NFI Group Inc.

Paul Soubry - President and Chief Executive Officer Glenn Asham - Chief Financial Officer

Mark Neville - Scotia Bank Kevin Chiang - CIBC Chris Murray - AltaCorp capital Bert Powell - BMO Capital Stephen Harris - GMP

Thank you, Lindsey, and good morning ladies and gentlemen. Welcome to the 2016 third quarter results conference call for New Flyer Industries.

Joining me today on the call today is Glenn Asham, our Chief Financial Officer. I'd like to start our call today by acknowledging that today is Remembrance Day in Canada and Veterans day in the United States and we ask that you join us I paying tribute to those members of the armed forces who have served and sacrificed for our countries.

Lest we forget. For your information, this call is being recorded and a replay will be available shortly after the call.

As a reminder to all participants and others regarding this conference call, certain information provided today maybe forward-looking and based on assumptions and anticipated results that are subject to uncertainties. Should any one or more of these uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected.

You are advised to review the risk factors found in the company's press release and other public filings with securities administrators for more details. The combination of New Flyer MCI continues to prove to be a great marriage of two market leading players in the parallel bus markets in North America.

As we dig deeper and work closer together it is clear that we share exactly the same vision and primary goals. First, to offer bus operators the best products, services and value in the industry and migrate from selling just assets to providing solutions that deliver lowest total cost of ownership.

Second, to operate as world-class manufacturers following lean principles, a quality roadmap and deploying a companywide safety culture. We want to be an employer of choice.

And finally to operate with an appropriate and flexible capital structure to diversify and grow our business while delivering a strong total shareholder return over the long-term. As I stated on previous investor calls, we're very encouraged with how the MCI employees and customers have embraced this combination.

Our message has been clear the day our deal was announced nearly one year ago. We are bus people and not just financial investors and we're in this business for the long-term.

We've demonstrated our commitment to MCI with the work environment upgrades, customer service enhancements and we've already commenced long overdue investment in product improvement and development. As of Q4 2016 we are extremely pleased with our performance in what was a trying period.

It started with the unexpected news from New Jersey Transit that MCI's commuter contract was being suspended. Then we managed through our planned summer shutdown that reduced production and deliveries and reacted by wrapping up our private market coach line to accommodate.

We took the calculated risk of completing all New Jersey coaches on the production line and then adjusted production schedules and volumes for both customers at MCI and New Flyer. We stood by employees and our suppliers and I'm really proud of how our team reacted and responded during this funding suspension.

The bottom line, no one was laid off as a result of New Jersey contract suspension and were are now delivering completed coaches and have commenced building the rest of the first production order. So I'll provide some details a little bit later and Glenn will now take you through the highlights of our financial results for the third quarter and I'll again give you some insights into the New Jersey contract and discuss our outlook and then open up to questions.

Over to you, Glenn.

Thank you, Paul and good morning everyone. I'll be highlighting certain 2016 third quarter results and provide comparisons to the same period last year.

I will focus my commentary on this to providing key financial insights that will then allow more time and attention on our market, business and strategic efforts. I would like to direct you to the company's full third quarter financial statements and management discussion and analysis of financial statements which are available on SEDAR or the company's website.

I do want to remind you that New Flyer's interim unaudited financial statements are presented in U.S. dollars.

The company’s functional currency and all amounts are referred to in U.S. dollars unless otherwise noted.

This is the third full quarter that the financial results of MCI are included in New Flyer's consolidated financial statements. We have provided 2015 quarterly revenue and adjusted EBITDA data for MCI in the management discussion and analysis of our financial statement for information and comparative purposes.

The company generated consolidated revenue of $511.5 million for the third quarter of 2016, an increase of 40.3% compared to $364.7 million during the third quarter of 2015. Revenues from transit bus and coach manufacturing operations increased 40.8% for the 2016 third quarter compared to the third quarter of 2015.

The increase is primarily a result of a 24.3% increase in total new transit bus and coach deliveries and a 10.6% increase in average selling price resulting from our favorable sales mix which now includes coaches. The deliveries increased primarily as a result of the inclusion of MCI.

After market revenue increased 38.1% primarily as a result of revenues generated by MCI when comparing to the third quarter of 2015. However the core after market revenue in 2016 third quarter decreased 5.7% when compared to the pro forma after market revenue for the core business in the third quarter of 2015.

