New Flyer announces 2011 Fiscal Year and Fourth Quarter Results

Highlights (U.S. dollars except as noted):

• Net earnings of $17.8 million in 2011 Q4 compared to a net loss of $13.6 million in 2010 Q4.
• Consolidated revenue of $256.9 million increased 25.5% and Adjusted EBITDA of $15.9 million decreased by 11.0%
• Higher selling prices when compared to 2010 Q4 resulted in bus revenue increase of 26.3%, however continued price pressure contributed to 14.3% decrease in bus Adjusted EBITDA in 2011 Q4.
• Aftermarket operations (spare parts and used bus sales) revenue increased by 19.5% while Adjusted EBITDA decreased 3.2%, compared to 2010 Q4.
• Production rate expected to be maintained at 36 EUs per week in 2012.
• The Company expects to maintain its dividends at an annual rate of C$0.86 per share, payable monthly, until August 2012 and then reduce the annual dividend to C$0.585 per share (equal to 50% of the pre-conversion annual distribution on the IDS of C$1.17).
• Two additional independent directors to be nominated for election at upcoming annual general meeting, increasing board to nine members.

WINNIPEG, March 21, 2012 /CNW/ - New Flyer Industries Inc. (TSX:NFI, 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 January 1, 2012 ("Fiscal 2011"). 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	2011	2010		2011	2010
(U.S. dollars in thousands)	Q4	Q4	change	Fiscal	Fiscal	change
Number of Equivalent Units delivered (EUs)	470	499	-5.8%	1,811	2,023	-10.5%
Average EU selling price	$484.0	$361.1	34.0%	$447.5	$434.0	3.1%

The Company experienced decreased volume in Fiscal 2011 due to a decline in market demand resulting from the continued downturn in the U.S. economy causing funding challenges for the majority of U.S. state and local governments. In reacting to the decrease in new orders the Company utilized its backlog built up over the past five years to fill the majority of open build slots to maintain a production rate of 36 EUs per week in Fiscal 2011.  As a result management priced new bids in a rational manner as opposed to simply reacting to aggressive competitive bids to maintain production volumes

Consolidated Revenue	2011	2010			2011	2010
(U.S. dollars in millions)	Q4	Q4	change		Fiscal	Fiscal	change
Bus	$   227.5	$   180.2	26.3%		$    810.4	$    878.1	-7.7%
Aftermarket	29.4	24.6	19.5%		116.0	105.7	9.8%
Total Revenue	$   256.9	$   204.8	25.5%		$    926.4	$    983.8	-5.8%

• Revenue from bus manufacturing operations for the 13-week period ended January 1, 2012 ("2011 Q4") increased 26.3% compared to the 13-week period ended January 2, 2011 ("2010 Q4"). The increase is primarily due to increased average selling price per EU which offset the impact caused by lower volumes. The increased average selling price per EU resulted from a sales mix that was comprised of mostly 40-foot buses as compared to a high percentage of 60-foot articulated buses (or 2 EU's) the previous year.
• Revenue from aftermarket operations in 2011 Q4 increased 19.5% compared to 2010 Q4 as a result of used bus sales and increased parts sales to U.S. customers.
• Revenue from bus manufacturing operations for Fiscal 2011 decreased 7.7% from the previous 52-week period ended January 2, 2011 ("Fiscal 2010"). The decrease is due to less deliveries but partially offset by an increase in the average bus selling price. Despite the reduced volume in Fiscal 2011, management believes that the Company has increased its market share in the bus manufacturing segment in Canada and the United States to 35% (2010: 34%) during a time when the current U.S. market contracted by an estimated 13.1%.
• Revenue from aftermarket operations for Fiscal 2011 increased 9.8% compared to previous year.  The increase is primarily a result of $3.3 million in used bus sales, increased parts volumes and the favourable impact of the stronger Canadian dollar on translation of Canadian dollar sales to U.S. dollars.

