New Flyer Announces Results for the Second Quarter of 2010 Fiscal Year

    
    Highlights (US Dollars except as noted):

    -   2010 Q2 consolidated revenue of $280.5 million increased by 2.6%
        compared to 2009 Q2 revenue of $273.5 million.

    -   2010 Q2 consolidated Adjusted EBITDA of $32.1 million increased by
        41% compared to $22.7 million in 2009 Q2 due to improved bus margins,
        foreign exchange and approximately $3.2 million of non-recurring
        items.

    -   Increased firm orders in backlog to 2,136 EU's from 1,783 EU's
        resulting from 2010 Q2 order activity comprising of 852 EUs of new
        firm and new option orders and exercised options of 294 EUs,
        including the City of Ottawa firm order to purchase 306 - 60 foot
        diesel buses (612 EUs).

    -   New Flyer's manufacturing plan of averaging 41 EUs per week is now
        sold out through the end of 2010 as a result of orders received in
        2010 Q2.

    -   Company's cash balance of $11.5 million at July 4, 2010 increased
        $13.9 million from April 4, 2010 primarily due to reduction of bus
        WIP inventory and increased earnings from bus manufacturing
        operations during 2010 Q2.

    -   2010 Q2 Distributable Cash of C$26.1 million (C$0.52 per unit)
        increased compared to 2009 Q2 of C$19.9 million (C$0.40 per unit).
        Payout ratio in 2010 Q2 of 53.9% compared to 72.2% in 2009 Q2.
    

WINNIPEG, Aug. 12 /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 4, 2010 ("2010 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.

    
    Bus Deliveries           ------------------------------------------------
    (U.S. dollars in            2010    2009            2010    2009
     thousands)                   Q2      Q2  change     YTD     YTD  change
    -------------------------------------------------------------------------
    Number of units
     delivered (EUs)             545     558   -2.3%     998    1151  -13.3%
    -------------------------------------------------------------------------
    Average bus selling
     price                    $464.4  $441.1    5.3%  $470.1  $426.3   10.3%
    -------------------------------------------------------------------------



    Consolidated Revenue     ------------------------------------------------
    (U.S. dollars in            2010    2009            2010    2009
     millions)                    Q2      Q2  change     YTD     YTD  change
    -------------------------------------------------------------------------
    Bus                       $253.1  $246.1    2.8%  $469.2  $490.6   -4.4%
    Aftermarket                 27.5    27.4    0.4%    54.3    56.2   -3.4%
    -------------------------------------------------------------------------
    Total Revenue             $280.5  $273.5    2.6%  $523.5  $546.9   -4.3%
    -------------------------------------------------------------------------
    

These results should be considered in the context of the market dynamics the Company has experienced over the last year. During the first half of 2009, New Flyer's business operations were ramping up to its highest productions levels on record but production was unexpectedly curtailed beginning in the second half of 2009 as a result of a large order deferral by a customer and a decline in order activity during the latter half of 2009.

    
    -   Revenue from bus manufacturing operations for 2010 Q2 increased 2.8%
        compared to the 13-week period ended July 5, 2009 ("2009 Q2"), The
        increase in 2010 Q2 primarily resulted from an increase in the
        average bus selling price, offset by a decrease in deliveries in 2010
        Q2 compared to 2009 Q2. The increase in average bus selling price is
        attributed to a mix of products sold with a higher selling price,
        primarily hybrid buses. Bus deliveries in 2010 Q2 decreased slightly
        compared to 2009 Q2, although the 2010 Q2 deliveries included the WIP
        inventory reduction.

    -   Revenue from aftermarket operations in 2010 Q2 remained substantially
        unchanged when compared to 2009 Q2, as lower U.S. sales were offset
        by increased sales to Canadian customers.

    -   Revenue from bus manufacturing operations for the 26-week period
        ended July 4, 2010 ("2010 YTD") decreased 4.4% compared to the 27-
        week period ended July 5, 2009 ("2009 YTD"). The 2010 YTD decrease is
        partly due to one less week of deliveries during 2010 Q1, as 2009 Q1
        included 14 weeks instead of the usual 13-week quarterly reporting
        period, and a reduction in production rates in 2010 YTD compared to
        2009 YTD to meet management's plan for a sustainable production rate.

    -   Revenue from aftermarket operations for 2010 YTD decreased 3.4%
        compared to 2009 YTD. The decrease is primarily a result of lower
        volumes during 2010 YTD due to one less week compared to 2009 YTD,
        however is somewhat offset by the favourable impact of the stronger
        Canadian dollar compared to the U.S. dollar. Management believes that
        the Company has maintained its market share in the aftermarket
        segment during the current soft U.S. market.


