New Flyer Announces 2008 Fiscal Year Results

• Record Fiscal 2008 revenue of $961.3 million increased by 8.4% compared to Fiscal 2007 revenue of $887.1 million.
• Record order backlog of $4.1 billion (representing 9,531 equivalent units) increased by 43.6% compared to December 30, 2007 total order backlog of $2.8 billion (representing 6,916 equivalent units).
• Adjusted EBITDA of $92.4 million decreased by 3.6% due to infrastructure costs to support business growth.
• Fiscal 2008 Distributable Cash of C$69.2 million (C$1.33 per unit) exceeds Cash Distributions by C$14.0 million (C$0.27 per unit) resulting in a Payout Ratio of 79.7% compared to Fiscal 2007 payout ratio of 77.0%
• Distributable Cash per Unit for 2008 Q4 improved 25% compared to 2007 Q4 and increased 8% year-over-year.

WINNIPEG, March 18, 2009

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 52-week period ended December 28, 2008 (“Fiscal 2008”). 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.

During Fiscal 2008, the Company’s consolidated revenue of $961.3 million increased by 8.4% compared to consolidated revenue for the 52-week period ended December 30, 2007 (“Fiscal 2007”) of $887.1 million. Fiscal 2008 bus manufacturing revenue contributed to the majority of this increase as a result of higher production and delivery levels in Fiscal 2008 compared to Fiscal 2007. Bus manufacturing revenue during Fiscal 2008 totaled $865.3 million compared to $804.4 million in Fiscal 2007, representing an increase in bus manufacturing revenue of 7.6%. Bus deliveries in Fiscal 2008 were 2,164 equivalent units, which represents an increase of 8.0% compared to Fiscal 2007 bus deliveries of 2,003 equivalent units. However, bus manufacturing revenue for Fiscal 2008 was impacted by a depreciating Canadian dollar and a reduction in delivery levels that occurred in the 13-week period ending December 28, 2008 (“2008 Q4”). Bus manufacturing revenue in 2008 Q4 of $198.9 million decreased by 7.1% compared to bus manufacturing revenue of $214.1 million in 2007 Q4. Total bus deliveries in 2008 Q4 were 492 equivalent units, which represents a volume decrease of 4.5% compared to 2007 Q4 deliveries of 515 equivalent units. This decrease in delivery volumes was due to engineering design deficiencies relating to a significant customer contract which caused an increased build up of 70 equivalent units and resulted in 284 equivalent units in inventory at December 28, 2008 as compared to 214 equivalent units at the end of the previous quarter. These engineering deficiencies have been resolved and management expects the contract to be substantially delivered during the first half of 2009. Also, Fiscal 2008 aftermarket revenue of $96.0 million increased significantly by 16.1% compared to Fiscal 2007 aftermarket revenue of $82.7 million. The continued growth in aftermarket operations is a result of increased market share as New Flyer buses continue to represent a larger share of the active installed fleet in the combined United States and Canadian market. However, the Company experienced a slower growth rate in 2008 Q4 as a result of both a temporary labour strike at a major customer and more generally because of the depreciating Canadian dollar. It is management’s belief that revenues from aftermarket operations will continue to experience solid growth during 2009 given revenue activity subsequent to year end.

Fiscal 2008 consolidated Adjusted EBITDA of $92.4 million decreased by 3.6% compared to Fiscal 2007 consolidated Adjusted EBITDA of $95.9 million. As previously reported, 2008 Q4 Adjusted EBITDA was reduced by $4.0 million compared to the 13-week period ending December 30, 2007 (“2007 Q4”) due to the depreciation in the value of the Canadian dollar, the impact of foreign exchange year-over year was not substantial as the average exchange rate in 2008 and 2007 was approximately the same. Bus manufacturing operations Adjusted EBITDA of $72.9 million for Fiscal 2008 decreased 7.1% compared to $78.4 million for Fiscal 2007 bus manufacturing operations Adjusted EBITDA. This decline is primarily the result of increased selling and general administration spending of $5.6 million (an approximate 20% increase from Fiscal 2007) as the Adjusted EBITDA gains from higher delivery volumes were offset by lower contract margins in Fiscal 2008 related to product sales mix. This increase in selling and general administration spending was due to: increased investment in new product development culminating with the launch of the next generation product Xcelsior (including marketing of this new product), expansion of the U.S. aftermarket distribution center in Kentucky and investments in new business process improvements. Aftermarket operations Adjusted EBITDA for Fiscal 2008 of $19.6 million represents an increase of 12.3% over Fiscal 2007 aftermarket operations Adjusted EBITDA of $17.4 million, resulting primarily from increased sales volumes.

