New Flyer Industries, Inc., the leading manufacturer of heavy-duty transit buses in Canada and the United States, announced strong order activity for the third quarter of 2010 of 861 buses or 1,125 equivalent production units or “EUs”, for a total of US $466 million. This order activity is made up of new firm and new option orders of 660 buses (813 EUs) and exercised options of 201 buses (312 EUs).
These third 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 67% of the EUs in these orders are clean-propulsion (i.e., hybrid or CNG) vehicles.
New Flyer’s total backlog as of October 3, 2010 was 9,011 EUs, which is a 6% increase over the 8,492 EUs in the backlog as of July 4, 2010. The firm portion of the total backlog remained steady at 2,145 EUs, compared with 2,136 EUs at the end of the previous quarter. The value of the order backlog as of October 3, 2010 increased by $300 million to $3.8 billion, compared with $3.5 billion as of July 4, 2010. Clean propulsion vehicles represent approximately 64% of the total backlog.
Some of the order activity during the quarter included:
• New York City Transit, the largest transit agency in North America, awarded New Flyer a contract for 475 – 40’ CNG buses. The order includes firm orders for 135 buses and up to 340 additional options. This order was the subject of a press release previously issued by the Company on August 20, 2010.
• The Port Authority of Allegheny County, the transit agency in Pittsburgh, PA, ordered 25 – 60’ diesel buses (50 EUs) with options for up to an additional 125 – 60’ buses (250 EUs). This is the first time that New Flyer has manufactured buses for Pittsburgh, which is among the 25 largest transit agencies in North America. With this order, 21 of the top 25 transit agencies will be operating New Flyer buses.
• Sound Transit, the regional transit agency in the Seattle, WA, area, converted options to firm orders for 25 – 60’ buses (50 EUs). The order consists of both diesel buses and diesel-electric hybrid buses.
• King County Metro, the transit agency within the city of Seattle, converted options for 86 additional 60’ hybrid buses (172 EUs).
• Champaign-Urbana Mass Transit District of Champaign, IL, ordered an additional 23 – 40’ hybrid buses. Champaign is a long-time New Flyer customer and continues to renew its fleet with this major order.
• York Region Transit of Newmarket, ON, has exercised options for an additional 20 – 40’ diesel buses. Including this order, York Region has ordered a total of 58 buses from New Flyer in 2010.
New Flyer’s management continues to view the North American market for heavy-duty transit buses as challenging and recognizes the market, especially in the United States, is softer than in recent years. Pricing over the past year continues to be very competitive and it is expected to remain as such throughout the next one to two years. , Management now estimates the total market size for deliveries in 2010 to be approximately 500 EUs below the previous management estimates of 5,500 – 6,000 EUs. While there have been some additional US federal funding programs announced in 2010, management does not anticipate a recovery of the market to 2008 levels until at least 2012.
The Company’s customers continue to advise that operating and local capital match funding challenges are the primary cause for the delays or decrease in procurement activity.
Management continues to monitor the economic and funding conditions and the procurement activity of its customers in the US and Canada and will adjust the Company’s production schedule as required to address such conditions.
• The American Public Transportation Association reported that total transit ridership increased 0.1% in the second quarter of 2010 (being the first increase in six consecutive quarters), but reported that bus ridership declined 1.7% in the same quarter. This decline in bus ridership however, was less than decreases experienced in previous quarters.
• On a positive note, the Nelson A. Rockefeller Institute reported that overall US state tax revenues grew 2.2% in the second quarter of 2010 compared to the same quarter in 2009.
Delays by customers in issuing procurements and awarding contracts, starting in the first quarter of 2010 have led to decreased order activity across the market compared to previous years. Although the Company’s awards have increased in the last two quarters, the first quarter of 2010 had essentially no award activity. While management has not yet set the Company’s 2011 production rate, this decreased award activity may have a slight negative impact on next year’s line entries.
During the quarter, 267 options from one customer were reinstated and the option term extended by one year. In total, 35 options expired in the quarter for a total of 133 options expiring year-to-date in 2010.
There are approximately 14,600 EUs in New Flyer’s current new potential pipeline or bid universe for heavy-duty transit buses, an increase from the approximately 13,900 EUs reported as of July 4, 2010.
NOTE: All dollar amounts are stated in US currency based on an exchange rate of US $1.00 = Cdn. $1.05 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 the United States and Canada. The Company’s three facilities -- in Winnipeg, MB, St. Cloud, MN and Crookston, MN - 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 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.