New Flyer Announces Results for the Second Quarter of 2015

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

• Consolidated revenue of $375.0 million increased by 8.2% compared to 2014 Q2 due to growth in both bus manufacturing and aftermarket revenue.
• Record quarterly consolidated Adjusted EBITDA of $39.2 million, an increase of 45.3% compared to 2014 Q2.
• Net earnings were $12.4 million compared to $3.6 million in 2014 Q2 and earnings per share of $0.22 increased from $0.06 in 2014 Q2.
• Bus deliveries increased 2.1% compared to 2014 Q2 despite being negatively impacted by an increase of 63 EUs in total bus inventory at the end of 2015 Q2. Increase due to the transition to the Xcelsior^® platform at the Alabama facility. Management expects to reduce the excess bus inventory by year end.
• Free Cash Flow was C$26.4 million and declared dividends were C$8.4 million. The Free Cash Flow payout ratio in 2015 YTD is 42.7% compared with 61.2% during 2014 YTD.
• Mr. Paulo Cezar da Silva Nunes appointed to the Company's board of directors.

WINNIPEG, Aug. 6, 2015 /CNW/ - New Flyer Industries Inc. (TSX:NFI) (TSX:NFI.DB.U), ("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 June 28, 2015 ("2015 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.

Operating Results

Total bus inventory at June 28, 2015 increased 63 EUs from the previous quarter, which negatively impacted 2015 Q2 bus deliveries. The Company scheduled the production of some NABI buses earlier than required by the customer to facilitate transition to Xcelsior^® only bus production.  Management expects to reduce the excess bus inventory through delivery of these buses prior to the end of Fiscal 2015.

• The increase in 2015 Q2 bus revenue primarily resulted from a 2.1% increase in total bus deliveries and a 5.3% increase in average selling price.  The increase in average selling price is the result of a more favourable product sales mix of bus types during 2015 Q2. The average selling price can be volatile when comparing two fiscal quarters as a result of sales mix.

• The increase in revenue from aftermarket operations during 2015 Q2 and the 26-week period ended June 28, 2015 ("2015 YTD") is primarily a result of incremental revenue from the Chicago Transit Authority ("CTA") midlife overhaul program.

• The increase in 2015 Q2 and 2015 YTD bus manufacturing operations Adjusted EBITDA as compared to the 13-week period ended June 29, 2014 ("2014 Q2") and the 26-week period ended June 29, 2014 ("2014 YTD") is primarily due to increased margins. Higher margins are primarily a result of a favourable sales mix and the cost savings achieved from transition to Xcelsior in Anniston. Management had anticipated and previously provided guidance that, on average, margins on orders planned for production in Fiscal 2015 are expected to be higher than the average margins achieved during Fiscal 2014. Adjusted EBITDA from bus manufacturing operations per EU can be volatile on a quarterly basis and therefore, management believes that a longer term view should be taken when comparing bus manufacturing operations margins.

• 2015 Q2 and 2015 YTD aftermarket operations Adjusted EBITDA increased compared to the 2014 respective periods, primarily due to the additional Adjusted EBITDA generated by the CTA midlife overhaul program. Profit margins have improved during 2015 Q2 and 2015 YTD primarily as a result of improved market fundamentals and the benefits to the product mix that have resulted from a far broader portfolio of services and parts offerings to customers.

The Company reported net earnings of $12.4 million in 2015 Q2 representing an improvement compared to net earnings of $3.6 million in 2014 Q2, primarily as a result of improved earnings from operations offset by increased income tax expense.

Liquidity

The Free Cash Flow payout ratio is 42.7% in 2015 YTD compared with 61.2% during 2014 YTD. In May 2015, the Company increased the annual dividend from $0.585 to $0.62 per common share.

As at June 28, 2015, there were $48.0 million of direct borrowings and $17.3 million of outstanding letters of credit related to the $115.0 million revolving credit facility ("Revolver"). 

During 2015 Q2, the Company increased its borrowings from the Revolver by $35.0 million to temporarily fund the working capital requirements primarily caused by increased inventories and decreased accounts payables.

U.S. Funding

The U.S. Administration's proposed Grow America Act, the revised multi-year surface transportation bill, was introduced to Congress on May 19, 2015 and continues to be reviewed by various committees. As a result, on May 29, 2015, President Obama signed the Highway and Transportation Funding Act of 2015 (the "HTF") into law which extended the "Moving Ahead for Progress in the 21st Century" ("MAP-21") authorization from May 31, 2015 through to July 31, 2015.

