North America s #1 Transit Bus Manufacturer and Parts Supplier

Transcription

1 North America s #1 Transit Bus Manufacturer and Parts Supplier Forward Looking Statements: May contain forward-looking statements relating to New Flyer Industries Inc. and related companies or to the environment in which they operate, which are based on their operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, or are beyond New Flyer s control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include those set forth in New Flyer s Annual Information Form which is available on SEDAR at New Flyer assumes no obligation to update or revise any forward-looking statements to reflect new events or circumstances, except as required by applicable securities laws. All figures are in U.S. dollars unless otherwise noted. Non-GAAP Measures: For the definition and explanation of EBITDA, ADJUSTED EBITDA, FREE CASH FLOW, ROIC, NOPAT and INVESTD CAPITAL please refer to Appendix A.

2 2 New Flyer Summary Performance Highlights LTM Sales: US $1.54B LTM Adj EBITDA: US $131.3M LTM Return on Sales: 8.6% Net Debt: $246M Leverage: 1.49 (Converts treated as equity) LTM ROIC: 1.6% LTM FCF: US $66.3M LTM Payout Ratio: 43% 215 Average Bus Line Entry Rate 5 EUs / available production week Current Bus Backlog: Firm: 2,192 EUs, $1.1B Options: 4,819 EUs, $2.4B LTM Book to-bill Ratio:121% North America s #1 Transit Bus Manufacturer and Parts Supplier Founded in 193 in Winnipeg, MB Total employees ~ 3,4 Facilities in both Canada and the US. Largest installed base supporting ~ 5% of all buses in service Market Share: Bus Deliveries: 48% (#1), Parts Sales: 33% (#1) Common Share (TSX:NFI) Significant Shareholders Shares Outstanding: 55.5 M Brazilian Strategic Investor 6 day Avg Daily Volume: ~ 145, Dividend = C$.62/share, Yield: ~3.8% = 19.99% TSR: H1-15 =17%, 214 =33%, 213 =3% Fully Diluted Market Cap: ~ C$1.B US Hedge Fund Convertible Debt (TSX:NFI. DB.U) = 11.1% Principal Outstanding: US $64.6 M 6 day Avg Daily Volume: ~ US $88K NFI Management & Board = 1.89% Coupon: 6.25%, Yield: ~ 4.9%

3 3 New Flyer Strategy: Optimize, Defend, Diversify & Grow 1. Offer NA operators the best buses, services and value in the industry Migrate from selling buses to providing solutions that deliver best bus value & support for life Provide complete offering: Bus ( Workhorse of the Fleet ) supported by Parts & Services Lead the market innovation Migrate to the Xcelsior platform for all Heavy Duty buses Offer MiDi for community shuttle, small transit agencies and private operators Increase focus on Aftermarket parts and services 2. Operate as a world class OEM using LEAN principles & Quality Roadmap Be recognized as an Employer of Choice Excel in supply chain, strategic sourcing and appropriate in-sourcing Continuous pursuit of eliminating waste and cost reduction to improve competiveness Excel at customer support, response and follow up Operate as a responsible, sustainable and environmentally conscious business 3. Perform while seeking Diversification and Growth Lead the Transit Bus industry and deliver income to Shareholders through dividends Operate with an appropriate capital structure to operate and grow the business Seek to diversify beyond single product/market (Heavy Duty Transit buses) to compete in more markets: Product (type of bus) and/or Market (Public vs Private) and/or Geography.

4 Share Price (C$) Shares Traded (Millions) 4 Focus on the future included Transformation & Acquisitions C $2M IPO as $1/unit C$11M Secondary $11.7/unit C $1M Secondary $11.4/unit C $12M Secondary $11.2/unit Launched OpEx Initiative Deferral of US Customer order for 1,8 EU First Xcelsior Platform Production Acquired TCB Fabrication Business $242M Non-cash Rights Offering & issue Common Share Launched MiDi Bus JV with ADL $65M Convert Debenture & terminate IDS Acquired Orion Parts from Daimler Announced Project United rationalization of NABI into NF Acquired NABI from Cerberus Marcopolo SA 19.9% equity Investment in NFI Aug-5 19-Aug-6 19-Aug-7 19-Aug-8 19-Aug-9 19-Aug-1 19-Aug Aug Aug Aug-14 - Combined Volume NFI Close NFI.UN Close