    Consolidated Adjusted    ------------------------------------------------
     EBITDA
    (U.S. dollars in            2010    2009            2010    2009
     millions)                    Q2      Q2  change     YTD     YTD  change
    -------------------------------------------------------------------------
    Bus                         25.8    16.3   58.1%    41.5    33.3   24.7%
    Aftermarket                  6.3     6.4   -1.5%    12.7    12.4    2.2%
    -------------------------------------------------------------------------
    Total Adjusted EBITDA       32.1    22.7   41.4%    54.3    45.8   18.6%
    -------------------------------------------------------------------------
    

The increase in 2010 Q2 consolidated Adjusted EBITDA is primarily due to contract runs with higher average contract margins in the bus manufacturing operations sales mix and the appreciation of the value of the Canadian dollar compared to the U.S. dollar which resulted in an increase to Adjusted EBITDA by approximately $3.9 million in 2010 Q2 compared to 2009 Q2 ($3.3 million increase in bus manufacturing operations and $0.6 million increase in aftermarket operations). However, these factors were partially offset as a result of fewer deliveries during 2010 Q2 as compared to 2009 Q2. Profit margins between orders can vary significantly due to factors such as order size and product type. As a result, Adjusted EBITDA from bus manufacturing operations per equivalent unit can be volatile on a quarterly basis due to sales mix and therefore, management believes that a longer term view should be taken when comparing bus manufacturing operations margins.

    
    -   2010 Q2 bus manufacturing operations Adjusted EBITDA increased
        primarily as a result of the foreign exchange impact that the
        weakening U.S. dollar had on 2010 Q2 Canadian bus sales. Also,
        Adjusted EBITDA was positively impacted by a $1.2 million reversal of
        the warranty accrual relating to acquiring the City of Ottawa's
        existing fleet of 226 articulated buses and a change in estimate
        which resulted in a net $2 million decrease in Performance Unit Plan
        expenses compared to 2009 Q2. 2009 Q2 Adjusted EBITDA was negatively
        impacted by the requirement to write down the cost of inventory
        related to customers' contracts to net realizable value by $1.1
        million.

    -   2010 Q2 aftermarket operations Adjusted EBITDA of $6.3 million (22.8%
        of revenue) remained fairly constant compared to $6.4 million (23.2%
        of revenue) in 2009 Q2. The Company is starting to observe margins
        tightening as local competition increases during a time when U.S.
        customers have cut operating budgets.
    

2010 YTD consolidated Adjusted EBITDA increased by 18.6% compared to 2009 YTD even with one less week during 2010 YTD. The increase is primarily due to the appreciation of the value of the Canadian dollar against the U.S. dollar in 2010 YTD compared to 2009 YTD, which increased Adjusted EBITDA by approximately $8.2 million ($6.3 million increase in bus manufacturing operations and $1.9 million increase in aftermarket operations).

    
    -   Bus manufacturing operations Adjusted EBITDA increased 24.7% compared
        to 2009 YTD. This increase in Adjusted EBITDA is primarily a result
        of a sales mix of on average higher margins that primarily occurred
        in 2010 Q2.

    -   Aftermarket operations Adjusted EBITDA for 2010 YTD increased 2.2%
        over 2009 YTD primarily due to the appreciation of the value of the
        Canadian dollar against the U.S. dollar, which was partially offset
        by the decrease in sales volume during 2010 YTD.


    Net earnings (loss)      ------------------------------------------------
    (U.S. dollars in            2010    2009     $      2010    2009     $
     millions)                    Q2      Q2  change     YTD     YTD  change
    -------------------------------------------------------------------------
    Earnings from operations    26.0    17.4     8.6    42.6    34.6     8.0
    Non-cash (charges)
     recovered                  16.1   (16.0)   32.1     2.3   (14.1)   16.4
    Interest expense           (13.2)  (12.6)   (0.6)  (27.8)  (24.5)   (3.3)
    Income taxes (recovered)     7.0    (3.5)   10.4     5.8    (5.9)   11.7
    -------------------------------------------------------------------------
    Net earnings (loss)         35.9   (14.7)   50.5    22.9    (9.9)   32.8
    -------------------------------------------------------------------------
    

2010 Q2 net earnings increased $50.5 million compared to 2009 Q2. The change in non-cash items included in earnings relates primarily to unrealized foreign exchange gain credited to earnings in 2010 Q2 was $14.3 million compared to a loss of $14.5 million in 2009 Q2 and relate to unrealized foreign exchange on the subordinated notes, both forming part of the IDSs and issued separately from the IDSs. Realization of these losses/gains is dependent on the exchange rate on the maturity date (August 2020) of the Canadian dollar denominated subordinated notes. The decrease in income taxes when comparing the two periods was primarily the result of an $11.3 million decrease in future income taxes. The future income tax savings primarily resulted from the recognition of previously unrecognized future tax assets. Similar to 2010 Q2, 2010 YTD net earnings increased in earnings from operations, non-cash charges recovered to earnings and decrease in future taxes.

