New Flyer Announces Record 2009 Fiscal Year Results in Revenue and Adjusted EBITDA

• Record Fiscal 2009 revenue of $1.1 billion increased by 14.4% compared to Fiscal 2008 revenue of $961.3 million.

• Record Adjusted EBITDA of $100.1 million increased by 8.2% after impact of increased  infrastructure costs to support business growth.

• Sustained order backlog of $3.9 billion (representing 8,990 equivalent units) compared to December 28 2008 total order backlog of $4.1 billion (representing 9,531 equivalent units).

• Liquidity of $80.7 million as at January 3, 2010, improved $21.3 million during 2009 Q4 primarily as a result of earnings from operations and reduction in non-cash working capital.
  

• Fiscal 2009 Distributable Cash of C$79.1 million (C$1.59 per unit) exceeds Cash Distributions by C$21.5 million (C$0.43 per unit) resulting in a Payout Ratio of 72.8% compared to Fiscal 2008 payout ratio of 79.7%.

WINNIPEG, March 23, 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 53-week period ended January 3, 2010 (“Fiscal 2009”). 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.

For Fiscal 2009, the Company’s consolidated revenue of $1.1 billion increased by 14.4% compared to consolidated revenue for the 52 week period ended December 28, 2008 (“Fiscal 2008”) of $961.3 million. Fiscal 2009 bus manufacturing revenue contributed to the majority of this increase as a result of higher delivery levels in Fiscal 2009 compared to Fiscal 2008. Bus manufacturing revenue during Fiscal 2009 totaled $991.7 million compared to $865.3 million in Fiscal 2008, representing an increase of 14.6%. Bus deliveries in Fiscal 2009 were 2,257 equivalent units, which represents an increase of 4.3% compared to Fiscal 2008 bus deliveries of 2,164 equivalent units. The increase in revenue was also favourably impacted by a price increase of 9.9%, as the average selling price of $439.4 thousand per equivalent unit during Fiscal 2009 increased from the average price per equivalent unit of $399.9 thousand during Fiscal 2008. This increase in average selling price is the result of changes in the product sales mix, which included more sales of hybrid and a unique contract for hydrogen fuel cell buses. Fiscal 2009 aftermarket revenue of $108.2 million increased by 12.7% compared to Fiscal 2008 aftermarket revenue of $96.0 million, as a result of increased customer demand together with New Flyer’s continued improvements in parts distribution programs. In an effort to fulfill the need for faster supply of parts, the Company has adopted a long-term strategy to explore the expansion of its warehousing and distribution capability so as to provide industry-leading response times to all of New Flyer’s customers in Canada and the United States. As a result, a new parts distribution center was opened in the summer of 2008 in northern Kentucky, and a third parts distribution center was opened in 2009 on the west coast of the United States. This network of parts distribution centers at strategic locations has significantly improved response time and minimized transportation costs to serve New Flyer’s customer base.

Fiscal 2009 consolidated Adjusted EBITDA of $100.1 million increased 8.2% compared to Fiscal 2008 consolidated Adjusted EBITDA of $92.4 million. Bus manufacturing operations Adjusted EBITDA of $76.2 million for Fiscal 2009 increased 4.5% compared to $72.9 million for Fiscal 2008 bus manufacturing operations Adjusted EBITDA. This increase of $3.3 million is a result of $5.9 million due to increased volume of bus sales (4.3% increase in deliveries), $8.4 million due to a more favourable sales margin mix, offset by $4.7 million in increased infrastructure spending to support business growth, write down of approximately $4.5 million of inventory associated with rectification of certain bus contracts and a $1.8 million foreign exchange impact. Aftermarket operations Adjusted EBITDA for Fiscal 2009 of $23.8 million represents an increase of 21.8% over Fiscal 2008 aftermarket operations Adjusted EBITDA of $19.6 million.

Fiscal 2009 net loss of $30.4 million is a change in net earnings compared to Fiscal 2008 net earnings of $87.6 million, primarily as a result of an increase in non-cash charges of $64.3 million in Fiscal 2009 compared to non-cash recoveries of $52.5 million during Fiscal 2008. The increase in non-cash charges is primarily attributable to a fair value adjustment to other liabilities, Class B and Class C common shares, and unrealized foreign exchange losses. Fair value adjustments to other liabilities for Class B and Class C common shares resulted in a non-cash charge of $5.0 million in Fiscal 2009 compared to a non-cash recovery of $23.5 million in Fiscal 2008. Unrealized foreign exchange losses charged to earnings in Fiscal 2009 were $36.2 million, which is primarily a result of the Canadian dollar denominated Subordinated Notes that mature in 2020, compared to an unrealized gain of $52.0 million in Fiscal 2008. The Fiscal 2009 net loss was also impacted by an increase in income taxes of $8.4 million in Fiscal 2009 as compared to Fiscal 2008 resulting from an increase of $1.6 million in current taxes related to increased earnings from operations and the reduced amount of foreign tax credits (“FTCs”) available to offset U.S. federal tax, and from an increase of $6.8 million in future taxes relating primarily to the foreign exchange impact of subsidiaries’ foreign branch.

