New Flyer Acknowledges Proposed Canadian Tax Changes
Winnipeg, Manitoba, Canada, July 21, 2011 – (TSX: NFI.UN) New Flyer Industries Inc. (“NFI”) and New Flyer Industries Canada ULC (“NFI ULC”) (together, “New Flyer”) acknowledge the announcement yesterday by the Minister of Finance (Canada) of proposed amendments to the Income Tax Act (Canada) concerning, among other things, the income tax treatment of publicly-traded “stapled” securities issued by corporations (the “Proposed Amendments”). New Flyer’s income deposit securities (“IDSs”), each consisting of one common share of NFI and $5.53 principal amount of 14% subordinated notes of NFI ULC (“Subordinated Notes”), would be subject to the Proposed Amendments as “stapled” securities.
If the Proposed Amendments are enacted as proposed, interest that is paid or becomes payable on the Subordinated Notes, will not be deductible in computing the income of NFI ULC for Canadian income tax purposes, which could have the effect of reducing New Flyer’s after-tax cash flows and earnings. In the case of New Flyer, the Proposed Amendments provide for a transitional period of continued interest deductibility until January 1, 2016 in respect of interest that is paid or becomes payable during, and is in respect of, such transitional period. The draft income tax legislation giving effect to Proposed Amendments has not yet been released.
On July 7, 2011, NFI filed a short form prospectus in connection with a non-cash rights offering to convert New Flyer from its current IDS structure to a traditional common share structure. Pursuant to the offering, NFI has issued to holders of its common shares, substantially all of which are represented by IDSs, rights to acquire common shares of NFI. The rights are exercisable upon the delivery of Subordinated Notes. The exercise of the rights will reduce the aggregate principal amount of Subordinated Notes held in the form of IDSs that would be subject to the interest deductibility limitations under the Proposed Amendments. If all of the rights are exercised, no Subordinated Notes will remain outstanding in the form of IDSs and the interest deductibility limitations of the Proposed Amendments would therefore not be applicable to New Flyer.
New Flyer Chairman of the Board, the Honourable Brian V. Tobin, commented, “The proposed amendments provide further support for the importance of New Flyer’s proposed conversion to a traditional common share structure. The Board of Directors of NFI continues to recommend that holders of NFI common shares (including holders of IDSs) exercise all of their rights.”
About New Flyer
New Flyer is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company’s three manufacturing facilities – in Winnipeg, MB; St. Cloud, MN; and Crookston, MN – are all ISO 9001, ISO 14001 and OHSAS 18001 certified. The Company currently operates a parts fabrication facility in Elkhart, IN and three parts distribution centers in Winnipeg, MB; Erlanger, KY; and Fresno, CA. A fourth PDC is expected to open in Ontario in 2011.
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 diesel-electric hybrid vehicles. All products are supported with an industry-leading, comprehensive parts and service network. The Company’s income deposit securities are traded on the TSX under the symbol NFI.UN. Further information is available on New Flyer’s web site at www.www.newflyer.com.
Certain statements in this press release are “forward looking statements”, which reflect the expectations of management regarding New Flyer’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 the conversion to a common share structure, competition in the heavy-duty transit bus industry, availability of funding to New Flyer’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 (including the Proposed Amendments), reliance on a limited number of key executives who New Flyer may not be able to adequately replace in the event that they leave New Flyer, 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 New Flyer’s contracts with its customers, New Flyer’s ability to execute its planned production targets as required for current business and operational needs, New Flyer’s ability to generate cash from the planned reduction in excess work in process, currency fluctuations could adversely affect New Flyer’s financial results or competitive position in the industry, New Flyer 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 New Flyer, the covenants contained in NFI ULC’s senior credit facility and subordinated note indenture could impact the ability of New Flyer to continue to fund distributions and take certain other actions, interest rates could change substantially and materially impact New Flyer’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, New Flyer’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 New Flyer to successfully execute strategic plans and maintain profitability and risks related to acquisitions. New Flyer cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in New Flyer’s press releases and materials filed with the Canadian securities regulatory authorities (including the prospectus discussed in this press release) 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 New Flyer assumes 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
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