    
    Distributable Cash       ------------------------------------------------
    (CAD dollars in             2010    2009            2010    2009
     millions)                    Q2      Q2  change     YTD     YTD  change
    -------------------------------------------------------------------------

    Distributable Cash          26.1    19.9   30.7%    42.0    38.8    8.4%

    Cash Distributions         (14.1)  (14.4)  -2.4%   (28.6)  (28.8)  -0.6%
    -------------------------------------------------------------------------
    Excess of Distributable
     Cash                       12.0     5.5  117.0%    13.4    10.0   34.3%
    -------------------------------------------------------------------------
    Payout Ratio               53.9%   72.2%  -25.4%   68.2%   74.3%   -8.3%
    -------------------------------------------------------------------------
    

As well as the above results, cumulatively, since the initial public offering on August 19, 2005, the Company has generated Distributable Cash of C$329.3 million and has declared distributions of $259.2 million, resulting in a cumulative surplus of C$70.0 million and a payout ratio of 78.7%.

    
    Liquidity Position                                July 4 April 4     $
    (U.S. dollars in millions)                          2010    2010  change
    -------------------------------------------------------------------------
    Cash (bank indebtedness)                            11.5    (2.4)   13.9

    Available funds from revolving credit facility      50.0    50.0       -
    -------------------------------------------------------------------------
    Total liquidity position                            61.5    47.6    13.9
    -------------------------------------------------------------------------
    

During 2010 Q2 the Company reduced its investment in working capital by $6.0 million. Consistent with the continued Operational Excellence effort, the number of units in inventory reduced from 299 EUs at April 4, 2010 to 262 EUs at July 4, 2010, with the stage of completion also improving from 12 EUs to 27 EUs of finished goods. The reduction of work in process inventory and increased earnings from operations during 2010 Q2 were the primary contributors to the $13.9 million increase in the Company's cash in 2010 Q2.

    
    Order Backlog            ------------------------------------------------
    (U.S. dollars in          July 4 April 4     $    July 4 April 4    EU
     millions)                  2010    2010  change    2010    2010  change
    -------------------------------------------------------------------------
                                   Dollar value           Equivalent Units
    -------------------------------------------------------------------------
    Firm orders                897.4   835.2    62.2   2,136   1,785   351.0
    Options                  2,634.0 2,807.0  (173.0)  6,356   6,728  (372.0)
    -------------------------------------------------------------------------
    Total Backlog            3,531.4 3,642.2  (110.8)  8,492   8,513   (21.0)
    -------------------------------------------------------------------------
    

The total order activity in 2010 Q2 was comprised of new firm and new option orders of 852 EUs and exercised options of 294 EUs, including the City of Ottawa firm order to purchase 306 - 60 foot diesel buses (612 EUs) in a unique arrangement that provides for New Flyer to re-purchase used 226 -60 foot diesel buses for resale and the provision of additional services to the City of Ottawa, emphasizing the Company's new life cycle management strategy. With the orders received in 2010 Q2, New Flyer's manufacturing plan of averaging 41 EUs per week is now sold out through the end of 2010. As reported in the news release dated July 16, 2010, options for 267 EU's valued at approximately $129 million had been removed from the order backlog as at July 4, 2010 as they had expired even though the customer had advised that they were in the process of authorizing the extension of these options. On August 4, 2010, the customer provided formal approval to extend these options to June 30, 2011. The reinstatement of these options will be included in New Flyer's third quarter order activity.

Conference Call

A conference call for analysts and interested listeners will be held on Friday, August 13th, at 9:00 a.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=3168000

A replay of the call will be available from 12:00 p.m. (ET) on August 13th until 11:59 p.m. (ET) on August 20th. To access the replay, call 416-849-0833 or 800-642-1687 and then enter pass code number 90555625 followed by the pound sign ("No."). The replay will also be available on New Flyer'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) 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. The Company's facilities are all ISO 9001, ISO 14001 and OHSAS 18001 certified. 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 gasoline-electric and diesel-electric hybrid vehicles. All products are supported with an industry-leading, comprehensive parts and support network. The Company's IDSs are traded 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 and aftermarket parts 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, 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 NFI 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.

SOURCE New Flyer Industries Inc.

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


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