New Flyer Announces Results for the Second Quarter of 2009 Fiscal Year



    
    Highlights:

    -   2009 Q2 consolidated revenue of $273.5 million increased by 5.0%
        compared to 2008 Q2 revenue of $260.4 million.
    -   2009 Q2 consolidated Adjusted EBITDA of $22.7 million decreased by
        12.4% compared to 2008 Q2 due to foreign exchange, lower bus
        deliveries and contract rectification costs.
    -   Continued growth of aftermarket operations resulted in 2009 Q2
        revenue and Adjusted EBITDA increase of 7.0% and 25.0%, respectively,
        compared to 2008 Q2.
    -   2009 Q2 Distributable Cash of C$19.9 million (C$0.40 per unit)
        increased by 8.1% compared to 2008 Q2 Distributable Cash resulting in
        a payout ratio of 72.2% in 2009 Q2 compared to 74.0% in 2008 Q2.
    -   Costs and staff reductions to be initiated immediately as a result of
        previously-announced deferral of customer order.
    -   New orders have sustained total bus order backlog of approximately
        $4.0 billion.
    

    WINNIPEG, Aug. 17 /CNW/ - 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 July 5, 2009 ("2009 Q2"). Full financial statements and
Management's Discussion and Analysis (the "MD&A") are available at the
Company's web site at: www.newflyer.com/index/financialreport. Unless
otherwise indicated all monetary amounts in this press release are expressed
in U.S. dollars.
    Favourable bus sales mix and continued growth in aftermarket operations
resulted in consolidated revenue for 2009 Q2 of $273.5 million, which
represents an increase of 5.0% compared to consolidated revenue for the
13-week period ended June 29, 2008 ("2008 Q2") of $260.4 million.

    
    -   Bus manufacturing revenue in 2009 Q2 of $246.1 million increased by
        4.8% compared to bus manufacturing revenue of $234.8 million in 2008
        Q2, primarily resulting from an increase in revenue attributable to
        favourable product sales mix when comparing average selling price in
        the current period to 2008 Q2, primarily due to increased sales of
        hybrid buses. Although consolidated revenue increased in 2009 Q2
        compared to 2008 Q2, total bus deliveries of 558 equivalent units in
        2009 Q2 decreased 4.8% as compared to 2008 Q2 deliveries of 586
        equivalent units.

    -   Another contributing factor of the overall increase in consolidated
        revenue was the 2009 Q2 aftermarket operations revenue of
        $27.4 million, increased 7.0% in 2009 Q2 compared to $25.6 million in
        2008 Q2. The continued strong growth in aftermarket operations is a
        result of an increase in 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.

    Consolidated Adjusted EBITDA for 2009 Q2 totaled $22.7 million compared to
$25.9 million in 2008 Q2 which represents a decrease of 12.4%. The impact of
the depreciation of the value of the Canadian dollar in 2009 Q2 compared to
2008 Q2, reduced Adjusted EBITDA by approximately $2.3 million ($1.6 million
reduction in bus manufacturing operations and $0.7 million reduction in
aftermarket operations).

    -   2009 Q2 bus manufacturing operations Adjusted EBITDA of $16.3 million
        remained fairly consistent as compared with the 14-week period ended
        April 5, 2009 ("2009 Q1") Adjusted EBITDA of $17.0 million, however
        decreased by 21.5% compared to bus manufacturing operations Adjusted
        EBITDA of $20.8 million in 2008 Q2. The decrease in bus manufacturing
        operations is primarily the result of fewer deliveries, the foreign
        exchange impact that the strengthening U.S. dollar had on the 2009 Q2
        Canadian bus sales and a write-down to the cost of inventory related
        to certain customers' contracts to net realizable value. However,
        these factors were partially offset by contract runs with higher
        average contract margins in the bus manufacturing operations sales
        mix.

