New Flyer Announces Results for the First Quarter of 2009 Fiscal Year

• 2009 Q1 consolidated revenue of $273.3 million increased by 21.8% compared to 2008 Q1 revenue of $224.4 million.

• Order backlog of $4.0 billion (representing 9,236 equivalent units) remained stable at record levels compared to December 28, 2008 total order backlog of $4.1 billion (representing 9,531 equivalent units).

• Continued growth of aftermarket operations resulted in 2009 Q1 revenue and Adjusted EBITDA increase of 15.7% and 9.2%, respectively, compared to 2008 Q1.

• 2009 Q1 Consolidated Adjusted EBITDA of $23.1 million compared to $27.0 million in 2008 Q1 due largely to bus manufacturing operations sales mix. Measured in Canadian dollars Adjusted EBITDA for 2009 Q1 for 2009 Q1 of C$ 28.6 million increased by 4.4% compared to 2008 Q1.

• 2009 Q1 Distributable Cash of C$18.8 million (C$0.38 per unit) compared to 2008 Q1 Distributable Cash of C$19.5 million (C$0.37 per unit). Distributions for 2009 Q1 were C$ 14.4 million resulting in a payout ratio for the quarter of 76.5%.

• Senior Credit Agreement renewed to April, 2012. 

WINNIPEG, May 11, 2009 – New Flyer Industries Inc. (TSX:NFI.UN), (“New Flyer” or the “Company”), the leading manufacturer of heavy-duty transit buses in Canada and the United States, today announced its results for the 14-week period ended April 5, 2009 (“2009 Q1”). Full financial statements and Management’s Discussion and Analysis (the “MD&A”) are available at the Company’s web site at: www.www.newflyer.com/index/financialreport.
Unless otherwise indicated all monetary amounts in this press release are expressed in U.S. dollars.

Total revenue was favourably impacted by an extra week of deliveries in the quarter, resulting in consolidated revenue for 2009 Q1 of $273.3 million, which represents an increase of 21.8% compared to the 13-week period ended March 30, 2008 (“2008 Q1”) of $224.4 million. The weaker Canadian dollar relative to the U.S. dollar in 2009 Q1 compared to 2008 Q1 has resulted in diluting revenue growth by approximately $7.8 million.

• Bus manufacturing revenue in 2009 Q1 of $244.5 million increased by 22.6% compared to $199.5 million in 2008 Q1, primarily resulting from a volume increase of 17.9% in total bus deliveries of 593 equivalent units in 2009 Q1 as compared to 2008 Q1 deliveries of 503 equivalent units. Another contributing factor of the overall increase was the average price per equivalent unit delivered in 2009 Q1 was $412.3 thousand compared to $396.6 thousand in 2008 Q1, representing an increase of 4.0%.
• As management anticipated, the 2009 Q1 aftermarket operations revenue of $28.9 million returned to expected growth rates, increasing 15.7% in 2009 Q1 compared to $25.0 million in 2008 Q1. The continued strong growth in aftermarket operations is a result of an increase in market share as New Flyer buses continue to represent a larger share of the active installed fleet in the combined United States and Canadian market and an increase in orders due to accelerated purchases that were deferred in the 13-week period ended December 28, 2008 (“2008 Q4”) during a labour strike at a major customer.

Consolidated Adjusted EBITDA for 2009 Q1 totaled $23.1 million compared to $27.0 million in 2008 Q1 (the most profitable reporting period since the Company’s initial public offering in 2005), which represents a decrease of 14.5%. In comparing the respective periods, this decrease in consolidated Adjusted EBITDA is primarily a result of large contract runs for the period with lower average contract margins in the bus manufacturing operations sales mix and higher incremental costs associated with the rectification of a design deficiency related to one significant customer’s contract.

• 2009 Q1 bus manufacturing operations Adjusted EBITDA of $17.0 million improved from 2008 Q4 Adjusted EBITDA of $12.9 million, compared to Adjusted EBITDA of $21.4 million in 2008 Q1. Adjusted EBITDA from bus manufacturing operations per equivalent unit can be volatile on a quarterly basis due to sales mix and therefore, a longer term view should be taken when comparing quarterly bus manufacturing operations margins.
• 2009 Q1 aftermarket operations Adjusted EBITDA of $6.1 million increased by 9.2% compared to $5.6 million in 2008 Q1, primarily due to the 15.7% increase in sales volume. Aftermarket operations growth however was partially offset by the depreciation of the value of the Canadian dollar in 2009 Q1.

