New Flyer Industries TSX: NFI TSX: NFI.DB.U North America s #1 Heavy-Duty Transit Bus Manufacturer and Parts Supplier Forward Looking Statements: Our remarks and answers to your questions today 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. 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 discussed today are in U.S. dollars unless otherwise noted.
2 Long standing tradition as the #1 Heavy-Duty Transit Bus manufacturer in Canada & US Founded in Winnipeg in 1930. Market Leader in Technology and Innovation Bus manufacturing plants in Manitoba and Minnesota and a Part Fabrication plant in Elkhart. 2,200 employees Parts Distribution Centers in Manitoba, Ontario, Kentucky and California Service Center in Arnprior with another being established in LA New Product Development Center in Winnipeg. Over 32,500 buses delivered, with 24,000 still in operation Offer heavy-duty buses from 35, 40, to 60 articulating buses. Commence 30 and 35 medium-duty (MiDi) bus manufacturing in 2014 NFI s next generation Transit Bus with advanced styling that is lighter, quieter and more fuel efficient. First delivery was in 2010. Targeting >90% of bus production for 2103
3 Industry Leading Market Share in both Bus & Parts 32% Transit Bus Market Share ~25% Pro Forma Parts Market Share Other 4% 10% 18% 7% 29% 32% Neopart 3% MCI 4% Suppliers Direct 4% Truck 5% Nova 6% Muncie 6% Other 14% Locals 7% EngDealers 8% New Flyer 18% Gillig 9% Orion 7% NABI 9% April 2012 Daimler announced Orion to close by YE2012. NYCT & Seattle bus contracts assigned to NFI. March 2013 NFI announces the acquisition of Orion Parts Business from Daimler Bus Source: New Flyer Database & Management Estimates based on EUs delivered
4 NFI backlog provides visibility of Near-to-Medium term sales Backlog has now started to recover 10000 Backlog proved crucial in period of low Industry activity 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Firm Deferred Order Firm Option Deferred Order Options NFI plan maintains a Line Entry production rate of 36 EUs/Production week
5 NFI Financial Performance (US$) Adversely impacted by Volume & Price during economic crisis Sales Adjusted EBITDA $1,200 $120 $1,000 $800 83 96 108 106 116 119 125 $100 $80 17 20 24 24 $600 $400 804 865 992 878 810 754 768 $60 $40 78 73 76 73 23 20 19 $200 $20 57 42 41 $0 2007 2008 2009 2010 2011 2012 2013 Q1 LTM $0 2007 2008 2009 2010 2011 2012 2013 Q1 LTM Parts Bus
Public Private 6 New Flyer Strategy: a diversified Full-Service Bus Manufacturer 1. Focus on Core Market/Business/Operations LEAN & Quality roadmap Increase Strategic and In-Sourcing Cost reduction and competiveness 2. Seek Diversification & Growth Full scope offering: Bus, Parts & Services Increase % of aftermarket Migrate to new Xcelsior platform & launch MiDi Expand beyond HD Transit and compete in more than one market (product and/or geography) Bus OEM, Parts & Services Canada/US International 3. Investment/Acquisition Criteria Current or potential for leading market share Opportunity for cost synergy based on scale (OpEx, purchasing, and overhead) plus ability to leverage R&D, technology and platforms Vertical integration potential for key or strategic value-added operations
7 Committed to propulsion options & technology leadership Focused on optimizing New Flyer s next-gen Xcelsior platform NF CNG Propulsion First delivered in 1994 Natural Gas NF Hydrogen FC Fleet Delivered fleet to BC Transit Jan 2010 Fuel Cells eaccessories All-Electric NF ebus Maiden Voyage: Apr 20-12, 1:05 pm Hybrid Diesel Trolley NF eaccesory Bus Delivered to MN Metro July 2012 Gas NF etrolley Bus First delivered in 1993 NF Hybrid Bus First delivered in 2000
8 NFI transformed to Common Share Structure Reducing Leverage and Interest Costs $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Total Debt (US $million) 4.00 3.80 3.60 3.40 3.20 3.00 2.80 2.60 2.40 2.20 2.00 2007 2008 2009 2010 2011 2012 2013 Q1 IDS Debt Bachelor Bonds Senior Term Loan Revolver Convertible Debenture Total leverage ratio $65M Convertible Debenture issued in Jun- 12. Proceeds used to redeem Bach Bonds/IDS Debt in August 2012. Convert price $10/share. $90M Revolver facility used to manage working capital fluctuations ($49M outstanding) $122M Senior term loan @ rate of LIBOR plus applicable margin. Expires in Apr-14. Interest on Bach Bonds/IDS Debt = 14% vs Converts = 6.25% 49.3M shares outstanding. 6.2 M shares to be added from Treasury once full Marcopolo investment complete. NFI Board/Management currently owns 1.1M Shares (or 2.3%).