    -   2009 Q2 aftermarket operations Adjusted EBITDA of $6.4 million (23.2%
        of revenue) increased by 25.0% compared to $5.1 million (19.9% of
        revenue) in 2008 Q2, primarily due to higher margins realized and a
        7.0% increase in sales volume in the current period, as the
        distribution center in Kentucky had just opened in 2008 Q2. A new
        distribution center in Fresno, California was opened at the end of
        2009 Q2.
    

    The Company reported a net loss of $14.7 million in 2009 Q2 compared to a
net loss of $10.7 million in 2008 Q2. In addition to the decrease in
consolidated Adjusted EBITDA of $3.2 million in 2009 Q2 compared to 2008 Q2,
the net loss was also impacted by the increase in non-cash charges which was
offset by lower income tax expense.
    The Company generated Distributable Cash of C$19.9 million during 2009 Q2
and declared distributions of C$14.4 million, which represents a 2009 Q2
payout ratio of 72.2%. By comparison, in 2008 Q2, the Company generated
Distributable Cash of C$18.4 million and declared distributions of C$13.6
million, resulting in a payout ratio of 74.0%. While foreign exchange rate has
negatively impacted Adjusted EBITDA, the Company's Canadian denominated
interest, income tax costs and hedging activities result in very little impact
on C$ Distributable Cash. Cumulatively, since the Company's initial public
offering on August 19, 2005 (the "IPO"), the Company has generated a
cumulative surplus of C$45.2 million and a payout ratio of 81.7%.
    The Company's liquidity position decreased from $70.7 million as at
December 28, 2008 to $33.9 million as at July 5, 2009. The July 5, 2009
liquidity position is comprised of bank indebtedness of $16.1 million and a
$50.0 million revolving credit facility. As at July 5, 2009, there were no
direct borrowings under this secured revolver as the bank indebtedness balance
of $16.1 million at July 5, 2009 was calculated from cash on hand net of
outstanding cheques. The decrease in cash as at July 5, 2009 is substantially
the result of increased inventory related to the significant customer contract
with a design deficiency as disclosed in the Company's December 28, 2008 MD&A
and described above, and timing of a few large accounts receivables totaling
$21.5 million, which were received subsequent to July 5, 2009. Work in process
inventory levels have also increased as a result of the Company ramping up
production levels at the end of 2009 Q1 from 48 to 50 equivalent units per
week. While the design deficiency has been rectified, the completion and
delivery of the 225 equivalent units included in all of this customer's orders
were delayed. As of July 5, 2009, 72 units have been delivered to the
customer. Management expects that this inventory buildup will be reduced
during the second half of 2009 in accordance with the planned delivery of
these buses. The relationship with this customer remains solid, and as a
result of open and effective communication and achievement of the customer's
specifications, the customer has initiated the process of further option
conversions.
    During 2009 Q2, as a result of working capital fluctuations in the
previous quarter, dividend payments by NFL Holdings, Inc. to the Company and
to New Flyer LLC were restricted under the provisions of the note indenture
governing the Subordinated Notes. Therefore, during this period, New Flyer
Industries Canada ULC ("NFI ULC") utilized its available cash and draws on its
revolving facility to make an inter-company loan to the Company to support
dividend payments by the Company on its common shares and to support a loan by
the Company to New Flyer LLC in lieu of dividends to New Flyer LLC on its
Class B and Class C Shares. Subsequent to 2009 Q2, management determined that
similar loan arrangements to support dividend payments relating to 13-week
period ended October 4, 2009 ("2009 Q3") will be required.
    On July 30, 2009, the Company announced that production of 140
diesel-electric hybrid articulated buses (representing 280 equivalent units)
under a major U.S. customer order that was planned to commence the last week
of July, 2009, had been deferred indefinitely as a result of delays in the
customer receiving state funding. All of these 140 buses were planned to be
delivered to the customer in the second half of the 53-week period ended
January 3, 2010 ("Fiscal 2009").
    Notwithstanding the deferred order, Management expects that full-year
total production for fiscal 2009 should not be less than the 2,164 EUs
delivered by the Company in fiscal 2008. This expectation is based on the
assumption regarding production schedule gaps, the revised production levels
resulting from the deferral, the Company being able to successfully deliver
all other customers' orders as planned and the Company being able to
successfully increase the rate of reduction of existing excess work in
