New Flyer Industries, Inc., the leading manufacturer of heavy-duty transit buses in Canada and the United States, announced order activity for the fourth quarter of 2010 of 268 buses or 325 equivalent production units (“EUs”), for a total of US $139 million. This order activity comprises new firm and new option orders of 192 buses (249 EUs) and exercised options of 76 buses (76 EUs).
These fourth quarter orders are from both current and new customers and are for a variety of vehicle configurations and propulsion systems, including 35’-, 40’- and 60’-foot buses with clean diesel, diesel-electric hybrid, and compressed natural gas (“CNG”) propulsion systems. Approximately 34% of the EUs in these orders are clean-propulsion (i.e., hybrid or CNG) vehicles.
Some of the New Flyer order activity during the quarter included:
• Edmonton Transit. Edmonton, AB, awarded a contract for 20 – 60’ clean diesel buses.
• Mississauga Transit, Mississauga, ON, awarded a contract for 35 – 40’ Xcelsior diesel buses, with options for eight more.
• Capital Area Transit Authority, Lansing, MI, awarded a contract for 70 - 40’ and 60’ diesel hybrid buses.
• Fairfax County, VA converted options for 31 diesel buses to firm orders.
• Metro Transit, Minneapolis, MN converted options for 25 – 60’ hybrid electric buses to firm orders.
• Milwaukee County Transit, Milwaukee, WI converted options for 35 – 40’ clean diesel buses to firm orders.
• The Maryland Transit Administration, Baltimore, MD, contracted to purchase the 12 remaining 60’ diesel hybrid buses that were partly completed for another US customer prior to that customer’s order deferral.
During 2010, New Flyer won bids representing 1,927 firm and option EUs, or 51% of EUs bid. During Q4, bids representing 249 firm and option EUs were won, or 29% of EUs bid.
• The Metrolinx contract was awarded to New Flyer in late 2008 for a two-year period. Under this program, agencies located in the province of Ontario could acquire new buses with additional provincial financial support. This contract has resulted in firm orders for 217 new EUs during 2010. With the ceiling for this program set at 297 units, New Flyer was successful in meeting the objectives of the program for 13 customer agencies. This program has now expired, with a new two-year program set to be tendered by Metrolinx in early 2011.
• Also during 2010, New Flyer was awarded an umbrella contract with the procurement department of a US State that resulted in 148 EUs added as firm orders. Given that this contract was a ‘standing offer’ open to public transit agencies across the United States, New Flyer did not record any firm orders or options at the time this contract was awarded. Other US States have shown an interest in similar procurement strategies, but Management is unable to predict how many firm orders might result from such potential contracts.
With respect to federal funding for Transit, the FTA re-authorization bill has been extended to March 2011 and management believes it will be extended again. The industry anticipates federal funding to remain approximately at the same levels as 2010. As reported in previous releases, downward pricing pressure has continued and management anticipates no real market recovery on volumes or prices in 2011.
• The latest data available from The American Public Transportation Association indicated a 2.24% decline in bus ridership in the third quarter of 2010 (“Q3 2010”) compared to the same period in 2009. Firm ridership figures for the fourth quarter of 2010 (“Q4 2010”) are not yet available but preliminary reports describe it as flat compared to Q3 2010.
• The US transit industry continues to face challenges with local funding. On a positive note, a recent report from the Rockefeller Institute of Government, however, noted that US State tax revenues rose for a third consecutive quarter at the end of 2010, continuing the reversal of a downward trend that devastated state budgets through 2010.
• Also encouraging is the most recent data from the Canadian Urban Transit Association, which reported that ridership increased in the first half of 2010 by 2.8% over the same period from 2009.
Given the overall drop in market demand for new orders, the active pursuit of option conversion and awards from group buying contracts permitted New Flyer to operate at a relatively stable run production rate. New Flyer’s option backlog includes the widest available range of bus models, lengths, and propulsion options for prospective customers with varying needs. In 2010, just 77 of New Flyer’s US options expired (19 expired in the first quarter of 2010; 58 in the second quarter of 2010, and none in Q3 2010 or Q4 2010) compared to 117 options expiring in 2009. The conversion rate of US options was 90% during 2010 and 92% in 2009. New Flyer currently holds a total of 1,132 options that if not exercised or extended will expire in 2011.
New Flyer’s total backlog as of January 2, 2011 was 8,712 EUs, a decrease of 3% from the 9,011 EUs in the backlog as of October 3, 2010. The firm portion of the total backlog is 1,897 EUs, compared with 2,145 EUs at the end of the previous quarter. The value of the order backlog as of January 2, 2011 decreased to $3.68 billion, compared with $3.8 billion as of October 3, 2010. Clean propulsion vehicles represent approximately 67% of the total backlog.
As at January 2, 2011, there were approximately 12,600 EUs in New Flyer’s new potential pipeline or bid universe for heavy-duty transit buses, a decrease from the approximately 14,600 EUs reported as of October 3, 2010. The drop in units was a result of: 500 EU’s (with only two firm EU’s) awarded to a competitor, 800 units that one agency deferred by approximately one year but that management expects to return to the Bid Universe, 200 EU’s that were canceled by an agency whose local funding did not materialize, and 500 EU’s from a buying group who reduced their initially projected requirements.
All dollar amounts are stated in US currency based on an exchange rate of US $1.00 = Cdn. $0.99 to calculate the value of the Canadian contracts in this release.
About New Flyer
New Flyer (newflyer.com) is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company’s three manufacturing facilities -- in Winnipeg, MB, St. Cloud, MN and Crookston, MN - are all ISO 9001, ISO 14001 and OHSAS 18001 certified.
During 2010, New Flyer’s footprint expanded in three key locations. Service centers were added in Arnprior, Ontario and in New York City as part of the Company’s strategic focus on offering ‘Best Bus Value and Support for Life’. In addition, New Flyer acquired TCB Enterprises, LLC of Elkhart, IN. TCB is now operated as an indirect subsidiary of New Flyer and is a high quality manufacturer and supplier of transit interior lighting and stanchions.
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 service network. The Company’s income deposit securities are traded on the Toronto Stock Exchange under the symbol NFI.UN. Further information is available on New Flyer’s website.
This press release may contain forward-looking statements relating to expected future events and financial and operating results of New Flyer and New Flyer Industries Canada ULC (“NFI ULC”) that involve risks and uncertainties. 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. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including market and general economic conditions and economic conditions of and funding availability for transit agencies to purchase buses and the other risks and uncertainties discussed in the materials filed with the Canadian securities regulatory authorities and available on SEDAR at sedar.com. Due to the potential impact of these factors, New Flyer and NFI ULC disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.