5 5 #1 Market Share for both HD Transit Buses & Parts Heavy-Duty Transit Bus Share based on EUs delivered in 214 in Can/USA Aftermarket Parts Share based on estimated parts sales in 214 Other (incl. El Dorado, Proterra and BYD) 5% Gillig 1% Prevost/Nova 6% MCI 4% 4% ABC Companies (Muncie - Baker) 5% Neopart 2% Mohawk 2% Other Transit Brokers 2% Bus Service Facilities 4% 33% 1% 6% Engine & Transmission Part Vendors 1% 47.5% 33% Local Suppliers 9% 15% New Flyer 33% Bus Component Vendors Direct 5% Truck/Common Parts Suppliers 8% New Flyer acquired Orion Parts in February 213 and NABI in June 213. Source: 214 New Flyer Database & Management Estimates

6 New York Los Angeles Chicago Seattle Philadelphia Toronto Newark Washington D.C. Montreal Vancouver Houston Minneapolis Ottawa Boston Baltimore San Francisco Edmonton Calgary Denver Las Vegas Pittsburgh Miami Orange County Phoenix Everett 6 North American Transit Bus Market & Segments Market Segments and primary targets of the 25 largest Transit Agencies Other Orion New Flyer NABI operate NF supported buses 6 Metropolitan Fleets 17 operators 39% of installed fleet Urban Fleets 2 operators 45% of installed fleet Municipal Fleets 9+ Operators 16% of installed fleet Primary Target market 2 Primary Target market 1 Primary Target market New Cdn/US market entrants focusing on battery-electric buses: *Quantities in Equivalent Units (EUs) Current US & Canada Active Transit Bus Fleet >8, buses Other 31% 1% 12% 21% 9% 17% Source: 214 New Flyer Database & Management Estimates

7 7 New Flyer Transit Buses New Flyer Xcelsior New Flyer MiDi Production launch in 29 based on >2 years experience with low floor transit buses Offered in 35, 4, and 6 lengths >12-year, 5, miles life Multiple propulsion systems options: diesel, hybrid, natural gas, electric-trolley and battery-electric Primary targets are metropolitan and urban fleets Typical sale price of approx $45K US for 35 /4 bus and $7K US for 6 articulated bus Joint venture with Alexander Dennis Limited to bring MiDi to North America. Production launch in and 35 low-floor bus >12-year, 5, miles life Clean diesel propulsion and currently investigating alternative propulsion systems Primary target is municipal/commercial shuttles Typical sale price approx $3K US NABI Bus platforms are no longer in production. Estimated NABI installed fleet: 8,5 buses NABI LFW In H2-15 they have been replaced with the Xcelsior NABI BRT

8 8 Market Leader in Technology & Propulsion Options Single platform - multiple propulsion options Battery-Electric Hybrid-Electric Natural Gas Electric-Trolley Clean Diesel New Flyer s Battery-Electric Xcelsior All propulsion options are based on New Flyer s optimized and robust Xcelsior platform

9 9 Manufacturing, Service and Parts Locations 3,4 team members with approx 1,3 covered by CBA Winnipeg CBA expires Mar 31/18 Crookston CBA expires Dec 31/15 St Cloud CBA expires Mar 31/17 Winnipeg, MB Headquarters Parts Fabrication and Bus Shell Assembly New Product Development NFI Parts Distribution Center Parts Distribution Manufacturing & Service Line Entries per Week Renton, WA Service Center Fresno, CA NFI Parts Distribution Center Los Angeles, CA Service Center CA BC WA OR NV ID AZ UT AB SK MT WY CO NM ND SD NE TX MB KS 18 OK MN 2 IA MO AR LA WI MS ON MI IL IN OH TN KY AL ` 12 GA WV SC QC PA VA NC NY VT NH NJ ME DE MD DC NB MA RI CT PE NS Arnprior, ON Service Center Brampton, ON NFI Parts Distribution Center Elkhart, IN TCB Part Fabrication Delaware, OH NABI Parts Distribution Center Hebron, KY NFI Parts Distribution Center FL Crookston, MN Bus Assembly St Cloud, MN Bus Assembly Anniston, AL Bus Assembly Parts & Service locations to provide best-in-class support and response

10 1 Significant Investment in LEAN. We call it OpEx. Key Operational Improvements since 29: Build in Station (by task) improved from 87% to 95% Average Labour Efficiency increased from 74% to 88% Days in Customer Acceptance reduced from 21 to 12 Focused investment on cultural, physical and process change

11 11 Standardized Visual Facility A place for everything and everything in it s place