Consolidated Adjusted
EBITDA	2011	2010			2011	2010
(U.S. dollars in millions)	Q4	Q4	change		Fiscal	Fiscal	change
Bus	10.8	12.6	-14.3%		56.6	73.2	-22.7%
Aftermarket	5.1	5.2	-3.2%		23.5	24.1	-2.4%
Total Adjusted EBITDA	15.9	17.8	-11.0%		80.1	97.3	-17.7%

The decrease in 2011 Q4 consolidated Adjusted EBITDA is primarily due to a sales mix that included lower average bus margins, negative impact of the appreciation in the value of the Canadian dollar compared to the U.S. dollar and a decrease in aftermarket earnings, offset somewhat by reductions in both cost of sales and compensation costs.

• 2011 Q4 bus manufacturing operations Adjusted EBITDA profit margins were negatively impacted by pricing pressure and low average order size.
• 2011 Q4 aftermarket operations Adjusted EBITDA decreased by 3.2% compared to 2010 Q4, primarily due to lower profit margins and setup costs related to the new Eastern Canadian Parts Distribution Center.

Fiscal 2011 consolidated Adjusted EBITDA decreased by 17.7% compared to previous year, due to: reduced deliveries, lower margins from competitive pricing pressure, which were partially offset by productivity gains resulting from operational excellence ("OpEx") activities and cost cutting measures.

• This decrease of $16.6 million in Fiscal 2011 Adjusted EBITDA from bus manufacturing operations is a result of decreased volume (10.5% decrease in EU deliveries), a less favourable sales margin mix offset by an increase in investment tax credits realized and expense reductions.
• Aftermarket operations Adjusted EBITDA for Fiscal 2011 decreased 2.4% over previous year due to pricing pressure.

Net Earnings (loss)	2011	2010	$		2011	2010	$
(U.S. dollars in millions)	Q4	Q4	change		Fiscal	Fiscal	change
Earnings from operations	30.1	2.9	27.2		73.6	64.5	9.1
Non-cash (charges) recovery	1.8	(5.9)	7.7		(4.9)	(14.9)	10.0
Interest expense	(5.0)	(12.8)	7.8		(42.0)	(53.5)	11.5
Income tax (expense) recovery	(9.1)	2.2	(11.3)		(7.5)	6.3	(13.8)
Net earnings (loss)	17.8	(13.6)	31.4		19.2	2.4	16.8

The Company reported net earnings of $17.8 million in 2011 Q4 compared to a net loss of $13.6 million in 2010 Q4 primarily attributable to increase in earnings from operations due to recognition of investment tax credits, decrease in finance costs, decrease in expenses relating to the bankruptcy of ISE Corporation in 2010 Q4 and a decrease in unrealized foreign exchange loss offset by the increase in income taxes in the current period.  The primary reason for the increase in the current income tax is due to a one-time income tax charge of $6.8 million relating to the realization of the investment tax credit pool.

Fiscal 2011 net earnings of $19.2 million increased compared to previous year net earnings of $2.4 million, primarily as a result of recognizing an increased amount of $26.5 million of investment tax credits, $11.6 million of decreased finance costs which offset the $15.2 million in increased current income tax expense.

Liquidity

As a result of the successful August 19, 2011, non-cash rights offering ("Rights Offering"), management adopted the disclosure of Free Cash Flow and has discontinued the disclosure of Distributable Cash and Payout Ratio. See "Non-GAAP Measurers". Management believes that this is consistent practice used by the majority of income trusts after their conversion to a traditional common share corporation. Management uses Free Cash Flow as a non-IFRS measure to assist investors and analysts in assessing New Flyer's ability to pay dividends to common shareholders, service debt, and meet other payment obligations. Management believes Free Cash Flow is also a common measure of a company's valuation and liquidity.

