NFI Investor Update Q2-2016

Transcription

1 0 NFI Investor Update Q North America s leading Transit Bus and Motor Coach Manufacturer and Parts Distributor August 11, 2016 Forward Looking Statements and Non-GAAP Measures are defined in APPENDIX B.

2 1 + NFI Investment Thesis Leading Share in Diversified Markets Deep Relationships with High Quality Customer Base Broad Product Offering with Technology Leadership Experienced Team poised for Growth & Diversification Strong Financial metrics North Americas #1 heavy duty transit bus brand, #1 motor coach brand and #1 aftermarket parts and service supplier >70,000 vehicles (transit buses and motor coaches) currently in service with ~50% share of Canadian and US installed base Founded in the 1930 s, NFI and MCI have established relationships with well nearly all domestic transit authorities and specifically 24 out of 25 of the largest agencies operate New Flyer, NABI, Orion or MCI buses or motor coaches Strong reputation and long standing relationship with hundreds of motor coach operators in Canada and US operating MCI or SETRA motor coaches Leading in-house engineering and new product development capability Integrated aftermarket parts and services operation Compliant with Buy-America and policies regarding Canadian content Offer the industry s widest range of green propulsion options: diesel, natural gas, electric trolley, diesel-electric hybrid, and now battery-electric Successful track record of positioning the business for growth and increased profitability Extensive LEAN transformation and OpEx experience with proven ability to complete accretive acquisitions and achieve synergies Proven financial performance and low leverage. Strong/Predictable cash flow to support rapid deleveraging and dividends

3 2 Company Overview Q2-16 LTM Highlights: Revenue: US $1.92 B Adj EBITDA: US $229.3 M Return on Sales: 11.9% Net Debt: $573 M Leverage: 2.21 (Converts treated as Equity) ROIC: 14.0% FCF: US $156.3 M Payout Ratio: 22.0% North America s #1 Transit Bus & Motor Coach manufacturer and parts supplier with the leading installed base of ~50% of transit buses and motor coaches currently in service (~70,000 buses) Public company with combined growth and yield focus. Significant Shareholders: Marcopolo S.A. =18.6%, Management/Board =1.9%). Fully Diluted Market Cap: ~$C 2.6B. ~ 5,000 employees in Can/US Bus Backlog: Firm: 3,035 EUs, $1.6 B Options: 6,975 EUs, $3.6 B LTM Book to-build Ratio: 159% Common Share (TSX:NFI) Shares Outstanding: 59.9M 60-day average Daily Volume: ~ 305K Dividend = C$0.95/share (1), Yield: ~2.3% (3) TSR (2) : 2016 YTD = 48% 2015 =115% Convertible Debt (TSX:NFI.DB.U) Principal Outstanding: US $25.8 M 60-day average Daily Volume: ~US $280K Coupon: 6.25%, Yield: ~ 2.0% (3) Dec 18-15: NFI added to S&P/TSX Composite Index Mar 14-16: NFI added to S&P/TSX Equal Weight Industrials Index Mar 11-16: NFI Equity Options commenced trading on Montreal Exchange (1) Effective May 12, 2016 the Dividend increased from C$0.70 to C$0.95 per share annually. (2) Total Shareholder s Return ( TSR ) is calculated by the growth in capital assuming the dividends are reinvested each time they are paid. (3) Calculated using closing TSX market price as at August 5, 2016

4 3 + NFI Business Strategy Our Facilities, Processes & Products Our Market Leading Positions in Bus/Coach/Parts Our Business and Revenue Stream Our Revenue, EBITDA and CashFlow Optimize, Defend, Diversify & Grow 1. Offer Canadian and US operators the best buses, services and value in the industry Migrate from selling buses to providing solutions and deliver best value and support for life of our products focusing on lowest Total Cost of Ownership Provide complete offering: Bus ( Workhorses of the Fleet ) supported by Parts, Service and Valued Added services Lead the market in innovation, reliability and quality Excel at customer support, response and follow up with emphasis on aftermarket parts and services 2. Operate as a world class OEM using LEAN principles, a Quality Roadmap and a Safety Culture Be recognized as an Employer of Choice with an industry leading safety culture Excel in engineering, supply chain, strategic sourcing and appropriate in-sourcing Continuous pursuit of eliminating waste and cost reduction to improve competiveness Operate as a responsible, sustainable and environmentally conscious business 3. Perform while seeking Diversification and Growth Lead the North American transit bus and motor coach industries and deliver strong TSR to Shareholders Operate with an appropriate and flexible capital structure to grow the business Seek to diversify over long term to ensure longevity and sustainability: Product (type of bus) and/or Market (Public vs Private) and/or Geography (North America vs International).