The 2015 Q3 core after market revenue was determined by including MCI results for 2015 third quarter, while excluding the revenue from the Chicago Transit Authority mid-life overall program. The company generated consolidated adjusted EBITDA of $63.8 million for the third quarter of 2016, an increase of 75.8% compared to $36.3 million during the third quarter 2015.

Transit bus and coach manufacturing operations adjusted EBITDA increased a 102.8%, primarily due to increased deliveries and improved margins. Contributors to the increase in margin in the period is a favorable sales mix which has been experienced for a few quarters now, cost savings recognized as a result of MCI synergies and the full impact of the New Flyer and NABI product rationalization.

Management cautions readers that quarterly transit bus and manufacturing adjusted EBITDA can be volatile and should be considered over a period of several quarters. Aftermarket operations adjusted EBITDA increased 36.1% as a result of the adjusted EBITDA generated from the MCI's aftermarket business.

Net earnings increased by 57% and earnings per share increased 43.3%. The company reported net earnings of $23 million in the third quarter of 2016, representing an improvement compared to net earnings of $16.6 million in the third quarter of 2015, primarily as a result of improved earnings from operations offset by the increase in income tax expense.

The company’s net earnings per share in the 2016 third quarter was $0.43 compared to $0.30 generated during the third quarter of 2015. During 2016 Q3 the company increased its liquidity position by $12.8 million primarily as a result of increased cash flows generated from operations.

The combination of the increased earnings and the liquidity has resulted in New Flyer reducing its pro forma leverage to 2.08 times adjusted EBITDA as of October 02, 2016 compared to 2.91 times adjusted EBITDA at the end of fiscal 2015 just after the acquisition of MCI. The company generated free cash flow of $48.9 million during the 2016 third quarter as compared to C$22.1 million in the third quarter of 2015 primarily as a result of increased suggested EBITDA.

The company declared dividends of C$14.5 million in the third quarter of 2016 which increased compared to C$8.6 million in 2015 third quarter. The amounts of dividends declared increased in the third quarter of 2016 primarily as a result of the conversions of debentures to shares and the 35.7% annual dividend rate increase announced in May 2016.

The current annual dividend rate is C$0.95 per share. With that I’ll turn it back to Paul.

Thanks, Glenn. The company's annual operating plan for the 53 weeks ending January 01, 2017 or what we refer to as fiscal 2016 is focused on maintaining and growing our leading market position both the heavy duty transit bus and motor coach markets through excellent quality, great customer service and enhanced competitiveness.

We continue to learn about the motor coach business and are prudently evolving our integration combination plan for MCI. The focus today has been on culture, facility upgrades, investing in information technology harmonization, product quality and customer service.

MCI continues to perform to management's acquisition case and we believe that approximately $7.6 million of the $10 million target annual cost synergies have been identified through the rationalization of corporate costs at the coordination of sourcing and purchasing activities. With the customized nature of the public transit and coach market and the increasing U.S.

content requirements under the fast act of 2015 procurement synergies resulting from a sourcing leverage not easily attained. We're pleased with our progress.

Any material sourcing changes must take into consideration several perspectives which include current supplier agreements, customer specified components, bus reliability performance and aftermarket serviceability and spare parts implications. As stated earlier on October 14, 2016 New Jersey Governor Chris Christie issued an executive order lifting suspension of all work funded by the New Jersey Transportation Fund.

New Jersey Transit firmly advised MCI to commence delivery of the completed coaches and to start inducting new coaches into production. As inspection schedules by both New Jersey Transit which happen at MCIs facility in Pembina, North Dakota and by the New Jersey Department of Transportation upon arrival of those coaches in New Jersey is variable.

We currently anticipate that approximately 50 of the completed coaches will be sold in 2016 with the remaining coaches being sold in the first quarter of 2017. As a result, management now expects the company to deliver approximately 3500 EUs in fiscal 2016 as compared to 3265 EUs in fiscal 2015 which includes New Flyer plus pro forma MCI.

Historically seasonality has not had a significant impact on New Flyer's transit bus business. However with the addition of MCI there is now a factor that we need to be aware of.

During MCIs fiscal 2015 they recorded 71% of annual new coach deliveries during the first three quarters of that year and 29% during the last quarter. Management expects similar coach revenue seasonality for fiscal 2016.

In addition to expected seasonal impact of MCI this year there will be some impact in Q4 resulting from the completion of the New Jersey coaches that are in the process of being delivered. As for next year, we currently project to deliver new transit buses and coaches of approximately 3650 EUs during the 52 weeks ended December 31, 2017 or fiscal 2017 which is one week less than this year.