On July 31, 2015, U.S. President Barak Obama signed a bill to temporarily fund and ensure solvency of the HTF through to October 29, 2015. This bill is the 34^th short-term transportation extension since 2009.

Given the uncertainty around negotiating a multi-year and sustainable funding mechanism, management anticipates additional short term extensions to MAP-21.

Canadian Funding

On April 21, 2015, the Government of Canada announced through the Federal Budget that it would be committing to invest an additional C$1 billion per year in major transit infrastructure projects.

Investments will be made through a new Public Transit Fund and will be in addition to current funding programs already included in the New Building Canada Plan. New investments will start flowing in 2017-2018 at C$250 million to increase to C$500 million in 2018-2019 and C$1 billion per year ongoing thereafter.

Outlook

Management continues to focus on executing the transition of production of the NABI bus models from the Anniston, AL facility to the Xcelsior platform. The completion of the transition is on target for the second half of 2015. Management expects the transition to allow for improvement in competitiveness by leveraging combined bus volume, production, and purchasing for greater efficiencies.

Management expects to invest, in total, approximately $20.0 million in direct operating costs and capital expenditures to complete the transition by utilizing operating cash flow, leases and the Credit Facility.  Of this total, the Company had incurred $13.2 million, consisting of $6.0 million of costs and $7.2 million in capital expenditures as of June 28, 2015.  Management anticipates these direct operating and capital expenditures will be paid back through captured cost reductions and synergies. Currently, the annualized cost savings are expected to be approximately $14.0 million.

Management believes pricing in certain types of bus competitions has normalized and expects that bus margins realized during Fiscal 2015 will be, on average, higher than those realized during Fiscal 2014. Management continues to pursue cost and overhead savings as a result of its decision to focus exclusively on the Xcelsior platform as well as in daily operations through its Operational Excellence initiatives.

During the first week of July 2015 there were no scheduled assembly line entries, providing an opportunity for employees to enjoy vacations and an effort to lessen future volatility in manpower. This resulted in a reduction of approximately 35 EUs being entered into production.  The New Flyer master production schedule combined with current backlog and orders anticipated to be awarded by customers under new procurements is now expected to enable the Company to operate at a corporate average line entry rate of approximately 50 EUs per available production week for Fiscal 2015.  The production rates vary from quarter to quarter due to sales mix and the phased introduction of the Xcelsior platform into the Anniston, AL manufacturing facility.

As disclosed in the Company's July 15, 2015 press release, there were new firm and option orders of 1,238 EUs that were pending from customers where approval of the award had been made by the customer's board, council, or commission, as applicable, but purchase documentation had not yet been received by the Company.  These firm and option orders were not included in the June 28, 2015 backlog. In regards to these pending awards, The Company has now received contracts for 513 EUs.

With respect to the aftermarket segment, management reiterates its forecast of core aftermarket parts revenue growth at approximately 5% during Fiscal 2015. As a reminder, the aftermarket revenue generated from CTA mid-life upgrade program has ended as of June 2015, which represented 18.6% of the total aftermarket revenue during 2015 YTD. In addition, management continues to be engaged in a strategic review of New Flyer's aftermarket business to identify efficiencies through business and system synchronization.

Conference Call

A conference call for analysts and interested listeners will be held on Friday August 7, 2015 at 8:00 a.m. (ET). The call-in number for listeners is 888-231-8191, 403-451-9838 or 647-427-7450. A live audio feed of the call will also be available at:

http://event.on24.com/r.htm?e=1023148&s=1&k=065746B996F6D1501CAB1705E5DF9162

A replay of the call will be available from 11:00 a.m. (ET) on August 7, 2015 until 11:59 p.m. (ET) on August 14, 2015. To access the replay, call 855-859-2056 or 416-849-0833 and then enter pass code number 82990013. The replay will also be available on New Flyer's web site at www.newflyer.com.