While Adjusted EBITDA decreased by $3.9 million in 2009 Q1 compared to 2008 Q1, the strengthening of the U.S. dollar compared to the Canadian dollar results in 2009 Q1 Adjusted EBITDA, measured in Canadian dollars, of C$ 28.6 million compared to C$ 27.4 million in 2008 Q1.  This represents an improvement of 4.4%.

The Company reported net earnings of $4.8 million in 2009 Q1 compared to net earnings of $35.7 million in 2008 Q1. In addition to the decrease in consolidated Adjusted EBITDA of $3.9 million in 2009 Q1 compared to 2008 Q1, net earnings were also impacted by the decrease in non-cash recoveries offset by lower interest costs.

The Company generated Distributable Cash of C$18.8 million during 2009 Q1 and declared distributions of C$14.4 million, which represents a 2009 Q1 payout ratio of 76.5%. By comparison, in 2008 Q1, the Company generated Distributable Cash of C$19.3 million and declared distributions of C$13.2 million, resulting in a payout ratio of 67.7%. These results highlight the foreign exchange impact caused by the lower Canadian dollar in the current period as compared to the exchange rate during 2008 Q1.  When the Canadian dollar depreciates in value against the U.S. dollar, the Company’s U.S. dollar Adjusted EBITDA decreases when the sales mix is weighted with Canadian revenue. However, excess Distributable Cash is not as significantly impacted due to the natural hedge provided by Canadian dollar denominated interest and income taxes. Cumulatively, since the initial public offering on August 19, 2005, the Company has generated Distributable Cash of C$227.0 million and has declared distributions of $187.4 million, resulting in a cumulative surplus of C$39.7 million and a payout ratio of 82.5%.

During 2009 Q1 the Company had a significant, but temporary, $41.3 million increase in working capital. This increase is substantially the result of increased accounts receivable and inventory related to a single contract with a design deficiency (as disclosed in the Company’s December 28, 2008 MD&A).  While the design deficiency has been rectified, the completion and delivery of the 161 equivalent units included in this order was delayed. As of May 5, 2009, 36 units have been delivered to the customer. Management expects that this working capital buildup will be reduced during the second half of 2009 in accordance with the revised delivery schedule for these buses.

Work in process inventory levels have also increased as a result of the Company ramping up production levels from 48 to 50 equivalent units per week. Cash generated from operations before working capital totaled $7.3 million for 2009 Q1 which partially offset the cash used to fund working capital. The Company’s liquidity position at April 5, 2009 was $31.3 million compared to $70.7 million as at December 28, 2008. Management believes that these funds will provide the Company with sufficient liquidity and capital resources to meet its current and future financial obligations as they come due, as well as provide funds for its financing requirements, capital expenditures and other needs for the foreseeable future.

On April 24, 2009, the Company entered into an amended and restated credit facility agreement (the “New Credit Facility”). The New Credit Facility refinances New Flyer’s term loan portion of the credit facility expiring on August 19, 2009 (the “Old Credit Facility”). The New Credit Facility matures on April 24, 2012 and consists of a $90.0 million term loan, a $50.0 million revolver and a $40.0 million letter of credit facility.

The total order backlog (including firm orders and options) of approximately $4.0 billion (representing 9,236 equivalent units) as at April 5, 2009 compared to the total order backlog of approximately $4.1 billion (representing 9,531 equivalent units) as at December 28, 2008. The firm order backlog, which represents 2,373 equivalent units of production, provides the Company with the order visibility to efficiently plan the production schedule, thereby minimizing expenses and working capital requirements, and is supportive of the current and planned levels of production.

During the quarter, New Flyer experienced an increase in inquiries and requests for information from customers seeking new buses. Currently, there are approximately 12,000 EUs in New Flyer’s new order pipeline or bid universe for heavy-duty transit buses. New Flyer’s new order pipeline includes: bids that have been submitted, bids currently in process of completion as a result of a tender, and anticipated bid activity to the end of the year based on management’s understanding of transit customers’ fleet procurement plans. This new order pipeline compares to approximately 7,000 EUs as at December 28, 2008, or an increase of approximately 71%.