This expectation increase in deliveries is a result of the continued strong industry demand that we see for both transit buses and motor coaches. Specifically in the public sector the number of active bids at the end of Q3 2016 was 6597 EUs which represents an increase of 2399 EUs compared to the Q2 2016.

Our bid universe which represents forecasted demand over the next five years totals 23,735 at the end of the quarter which is an increase of 4403 compared to the previous quarter. As you know from New Flyers Q3 2016 orders and backlog update we adjusted downward our guidance - our growth guidance of our core parts business for 2016.

Aftermarket parts sales volume is very difficult to forecast since the majority of the sales are transactional in nature and therefore unpredictable. As we completed Q3 2016 it became clear that achieving our original parts volume guidance was going to be very difficult.

Please note that margin performance has more than made up for the volume slowdown. Just like our manufacturing business we're not chasing parts volume for volumes sake but rather we remain focused on servicing our customers, enhancing our profitability and improving our cash flow performance.

For 2017 we currently believe that the growth of the aftermarket parts industry overall will range somewhere in the 02% range. We have come to this conclusion as a result of two primary factors; the first is the increase in new coach and bus deliveries in recent years to medium and large operators which is our core target market has resulted in enhanced fleet replacement which creates a dampening effect on the aftermarket business in the early years of those delivers.

Second, overall transit bus and motor coach fleets size [indiscernible] has remained fairly consistent which does dries-up demand for routine preventive maintenance parts and repair. While the overall industry market growth we expect to be relatively flat, we will continue to focus on enhancing our customer service levels, growing our share, improving our efficiency, working capitalization and our profitability.

Now finally we've already been asked many times how Tuesday's historic United States election might impact our business going forward. While it's impossible to predict at this point there are few issues that are worth noting.

First we're not significantly impacted by trade agreements today like NAFTA or TPP as our primary market requires compliance with by America requirements. We fully comply today and have plans in place to address the increased U.S.

material content requirements that take effect in 2018 and again in 2020 that were defined in the fast act of 2015. Our core market of transit agencies have a mission to provide an essential service across America and we do not see that changing.

Nearly 90% of our revenues to U.S. operators and the majority of our productive capacity is already located in the United States.

Regardless of your political stripes a few things I'd like to point out that are encouraging. First, President Elect Trump's Republican election platform indicated substantial tax incentives and significant investment in infrastructure.

In fact I believe he indicated nearly twice the investment in infrastructure than the Democrats platform spoke to. While Mr.

Trump did not specifically mention buses during his brief victory speech, he did state during his campaign that he supported spending money on transit Second, the election was a historic day for United States public transportation as voters approved 33 of 48 local and statewide public transit measures for current passage rate of nearly 70%. Throughout the country in 2016 in 23 states and communities of all sizes U.S.

voters considered nearly $200 billion in local investment for public transportation at the ballot box. This is the largest of its kind in the history of the United States.

Tuesday's success demonstrates that voters have once again continued their legacy of strong support for local investment in transit. Obviously, we will monitor closely any protectionist sentiments, any government funding mechanism changes, any economic reactions, currency exchange rates and so forth.

The bottom line is we are well-positioned, we're the market leader and will adapt accordingly and will continue to focus our products, our service our competitiveness. Our company remains poised to continue as North America's leading provider of heavy duty transit buses, motor coaches and parts.

We're really happy with our efforts on our transit bus electric propulsion development as that market takes shape and we're now actively investing in product development and enhancements of our motor coach lineup. We're pleased with our investment plan, our cash flow generation, our debt paydown performance and our leverage reduction as we had planned.

We're proud of our history and excited about our future. Ladies and gentlemen thanks for listening today.

With that we'll invite your questions. Lindsey, please provide instructions to our callers.

Hi good morning, guys.

Hi Mark.

Hi Mark.

Just a few questions, just first on the 2017 delivery guidance, I guess is just to help us out a bit can you maybe give us an idea how much is the MCI versus transit?

So, I mean we've taken, we've reported on the overall OEMs as many effective segments so we don’t have specific guidance on any individual plans. However if you go back and look at the time of the acquisition it hasn’t been really that much of any partnerships and production rates between the plants.

MCI represented about one third of the aggregate business. So they would be in that neighborhood.

We do expect that we're going to increase the volumes of both our motor coaches and our transits for next year.

Okay and the aftermarket the 0 to 2% growth is that a volume number or is it sort of an all-encompassing price mix volume for next year?

