New Flyer Announces 2012 First Quarter Results

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

• Net earnings were $2.7 million in 2012 Q1 compared to a net loss of $6.4 million in 2011 Q1.
• Revenue of $227.6 million increased by 6.2% compared to 2011 Q1, however the number of EU's delivered in 2012 Q1 decreased by 5.6% compared to 2011 Q1.
• Consolidated Adjusted EBITDA of $16.7 million decreased by 24.1% compared to 2011 Q1 due to decreased volume and sales mix.
• Aftermarket Adjusted EBITDA increased 2.2% compared to 2011 Q1.
• Work in process inventory was at its lowest level in the last ten years as a result of continued business improvement from Operational Excellence efforts and favourably impacted Cash Flows.
• Free Cash Flow was C$10.6 million and declared dividends were C$9.5 million.

WINNIPEG, May 9, 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 13-week period ended April 1, 2012 ("2012 Q1"). 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 thousands)	2012 Q1	2011 Q1	Change
Number of Equivalent Units delivered (EUs)	442	468	-5.6%
Average EU selling price	$444.0	$400.1	10.8%

The increased average selling price per equivalent unit is attributable to a 2012 Q1 sales mix comprised of a very low percentage of articulated buses when compared to 2011 Q1. Total bus deliveries of 442 equivalent units ("EUs") in 2012 Q1 decreased compared to 2011 Q1 deliveries of 468 EUs, primarily as a result of there being one less work week due to the holiday period schedule straddling the beginning of the 2012 year.

Consolidated Revenue (U.S. dollars in millions)	2012 Q1	2011 Q1	Change
Bus Aftermarket	$   196.2 31.4	$   187.5 26.9	4.7% 16.8%
Total Revenue	$   227.6	$   214.3	6.2%

• Bus manufacturing revenue in 2012 Q1 increased as a result of a 10.8% increase in average selling price, partially offset by a 5.6% decrease in deliveries and a $0.5 million unfavourable foreign currency impact.
• Aftermarket revenue in 2012 Q2 increased $4.5 million when compared to 2011 Q1, as a result of higher parts volumes and $0.2 million of used bus sales.

Consolidated Adjusted EBITDA (U.S. dollars in millions)	2012 Q1	2011 Q1	Change
Bus Aftermarket	10.9 5.7	16.4 5.6	-33.1% 2.2%
Total Adjusted EBITDA	16.7	22.0	-24.1%

• The decrease in 2012 Q1 bus manufacturing operations Adjusted EBITDA as compared to 2011 Q1 is primarily due to decreased volumes and a sales mix that included runs of lower average bus contract margins, the negative impact of the appreciation in the value of the Canadian dollar compared to the U.S. dollar and a decrease in investment tax credits realized. Adjusted EBITDA was also impacted by $0.5 million one-time charge as a result of the signing bonus provided in the new Winnipeg collective bargaining agreement; however the benefit will be realized over the remaining three quarters of Fiscal 2012 due to the negotiated wage freeze.
• 2012 Q1 aftermarket operations Adjusted EBITDA increased slightly due to increased sales volumes but which were offset by lower profit margins in the current period compared to 2011 Q1. The lower margins are due to pricing pressure that still exists in the current aftermarket industry.

Net Earnings (loss) (U.S. dollars in millions)	2012 Q1	2011 Q1	$ Change
Earnings from operations Non-cash charges (excluding depreciation and amortization) Finance costs Income tax (expense) recovered	8.0 (2.3) (3.7) 0.7	15.0 (5.6) (13.2) (2.6)	(7.0) 3.3  9.5 3.3
Net earnings (loss)	2.7	(6.4)	9.1

The Company reported net earnings of $2.7 million in 2012 Q1 representing an improvement compared to a net loss of $6.4 million in 2011 Q1, primarily as a result of lower non-cash charges, decrease in income taxes and a significant decrease of finance costs, offset by the decrease in earnings from operations in the current period.

Liquidity

Free Cash Flow (CAD dollars in millions)	2012 Q1	2011 Q1	Change
Free Cash Flow	10.6	4.2	152.4%
Declared dividends	9.5	4.9	93.9%

Currently, the board of directors of NFI (the "Board") declares annual dividend payments of C$0.86 per Share. The Board expects to maintain this rate of dividends until no later than August 2012, the month during which the Company has the option to redeem the remaining Subordinated Notes. The current Free Cash Flow generated is sufficient, and provisions have been made to sustain dividends until August 2012, at which time the Company expects to establish its new dividend policy and reduce the annualized dividend payment to approximately 50% of the previous annual IDS distribution level of C$1.17 per IDS.

Liquidity Position (U.S. dollars in millions)	April 1 2012	January 1 2012	$ Change
Cash Available funds from revolving credit facility	7.5 69.5	10.1 67.2	(2.6) 2.3
Total liquidity position	77.0	77.3	(0.3)

During 2012 Q1, the Company decreased its cash by $2.6 million, due to $12.1 million of cash used in financing activities and $3.6 million invested in capital equipment offset by $13.0 million of net cash generated by operating activities. Cash flows from operating activities were positively impacted as the number of units in work-in-process inventory had been reduced to its lowest levels in the last ten years. The Company is investing and currently commissioning capital equipment; such as laser cutting machines and a small parts paint system, which is expected to enable the Company to reduce costs of manufacturing.

2012 First Quarter in Review

During 2012 Q1 instability in the heavy-duty transit industry continued as the economy recovers and the U.S. heads to a Presidential election in the fall of 2012. At the same time, there were some positive signs in ridership; aging fleets (primarily of U.S. based transit operators), state tax collections increasing and general economic health, all of which are early indicators of a future recovery. As such, management is firmly focused on its long-term plans that include: a continued pursuit of operational excellence ("OpEx") to further reduce the direct cost of bus manufacturing, reduce material costs through strategic sourcing and to reduce overhead to allow for better cost competitiveness, and a commitment to the Company's product development and its product optimization plan to fully migrate to the next generation Xcelsior platform.

New Flyer's backlog position combined with the order intake over the last 12 months is expected to allow the Company to maintain the current production line entry rate of approximately 36 EUs per week.

On April 25, 2012, Daimler Buses ("Daimler") announced that it has decided to exit the heavy duty transit bus business in North America and to wind down production of Orion buses in the U.S. and Canada.  According to Daimler, effective immediately, Orion plans to take no additional new orders. It is management's belief that Orion delivered approximately 450 EUs in 2011, representing 8.7% of the total annual heavy-duty bus deliveries in Canada and the United States. Management does not anticipate a material impact on New Flyer production in the near term at this time.

Conference Call

A conference call for analysts and interested listeners will be held on Friday May 11, 2012 at 10:00 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/detail/955951/1024549

A replay of the call will be available from 1:00 p.m. (ET) on May 11th until 11:59 p.m. (ET) on May 18th.  To access the replay, call toll free 1-855-859-2056 and then enter pass code number 72903149. 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, past service pension costs, 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 U.S. federal "Buy-America" legislation, certain states' U.S. content bidding preferences 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, joint ventures and other strategic relationships with third parties. 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]