Fiscal 2008 net earnings of $87.6 million increased compared to Fiscal 2007 net loss of $130.7 million. The increase in net earnings is primarily the result of non-cash recoveries; these totaled $52.5 million in Fiscal 2008 compared to non-cash charges of $145.9 million during Fiscal 2007. The decrease in non-cash charges is primarily attributable to a fair value adjustment to other liabilities, Class B and Class C common shares, and reduction in unrealized foreign exchange losses or gains. Fair value adjustments to other liabilities for Class B and Class C common shares resulted in a recovery of $23.5 million in Fiscal 2008 compared to a non-cash charge of $90.2 million in Fiscal 2007. Unrealized foreign exchange gains credited to earnings in Fiscal 2008 were $52.0 million, which is comprised primarily of unrealized gains on long-term debt that matures in 2020, compared to a loss of $26.5 million in Fiscal 2007. The Fiscal 2008 net earnings were also favorably impacted by a year-over-year decrease in income tax expense. The decrease in income tax is related to both current and future income tax savings caused by the combination of reduction in Canadian earnings as discussed above, and the favourable impact the depreciation in the Canadian dollar had on future income taxes related to the U.S. denominated debt.

During 2008 Q4 the Company generated Distributable Cash of C$15.5 million (C$0.31 per unit) and declared total distributions of C$14.4 million (C$0.29 per unit) resulting in excess Distributable Cash of C$1.1 million (C$0.02 per unit). By comparison, in 2007 Q4 the Company generated Distributable Cash of C$13.0 million (C$0.25 per unit) while declaring total distributions of the same amount resulting in no excess Distributable Cash. These increases in 2008 Q4 occurred even though Adjusted EBITDA decreased 35.3% in 2008 Q4 as compared to 2007 Q4. These results highlight the foreign exchange impact caused by the depreciation in the Canadian dollar.  When the Canadian dollar depreciates against the U.S. dollar, the Company’s U.S. dollar Adjusted EBITDA decreases, but excess Distributable Cash increases as it is not as significantly impacted due to the natural hedge provided by Canadian dollar denominated interest and income taxes.

The Company generated Distributable Cash of C$69.2 (C$1.33 per unit) million during Fiscal 2008 and declared distributions of C$55.2 million (C$1.06 per unit), which represents a Fiscal 2008 payout ratio of 79.7%. During Fiscal 2007, the Company generated Distributable Cash of C$66.1 million (C$1.23 per unit) and declared distributions of C$50.9 million (C$0.95 per unit), resulting in a payout ratio of 77.0%.

Cumulatively, since the Issuer’s initial public offering on August 19, 2005, the Company has generated Distributable Cash of C$208.2 million (C$4.02 per unit) and has declared distributions of $173.0 million (C$3.34 per unit), resulting in a cumulative surplus of C$35.2 million (C$0.68 per unit).

The Company’s positive cash flow from operations offset its financing and investing activities which resulted in a net cash inflow of $5.4 million during Fiscal 2008. As a result, the Company’s liquidity position as at December 28, 2008 totaled $70.7 million comprised of cash balances of $30.7 million and a $40.0 million revolving credit facility, which was undrawn as at December 28, 2008. In comparison, the Company began Fiscal 2008 with total liquidity of $65.3 million.

The total order backlog (including firm orders and options) of approximately $4.1 billion (representing 9,531 equivalent units) as at December 28, 2008 increased by 43.6% compared to the total order backlog of approximately $2.8 billion (representing 6,916 equivalent units) as at December 30, 2007. Currently the robust heavy-duty transit bus order pipeline of orders available for bid still continues, with a total of 11,472 EUs for 2009; these include bids that have been submitted, bids currently in process, and anticipated bid activity to the end of 2009 based on transit customers’ fleet procurement plans. Management expects to leverage the Company’s solid product positioning to continue to grow market share.

The orders awarded in Fiscal 2008 have provided a sufficient firm order backlog as of December 28, 2008 of $1.2 billion (2007: $1.2 billion), which represents 28.4% of the total backlog. The firm order backlog, which represents 2,498 equivalent units of production (2007: 2,844 equivalent units), provides the order visibility to allow the Company to efficiently plan the production schedule, thereby minimizing expenses and working capital requirements and is supportive of the current and planned increases to production levels.

Conference Call

A conference call for analysts and interested listeners will also be held on Friday, March 20, 2009 at 9:00 a.m. (Toronto time). The call-in number for listeners is 800-732-0232. A live audio feed of the call will also be available at:  http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2542760

A replay of the call will be available from 11:30 a.m. (ET) on March 20, 2009 to 11:59 p.m. on March 27, 2009. To access the replay, call 416-640-1917 or 877-289-8525, enter the pass code number 21297007, and then press the pound sign (“#”). The replay will also be available on the Company’s website 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 Canada and the United States. The Company’s three facilities – in Winnipeg, MB, St. Cloud, MN and Crookston, MN – are all ISO 9001, ISO 14001 and OHSAS 18001 certified. With a skilled workforce of approximately 2,400 employees, New Flyer is a technology leader in the heavy-duty transit market, 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 of New Flyer’s products are supported by an industry-leading, comprehensive parts and service network. The IDSs are listed 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 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]