Yes, I think more of the latter, look at the end of the day we got – we had expected to be able to grow the business this year. It is trans-highly, highly transactional in nature, where we probably have 40 or so percent of our business is where customers buy under a contract.

They are not contracts for specific volumes. They are effectively offers.

So what we found ourselves in is while we've been showing some really solid growth it is really hard to predict the market size, both volume and price and so forth. So we've done our best to do a top down and a bottom up and we think the margins that the market is effectively going to hang around the 0 to 2% or a flat perspective.

And so that's the best color we can provide.

That's fair and I guess the reason I guess it brings me to my next question, and when you talk about the recent weakness in that business and you talk about enhanced replacement in recent years. I guess if I sort of thought about that big picture it would seem like you could be potentially be sort of maybe one, two year type headwind, just given the strength in recent years.

So just sort of curious how you think about that I guess in the context of the next year and your guidance?

I think that's a fair way to look at it and we tried to build it more clear in this quarter. The vast majority of our parts are sold to large operators.

So New York, New Jersey, LA and so forth. These guys have had huge fleet replacements over the last two or three years and so all of those busses are replacing a bus that's somewhere between 12 and 16 years old who has been sucking up a lot of parts.

And so it does have a lead and a lag type implication on both the – on effectively the parts supply. But there has been a balloon of those type of customer dealer and in fact just earlier this year we finished up an order for 900 brand new busses for LA and now the parts sale to LA is down.

So there is going to be those ebbs and flows over the next period for us. We're not concerned about it.

We're actually very excited about our performance and about the price work we've doing and the margin enhancement and so forth. The reality is the volume is tough to predict and therefore very difficult to give guidance on.

All right and maybe if I can just sneak one in EBITDA for EU, I know you don’t guidance here, just it has been bouncing around a bit. And I guess over the last four quarters since you bought MCI three of those four quarters it was sort of in the 55K per bus or EU perhaps in Q2 which was quite strong.

So I'm just sort of if you can, I don’t know how you want to talk about it, whether it's the impact of mix or how we should think about sort of a base line again, how much mix versus the operational improvements you've made. Is there any color or sort of guidance to give us sort of moving forward just sort of as a baseline to think about it if it is possible?

Sure, so I guess if you compared our one year back when we were in sort of the mid 30s now we're sort of the mid 50s. We did in our MD&A provide a little bit background on the MCI business and then I think on a full year basis they averaged about maybe would contribute about $8100 of that increase on EUs so about one third of the increase.

For sure in the first three quarters or sorry first two quarters of the year we had a very strong mix. I think our average over those periods were somewhat close to $59,000 a bus.

I would say this quarter when the mix is more loner term and so in terms of what our overall expectation is although it will continue to be variable for example to give in certainly what's happened with the Canadian dollar and the timing of when we bid contracts versus we bid contracts versus we builds contracts if we came up on a quarter with fair amount of Canadian business that would drop from this level. But if you assume sort of the gain U.S.

gain split we have today, I would say this quarter is more normal of what we will see.

Okay and then that's very helpful. So sort of this quarter and we can sort of whatever we want to add subtract or synergies or whatever, but again this quarter mix is I think you said normative.

So okay now that's quite helpful and then just was there any margin impact this quarter from any disruption in New Jersey Transit or not really?

Very little, I mean there was volume disruption, but margins is we didn’t have to actually invoke any of the layoffs or anything like that that we essentially will look at, that was driven costs, so we're fortunate that we're able to avoid that. There probably was a little bit of inefficiency that we built into some of the businesses as shuffled around some production schedules but not significantly.

So…

There were in the change though Mark a little bit in that the margins in the motor coach space between public and private. The public margins have been getting softer over the last couple of years and so the New Jersey contract doesn't have the same margin as an average motor coach going through MCI.

So then there will always be the mix movement as Glenn said between the Canadian and US and there will also be mix movement between public and private tech customers.

Okay, thanks a lot guys very helpful.

Thanks Mark.

Hi thanks for taking my question and good morning everybody. I guess just following up on the EBITDA maybe another way if I were to look at it this way your pro forma EBITDA in Q3 was about 53 million I believe including MCI, about 10 million higher than that this quarter.

If mix is normative and you've obviously got these savings that are rolling through is there anything to suggest they are about to take Q4 of 2015 last year and add another 10 million to Q4 of this year? I mean roughly speaking is there something wrong with those kind of assumptions given that mix is normative?

