Expected to generate over $75 million of annualized cost savings
Winnipeg, Manitoba, CANADA – July 27, 2020: (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.
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.
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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