5 4 NFI Strategic Plan and Execution has delivered solid TSR Total Shareholder Return (1) Cultural & Structural Change Adopted Stakeholder Model. Commitment to Culture, People & LEAN operations Migrated Capital Structure from Income Deposit Security (yield only focus) Common Share (Growth and Yield) Strategic Acquisition's Total Return S&P/TSX Composite -- Investment Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 NFI's first acquisition enhanced part fabrication capability and capacity 19.9% equity investment in NFI by a leading global bus and coach body manufacturer NFI acquired Orion s parts business from Daimler NFI acquired US manufacturer of heavyduty transit buses and parts distributor NFI acquired North America s leading manufacturer of motor coach and parts/service support Source: FactSet, Company filings 1. Total shareholder return includes capital appreciation and dividends paid. 2. Calculated using closing TSX market price as at August 7, 2016

6 5 #1 Market Share in Transit Bus Heavy-Duty: Xcelsior Medium-Duty: MiDi Launch in 2009 based on >20 years experience with low floor transit buses Offered in 35, 40, and 60 lengths Primary targets is metropolitan & urban fleets Typical sale price of approx US $450K for 35 /40 and US $700K for 60 articulated JV with Alexander Dennis (UK) to introduce MiDi to North America in and 35 low-floor medium duty bus, tested to HD standards. Primary target is municipal/ & commercial shuttles Typical sale price of approx US $300K HD Transit Bus Share (2015 market is ~5,300 units) Active Canada/US HD Transit Bus Coach Fleet ~85,000 Average Age of the HD Transit Fleet: US = 7.8 years, Canada = 7.3 years Source: APTA Public Transportation Factbook % 3% 45% 33% Orion Parts and NABI acquired by NFI in 2013 Source: New Flyer Database & Management Estimates

7 6 Transit Bus Market Segments in Canada and US Transit Market Segments and primary targets 24 of the 25 largest Transit Agencies operate NF supported transit buses Metropolitan Fleets 17 operators 39% of installed fleet Urban Fleets 200 operators 45% of installed fleet Municipal Fleets 900+ Operators 16% of installed fleet New market entrants focusing only on battery-electric buses: Source: New Flyer Database & Management Estimates

8 7 #1 Market Share in Motor Coaches New Coach Private New Coach Public Pre-Owned Coach Targets the mid-range to luxury segments J Model is the #1 selling coach in the N.A. private market NA Distributor of Daimler s SETRA coaches Tour and charter operators Hotels and casinos Inter-city line-haul operators Contract carriers Targets the mid-range segment Buy America compliant D Model is the #1 selling coach of all time in N.A. Transit authorities Universities U.S. Federal Government Correctional facilities Trade-in option to support new coach sales Coaches are refurbished at MCI s service centers and various 3 rd parties Value customers in the private market Small private fleets MCIU sells approx 350 pre-owned units annually Motor Coach Share: 2015 market is ~2,265 units Active Canada/US Motor Coach Fleet ~55,500 units Average Age of the Motor Coach Fleet: US and Canada = 9 years Source: ABA Motorcoach Census March 2015 Turkey 9% Netherlands & Macedonia 24% 38% 50% 1% 26% 23% 29% Canada & US Source: MCI Database & Management Estimates

9 8 Motor Coach Market in Canada and US Market Segments and primary targets Private Market Segment Definitions Transit Fixed Route/ Line Haul Tour & Charter Conversion 12% of installed fleet 34% of installed fleet 52% of installed fleet 2% of installed fleet Public Private Private Private Source: MCI Database & Management Estimates

10 + Annual Deliveries and Market Demand Transit Bus EUs delivered in Can/US Motor Coaches delivered in Can/US Public Bid Universe & Active Opportunities (EUs) US Federal Funding for Transportation Operator RFPs Issued. EUs for Proposals in development Bids submitted by NFI and EUs awaiting selection NFI forecasted EU buys in next 5 years Source: MCI Database & Management Estimates 9 1,492 1,862 1,767 1,190 1,479 1,514 1, ,050 1,292 1,056 1, ,050 1,500 1,272 1,864 2,051 1,731 1,938 1,583 1,442 2,003 2,164 2,257 2,023 1,811 1,656 1,475 1,343 2,191 2,437 2,451 2,485 2,381 2,330 2,048 1,752 2,099 1,852 1,820 1,584 1,208 1,543 1,566 1,773 1,926 2,311 2,990 2,824 4,797 5,347 5,816 5,388 5,009 4,723 4,333 4,047 5,212 5,065 5,284 5,154 5,109 5,010 5,128 5,373 6,236 6,032 5, Total Industry Total Industry

11 10 + Public Customers Book-to-Bill and Backlog Book-to-Bill >100% for 13 of last 14 Quarters Total Backlog (Firm and Options) Includes MCI backlog Note: US Customer deferred Order was removed from backlog IN 2013 following 5 years of inaction.