Yes, I don’t see anything off the top of my head that would cause me to think that would be a wrong assumption.

The only thing Kev that will maybe change for us depending on I mean right now we're guessing that 50 of these jerseys crossed the line, because he inspection process is highly variable and so any more less New Jerseys will have an impact on the total EBITDA of the quarter.

Right, now that helps. And then when I think of congratulations on the amount of deleveraging done in a very short period of time here you are on the cusp of reaching below two times, just wondering what that means for your free cash flow priorities, especially since you are talking about a softer aftermarket environment, does that make M&A more killing in that space or valuations coming down because of some of the softness you are seeing and maybe there is an opportunity to deploy capital there?

I'll be careful about softness because it is not as if the market is going down it is just as we're learning more and more and more about the parts business and we're trying to do a better job of analyzing, predicting, modeling and so forth it is still a pretty strong business with good margins and it is just the growth paces is obviously not there or maybe there where we thought it would be. In terms of M&A you know look we are absolutely giddy and ecstatic about how well recently our TCB activity went and then our Marcopolo getting involved, Orion and NABI, the work we did to integrate those into our businesses.

MCI is not the same because it is a coach business. It is not the same customers.

It is not the same manufacturing profile and input cost and the decision criteria about what goes on the bus and so forth. Absolutely, unequivocally, we want to continue to diversify and grow this business.

As you stated we are really pleased with the cash flow coming off the business and we are investing and continue to invest in New Flyer and now MCI and we are going to keep doing that. There is facility investment, there is IT, there has been product enhancement and so forth.

We will continue to look for M&A either through tuck-in that makes sense with our current kind of two lines of business, the OEM, the building of buses or the aftermarket and we will continue to look at other things that can diversify our business. We're actively interested in looking, but make no mistake, getting MCI right and making sure that if we invest in it culturally, physically, product wise for the next chapter is absolutely first on our priority list.

That's helpful and maybe just a couple of quick ones from me? Just I want to see if I’m getting my numbers right here.

If I kind of right size from some of the noise within as it relates to New Jersey contract deferrals and I guess suspension, it looks like this you would have otherwise delivered 3450 buses and next year call it a 3650, but if I back out say 40 to 50 in it you’re run rating around 3600 normalized. So just about a 4% to 5 % growth rate.

Is that what the growth rate you are seeing industry wide is for coach/heavy duty buses or are you taking market share or is the market growing bigger than that maybe?

No, I think your analysis is probably fair. We think there is a share recovery at MCI slightly, there was a share for growth a little bit in the transit bus business, that’s why we projected that both those businesses we can increase the production rates.

And you've been around watching us long enough Kev. We kept saying we are not going to increase production rate just for the sake of a quarter or two.

We want to make sure that we are confident and that it is sustainable over a longer period of time, given the fact that we are largely assemblers, we do fabricate of our own carpet. For every job in our facility there is a six and supplied chain and we watch stability of intern as well as the supply chain that helps us.

So, we are really excited to be able to start to increase the volume for next year. New Jersey did cause a turbulence in the third and the fourth and maybe a little bit in the first quarter of next year, but we are really pleased with the ability to ramp those up.

And just a last one from me. Just a housekeeping question.

It’ just because of the noise around New Jersey. How should I be thinking about working capital in the fourth quarter?

Is it a bigger than normal – just because you want to build a – little bit of inventory from buses differed or should I think a more normalized Q4 for you from a working capital perspective?

It is actually a little bit difficult to answer this because we have been working with Jersey and we actually may see some changes in our payment terms – in this case we would take away all the noise. So, at this point, I think we might see sort of a normalized type quarter.

Okay, that’s perfect. Thank you very much.

Thanks, good morning guys. Just thinking about the aftermarket business and your – with the growth numbers but one of the things I was curious about is that you've finished convergence a couple of months ago.

Just thinking about any thoughts around footprints inventory management and maybe if you are even going to – in volume increase any thoughts around margins and margin improvement as we move into 2017 is great.

Great question. Just for those who don’t know the whole story convergence was the project theme that we used to synchronize the New Flyer and the NABI parts businesses into one company and so we've it had two major elements to start.

One was the harmonization of the IT systems all on to the New Flyer Oracle platform which is really focused around selling parts an ERP system from a plant that we had Jerry rig in the past. And then the issue Second issue was the harmonization in the organization so that we are now responding to customers lives, customer profile and segment not by two different businesses.