Free Cash Flow	2011	2010			2011	2010
(CAD dollars in millions)	Q4	Q4	Change		Fiscal	Fiscal	change
Free Cash Flow	(0.9)	0.6	-246.3%		11.0	30.1	-63.5%
Declared dividends	9.5	4.9	93.9%		26.0	19.2	35.4%

The Company generates its Free Cash Flow from operations and management expects this will continue to be the case for the foreseeable future. Cash flows from operating activities are significantly impacted by changes in non-cash working capital. The Company has a revolving credit facility to finance working capital and therefore has excluded the impact of working capital in calculating Free Cash Flow. As well, cash flows from operating activities and net loss/earnings are significantly affected by the volatility of current income taxes, which in turn produces temporary fluctuations in the determination of Free Cash Flow. For example, the primary reason for the negative Free Cash Flow in 2011 Q4 is due to the $6.8 million one-time tax expense on the realization of the investment tax credit pool. The benefit of the $23.8 million of unused investment tax credits is expected to be realized as cash inflows in the future. As well, during Fiscal 2011, Free Cash Flow of C$11.0 million was negatively impacted by the one-time income tax charge of $13.4 million (C$13.1 million) that occurred in 2011 Q3.

Although the current Free Cash Flow generated is not sufficient, provisions have been made to sustain dividends until August 2012 when the Company intends to reduce the annualized dividend payment to approximately C$0.585 per share, equal to 50% of the annual distribution of C$1.17 per income deposit security ("IDS") paid prior to the completion of the Rights Offering.

Liquidity Position	January 1	January 2	$
(U.S. dollars in millions)	2012	2011	change
Cash	10.1	73.5	-63.4
Available funds from revolving credit facility	81.0	50.0	31.0
Total liquidity position	91.1	123.5	-32.4

During Fiscal 2011 Q4 the Company decreased its cash by $63.3 million due primarily to increasing the investment in non-cash working capital by $62.1 million resulting from increased accounts receivables and decreased deferred revenue, which offset the increase in accounts payables. This was expected as the Ottawa OC Transpo contract at the end of Fiscal 2010 was cash favourable due to significant milestone payments.

2012 Outlook

Management estimates that heavy-duty bus manufacturers delivered approximately 5,150 EUs in 2011 in Canada and the United States, which improved New Flyer's market share for 2011 to approximately 35%, an increase of 1% from the previous year. Management also estimates that at total of 1,650 EUs were awarded by transit agencies to industry manufacturers in 2011 and that the Company was awarded 46% of the contracts and 30% of such EUs.  Management currently anticipates that for 2012, the total market size for both bus deliveries and parts are estimated to remain flat or may slightly decline.

New Flyer plans for its average manufacturing rate in Fiscal 2012 to remain at approximately 36 EUs per production week. The Company intends to maintain a consistent and balanced weekly line entry rate and may produce certain customers' orders in advance of the original schedule. This is possible as a result of the Company's order backlog and financial flexibility supported by the Company's credit facility.  Management estimates that the level of work in process inventory will remain in the range of 200 to 230 EUs.

Management plans to continue its pursuit of OpEx to further reduce the direct cost of bus manufacturing and to reduce overhead to allow for better cost competitiveness.

New Flyer continues to anticipate rationalization in the Canadian and United States bus manufacturing industry to occur in the coming years and is committed to continue as the leading market player.  Management remains committed to its product development and optimization plan to fully migrate to the Xcelsior next generation bus platform with the first 60-foot articulated buses now in production.  Further, the Company will maintain its approach to selling parts and service solutions in an effort to assist customers in reducing their total costs of bus operation.

The collective agreement governing Winnipeg's production union employees expires on March 31, 2012.  The Company and the union leadership representing these production unit employees are currently negotiating a new collective agreement.

New Flyer to Propose Two Additional Directors

New Flyer also announced today that it will propose two additional independent directors for election at the Company's upcoming annual meeting of shareholders on May 10, 2012.  At the meeting, shareholders will be asked to elect Mr. William Millar and Mr. Adam Gray to an expanded Board which will result in a total of nine New Flyer directors.  Speaking on behalf of the Board, the Honourable Brian Tobin, Chairperson of the Board said, "We are pleased to be proposing to shareholders that Mr. Millar and Mr. Gray join the Board.  They bring deep experience and perspective relative to the US transit industry and capital markets that will be an asset to the Board as we continue to work to build shareholder value.  We think they will each make valuable contributions as directors and we are looking forward to working with both of them."