12 11 + Most comprehensive Parts & Support Services in the industry Aftermarket Parts Product Support Services Widest transit bus and motor coach product assortment and industry leading distribution network with shortest delivery times. Publications: Wide range of customized parts, maintenance and operational documentation. New Flyer publications are the industry standard. Added value through Unique offerings (Kits, Mid-life upgrade programs, Vendor Managed Inventory, KanBan, etc). Field Support: Product acceptance, field support, field engineering and warranty management. Training: Operator and maintenance training provided in connection with new bus sales or aftermarket support (On-the-job, Classroom, elearning, etc.). New Flyer Connect: On-board system that permits real-time monitoring of the bus driver and vehicle performance to help improve driver safety, driving efficiency, and reduce fuel use and maintenance costs MCI Service Centers: Nationwide footprint with service centers, distribution facilities and over 3,000 emergency response partners

13 12 + Manufacturing, Parts & Service Footprint MCI - Winnipeg, MB Parts Fabrication, MCI D Model Shell Assembly Complete J Model manufacture New Product Development NFI - Winnipeg, MB Parts Fabrication and Bus Shell Assembly New Product Development Parts Distribution Renton, WA NFI Service Center AB SK MB ON QC Montreal, PQ MCI Service Center Winnipeg, MB Frank Fair Fiberglass Fabrication ND MN NY Arnprior, ON NFI Service Center Brampton, ON NFI Parts Distribution Fresno, CA NFI Parts Distribution CA IL IN OH ` WV PA NJ Blackwood, NJ MCI Service Center East Brunswick, NJ MCI Parts Distribution Ontario, CA NFI Completion & Service Center KY Delaware, OH NABI Parts Distribution Los Alamitos, CA MCI Service Center Pembina, ND MCI D Shell Completion TX AL FL Hebron, KY NFI Parts Distribution Louisville, KY MCI Parts Distribution St Cloud, MN NFI Bus Manufacture Des Plaines, IL MCI Service Center Anniston, AL NFI Bus Manufacture Crookston, MN NFI Bus Completion Dallas, TX MCI Service Center Elkhart, IN TCB Part Fabrication Winter Garden, FL MCI Service Center

14 13 + Environmental Commitment: Green Propulsion Options Clean Diesel Natural Gas Electric-Trolley Hybrid-Electric Battery-Electric Clean Diesel Natural Gas Electric Trolley Hybrid Electric All Electric Xcelsior MiDi D Model J Model Additional propulsion options currently being evaluated for NFI MiDi and MCI J Model

15 14 + Financial Performance Sales ($M US) Return on Invested Capital , ,451 1, ,132 1,217 1, , % 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 6.2% ROIC = Net operating profit after tax Average invested capital for the period 8.6% 8.5% 12.2% % Millions Q2 LTM Bus Aftermarket 0.0% Q2 LTM Average Invested Capital for the period Return on Invested Capital 0 Quarterly Adj EBITDA ($M US) Adj EBITDA ($M US) Millions $240 $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Adjusted EBITDA USD Adjusted EBITDA LTM Adjusted EBITDA Q2 LTM Bus Aftermarket

16 15 + Cash Flow Performance 2016 Q2 LTM Adjusted EBITDA to Free Cash Flow ($M) Millions Free Cash Flow and Dividends ($M C) Q2 LTM Free Cash Flow Dividends NFI Annual Dividend Increased 35.7% from $.70/share to $.95/share on May 12, 2016 (now paid quarterly)

17 16 + Debt and Total Leverage Total Debt ($US M) $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 Total Leverage Ratio does not include Convertible Debenture as debt. Under NFI Senior Credit Agreement Total Leverage must be maintained below 4X Adj EBITDA Q2 Total Leverage Ratio $26M Convertible Debenture issued in 6.25%. Convert price $US10/share $343M Revolver facility used to manage working capital fluctuations ($91M outstanding) $482M Senior secured term loan IDS Debt Bachelor Bonds Senior Term Loan Revolver Convertible Debenture Total leverage ratio