12 12 Capability added to increase fabrication and value-add

13 13 The Industry s most comprehensive Parts & Support Services Aftermarket Parts Product Support Services With addition of Orion Parts and NABI, New Flyer is the recognized leader in both size and quality of service Key competitive advantages include: widest product assortment (parts for products manufactured by New Flyer, NABI, Orion, as well as other bus manufacturers) and industry leading distribution network with shortest delivery times. Exclusive Product Distribution: NFI proprietary line of service parts under the Kinetik brand Exclusive license for Xtended Life TM brake kits which increases life of brakes, thereby reducing vehicle operating/maintenance costs Unique offerings (Kits, Mid-life upgrade programs, Vendor Managed Inventory, KanBan, etc). Publications: Wide range of customized parts, maintenance and operational documentation. New Flyer publications are the industry standard. Service Support: Product acceptance, field support, field engineering and warranty management. Product 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 Well positioned to maximize market share of parts and life cycle support services

14 US Federal Funding ($ millions) % Change vs Same Last Year 21 Q3 29 Q1 21 Q4 29 Q2 29 Q3 211 Q1 29 Q4 211 Q2 21 Q1 21 Q2 211 Q3 21 Q3 211 Q4 213 Q4 211 Q1 212 Q1 211 Q2 212 Q2 211 Q3 211 Q4 212 Q3 212 Q1 212 Q4 212 Q2 212 Q3 213 Q1 212 Q4 213 Q2 213 Q1 213 Q2 213 Q3 213 Q3 213 Q4 213 Q4 214 Q1 214 Q1 214 Q2 214 Q2 214 Q3 214 Q4 214 Q3 215 Q1 214 Q4 14 Transit Industry Health Indicators US Fed Funding vs Industry Deliveries US Quarterly State Tax Collections [YOY % Chg] ISTEA TEA-21 SAFETEA-LU Extension to SAFETA-LU MAP ARRA DRRA GROW AMERICA Bus Deliveries (EU) State Tax Revenue YoY Change Source: & management estimates Source: The Nelson A. Rockefeller Institute State Revenue Reports Average Age of of Transit Buses [years] Qtrly Transit Ridership % Chg YOY Q Canada USA % 6.% 4.% 2.%.% -2.% -4.% -6.% US Bus Total US Total All Modes CDN Total All Modes Source: CUTA, APTA Source:

15 12-Jan-9 12-Mar-9 12-Feb-9 12-Apr-9 12-May-9 12-Jun-9 12-Jul-9 12-Aug-9 12-Sep-9 12-Oct-9 12-Nov-9 12-Dec-9 12-Jan-1 12-Mar-1 12-Feb-1 12-Apr-1 12-May-1 12-Jun-1 12-Jul-1 12-Aug-1 12-Sep-1 12-Oct-1 12-Nov-1 12-Dec-1 12-Jan Mar Feb Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Mar Feb Apr May Jun Jul Aug Sep Oct Nov Dec Jan Mar Feb Apr May Jun Jul Aug Sep Oct Nov Dec Jan Mar Feb Apr May Jun Jul-15 Q1 28 Q4-6 Q2 28 Q1-7 Q3 28 Q2-7 Q3-7 Q4 28 Q4-7 Q1 29 Q1-8 Q2 29 Q2-8 Q3 29 Q3-8 Q4 29 Q4-8 Q1 21 Q1-9 Q2 21 Q2-9 Q3-9 Q3 21 Q4-9 Q4 21 Q1-1 Q1 211 Q2-1 Q2 211 Q3-1 Q3 211 Q4-1 Q4 211 Q1-11 Q1 212 Q2-11 Q2 212 Q3-11 Q4-11 Q3 212 Q1-12 Q4 212 Q2-12 Q1 213 Q3-12 Q2 213 Q4-12 Q3 213 Q1-13 Q4 213 Q2-13 Q1 214 Q3-13 Q2 214 Q4-13 Q1-14 Q3 214 Q2-14 Q4 214 Q3-14 Q1 215 Q4-14 Q2 215 Q1-15 Q Market Size, Book-to-Bill, Bid Universe and Backlog EUs delivered in Can/US has flattened out NFI Book-to-Bill >1% for last 9 of 1 quarters % 3% 25% % 3 15% 3 2 1% 2 1 5% % Actual Deliveries (EU) - Total Market New Flyer Deliveries LTM New Orders (EU) LTM Deliveries (EU) LTM Order Intake/Deliveries Improved NFI Bid Universe & Active Opportunities (EUs) NFI backlog has recovered 25, 2, 15, 1, Heavy Duty Bid Universe NFI forecasted bus buys in next 5 years Bids submitted by NFI awaiting selection Operator RFPs issued. Proposals in development , Ongoing Bids Submitted Bids Forecast Firm Deferred Order Firm Option Deferred Order Option Note: US Customer Deferred Order was removed from backlog following 5 years of inaction.