Having said that, the next chapter in our lives is to look at the footprint around the parts warehouses. Currently there is a number of them, some of them you can kind of locate it close together and then houses currently there is a number of them.

Some of them even kind of located close to each other. The optimization of the inventory inside those.

So that is what we are looking at right now some of those leases and so forth are long termed. So we are right now in the phase of looking.

The other part of that is trying and get our heads around what we want to do with the MCI parts business and how it fits in the system, in the tools and so forth. So far for 17 at this point, Chris, we have not been in any additional synergies clearly will be looking for.

Okay, great. You talked a little bit about margin in terms of Boston and the option was kind of an interesting analysis.

So I think , you made the comment a-- may be the common of about 16,000 per unit improvement that we are seeing year-over-year. Just been basically mix but also a lot of internal improvement.

I know you also litter to the fact and you have cut a hit of a good portion of the first 10 million. Thoughts around - you made some comments, but you also have made some comments around product development.

How should we think about the pace of continuous improvement is -- into 17 in the manufacturing businesses.

I think there is still an opportunity. We continue to be very pleased with the choicest that we have been making of make versus buy of strategic sourcing as well as certain pieces of insourcing and those that were on – what we are trying to do is that we are going to have a sub assembly like a door or something.

If we can build that thing put it together adjacent to the product line and then put it right on the bus. The handling cost the damage cost the working capital the time delayed, all that stuff gets better and better and better.

So we continue to believe that there is opportunity there. Some of those take capital investment, which were measuredly putting in place at Flyer and at MCI.

And so I think there is more opportunity going forward. I think I'm very pleased with progress up to date and I think that there's opportunity going into 17 and 18 for that.

Any chance that we are going to – a magnitude of it –

No, not now. Not yet.

Nice try though.

Okay and then just finally for me kind of housekeeping question. Return on invested capital we've that continuing to trend any,– I didn’t see it in the release so I apologize a bit there but just any updates on that?

Yeah, no we will get there - have our updated investor deck probably on our website Monday morning at the latest. There is actually a holiday here and - no staff to help us do its some of the technical things, but I want to see when we issue are reported are rolled for – to have Ian 00 now and then the will would back in New Jersey return the we read it is the company we –for – 12 months and bases is 14.1% so it is around the same level that was in the last quarter.

Okay great. Thanks guys.

Thanks Chris.

Thanks Paul. I just want to go back to the New Jersey contract and delivery.

50 coming in Q4 which would mean you have got a 142 for delivery in 2017 so I assume that is giving you confidence in terms of what your delivery profile can look like for 2017 if I just add that to current base that kind of builds up to the 36 hundred units.

Careful Bert. If you in take it in a standard perspective, just when the governor lifted the suspension we had 90 buses sitting in parking lots right?

Yes.

So when we got through that whole process of the suspension we pulled forward a bunch of customers that we thought we going to build in 20 late Q4 2016 and submit 2017. So it’s not surely additive the real additive is the portion of the 90 that we sell in 2016 and then the rest.

Right now we are assuming 50 this year and 40 go into first quarter of next year. That is the incremental from the New Jersey we are back to normal production levels.

Plus a little bit of increase as Glenn and I talked about earlier.

So the 36 you think, so you've got visibility for 2017 and you've have got confidence to keep that build rate going right into 2018?

Correct.

Okay and what’s the confidence is it more on the transit side that you are seeing or is it the coach size that is giving you the confidence? Because coach I think the ordering in that is a little more episodic, is it not?

It is, look we had a wonderful discussion debate with our board yesterday. And in terms of the quality of our schedule on the public side is better than it has ever been in terms of our knowledge of what we are going to build to out say the next 12 or 15 months.

Now there is always variability, there is always schedule changes, there is always customers that want a sooner or later that we push and pull and so forth. There are customers that want buses inside the production window that we are going to adjust our total schedules for work.

But the transit schedule we have an incredibly high degree of confidence in our ability to schedule. Remember that, I shouldn’t say transit, it's our public business because MCI has a portion of their business that is public and therefore contractual.

On the motor coach side that is private. You're absolutely right it is transactional 1234 busses at a time and most of the time one or two.

In that business we built to customers' specs and so we have certain contracts that we know what we're going to build and when. It is probably really in the first half of the year where we have good schedule visibility, but also a good portion of that business is where we build basically a spec coach put it online and either finish it for the customer while it's online or just that once that bus is completed and then we have a customer to sell it to.