9 Significant improvements made in Operations Focused management on both cultural and physical change CME Annual LEAN Assessment (out of 5) Substantially reduced Bus WIP (EUs) 4 3 2 1 0.9 1.5 2.2 2.5 3.2 3.8 450 400 350 300 250 200 150 100 50 341 403 320 245 299 262 241 209 218 236 238 189 175 187 183 225 203 0 2008 2009 2010 2011 2012 2013 0
% Change vs Same Last Year 10 Macro-economic Fundamentals continue to Improve Which bodes well for investment in public transit US Qtrly State Tax Revenue [YOY % Change] USA Quarterly State Tax Revenue YOY % Change 20 15 10 5 0-5 -10-15 -20-25 -30 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E 2009 2010 2011 2012 Personal Income Tax Corporate Income Tax General Sales Tax Source: The Nelson A. Rockefeller Institute State Revenue Reports 2010 Average Age of Bus [Yrs] 2011 2012 Source: http://www.apta.com/resources/statistics/documents/factbook/2012- Fact-Book-Appendix-A.pdf Annual Avg Crude Oil Price - [US$] Crude Oil Price - Annual Average $110.00 $100.00 $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Monthly Unemployment Rate US CA J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F Source: US Bureau of Labor Statistics (US) ; Stats Canada (CAD) Annual Transit Ridership % Chg YOY Annual Ridership % Chg YOY 6.00% 4.00% 2.00% 0.00% -2.00% -4.00% -6.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 US Bus Total US Total All Modes CDN Total All Modes Source: http://www.apta.com/resources/statistics/pages/ridershipreport.aspx
12-Jan-09 12-Feb-09 12-Mar-09 12-Apr-09 12-May-09 12-Jun-09 12-Jul-09 12-Aug-09 12-Sep-09 12-Oct-09 12-Nov-09 12-Dec-09 12-Jan-10 12-Feb-10 12-Mar-10 12-Apr-10 12-May-10 12-Jun-10 12-Jul-10 12-Aug-10 12-Sep-10 12-Oct-10 12-Nov-10 12-Dec-10 12-Jan-11 12-Feb-11 12-Mar-11 12-Apr-11 12-May-11 12-Jun-11 12-Jul-11 12-Aug-11 12-Sep-11 12-Oct-11 12-Nov-11 12-Dec-11 12-Jan-12 12-Feb-12 12-Mar-12 12-Apr-12 12-May-12 12-Jun-12 12-Jul-12 12-Aug-12 12-Sep-12 12-Oct-12 12-Nov-12 12-Dec-12 12-Jan-13 12-Feb-13 12-Mar-13 12-Apr-13 11 The NFI Bid Universe has shown Significant Recovery 5 year total >15,200 EUs. Active Opportunities >7,300 EUs Units forecasted to come out for Competition 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - EUs for Bids Submitted EUs Bids in Progress Federal Stimulus investments contributed to surge in 2010 Reflects increased competitions in process Ongoing Bids Submitted Bids Forecast
12 NFI Book-to-Bill Ratio (Intake/Deliveries) has rebounded Now back to >100% of LTM deliveries 6,000 300% 5,000 250% 4,000 200% 3,000 150% 2,000 100% 1,000 50% - 0% LTM New Orders (EUs) LTM Deliveries (EUs) LTM Order Intake / Deliveries
13 Launched a JV with Alexander Dennis Limited in 2012 A medium-duty (MiDi) Bus for North America North America s largest Heavy Duty Transit Bus and Parts company + UK s largest Bus & Coach builder and world leader in midi-bus Strategic Rationale 10 Year Bus targeted at both Public & Private applications Lighter and quieter than Heavy-Duty buses with materially different operating economics Enhanced styling and passenger comfort Prototypes are currently being manufactured with testing in Q2-Q3 2013. Production build to commence in Dec-13
Marcopolo S.A. strategic Investment in NFI - February 2013 Launches a strategic relationship and provides growth capital to NFI North America s largest Heavy Duty Transit Bus and Parts company + The world s 2 nd largest Bus builder delivering over 35,000 buses annually Strategic Rationale Provides significant equity capital to NFI at an attractive price (Approx 26% premium to 60-day VWAP) Enhances NFI s financial flexibility to further pursue growth and diversification opportunities Strategic value of knowledgeable, sophisticated, like-minded investor Opportunity to strengthen North American market position and competitiveness through commercial agreements with a leading global bus manufacturer Access to MP products, know-how, relationships and technology sharing to enhance NFI s product offerings and profitability Opportunity to seek markets outside North America where NFI intellectual property may be exported 15
NFI Strategic Investment in expanding Aftermarket - March 2013 acquisition of Orion s Parts business from Daimler Bus North America s #1 Bus Aftermarket Parts Business + North Strategic Rationale America s #4 Bus Aftermarket Parts Business Strengthens NFI leadership position as the largest provider of aftermarket parts in the North American transit bus industry. Pro-forma 25% bus parts market share. Broadens exposure to large transit agencies, and further enhances NFI s relationship with various transit authorities Highly attractive revenue stream from the proprietary parts business serving over 10,000 Orion buses currently in service Immediately accretive to earnings and cash flow with added value through combined scale, footprint and overhead utilization Significant potential for incremental growth by leveraging scale and broader product offering to increase penetration into North America s installed fleet of all OEM makes and models 16
17 NFI Investment Thesis #1 Manufacturer of Heavy Duty Transit Bus Manufacturer in North America #1 Market Share of delivered buses and #1 Market Share of aftermarket bus part sales Market Innovation leader with the broadest green product offering High quality diversified customer base generating repeat business in replacement industry Experienced Executive team with a track record and significant OpEx and LEAN experience Conversion to Common Share Structure complete. Lower leverage & Interest Cost Predictable cash flow business model, conservative financing structure, relatively low CAPEX needs Income instrument with Yield currently at approx 6.0% (annual dividend at C$0.585/share. Distributions have been paid for 91 consecutive months (since IPO). Management believes dividend is sustainable. Prospects for Growth Transit is an essential service with an aging US fleet (avg age >7.8 yrs vs. avg target life of 12 yrs) After three years of a very difficult market, now experiencing record bid activity (Active bids >7,300 EUs, Bid Universe >15,200 EUs) with loss of one competitor (Orion). NFI backlog has returned to growth ($3.3B and 7,527 EUs) Book-to-Bill Ratio is recovering (LTM is 211% vs 31% for 2012 Q1 LTM) JV launched with Alexander Dennis to introduce MiDi bus in North America. Marcopolo 19.99% Strategic Investment in NFI with operational MOU. Parts and service offering business continues to grow through acquisition of Orion Bus Parts Distribution business.