18 APPENDIX A 17 Canadian and US Bus Market Segments Bus Type Approx Annual Deliveries (EUs) School Bus ~30,000-35,000 NFI Strategic Actions since 2011 Cutaways (Truck Chassis based) ~15,000-18,000 MiDi JV with ADL to diversify Medium Duty Transit and Shuttle ~ Invest in OpEx Acquired TCB Convert Capital Structure Heavy Duty Transit EU s (single and articulated) ~5,200-5,500 Motor Coach ~2,000 2, Acquired Orion Parts & NABI Acquired MCI

19 + APPENDIX B FORWARD LOOKING STATEMENTS, FINANCIAL TERMS, DEFINITIONS AND CONDITIONS 18 FORWARD LOOKING STATEMENTS This investor presentation contains forward-looking statements relating to expected future events, including the integration of the acquired business into New Flyer s existing business and expected synergies, the diversification and growth of the combined bus and aftermarket parts businesses. Although the forward-looking statements contained in this investor presentation 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 reflected in such forward-looking statements for a variety of reasons, including risks related the ability to implement the operational changes necessary to achieve the intended synergies, acquisitions, joint ventures and other strategic relationships with third parties (including liabilities relating thereto), the covenants contained in the Company s new senior credit facilities could impact the ability of the Company to fund dividends, market and general economic conditions and economic conditions of and funding availability for customers to purchase buses and to purchase parts or services, customers may not exercise options to purchase additional buses, the ability of customers to suspend or terminate contracts for convenience and the other risks and uncertainties discussed in the materials filed with the Canadian securities regulatory authorities and available on SEDAR at Due to the potential impact of these factors, the Company disclaims any intention or obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise, unless required by applicable law. FINANCIAL TERMS, DEFINITIONS AND CONDITIONS References to EBITDA are to earnings before interest, income taxes, depreciation and amortization, fair value adjustment for total return swap and unrealized foreign exchange losses or gains on non-current monetary items. References to Adjusted EBITDA are to EBITDA after adjusting for: the effects of certain non-recurring and/or non-operations related items that have impacted the business and are not expected to recur, including non-recurring transitional costs relating to business acquisitions, product rationalization costs, impairment loss on equipment and intangible assets, realized investment tax credits ( ITCs ), equity settled stock-based compensation, past service costs, fair value adjustment to MCI s inventory and deferred revenue, proportion of the total return swap realized, loss on derecognition of long-term debt and costs associated with assessing strategic and corporate initiatives. Return on Invested Capital ROIC is calculated by dividing Net Operating Profit After Tax by Average Invested Capital for the period. References to Net Operating Profit After Tax are to Adjusted EBITDA less depreciation of plant and equipment and income taxes. References to Invested Capital are to shareholders equity plus long-term debt, obligations under finance leases, other long-term liabilities, convertible debentures and derivative financial instrument liabilities less cash. Management believes EBITDA, Adjusted EBITDA, ROIC and Free Cash Flow (as defined below) are useful measures in evaluating the performance of the Company. 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, fair value adjustment to MCI s inventory and deferred revenue, proportion of the total return swap realized and principal payments on capital leases. However, EBITDA, Adjusted EBITDA, ROIC and Free Cash Flow are not recognized earnings measures and do not have standardized meanings prescribed by IFRS. Readers of this presentation are cautioned that EBITDA, and Adjusted EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as an indicator of New Flyer'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 net earnings and cash flow to EBITDA and Adjusted EBITDA, based on the Financial Statements, has been presented In Management s Discussion and Analysis of Financial Condition under the heading Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA and Reconciliation of Cash Flow to EBITDA and Adjusted EBITDA, respectively. A reconciliation of Free Cash Flow to cash flows from operations is provided under the heading Summary of Free Cash Flow. New Flyer s method of calculating EBITDA, Adjusted EBITDA, ROIC and Free Cash Flow may differ materially from the methods used by other issuers and, accordingly, may not be comparable to similarly titled measures used by other issuers. Dividends paid from Free Cash Flow are not assured, and the actual amount of dividends received by holders of Shares will depend on, among other things, the Company's financial performance, debt covenants and obligations, working capital requirements and future capital requirements, all of which are susceptible to a number of risks, as described in New Flyer s public filings available on SEDAR at All figures are in U.S. dollars unless otherwise noted.