Press Releases

New Flyer Announces Expected Production Decrease Resulting From Deferral of a Customer Order

Winnipeg, Manitoba, Canada, July 30, 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, announced today that production of 140 diesel-electric hybrid articulated buses (representing 280 equivalent units or “EUs”) under a major U.S. customer order that was planned to commence this week has been deferred indefinitely as a result of delays in the customer receiving state funding.  All of these 140 buses were planned to be delivered to the customer in the second half of fiscal 2009.

The customer has advised the Company that the buses under this order are required under its bus replacement plan and that it intends to purchase the buses once funding is made available. The customer planned to fund this order solely from state monies as federal stimulus monies available to the customer were allocated to other capital projects.  The customer advised that funding for this order is dependent on the approval of its funding application to the state, but is unable to confirm when the state is expected to approve the funding request.  The Company’s management is monitoring the situation and will reschedule these buses back into the Company’s production schedule once the customer’s funding has been approved.

Given the “engineer-to-order” nature of heavy-duty transit buses, other customers’ orders in the backlog cannot be easily rescheduled within the second half of 2009 (“2009 H2”) to fill the gaps in the production schedule created by this order deferral.  This deferral is expected to result in a reduction in the Company’s planned production levels from approximately 50 EUs per week to an average of 36 EUs per week for the remainder of fiscal 2009.  While some scheduling adjustments can be made, the revised production schedule currently assumes that the majority of the production schedule gaps cannot be filled.

Notwithstanding the deferred order, the Company’s management expects that full-year total production for fiscal 2009 should not be less than the 2,164 EUs delivered by the Company in fiscal 2008. This expectation is based on the above assumption regarding production schedule gaps, the revised production levels resulting from the deferral, the Company being able to successfully deliver all other customers’ orders as planned and the Company being able to successfully increase the rate of reduction of existing excess work in process.

The expected revenue from this deferred order is approximately $122 million and represents approximately 3% of the total order backlog of $4 billion (which is made up both firm orders and options) that the Company reported on July 21, 2009.  The total unexercised bus options that this customer has represent an additional 760 buses (1,520 EUs) over a five-year term, which represents an additional 16% of the Company’s total order backlog.  These options are assignable to other customers.

The Company’s management is exploring a variety of actions to mitigate the effects of this order deferral, including advancing the production of certain other customer orders into the 2009 production schedule, re-allocating certain labour resources to increase the rate of reduction of existing excess work in process levels and reviewing other means of reducing expenses and fixed overhead costs that relate to the previously planned higher production rate.  The Company’s ability to successfully implement these types of mitigating actions cannot be predicted at this stage.

Despite this order deferral and expected reduction in sales for 2009 H2, management expects that Adjusted EBITDA for fiscal 2009 should not be less than the Company’s Adjusted EBITDA for fiscal 2008.  Further, management believes the Company will be able to continue to make monthly distributions to the holders of its income deposit securities at the current rate and to maintain compliance with the financial covenants under the Company’s senior credit facility.   Management anticipates that the planned increase in the rate of reduction of excess work in process and the reduced requirement of funding expensive inventories of material and supplies related to diesel-electric hybrid buses should permit sufficient cash to be generated by the Company to substantially compensate for the expected decrease in the rate of production.  Management also anticipates that the payout ratio for fiscal 2009 should not be higher than the Company’s payout ratio for fiscal 2008 of 79.7%.  In addition to the assumptions already discussed above, management’s expectations regarding the anticipated financial results will depend on the Company being able to collect payment for buses from customers in accordance with the terms of such customers’ contracts and being able to successfully manage the Company’s working capital.

The Company has not been advised of any other material funding issues nor has it received any other material order deferrals from any of its other customers.

The Company intends to provide a further update on this situation in connection with the release of its 2009 second quarter results in mid-August.

A conference call for analysts and interested listeners will be held on Friday, July 31, 2009, at 1:00 p.m. (ET).  The call-in number for listeners is 800-731-5319 or 416-644-3420.  A live audio feed of the call will also be available at:

A replay of the call will be available from 3:00 p.m. (ET) on July 31, 2009 until 11:59 p.m. (ET) on August 7, 2009.  To access the replay, call 877-289-8525 or 416-640-1917, enter pass code number 21312574 followed by the pound sign (“#”). The replay will also be available on the Company’s web site at www.www.newflyer.com.

All dollar figures in this press release are expressed in U.S. dollars.

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 Company’s Management Discussion & Analysis.  Management believes Adjusted EBITDA is a useful measure in evaluating the performance of the Company.  Adjusted EBITDA is not an earnings measure recognized under GAAP and does not have a standardized meaning as prescribed by GAAP.  Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other entities.  Investors are cautioned that Adjusted EBITDA 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 the United States and Canada. 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, NFI is a technology leader, 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 products are supported with an industry-leading, comprehensive parts and service network. NFI’s income deposit securities are traded on the Toronto Stock Exchange under the symbol NFI.UN. Further information is available on Company’s web site at www.www.newflyer.com.

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 are described in this press release and the Company’s public disclosure documents, including, but 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, the Company’s ability to execute its planned production targets and reallocate production as a result of the deferred order described above, the Company’s ability to generate cash from the planned reduction in excess work in process, 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 New Flyer Industries Canada 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, please contact:
New Flyer Industries Inc.
Glenn Asham
Chief Financial Officer
Tel: 204-224-1251