUs (valued at $6.0 billion) at the end Q4 2017, and 9,984 EUs (valued at $5.1 billion) at the end of Q1 2017.
NFI Group’s total backlog consists of transit buses and motor coaches primarily for public customers. Transit buses and motor coaches incorporating clean propulsion systems including natural gas, diesel-electric hybrid, electric-trolley, and battery-electric represent approximately 55% of the total backlog. Zero-emission buses and motor coaches (battery-electric, fuel cell-electric and electric-trolley) represent approximately 4.5% of total backlog.
NFI Group’s Bid Universe metric reports active public sector competitions in Canada and the United States, and provides an overall indicator of active bid activity and expected heavy-duty transit bus and motor coach market demand. It is a point-in-time snapshot of: (i) EUs in active competitions, defined as all requests for proposals received and in process of review plus bids submitted and awaiting customer action, and (ii) management’s forecast based on public customer projection of expected EUs to be placed out for competition over the next 5 years.
At the end of Q1 2018 active EUs were 6,453 and total Bid Universe was 23,538 EUs.
Procurement of heavy-duty transit buses and motor coaches by the public sector is typically accomplished through formal multi-year contracts, while procurement by the private sector is typically through transactional sales. As a result, NFI Group does not publish a Bid Universe metric for private sector buses or motor coaches.
Sales of cutaway and medium-duty buses manufactured by ARBOC are generated on a transactional purchase order basis through third party dealers who hold contracts directly with the operators. Bids are submitted by and agreements are held with a network of dealers and therefore cutaway and medium-duty bus activity is not included in the Bid Universe metric.
Total shipments by NFI Parts for Q1 2018 increased by 9.7% compared to the previous quarter, and increased by 4.2% compared to Q1 2017.
Gross orders received by NFI Parts increased by 1.2% in Q1 2018 compared to Q4 2017, while increasing by 6.6% over Q1 2017 orders.
ARBOC aftermarket parts orders and shipments are not included in these figures as they are not material.
Management continues to expect bus procurement activity by public transit agencies throughout the U.S. and Canada to remain robust based on an aging fleet, healthy overall economic conditions, expected customer fleet replacement plans, and active or anticipated procurements. As the population ages and ease of access becomes more of a focus, management also believes the demand for low-floor cutaway and medium-duty buses with greater accessibility will grow from its current level of 5% of the total market, following the migration that occurred in heavy-duty transit bus space.
Management continues to anticipate stable private sector demand for motor coaches through 2018 given market dynamics including the economy, travel trends and credit markets.
NFI Group’s master production schedule combined with current backlog and orders anticipated to be awarded by customers under new procurements is expected to enable NFI Group to deliver approximately 4,350 EUs in fiscal 2018 with production rates varying from quarter to quarter due to product mix and award timing.
2018 deliveries are expected to comprise of the following vehicle types:
- Heavy-Duty Transit - 2,774 EU
- Motor Coach - 1,076 EU
- Cutaway and Medium-Duty - 500 EU
- Total - 4,350 EU
While parts sales remain difficult to forecast, management expects the parts market to remain relatively stable in 2018, but may experience quarter-to-quarter volatility, which is typical for this segment of the business.