New Flyer Announces Results for the First Quarter of 2010 Fiscal Year

• Ottawa bus order for 306 enhanced design articulated buses (612 EU’s) results in a continuous production run beginning July 2010 supporting Company’s focus on operating efficiency and quality and filling 2010 production schedule.
• 2010 Q1 consolidated revenue of $243.0 million decreased by 11.1% compared to 2009 Q1 revenue of $273.3 million due to one less week in 2010 Q1 as compared to 2009 Q1, reduced production rates and delayed deliveries resulting in a buildup of EUs in WIP during 2010 Q1).
• Continued profitability of aftermarket operations resulted in a 6.1% increase in aftermarket operations Adjusted EBITDA in 2010 Q1.

• 2010 Q1 Consolidated Adjusted EBITDA of $22.2 million compared to $23.1 million in 2009 Q1 due to reduction in bus operations resulting from reduced deliveries offset partially by improved margins.
• 2010 Q1 Distributable Cash of C$15.9 million (C$0.32 per unit) decreased compared to 2009 Q1 Distributable Cash of C$18.8 million (C$0.38 per unit) primarily due to stronger Canadian dollar in 2010 Q1. Payout ratio in 2010 Q1 of 91.5% compared to 76.5% in 2009 Q1

WINNIPEG, May 13, 2010 – 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 13-week period ended April 4, 2010 (“2010 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.

On April 28, 2010, Ottawa’s City Council approved the purchase of 306 new articulated clean diesel buses (612 EU’s) for approximately C$190 million, consisting of 80 buses purchased on the exercise of options plus an additional 226 articulated buses under the existing bus procurement contract between Ottawa and New Flyer.

The first buses are expected to enter production in July 2010, with delivery of the new fleet anticipated to start in August 2010, and completed delivery to occur within approximately one year. Management does not currently anticipate increasing the Company’s production rate at its facilities in Manitoba or Minnesota as a result of being awarded the Ottawa order, but rather, it permits the Company to fill the 2010 production schedule and use this large contract run to smooth out production using level loading techniques. Delivery of these buses will allow New Flyer to replace the significant U.S. order deferral announced in 2009. The Ottawa contract also presents the Company with the opportunity to reverse the recent trend of a reduced average number of buses per customer order, largely caused by the previously announced U.S. customer order deferral, and to pursue operational excellence goals and ensure the highest quality. The contract also contains a favourable milestone billing schedule that positively aligns related cash flows.

Consolidated revenue for 2010 Q1 of $243.0 million decreased 11.1% from consolidated revenue for the 14-week period ended April 5, 2009 (“2009 Q1”) of $273.3 million.  This decrease is the result of fewer bus deliveries during 2010 Q1 compared to 2009 Q1, partially offset by a higher average bus selling price and the positive impact of foreign currency translation as a result of the stronger Canadian dollar.

• Bus manufacturing revenue in 2010 Q1 of $216.1 million decreased by 11.6% compared to bus manufacturing revenue of $244.5 million in 2009 Q1, primarily resulting from a volume decrease of 23.6% in total bus deliveries of 453 equivalent units (“EUs”) in 2010 Q1 as compared to 2009 Q1 deliveries of 593 EUs. The decrease is due to one less week of deliveries during 2010 Q1, as 2009 Q1 included 14 weeks instead of the usual 13-week quarterly reporting period, a reduction in production rates of 16.0% in 2010 Q1 compared to 2009 Q1 and delayed deliveries resulting in a buildup of EUs in work in process inventory (“WIP”) during 2010 Q1. Production rates reduced in 2010 Q1 to 39 EUs per week compared to 46 EUs per week in 2009 Q1 as a result of the large contract deferral in July last year and management’s expectations of the sustainable production rate. Deliveries have been delayed as a result of a 30% increase in the number of orders being delivered in 2010 Q1 compared to 2009 Q1 due to smaller order sizes. In addition, orders have continuously been moved forward in New Flyer’s production schedule since the deferral of the large customer order in July 2009 which has compressed the timeavailable to plan production of orders. As a result of the decrease in order size the Company has experienced increased engineering, supply and operating complexities with less time to plan orders due to expediting orders to fill the production schedule. The negative impact of lower bus deliveries was partially offset by higher average selling prices.
• 2010 Q1 aftermarket operations revenue of $26.9 million decreased by 6.9% in 2010 Q1 compared to $28.9 million in 2009 Q1. This decrease is primarily a result of lower volumes during 2010 Q1 due to one less week compared to 2009 Q1, somewhat offset against a favourable impact of the stronger Canadian dollar on translation of Canadian dollar sales to U.S. dollars.