Conference Call

A conference call for analysts and interested listeners will be held on Tuesday, May 12th, at 11:00 a.m. (ET). The call-in number for listeners is 800-594-3615 or 416-644-3428. A live audio feed of the call will also be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2640880

A replay of the call will be available from 1:00 p.m. (ET) on May 12th until 11:59 p.m. (ET) on May 19th. To access the replay, call 416-640-1917 or 877-289-8525, enter pass code number 21304579 followed by the pound sign (“#”). The replay will also be available on the Company’s web site at www.www.newflyer.com.

Non-GAAP Measures

Adjusted EBITDA consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges, adjusted for certain costs related to offerings and certain other non-recurring charges as set out in the MD&A. Management believes Adjusted EBITDA and Distributable Cash (as defined below) and Distributable Cash Per Unit are useful measures in evaluating the performance of the Company. “Distributable Cash” means cash flows from operations adjusted for changes in non-cash working capital items, and effect of foreign currency rate on cash and increased for withholding taxes related to capital transactions, defined benefit funding, distributions on Class B and Class C common shares, costs related to offerings, fair market value adjustment to inventory, fair market value adjustment to prepaid expenses, proceeds on sale of redundant assets, and interest on subordinated notes forming part of the IDSs and decreased for defined benefit expense, maintenance capital expenditures, fair market value adjustment to deferred revenue, fair market value adjustment to accounts payable and accrued liabilities and principal payments on capital leases. Adjusted EBITDA and Distributable Cash are not earnings measures recognized under GAAP and do not have standardized meanings as prescribed by GAAP. Therefore, Adjusted EBITDA, Distributable Cash and Distributable Cash Per Unit may not be comparable to similar measures presented by other entities. Investors are cautioned that Adjusted EBITDA and Distributable Cash should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of New Flyer’s performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.

About New Flyer

New Flyer is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company’s three facilities – in Winnipeg, MB, St. Cloud, MN and Crookston, MN – are all ISO 9001, ISO 14001 and OHSAS 18001 certified. With a skilled workforce of approximately 2,500 employees, New Flyer is a technology leader in the heavy-duty transit market, offering the broadest product line in the industry, including drive systems powered by clean diesel, LNG, CNG and electric trolley, as well as energy-efficient gasoline-electric and diesel-electric hybrid vehicles. All of New Flyer’s products are supported by an industry-leading, comprehensive parts and service network. The IDSs are listed on the Toronto Stock Exchange under the symbol NFI.UN.

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, results of operations, performance and business prospects and opportunities. The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “projects”, “estimates” 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. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Such differences may be caused by factors which include, but are not limited to, competition in the heavy-duty transit bus industry, availability of funding to the Company’s customers at current levels or at all, material losses and costs may be incurred as a result of product warranty issues, material losses and costs may be incurred as a result of product liability claims, changes in Canadian or United States tax legislation, the Company’s success depends on a limited number of key executives who the Company may not be able to adequately replace in the event that they leave the Company, the absence of fixed term customer contracts and the termination of contracts by customers for convenience, the current “Buy-America” legislation and the Ontario government’s “Buy Canadian” purchasing policy may change and/or become more onerous, production delays may result in liquidated damages under the Company’s contracts with its customers, currency fluctuations could adversely affect the Company’s financial results or competitive position in the industry, the Company may not be able to maintain performance bonds or letters of credit required by its existing contracts or obtain performance bonds and letters of credit required for new contracts, third party debt service obligations may have important consequences to the Company, the covenants contained in the senior credit facility and subordinated note indenture of NFI ULC could impact the ability of the Company to fund distributions and take certain other actions, interest rates could change substantially and materially impact the Company’s profitability, the dependence on limited sources of supply, the possibility of fluctuations in the market prices of the pension plan investments and discount rates used in the actuarial calculations will impact pension expense and funding requirements, the Company’s profitability and performance can be adversely affected by increases in raw material and component costs and the availability of labour could have an impact on production levels. The Company cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the Company’s materials filed with the Canadian securities regulatory authorities and available on SEDAR at www.sedar.com.

Although the forward looking statements contained in this press release are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements, and the differences may be material. These forward looking statements are made as of the date of this press release and the Company assume no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.

For further information:
Glenn Asham
Chief Financial Officer
Tel: (204) 224-1251
E-mail: [email protected]