16 16 Average Weekly Line Entry & Delivery Rates (EUs) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Heavy Duty Line Entry Heavy Duty Delivery MiDi Line Entry MiDi Delivery Includes activity from NABI Bus LLC following acquisition by New Flyer in June 213. New Flyer MiDi commenced production in Jan Full Year Run Rate: Average Line Entry rate (EUs/Available Production Week): Heavy-Duty = 49, MiDi = 1.25

17 17 Strong Balance Sheet Capital Structure transformation reduced both Leverage and Interest Costs Total Debt ($US M) Total Leverage Ratio $45 $4 $35 $3 $25 $2 $15 $1 $5 NFI Total Leverage Ratio does not include Convertible Debenture as debt $65M Convertible Debenture issued in 6.25%. Proceeds used to redeem Bach Bonds/IDS Debt in Aug-12. Convert price $US1/share $115M Revolver facility used to manage working capital fluctuations ($48M outstanding) $142M Senior secured term loan Credit facility expires Apr $ Q2 LTM IDS Debt Senior Term Loan Convertible Debenture Bachelor Bonds Revolver Total leverage ratio

18 Millions 18 NFI 5-year Cash Flow Performance Free Cash Flow/Share ($C) $1.6 $1.4 $ $ $.8 $.6 $.4 $ $ Q2 LTM 215 Q2 LTM Adj EBITDA to Free Cash Flow ($M) Free Cash Flow and Dividends ($M C) Q2 LTM Free Cash Flow Dividends In 211, NFI completed a noncash rights offering to facilitate conversion from an IDS to a traditional common share structure. Shareholders exercised approximately 89% of the Rights issued by tendering approximately C$242.3M principal amount of Subordinated Notes in exchange for approximately 39 million common shares. In 213, Marcopolo S.A. acquired approximately 11 million newly issued common shares, representing a 19.99% stake in NFI.

19 19 NFI 5-year Financial Performance Sales ($M US) Adj EBITDA ($M US) , , ,132 1, , Q2 LTM Bus Parts Q2 LTM Bus Parts *Bus Includes Corporate Overhead Return on Invested Capital 12.% 1.% 8.% 6.% 4.% 2.% 9.3% ROIC = 6.2% Net operating profit after tax Average invested capital for the period 8.6% % 1.6% Millions.% Q2 LTM Average invested capital for the period Return on Invested Capital

20 2 Investment Thesis Summary Leading North American Market Share Deep Relationships with High Quality Customer Base Leadership in Product Offering and Technology Well Positioned Against Competitors Multi-Faceted Growth Strategy Experienced Executive Team Strong Free Cash Flow Generation Approximately 48% of heavy-duty delivered buses in 214 (equivalent units) Approximately 33% aftermarkets parts market share based on 214 sales Established relationships with well over 38 transit authorities who operate approximately 87% of the heavy-duty transit buses in the U.S. and Canada in out of 25 largest transit agencies operate New Flyer, NABI or Orion buses Market leader with a proven next generation Xcelsior transit bus platform Most transit propulsion options: diesel, natural gas, electric trolley, diesel-electric hybrid & battery-electric Leading in-house engineering and new product development capabilities With approximately 8, heavy-duty transit buses currently in service (Can/US), the company supports the largest installed base with over 5% being New Flyer, NABI or Orion buses Integrated aftermarket parts and services operation Compliance with Buy-America legislation and provincial policies regarding Canadian content Focused on completing the integration of NABI into New Flyer providing overhead and supply synergies Bus Business Consolidation = Project United, Parts Business Consolidation = Project Convergence Growth of clean technology aligned with New Flyer product offering and engineering capabilities Monitor a robust pipeline of M&A opportunities to diversify product offerings and geographic footprint Deep industry experience and track record to position the business for growth and increased profitability Extensive LEAN transformation and operational experience with proven ability to complete and integrate strategic acquisitions Improved Return on Sales, Free Cash Flow and Return on Invested Capital performance Strong/Predictable free cash flow and high cash conversion ratio Low operating leverage with fixed costs representing approx 1% of total bus manufacturing costs Source: Company filings, management estimates

21 APPENDIX A DEFINITIONS OF EBITDA, ADJUSTED EBITDA, RETURN ON INVESTED CAPITAL AND FREE CASH FLOW References to EBITDA are to earnings before interest, income taxes, depreciation and amortization, 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 nonoperations 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 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. 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 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