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

• 2010 Q3 consolidated revenue of $255.4 million decreased by 15.9% compared to 2009 Q3 revenue of $303.6 million due to reduced industry demand.
• 2010 Q3 consolidated Adjusted EBITDA of $25.2 million decreased by 14.2% compared to $29.4 million in 2009 Q3 due to reduced deliveries with lower average bus selling price. 2010 YTD consolidated Adjusted EBITDA of $79.4 million increased 5.8% compared to $75.1 million in 2009 YTD.
• Continued growth of aftermarket operations resulted in 2010 Q3 revenue and Adjusted EBITDA increase of 4.2% and 13.8%, respectively, compared to 2009 Q3.
• Company’s cash balance of $61.2 million at October 3, 2010 increased $49.7 million from July 4, 2010 primarily due to reduction of bus WIP inventory and improved customer collections.
• 2010 Q3 Distributable Cash of C$20.7 million (C$0.42 per unit) decreased compared to 2009 Q3 of C$ 22.2 million (C$0.45 per unit). Payout ratio in 2010 Q3 of 69.8% compared to 64.9% in 2009 Q3. 2010 YTD payout ratio of 68.7% improved from 70.9% in 2009 YTD.
• New Flyer obtained 59% of bus orders awarded in 2010 Q3 resulting in an increased order backlog of 9,011 EU’s from 8,492 EU’s.

WINNIPEG, November 15, 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 October 3, 2010 (“2010 Q3”). 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.

Bus Deliveries (U.S. dollars in thousands)	2010 Q3	2009 Q3	Change	2010 YTD	2009 YTD	Change
Number of units delivered (EUs)	526	616	-14.6%	1,524	1,767	-13.8%
Average bus selling price	$434.8	$451.3	-3.6%	$457.9	$435.0	5.3%

 

Consolidated Revenue (U.S. dollars in millions)	2010 Q3	2009 Q3	Change	2010 YTD	2009 YTD	Change
Bus Aftermarket	$228.7 26.7	$278.0 25.6	-17.7% 4.2%	$697.9 81.1	$768.6 81.9	-9.2% -1.0%
Total Revenue	$255.4	$303.6	-15.9%	$779.0	$850.5	-8.4%

These results should be considered in the context of the market dynamics the Company has experienced over the last year. During the first half of 2009, New Flyer’s business operations were ramping up to its highest productions levels on record but production was unexpectedly curtailed beginning in the second half of 2009 as a result of a large order deferral by a customer and a decline in industry order activity during the latter half of 2009.

• Revenue from bus manufacturing operations for 2010 Q3 decreased 17.7% compared to the 13-week period ended October 4, 2009 (“2009 Q3”). The decrease primarily resulted from lower average bus selling price during 2010 Q3 and a decrease in deliveries in 2010 Q3 compared to 2009 Q3. The decrease in average bus selling price is attributed to a mix of products sold with a lower selling price.
• Revenue from aftermarket operations in 2010 Q3 increased 4.2% compared to 2009 Q3 as New Flyer reversed a recent trend by increasing sales in the U.S. market during 2010 Q3. Management believes that the Company has increased its market share by 1% in the aftermarket segment during a time when the current U.S. market is contracting.
• Revenue from bus manufacturing operations for the 39-week period ended October 3, 2010 (“2010 YTD”) decreased 9.2% from the 40-week period ended October 4, 2009 (“2009 YTD”). The 2010 YTD decrease is partly due to one less week of deliveries during the 13-week period ended April 4, 2010 (“2010 Q1”), as compared to the 14-week period ended April 5, 2009 (“2009 Q1”), and a reduction in production rates in 2010 YTD compared to 2009 YTD as a result of reduced industry orders.
• Revenue from aftermarket operations for 2010 YTD decreased 1.0% compared to 2009 YTD. The decrease in 2010 YTD aftermarket operations revenue is primarily a result of lower volumes during 2010 Q1 due to one less week in this quarter compared 2009 Q1, somewhat offset against a favourable impact of the stronger Canadian dollar on translation of Canadian dollar sales to U.S. dollars. During 2010 YTD, aftermarket operations revenue has increased in the Canadian market, while experiencing some reduction in sales in the U.S. market throughout 2010 YTD.