Consolidated Adjusted EBITDA for 2010 Q1 totaled $22.2 million compared to $23.1 million in 2009 Q1, which represents a decrease of 3.8%. In comparing the respective periods, the decrease is primarily a result of lower deliveries (partly due to one less week in 2010 Q1 as compared to 2009 Q1 and a buildup of EUs in WIP at 2010 Q1) which was partially offset by higher average contract margins in the bus manufacturing operations sales mix and the positive impact of the appreciation of the value of the Canadian dollar against the U.S. dollar in 2010 Q1 of approximately $4.3 million compared to 2009 Q1.

• 2010 Q1 bus manufacturing operations Adjusted EBITDA of $15.7 million (7.3% of revenue) decreased by 7.4% compared to bus manufacturing operations Adjusted EBITDA of $17.0 million (6.9% of revenue) in 2009 Q1. The increase in bus manufacturing operations Adjusted EBITDA as a percentage of revenue is the result of higher contract margins related to a more favourable sales mix when comparing the two periods.

• 2010 Q1 aftermarket operations Adjusted EBITDA of $6.5 million increased by 6.1% compared to $6.1 million in 2009 Q1, primarily due to the appreciation of the value of the Canadian dollar against the U.S. dollar in 2010 Q1, which was partially offset by the decrease in sales volume.

The Company reported a net loss of $13.0 million in 2010 Q1 compared to net earnings of $4.8 million in 2009 Q1. 2010 Q1 net loss was negatively impacted by the increase in non-cash charges and higher interest costs. In 2010 Q1, non-cash charges totaled $19.5 million compared to non-cash charges included in 2009 Q1 earnings of $4.1 million. This change in non-cash items included in earnings related primarily to unrealized foreign exchange, fair value adjustments to assets and liabilities and amortization.

The Company generated Distributable Cash of C$15.9 million during 2010 Q1 and declared distributions of C$14.6 million, which represents a 2010 Q1 payout ratio of 91.5%. By comparison, in 2009 Q1, the Company generated Distributable Cash of C$18.8 million and declared distributions of C$14.4 million, resulting in a payout ratio of 76.5%. The 2010 Q1 payout ratio deteriorated 15.0% even though Adjusted EBITDA only decreased 3.8% in 2010 Q1 as compared to 2009 Q1. These results highlight the foreign exchange impact caused by the stronger Canadian dollar against the U.S. dollar for the current period as compared to the exchange rate in 2009 Q1.  When the Canadian dollar appreciates in value against the U.S. dollar, the Company’s U.S. dollar Adjusted EBITDA increases when the sales mix is weighted with Canadian revenue, but 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$303.2 million and has declared distributions of $245.2 million, resulting in a cumulative surplus of C$58.0 million and a payout ratio of 80.9%.

During 2010 Q1 the Company had a significant increase in non-cash working capital of $32.7 million, which management anticipates to be temporary in nature. This increase is substantially the result of an increase in accounts receivables due to the timing of collections under customer contracts and a decrease in accounts payables due to the payments related to the 2010 engine pre-buy campaign, thereby causing a decrease in the Company’s cash balances by $33.1 million and resulting in a bank indebtedness balance of $2.4 million at April 4, 2010, as compared to a cash balance of $30.7 million at January 3, 2010. The Company’s liquidity position as at April 4, 2010 totaled $47.6 million net of the bank indebtedness and a $50.0 million revolving credit facility.

The smaller order sizes that management had anticipated has impacted the WIP levels during 2010 Q1, as smaller orders generally increase engineering, supply and operating complexities. This increased complexity resulted in a 22.0% quarterly increase of equivalent units in work in process as at April 4, 2010. However, this increase had a very small impact on cash as the mix of inventory changed from a lower quantity of high dollar value buses in WIP to higher quantity of lower cost buses. The cost per EU in WIP inventory decreased significantly when the high dollar value hybrids and hydrogen fuel cells buses were delivered in 2010 Q1.

Conference Call

A conference call for analysts and interested listeners will be held on Friday, May 14th, at 9:00 a.m. (ET). The call-in number for listeners is 888-231-8191 or 647-427-7450. A live audio feed of the call will also be available at:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3061740

A replay of the call will be available from 12:00 p.m. (ET) on May 14th until 11:59 p.m. (ET) on May 21st. To access the replay, call 416-849-0833 or 800-642-1687 and then enter pass code number 72546137 followed by the pound sign (“#”). The replay will also be available on New Flyer’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 the United States and Canada. The Company’s facilities are all ISO 9001, ISO 14001 and OHSAS 18001 certified. With a skilled workforce of over 2,000 employees, New Flyer 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 support network. The Company’s IDSs are traded 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]