					Mr. William Millar of Falls Church, VA, is the recently-retired president and chief executive officer of the American Public Transportation Association and has significant experience leading state and local transit agencies over his 40-year career.  Mr. Millar is a recognized expert in the field of public transportation and transportation policy.  Mr. Millar holds an MA from the University of Iowa majoring in urban transportation planning and policy analysis and a BA from Northwestern University.
					Mr. Adam Gray of Greenwich, CT, is a managing partner of Coliseum Capital Management LLC ("Coliseum"), one of New Flyer's largest shareholders. Coliseum, which Mr. Gray co-founded in December 2005, is a private investment firm that makes long-term investments in both public and private companies.  Mr. Gray holds a BSE in Finance from the Wharton School of Business and a BS in Mechanical Engineering from the School of Engineering & Applied Science at the University of Pennsylvania.
					In connection with the proposed nomination of Mr. Gray to the Board, New Flyer and Coliseum have entered into an agreement pursuant to which New Flyer has agreed that it will support Mr. Gray's nomination to the Board for a period of one year until the 2013 annual meeting of shareholders, and Coliseum has agreed to support management's slate of directors during that same period.  In addition, Coliseum has agreed, subject to certain exceptions, not to acquire 20% or more of New Flyer's outstanding shares or take certain actions in relation to proxy contests, in each case until the later of six months following Coliseum ceasing to have a representative on the Board and 12 months following the date of the upcoming annual meeting of shareholders.  The agreement also provides Coliseum with a pre-emptive right to purchase shares in certain circumstances to maintain its proportionate interest in New Flyer during the same period.  A copy of the agreement will be made available under New Flyer's profile on SEDAR at www.sedar.com.

Conference Call

A conference call for analysts and interested listeners will be held on Thursday March 22, 2012 at 2:00 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/detail/936189/1000885

A replay of the call will be available from 5:00 p.m. (ET) on March 22, 2012 until 11:59 p.m. (ET) on March 29, 2012.  To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 61494481. 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. "Free Cash Flow" means cash flows from operations adjusted for changes in non-cash working capital items, effect of foreign currency rate on cash, defined benefit funding, business acquisition related costs, costs associated with assessing strategic and corporate initiatives, proceeds on sale of redundant assets and decreased for defined benefit expense, capital expenditures and principal payments on capital leases. Management believes Adjusted EBITDA and Free Cash Flow are useful measures in evaluating the performance of the Company and/or the Issuer. However, Adjusted EBITDA and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by IFRS. Readers of this MD&A are cautioned that Adjusted EBITDA and Free Cash Flow should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of the Company's and/or the Issuer's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. A reconciliation of Adjusted EBITDA and Free Cash Flow to net earnings and cash flow from operations, respectively, is provided in the MD&A.

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 diesel-electric hybrid vehicles. All products are supported with an industry-leading, comprehensive parts and support network. The common shares of the Company are traded on the Toronto Stock Exchange ("TSX") under the symbol NFI and the IDSs of NFI and New Flyer Industries Canada ULC ("NFI ULC") are traded on the TSX 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 Issuer's and 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 to purchase buses and to exercise options and to purchase parts or services at current levels or at all, aggressive competition 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, 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 certain Canadian content purchasing policies 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 as required for current business and operational needs, 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 Company'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, the availability of labour could have an impact on production levels, the ability of the Company to successfully execute strategic plans and maintain profitability and risks related to acquisitions. The Company and NFI ULC caution that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in their 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 assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.

 

 

Glenn Asham
Chief Financial Officer
Tel: [phone]
E-mail: [email protected]