Consolidated Adjusted EBITDA (U.S. dollars in millions)	2010 Q3	2009 Q3	Change	2010 YTD	2009 YTD	Change
Bus Aftermarket	19.1 6.1	24.0 5.3	-20.5% 13.8%	60.6 18.8	57.3 17.8	5.8% 5.7%
Total Adjusted EBITDA	25.2	29.4	-14.2%	79.4	75.1	5.8%

The decrease in consolidated Adjusted EBITDA is primarily due to fewer deliveries during 2010 Q3 as compared to 2009 Q3, with a sales mix that included contract runs of lower average bus contract margins, offset by increased growth in aftermarket earnings, production efficiencies generated from Operational Excellence (“OpEx”) efforts and the appreciation in the value of the Canadian dollar compared to the U.S. dollar. The appreciation in the value of the Canadian dollar compared to the U.S. dollar resulted in an increase to Adjusted EBITDA of approximately $2.3 million in 2010 Q3 compared to 2009 Q3 ($2.0 million increase in bus manufacturing operations and $0.3 million increase in aftermarket operations). The profit margins between orders can vary significantly due to factors such as order size and product type. Adjusted EBITDA from bus manufacturing operations per EU can be volatile on a quarterly basis due to sales mix and therefore, management believes that a longer term view should be taken when comparing bus manufacturing operations margins.

• This decrease is primarily the result of 14.6% fewer deliveries during 2010 Q3 as compared to 2009 Q3, with lower average contract margins.
• 2010 Q3 aftermarket operations Adjusted EBITDA of $6.1 million (22.8% of revenue) increased 13.8% compared to $5.3 million (20.8% of revenue) in 2009 Q3. This increase is primarily due to impact of the stronger margins on sales to Canadian customers due to translation of the appreciation in the value of the Canadian dollar compared to the U.S. dollar.

2010 YTD consolidated Adjusted EBITDA increased by 5.8% compared to 2009 YTD consolidated Adjusted EBITDA, even with one less week of deliveries during 2010 YTD. The appreciation in the value of the Canadian dollar against the U.S. dollar in 2010 YTD resulted in an increase to Adjusted EBITDA by approximately $10.5 million compared to 2009 YTD ($8.3 million increase in bus manufacturing operations and $2.2 million increase in aftermarket operations).

• Bus manufacturing operations Adjusted EBITDA increase is primarily a result of a sales mix of on average higher margins that primarily occurred in the second quarter of 2010 (“2010 Q2”), OpEx gains and a favourable foreign currency impact, which was offset by fewer deliveries in 2010 YTD.
• Aftermarket operations Adjusted EBITDA for 2010 YTD increased 5.7% over 2009 YTD primarily due to the appreciation in the value of the Canadian dollar against the U.S. dollar, which was partially offset by the slight decrease in sales volume during 2010 YTD.

Net Earnings (loss) (U.S. dollars in millions)	2010 Q3	2009 Q3	$ Change	2010 YTD	2009 YTD	$ Change
Earnings from operations Non-cash charges Interest expense Income tax (expense) recovery	19.1 (11.3) (13.0) 2.0	23.7 (15.6) (12.9) (4.3)	(4.6) 4.3 (0.1) 6.3	61.6 (9.0) (40.8) 7.8	58.2 (29.8) (37.4) (10.2)	3.4 20.8 (3.4) 18.0
Net earnings (loss)	(3.1)	(9.2)	6.1	19.8	(19.1)	38.8

The Company increased its net earnings in 2010 Q3 compared to 2009 Q3, primarily as a result of a decrease in incomes taxes of $6.3 million and a $4.3 million decrease in non-cash charges offset by a $4.6 million decrease in earnings from operations when comparing the two periods. The change in non-cash charges included in earnings relate primarily to unrealized foreign exchange, fair value adjustments to assets and liabilities and amortization. The unrealized foreign exchange losses relate to the Subordinated Notes, both forming part of the IDSs and issued separately from the IDSs. Realization of these losses/gains is dependent on the exchange rate on the maturity date (August 2020) of the Canadian dollar denominated Subordinated Notes. The 2010 YTD net earnings increased significantly compared to 2009 YTD, primarily due to increases in earnings from operations, decreases in non-cash charges included in earnings and decrease in income taxes.

