New Flyer Announces June Cash Distribution, Business Update, Corporate Structure Plans and Change in Distribution Level

Business Update

Given the recent market price performance of its income deposit securities (“IDSs”), New Flyer has decided to provide an update on the current performance of the business to reassure investors that the business continues to be fundamentally sound.

In the last ten weeks since the end of the first quarter, New Flyer’s order activity has consisted of new orders for 365 equivalent units or “EUs” (consisting of new firm orders and new options) and the conversion of existing options into firm orders for 633 EUs, for total order activity of 998 EUs. As a result New Flyer is pleased to report that substantially all production slots in the 2011 manufacturing schedule have been filled at a production rate of 36 EUs per week. Management currently anticipates total deliveries for 2011 to be between 1,800 and 1,850 EUs (compared to deliveries of 2,023 EUs in 2010). Paul Soubry, New Flyer’s President and Chief Executive Officer commented, “We are pleased with the order activity level in the second quarter so far. While the overall market environment continues to be challenging primarily as a result of US customer funding issues, we have no intentions of standing still and are confident in our business plan. As we have clearly stated, we will continue to proactively pursue opportunities that are in the best interests of our security-holders, customers and employees”.

Conversion Plans and Change in Distribution

New Flyer is actively exploring alternatives to convert from an IDS structure to a traditional common share structure. In the current IDS structure, each holder of IDSs holds a unit consisting of one common share of NFI and C$5.53 principal amount of subordinated notes of NFI ULC (the “subordinated notes”). In a common share structure, holders would hold only common shares of NFI. Management believes that the current IDS structure poses a number of challenges including the following:

• High financial leverage and constrained financial flexibility
• Limited ability to reinvest in the business and pursue diversification and growth opportunities
• Mismatch between predominantly US$ operating cash flows and CDN$ denominated debt and financing costs
• Costly and inefficient to maintain current IDS structure
• Capital market constraints for IDS issuers – New Flyer is the only remaining Canadian
  IDS issuer

Management believes that a traditional common share structure should address these challenges and is the best capital structure alternative for the company. New Flyer intends to communicate to investors the details of its conversion plans as soon as they are finalized which is anticipated be in the next two to four weeks.

In conjunction with the conversion plan, New Flyer will establish a new dividend policy. New Flyer’s Board of Directors intends to establish a common share dividend policy that is consistent with the company’s long-term financial performance and the need to internally retain cash flows to support the ongoing requirements of the business and to provide the financial flexibility to pursue strategic opportunities. With these objectives, the board anticipates establishing the annualized dividend at a level of approximately 50% of the current distribution level of $1.17 per IDS once a common share conversion is completed. Management believes this level of dividends will provide investors with an attractive level of current income when compared to other common share investments on the TSX.

For holders of common shares following the conversion, the new payment is expected to consist entirely of eligible dividend income. For Canadian residents, eligible dividends are entitled to the enhanced gross-up and dividend tax credit under the Income Tax Act (Canada) which should result in a more favourable rate of taxation relative to the pre-conversion IDS distribution which consists of a combination of interest and dividend income.

In conjunction with the conversion, the board expects to declare a special dividend on a monthly basis during the period from the closing of the conversion up until no later than August 2012 when New Flyer anticipates redeeming or repurchasing any remaining outstanding subordinated notes of NFI ULC. New Flyer anticipates this special dividend would result in an overall dividend level of $0.77 to $0.93 on an annualized basis through August 2012. Further details will be announced together with the company’s conversion plans in the next few weeks.

Paul Soubry further stated, “We believe a conversion to a traditional common share structure, along with an appropriate dividend policy, is in the best interest of New Flyer and its investors. New Flyer’s operating business remains robust despite the challenging market for heavy-duty transit buses, and we continue to have confidence in our strategic plan. A conversion to a traditional common share structure will alleviate the financial and operating constraints resulting from the high financial leverage inherent in the IDS structure, and should provide the flexibility required to pursue strategic opportunities for long-term growth and diversification to permit us to build on New Flyer’s success.”

Declaration of June 2011 Cash Distribution

Finally, New Flyer today declared the seventieth consecutive monthly cash distribution on the IDSs in the amount of $0.0975, which will be payable on July 15, 2011, to holders of record of IDSs at the close of business on June 30, 2011. The IDSs trade on the Toronto Stock Exchange under the symbol NFI.UN.

The total distribution of C$0.0975 per IDS reflects a cash dividend of C$0.03298 per common share and an interest payment of C$0.06452 per C$5.53 principal amount of subordinated notes for the period from June 1, 2011 to June 30, 2011.

All dividends paid by NFI to Canadian residents on the common shares after December 31, 2005 are designated as “eligible dividends” for purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation. In addition, unless stated otherwise, all dividends paid by NFI hereafter on the common shares are designated as “eligible dividends” for the purpose of such rules.

About New Flyer

New Flyer is the leading manufacturer of heavy-duty transit buses in the United States and Canada and a leading provider of aftermarket services. New Flyer has the broadest range of products in the heavy-duty transit bus industry and provides its products and services to the majority of the largest transit authorities in North America.

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, the ability to complete a corporate structure conversion to a common share structure, competition in the heavy-duty transit bus industry, availability of funding to the Company’s customers to purchase buses, parts or services at current levels or at all, competition and aggressive and reduced pricing in the industry, 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 Canadian content 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, 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 NFI ULC’s senior credit facility and subordinated note indenture could impact the ability of the Company to continue 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 timely supply of materials from suppliers, 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, the availability of labour could have an impact on production levels, the ability of the Company to successfully execute strategic plans and maintain profitability and risks related to acquisitions. The Company cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the Company’s press releases and materials filed with the Canadian securities regulatory authorities and are 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