process.
    Management has explored a variety of actions to mitigate the effects of
this order deferral, including advancing the production of certain other
customer orders into the 2009 production schedule, re-allocating certain
labour resources to increase the rate of reduction of existing excess work in
process levels and reviewing other means of reducing expenses and fixed
overhead costs that relate to the previously planned higher production rate.
As a result, the Company will reduce its unionized workforce by up to
approximately 270 positions at its facilities located in Winnipeg, Manitoba
and its facilities in Crookston and St. Cloud, Minnesota. The Company will
also reduce its salaried workforce by up to approximately 50 positions, the
majority of the salaried workforce reduction to take place in Winnipeg. Some
of the workforce reductions will take place immediately, with the balance of
the reductions taking place over the remainder of the year. This reduction of
employees represents approximately 13 percent of New Flyer's total workforce
in Canada and the United States. In addition to the workforce reductions, the
Company plans to shutdown its facilities in Winnipeg, Crookston and St. Cloud
during the last two weeks of the year (six production days) while continuing
to ship completed buses.
    Despite this order deferral and expected reduction in sales for the
second half of 2009, management expects that Adjusted EBITDA for Fiscal 2009
should not be less than the Company's Adjusted EBITDA for fiscal 2008.
Further, management believes the Company will be able to continue to make
monthly distributions to the holders of its IDSs at the current rate and to
maintain compliance with the financial covenants under the Company's senior
credit facility. Management also anticipates that the payout ratio for Fiscal
2009 should not be higher than the Company's payout ratio for fiscal 2008 of
79.7%. In addition to the assumptions already discussed above, management's
expectations regarding the anticipated financial results will depend on the
Company being able to collect payment for buses from customers in accordance
with the terms of such customers' contracts and being able to successfully
manage the Company's working capital.
    The Company has not been advised by other customers of any other material
funding issues nor has it received any other material firm order deferrals
from any of its other customers.
    The total order backlog (including firm orders and options) of
approximately $4.0 billion (representing 9,425 equivalent units) as at July 5,
2009 increased slightly compared to the total order backlog of approximately
$4.0 billion (representing 9,236 equivalent units) as at April 5, 2009. The
firm order backlog, which represents 2,388 equivalent units of production,
while some orders specify when the deliveries must occur, the majority of the
firm orders do not contain limitations on deliveries and as such provides the
Company with the order visibility to efficiently plan the production schedule,
thereby minimizing expenses and working capital requirements, and is
supportive of the current and planned levels of production.
    As of July 21, 2009, there are approximately 11,000 EUs in New Flyer's
new potential order pipeline or bid universe for heavy-duty transit buses, a
slight reduction from the approximately 12,000 EUs reported as of April 5,
2009. New Flyer's new order pipeline includes: bids that have been submitted,
bids currently in process of completion as a result of a tender, 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.

    Conference Call

    A conference call for analysts and interested listeners will be held on
Tuesday, August 18th, at 9:00 a.m. (ET). The call-in number for listeners is
800-733-7560 or 416-644-3414. A live audio feed of the call will also be
available at:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2770900
    A replay of the call will be available from 11:00 a.m. (ET) on August
18th until 11:59 p.m. (ET) on August 25th. To access the replay, call
416-640-1917 or 877-289-8525, enter pass code number 21312606 followed by the
pound sign (No.). The replay will also be available on the Company's web site
at 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) 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 and Distributable Cash 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 2,500 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 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,
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 NFI ULC's senior credit facility and
Subordinated Note indenture 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:

For further information: Glenn Asham, Chief Financial Officer, Tel:
(204) 224-1251, E-mail: investor@newflyer.com


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