Distributable Cash (CAD dollars in millions)	2010 Q3	2009 Q3	Change	2010 YTD	2009 YTD	Change
Distributable Cash Cash Distributions	20.7 (14.5)	22.2 (14.4)	-6.5% 0.5%	62.8 (43.1)	61.0 (43.2)	3.0% -0.2%
Excess of distributable cash	6.3	7.8	-19.5%	19.7	17.8	10.7%
Payout Ratio	69.8%	64.9%	7.5%	68.7%	70.9%	-3.1%

As well as the above results, cumulatively, since the initial public offering on August 19, 2005, the Company has generated Distributable Cash of C$350.1 million and has declared distributions of $273.7 million, resulting in a cumulative surplus of C$76.4 million and a payout ratio of 78.2%.

Liquidity Position (U.S. dollars in millions)	October 3 2010	July 4 2010	$ Change
Cash Available credit from revolving credit facility	61.2 50.0	11.5 50.0	49.7 –
Total liquidity position	111.2	61.5	49.7

During 2010 Q3, the Company reduced its investment in non-cash working capital by $46.1 million, primarily as a result of reduced accounts receivable and inventory related to the delivery of 41 Ottawa buses (82 EUs). As well, the Company has continued its OpEx efforts in both aftermarket operations and bus manufacturing operation. The number of units in work in process inventory (“WIP”) reduced from 262 EUs at July 4, 2010 to 241 EUs at October 3, 2010. The
reduction of WIP and receipt of Ottawa’s milestone payments during 2010 Q3 were the primary contributors to the $49.6 million increase in the Company’s cash in 2010 Q3.

Industry Outlook

As a result of recent economic downturn and increased unemployment levels, ridership has declined in recent periods. Based on current conditions in United States and Canada, management expects that demand over the next two years will decline by approximately 10% or roughly 500 EUs per year. Due to widespread local funding challenges, management does not expect demand in the U.S. to begin to recover until at least 2012. Management estimates there are approximately 14,600 EUs in New Flyer’s current new potential order pipeline or bid universe for heavy-duty transit buses, an increase from the approximately 13,900 EUs reported as of July 4, 2010. However, management believes that although transit bus potential order pipeline remains strong, in the near term, many customers are deferring procurements in the face of reduced sales tax revenues and the consequent local funding challenges. As a result, management expects further price pressure on future business. New Flyer’s new potential order pipeline includes: bids that have been submitted, bids currently in process of completion as a result of a tenders, and anticipated bid activity to the end of the year based on management’s understanding of transit customers’ fleet procurement plans. Management is not able to predict at this stage how many bids will result in awarded orders.

Order Backlog (U.S. dollars in millions)	October 3 2010	July 4 2010	$ Change	October 3 2010	July 4 2010	EU Change
	Dollar Value			Equivalent Units
Firm orders Options	909.2 2,859.5	897.4 2,643.0	11.8 225.5	2,145 6,866	2,136 6,356	9 510
Total Backlog	3,768.7	3,531.4	237.3	9,011	8,492	519

Despite the challenging market, the Company has experienced order activity for 2010 Q3 of 1,125 EUs, for a total of US $476.0 million. This order activity is made up of new firm and new option orders of 813 EUs and exercised options of 312 EUs. Although the Company’s awards have increased in the last two quarters, the first quarter of 2010 had essentially no award activity in the industry. Based on the current state of the North American transit industry, management expects the production rate for 2011 to approximate 40 EUs per production week. Similar to last year the Company will focus on meeting planned customer deliveries at the end of 2010 by having no new production starts during the last two weeks of 2010. Management continues cost reduction plans as a reaction to recent pricing pressure in the industry.

Conference Call

A conference call for analysts and interested listeners will be held on Wednesday, November 17th, at 11:00 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=3278220

A replay of the call will be available from 2:00 p.m. (ET) on November 17th until 11:59 p.m. (ET) on November 24th. To access the replay, call 416-849-0833 or 800-642-1687 and then enter pass code number 20116449 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, business acquisition related costs 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 of New Flyer Holdings, Inc., 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 and aftermarket parts 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 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:
Glenn Asham
Chief Financial Officer
Tel: (204) 224-1251
E-mail: [email protected]