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Press release from CNW Group

New Flyer Announces Results for the Third Quarter of 2011 Fiscal Year

Monday, November 07, 2011

New Flyer Announces Results for the Third Quarter of 2011 Fiscal Year18:16 EST Monday, November 07, 2011Highlights (US Dollars except as noted):The Company reported net earnings of $15.1 million in the quarter compared to a net loss of $3.1 million in 2010 Q3.The Company generated Free Cash Flow of C$11.4M, however a one-time income tax charge of C$13.1 million reduced Free Cash Flow to C$(1.7) million.Total liquidity at October 2, 2011 of $99.6 million increased by $24.5 million from July 3, 2011 due to successful refinancing of the senior credit facility. Lower volumes when compared to 2010 Q3 resulted in Revenue and Adjusted EBITDA decreases of 10.2% and 11.8%, respectively.  Production rate expected to be maintained at 36 EUs per week through the balance of 2011 and into 2012.Aftermarket operation's (parts and now used bus sales) revenue increased by 6.9% while Adjusted EBITDA decreased 10.9%, compared to 2010 Q3.The Company maintains its dividend policy at an annual rate of C$0.86 per share, payable monthly.WINNIPEG, Nov. 7, 2011 /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 October 2, 2011 ("2011 Q3"). 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.Operating Results       Bus Deliveries 20112010 20112010  Q3Q3changeYTDYTDchangeNumber of units delivered (EUs)442526-16.0%1,3411,524-12.0%Average bus selling price (U.S. dollars in thousands)$454.2$434.84.4%$434.7$457.9-5.1%       Consolidated Revenue20112010 20112010 (U.S. dollars in millions)Q3Q3changeYTDYTDchangeBus$200.7$ 228.7-12.2%$    582.9$   697.9-16.5%Aftermarket28.626.76.9%86.681.16.8%Total Revenue$ 229.3$ 255.4-10.2%$    669.5$   779.0-14.1%Management notes that bus competition among the major bus manufacturers in late 2010 and into 2011 has been the most intense in several years with extremely aggressive pricing in response to public tenders.  With several competitors scrambling to fill open production slots in 2011 and 2012 and two competitors reportedly operating on reduced work weeks, management expects continued pricing pressure for the balance of 2011 and through 2012.The decrease in revenue from bus manufacturing operations in 2011 Q3 primarily resulted from a decrease in total bus deliveries offset somewhat by an increase in average selling price per equivalent unit (or "EU"). The increase in average bus selling price during 2011 Q3 is attributed to a mix of products sold with a higher selling price.Revenue from aftermarket operations in 2011 Q3 increased due to the delivery of an additional three used buses, increased parts volumes and the favourable impact of the stronger Canadian dollar on translation of Canadian dollar sales to U.S. dollars.       Consolidated Adjusted EBITDA20112010 20112010 (U.S. dollars in millions)Q3Q3changeYTDYTDchangeBus$16.8$19.1-12.0%$45.8$60.6-24.4%Aftermarket5.46.1-10.9%18.418.8-2.2%Total Adjusted EBITDA$22.2$25.2-11.8%$64.2$79.4-19.2%The decrease in 2011 Q3 consolidated Adjusted EBITDA compared to the 13-week period ended October 3, 2010 ("2010 Q3"), is primarily due to 16.0% fewer deliveries offset by the net impact of the appreciation of the value of the Canadian dollar compared to the U.S. dollar which resulted in a increase to Adjusted EBITDA of approximately $3.1 million in 2011 Q3 compared to 2010 Q3.2011 Q3 bus manufacturing operations Adjusted EBITDA decreased primarily as a result of lower volumes, partially mitigated by the foreign exchange impact.2011 Q3 aftermarket operations Adjusted EBITDA decreased compared 2010 Q3, primarily due to pricing pressure caused by the current aftermarket contraction in the U.S.       Net earnings (loss)20112010$20112010$(U.S. dollars in millions)Q3Q3changeYTDYTDchangeEarnings from operations$  15.8$  19.1$  -3.3$  43.6$  61.6$  -18.0Non-cash (charges) recovered4.7(11.2)15.9(6.8)(8.9)2.1Interest expense(10.4)(13.0)2.6(37.0)(40.8)3.8Income taxes (expense) recovered5.02.03.01.64.1-2.5Net earnings (loss)$  15.1$  (3.1)$  18.2$   1.4$  16.0$  -14.6The Company reported net earnings of $15.1 million in 2011 Q3 compared to a net loss of $3.1 million in 2010 Q3 primarily attributable to a $19.4 million increase in the unrealized foreign exchange gain on Canadian denominated long-term debt, decrease in interest expense and increase in income taxes recovered offset by a decrease in earnings from operations. The increase in income taxes recovered when comparing the two periods was primarily the result of a $14.5 million increase in future income taxes recovered offset by an $11.5 million increase in current income taxes. The primary reason for the increase in the current income tax is due to a one-time income tax charge of $13.4 million was imposed relating to the realization of a taxable gain on the refinancing of the credit facility and reallocation of previously applied foreign tax credits.For the 39-week period ended October 2, 2011, the Company spent $2.7 million investigating strategic relationships and potential acquisitions.LiquidityAs a result of the successful August 18, 2011, non-cash rights offering, management has now adopted the disclosure of Free Cash Flow and has discontinued the disclosure of Distributable Cash and Payout Ratio. Management believes that this is consistent practice used by the majority of income trusts after their conversion. 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. Free Cash Flow is also a common measure of a company's valuation and liquidity.       Free Cash Flow20112010 20112010 (CAD dollars in millions)Q3Q3ChangeYTDYTDchangeFree Cash Flow(1.7)9.8-117.3%10.129.4-65.6%       Declared dividends6.74.936.7%16.514.315.4%       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 in 2011 Q3, a one-time income tax charge of $13.4 million (CAD 13.1 million)  was imposed relating to the realization of a taxable gain on the refinancing of the credit facility and reallocation of previously applied foreign tax credits.    Liquidity PositionOctober 2July 3$(U.S. dollars in millions)20112011ChangeCash23.225.1- 1.9Available funds from revolving credit facility90.050.040.0Less: letters of credit outstanding(13.6)--13.6Total liquidity position99.675.124.5During 2011 Q3, the Company decreased its cash by $1.9 million primarily due to $5.7 million of one-time costs associated with share issuance and debt refinancing which was partially offset by $4.0 million of proceeds from the delayed draw component of the Credit Facility.Conference CallA conference call for analysts and interested listeners will be held on Tuesday November 8, 2011 at 1:00 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/viewEvent.cgi?eventID=3718220A replay of the call will be available from 4:00 p.m. (ET) on November 8th until 11:59 p.m. (ET) on November 15th.  To access the replay, call 416-849-0833 or 855-859-2056 and then enter pass code number 22834908. The replay will also be available on New Flyer's web site at www.newflyer.com.Non-GAAP MeasuresAdjusted 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 Free Cash Flow (as defined below) are useful measures in evaluating the performance of the Company and/or the Issuer. "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. 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.About New FlyerNew 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 income deposit securities of NFI and New Flyer Industries Canada ULC ("NFI ULC") are traded on the TSX under the symbol NFI.UN.Forward-Looking StatementsCertain 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 to purchase buses, 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  the Ontario government's Canadian content 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 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 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 Issuer cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in the press releases and materials filed by the Company and NFI ULC 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: Glenn Asham Chief Financial Officer Tel: (204) 224-1251 E-mail: investor@newflyer.com