New Flyer Defers Indefinitely Production of 140 Diesel-Electric Hybrid Buses Due to Delays in Customer Receiving State Funding
New Flyer Industries Inc. will defer indefinitely the production of 140 diesel-electric hybrid articulated buses (representing 280 equivalent units or EUs) under a major US customer order that was planned to commence this week as a result of delays in the customer receiving state funding. All of these 140 buses were planned to be delivered to the customer in the second half of fiscal 2009.
The customer told New Flyer that the buses under this order are required under its bus replacement plan and that it intends to purchase the buses once funding is made available. The customer planned to fund this order solely from state monies as federal stimulus monies available to the customer were allocated to other capital projects.
The customer advised that funding for this order is dependent on the approval of its funding application to the state, but is unable to confirm when the state is expected to approve the funding request. New Flyer is monitoring the situation and will reschedule these buses back into the production schedule once funding has been approved.
Given the “engineer-to-order” nature of heavy-duty transit buses, other customers’ orders in the backlog cannot be easily rescheduled within the second half of 2009 to fill the gaps in the production schedule created by this order deferral. This deferral is expected to result in a reduction in planned production levels from approximately 50 EUs per week to an average of 36 EUs per week for the remainder of fiscal 2009.
While some scheduling adjustments can be made, the revised production schedule currently assumes that the majority of the production schedule gaps cannot be filled.
Notwithstanding the deferred order, New Flyer expects that full-year total production for fiscal 2009 should not be less than the 2,164 EUs delivered in fiscal 2008.
The expected revenue from this deferred order is approximately $122 million and represents approximately 3% of the total order backlog of $4 billion (which is made up both firm orders and options) that New Flyer earlier reported. The total unexercised us options that this customer has represent an additional 760 buses (1,520 EUs) over a five-year term, which represents an additional 16% of the total order backlog. These options are assignable to other customers.