The Company generated Distributable Cash of C$18.1 million during 2009 Q4 and declared distributions of C$14.4 million, which represents a 13-week period ended January 3, 2010 (“2009 Q4”) payout ratio of 79.5%. By comparison, during the 13-week period ended December 28, 2008 (“2008 Q4”), the Company generated Distributable Cash of C$15.5 million and declared distributions of C$14.4 million, resulting in a payout ratio of 92.7%. During Fiscal 2009, New Flyer generated Distributable Cash of C$79.1 million and declared distributions of C$57.6 million, representing a payout ratio of 72.8%.  In comparison, Fiscal 2008 Distributable Cash and declared distributions were C$69.2 million and C$55.2 million, respectively, which represents a payout ratio of 79.7%.

Cumulatively, since the Issuer’s initial public offering on August 19, 2005 (the “IPO”), the Company has generated Distributable Cash of C$287.3 million and has declared distributions of $230.6 million, resulting in a cumulative surplus of C$56.7 million and a payout ratio of 80.3%.

Cash generated from operations before working capital during 2009 Q4 totaled $8.4 million and cash provided by the changes in working capital was $19.7 million, both of which contributed to the total cash from operations of $28.1 million in 2009 Q4. A main contributor of this cash inflow is the decrease in inventory of $20.7 million from the previous quarter primarily as a result of a 75 equivalent unit reduction in inventory levels from the 13-week period ended October 4, 2009.

As a result of improved cash flow generated in 2009 Q4, the Company repaid in the 13-week period to end on April 4, 2010 all outstanding inter-company loans that were used to support dividend payments by NFI on its common shares and New Flyer LLC has repaid all outstanding loans advanced by NFI in lieu of dividends on its Class B and Class C Shares.

The Company’s liquidity position improved $21.3 million as at January 3, 2010 in comparison to the liquidity position at October 4, 2009. The January 3, 2010 liquidity position of $80.7 million is comprised of cash of $30.7 million and a $50.0 million secured revolving credit facility. As at January 3, 2010, there were no borrowings under this secured facility.

The total order backlog (including firm orders and options) of approximately $3.85 billion (representing 8,990 equivalent units, including 1,800 equivalent units from the U.S. customer that had deferred their order due to delay in state funding) as at January 3, 2010 remained fairly stable compared to the total order backlog of approximately $3.86 billion (representing 8,949 equivalent units) as at October 4, 2009. Subsequent to the year-end order activity, New Flyer was awarded a bus procurement contract by a U.S. customer for options of up to 500 buses of varying lengths and propulsion systems; representing a minimum value of approximately $173.0 million should all buses be purchased.

Management confirms its initial estimate of the line entry target rates for the 52–week period ended January 2, 2011 (“Fiscal 2010”), in the range of approximately 40 to 42 EUs per week. To this point the market has not signaled demand that would require us to increase our line-entry rates. Management anticipates that smaller order sizes will impact work in process inventory (“WIP”) levels during Fiscal 2010, as smaller orders will increase operating complexities. For example the number of EUs per order has decreased from 33 EUs per order in Fiscal 2008 to 20 EUs per order in Fiscal 2009. Management estimates that the current level of equivalent units in WIP will continue to vary in the range of 245 to 300 equivalent units due to order size and the nature of orders, while still being able to successfully manage the Company’s working capital.

Conference Call

A conference call for analysts and interested listeners will be held on Wednesday, March 24th, at 3:00 p.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=2998820

A replay of the call will be available from 5:00 p.m. (ET) on March 24th until 11:59 p.m. (ET) on March 31st. To access the replay, call 416-849-0833 or 800-642-1687 and then enter pass code number 63293457. 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 and a leading provider of aftermarket parts and support. 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 also has three parts distribution centers in Winnipeg, MB, Erlanger, KY and Fresno, CA. With a skilled workforce of approximately 2,300 employees, New Flyer is a technology leader in the heavy-duty transit bus market, offering the broadest and most advanced product line in the industry. The IDSs are listed on the Toronto Stock Exchange under the symbol NFI.UN.

Forward-Looking Statements

Certain statements in this MD&A 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 MD&A. 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 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 and reallocate production as a result of deferred bus orders, 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 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 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 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:

Glenn Asham
Chief Financial Officer
Tel: (204) 224-1251
E-mail: [email protected]