So there is risk and always risk in our delivery guidance associated with the manufacturing business. But I – we're very comfortable based on the demand, based on the competitiveness, based on the contractual portions of our business that our schedule next year is doable for sure.

Okay, thanks for that, that helps. And then just thinking about the MCI delivery and I guess it kind of lies up with the transit bus as well kind of that 29% in the fourth quarter does that impact margins?

If I go back and look at the EBITDA pre-EU in the MCI business fourth quarter last year taking out pre-owned is kind of 92,000 relative to your 64 the prior three, so just wanted?

If you look at that and I guess a couple of factors, number one obviously volumes sold, better cost leverage in the fourth quarter in the MCI business than overall for the year. The other piece is that where the seasonality is primarily in the private market side versus public and as we said the private market margins or the public margins have been coming down, so it is more private, that should be a positive impact.

Okay, so if I look at relative to last year what you expect this year is it given the mix and we've got some New Jersey transit going through should be less than what you did last year in the fourth quarter?

I'm sorry Bert, you broke up there a little bit, but I think it is a question, sorry if I invite you got the New Jersey delivery in the fourth quarter so the mix should skew this year towards public which would mean you should be last on it on EBITDA per EU in MCI for the fourth quarter is it correct?

Oh for sure and then the catch up in New Jersey is going to skew downward but the seasonality will be in the private piece which would push upwards and so there's two offsetting impacts.

towards and so there's two offsetting us first to offsetting right because with the last year we had when you had those impacts when you had the same mix of public and private in the fourth quarter for MCI.

Problem is we have the incremental if you will or the catch up units in New Jersey that has that negative drag on it.

Yes that's what I'm tying to get at Paul. Okay, thank you.

Thanks Bert.

Okay, thank you.

Guys, most of my questions were answered, but just a couple of things to followup on the aftermarket business you do a parts business for two lines of busses that are no longer being manufactured at Orion and NABI until two to what extent is any sort of erosion of that that sleep based responsible for slower growth or can you give the other way that those buses that remain out there are older and are consuming more parts how does the dynamic of that work?

That's a really good question. When we acquired those businesses that's a reality as we knew we would stop manufacturing Orion's would stop and NABIs would stop.

There's about 10,000 Orions on the road and about like 7500 or 8000 NABIs on the road. We had streamlined it originally in terms of assuming over a 12 year period those buses would all be gone.

We have not yet seen the drop off at that pace and so we think that customers are keeping those busses at this point in time slightly longer than we originally forecasted. So I would say where we are today really it has not had a big impact.

But remember that the parts on a bus maybe 15 plus or minus percent is truly proprietary and therefore largely only available from the OEM. The rest of the stuff on a bus is available from multiple sources.

So it is not as if that though those buses are sitting in longer or pulled out faster service it is going to have a dramatic impact because those customers can buy parts anywhere.

So that 8515 mix is that your parts business mix because I assume you can multisource a lot of those common parts the third-party parts?

Correct.

But your actual aftermarket business is 8515?

Well I don't have exact calc of 8515 meaning 15 is truly proprietary, I don’t have that data at my fingertips right now directionally that's approximately correct.

Yes, okay, okay. and on the MCI side and I had the impression the last time you talked that you getting to know the business and you were working towards having a set of a strategic plan for MCI that you would build to share with us and rollout is that still the way you're going to approach that or this going to be more of a continuing, evolving story where you make individual decisions, but there won't be something you can roll up and share with the Street.

Well that’s a good question, the NABI one it was much easier become at the end of the day once we made a decision to completely harmonize the businesses and the products it was a know what an obvious disclosable event. We need to do two things always we need to keep our investors informed what were doing and what impact it has on investment but we also that actually worked very careful that we don't tip off our competitors you being the only guys that are publicly traded in terms of what working to do from a competitive product facilities in investment blah, blah, blah, perspective.

I would think that we will continue to be transparent with things that we think will actually move the performance of the business, but we will also older cards close to our chess relative to some f the competitive dynamics.

Okay great. and can you have use a little bit of an update as to what pricing is like in all of these the processes you're involved with it would you describe it is stable or improving or deteriorating relative to the levels last year or two.

I would say stable is probably the right word every competition is obviously different and remember will continue to reiterate. This is not like a tractor or as truck where every you don't think I'm off the line is essentially the same of the cut color and options EU two thirds of what we built a highly customized product so pricing has a lot of elements and a lot of factors that contribute to it but what I would say we're in the neutral to slightly improved in terms of the overall pricing environment and I would attribute some of that to the performance of our business in terms of the quality of the product quality customer service the relationship with customers and we will continue to try and tell a value story rather than compete on price.