New Board Member

New Flyer also announced today that Mr. Paulo Cezar da Silva Nunes has been appointed to the Board of Directors of the Company, which now consists of nine members. Mr. Nunes has deep experience in the manufacturing, distribution and automotive-related sectors having served in leadership positions for almost 40 years in Brazil with Dana Corporation and Racine Hydraulics.  Mr. Nunes is now an independent automotive business consultant to Brazilian companies and currently serves on the board of directors of Cesbe S.A., a Brazilian construction company, and Marcopolo S.A. He previously served as a long time board member of Sindipeças (the Brazilian Auto-Parts Makers Association).  The appointment of Mr. Nunes was proposed by Marcopolo, New Flyer's largest shareholder, pursuant to the Investment Agreement between New Flyer and Marcopolo dated January 23, 2013.  That agreement gives Marcopolo the right to propose one nominee as a director of the Company.  The Honourable Brian Tobin, Chairperson of the Board for New Flyer, said, "We welcome Paulo to the Board and look forward to his valuable contributions.  We also see this appointment an important part of advancing our relationship with Marcopolo that we began two years ago."

Annual Meeting

As previously disclosed in the Company's filings on SEDAR and on its website, New Flyer is pleased to confirm that all resolutions were passed at the Company's annual meeting of shareholders held on May 7, 2015 in Toronto, Ontario. Each director nominee was elected to hold office until the next annual meeting by a substantial majority as follows:

Additionally, the Company's shareholders approved the resolution to appoint Deloitte LLP as the auditors of the Company until the next annual meeting and to authorize the board of directors to fix the remuneration of the auditors (99.69% voted in favour). A large majority of shareholders also voted for the Company's advisory resolution on the approach to executive compensation (84.19% voted in favour). Detailed voting results for the meeting are available on SEDAR at www.sedar.com and on the Company's website at www.newflyer.com.

Non-IFRS Measures

"Earnings from Operations" refer to earnings before interest, income taxes and unrealized foreign exchange losses or gains on non-current monetary items. "Adjusted EBITDA" consists of earnings before interest, income taxes, depreciation, amortization and other non-cash charges and certain other non-recurring charges as set out in the MD&A. "Free Cash Flow" means net cash generated by operating activities adjusted for changes in non-cash working capital items, interest paid, interest expense, income taxes paid, current income tax expense, effect of foreign currency rate on cash, past service costs, defined benefit funding, non-recurring transitional costs relating to business acquisitions, costs associated with assessing strategic and corporate initiatives, product rationalization costs, defined benefit expense, cash capital expenditures, realized ITCs and principal payments on capital leases. Management believes Earnings from Operations, Adjusted EBITDA and Free Cash Flow are useful measures in evaluating the performance of the Company. However, Earnings from Operations and Adjusted EBITDA and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") and may not be comparable to similarly titled measures used by other issuers. Readers are cautioned that Earnings from Operations and Adjusted EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of the Company's performance, and Free Cash Flow should not be construed as an alternative to cash flows from operating, investing and financing activities determined in accordance with IFRS, 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 is the industry technology leader and offers the broadest product line of transit buses including drive systems powered by: clean diesel, natural gas, electric trolley, diesel-electric hybrid and now, battery electric.  All buses are supported by an industry-leading comprehensive warranty and support program, and service network.  New Flyer also operates the industry's most sophisticated aftermarket parts organization, sourcing parts from hundreds of different suppliers and providing support for all types of heavy-duty transit buses.

The New Flyer group of companies employ over 3,300 team members with manufacturing, fabrication, parts distribution and service centers in both Canada and the United States.  Further information is available on New Flyer's web site at www.newflyer.com.

The common shares and convertible unsecured subordinated debentures of the Company are traded on the Toronto Stock Exchange under the symbols NFI and NFI.DB.U, respectively.

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", "forecasts", "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, 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 and product liability claims, changes in Canadian or United States tax legislation, 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, 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 ("Credit Facility") and the indenture governing its Debentures could impact the ability of the Company to fund dividends 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, new products must be tested and proven in operating conditions and there may be limited demand for such new products from customers, the ability to successfully complete the product rationalization of the NABI bus platform to the Xcelsior on budget and on schedule and to achieve the projected costs savings, the ability of the Company to successfully execute strategic plans and maintain profitability, risks related to acquisitions, joint ventures, and other strategic relationships with third parties and the ability to successfully integrate acquired businesses and assets into the Company's existing business and to generate accretive effects to income and cash flow as a result of integrating these acquired businesses and assets. The Company cautions that this list of factors is not exhaustive. These factors and other risks and uncertainties are discussed in its press releases and 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 assumes 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.