Okay, great. That’s it from me.

Thank you.

Hey, thanks, just one followup, I was just wondering, you've gone though this whole New Jersey thing here and I know a lot of it was political in nature so not necessarily, nutrition on this early stuff that controlnf but does not change potentially how you bid on some of the public coach buses is something take away from your experience that you cannot help mitigate this risk with reporters this is such a outer left field situation that you just have to live with it.

I'd say the latter Kevin and here is the logic on it. Every single customer our ours that buys transit buses in the United States or public uses public money the state relies on the federal formulas and the local matching and that methodology New Jersey and New York are the only ones that we have experienced where they actually use state money for in some cases some competition the hundred percent of the buy.

And therefore in the New Jersey case the money comes from the trust fund which effectively wasn't appropriated even though we were under contract everything else effectively the money is appropriate set aside before we start building a coach and so we don't worry about yesterday's changing and hiding in deliveries and once a while there's a volume change and so forth but this truly to us was so abnormal. And in hindsight may be as we bid any customer that is only state funds maybe will be a little more cautious or a little bit more aware but I think this truly was abnormal.

Okay that's helpful thank you

Yes, thanks guys. Just following up on some of your earlier comments about product development and MCI, a couple of quarters ago you sort of were talking about the fact that maybe a little more are going with a practical manual more of a challenging roadmap in terms of product development, but just want to expand on some of your comments that you started some new work and does that imply that you've may be found in a different way to sorcerer war you've got some different ideas on where you go with technologies?

Well, just a little color. The vast majority of motor coaches are 45 foot long.

In the public sector there are some customers that want 40 foot coaches and of course New Flyer MCI has two different platforms a J model and D model. In the last couple of years let's call it: 3 to 5 years there's been a segment that the ball is 35 coach.

We don’t play in that segment today MCI historically did some when it was owned by a Mexican company business when it was owned by a American company but it really has not played in that. So there's an example of what we need to think and look about it that a place we want to play and when we think about our D platform J platform and some the investment rulemaking and so forth obviously would want to do all the things that we did a flyer which is look at his or her way, harmonize the platforms and therefore get up purchasing efficiency, overhead efficiency and so forth is the way to adjust the size of our platform to build compete in different segments is there a propulsion system dynamic here like we saw in transit word today in the private market for MCI we only sell diesel buses and in the public we sell diesel hybrid and natural gas and so is there and the electrification dynamic and on and on and on.

So those are the kind of things that we are if you go back to the discussion earlier on one of the other questions is, we are going to invest in doing the right things in terms of the efficiency of the machine but also adapting and reacting to the market changes. Unfortunately MCI that had gone through some financial turbulence and then went through bankruptcy and then was owned by private equity, it did not invest in that stuff.

And so call it catch up or call it responding or reacting to the market that's what we're going to do.

Okay great. And then just for planning purposes Q4, I know historically New Flier always had about a one-week shutdown but you continued to ship, how should we just think about sort of the pace of shipping versus production as we head patient's of shipping versus production as we head into the end of the year?

Yes, so I guess first probably we'll look at our year end which is [indiscernible] will have that full week during Christmas which is traditionally a lower activity week. So I would same as last year assume that work on continuing to ship produce new car during that week.

Okay and that will be both New Flyer and MCI operations ?

Yes that's correct. And Chris as you know that soon that are your first for so while the old way is in lower activity of I would blasters do MLB is valuable the wire and MPI operations yes that's correct last year what and Chris you know that the whole accelerated tax depreciation and scenario in the United States does in this goes back the seasonality Glenn talked about with earlier.

You know we will do what we do in terms of the production of buses, but there is definitely a heightened sales activity and in November December relative to the private market

Okay great and then so should we expect a pretty decent inventory flush there?

Yes, I guess on the newswire side, I think we've done a fairly good job now of sort of keeping our work levels overall fairly flat quarter to quarter, but there still obviously some room and given the fact that we won't be delivering any sort of that is available to people. I'm really not seeing anything new, but I am satisfied has been a reduction in inventory.

Okay great, thank you.

Thanks Chris

Thank you, Lindsey. Thank you, ladies and gentlemen for joining us today.

Once again I appreciate your time on this very special important Remembrance and Veteran's day. We look forward to taking to you again next quarter.

Thank you.