NFI Group Inc.

Paul Soubry - President and CEO Glenn Asham - EVP and CFO

Chris Murray - AltaCorp Capital Cameron Doerksen - National Bank Financial Stephen Harris - GMP Securities David Simpson - Edge Asset Management Mark Neville - Scotiabank Daryl Young - TD Securities

Thank you, Denise, and good afternoon, ladies and gentlemen. Welcome to the 2017 fourth quarter and fiscal year results conference call for New Flyer Industries.

Joining me on the call today is NFI’s Chief Financial Officer, Glenn Asham. For your information, this call is being recorded, and a replay will be made available shortly after the call.

As a reminder to all participants and others regarding this call, certain information provided today may be 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’re advised to review the risk factors found in the company’s press releases and other public filings with the security administrators for more details. I’d like to start off today by thanking our team, our customers, our suppliers, our Board, our entire leadership squad for another really fantastic year.

We continue to be confident in our market position, our strategy and our business plan and we’re excited today to report record earnings and performance for Q4 2017 and fiscal year 2017. We had strong deliveries in Q4 2017 with over 1,068 equivalent units of new transit busses, motor coaches and cutaway busses delivered which compares to 993 in the fourth quarter last year.

For the full fiscal year of 2017, we delivered a total of 3,828 equivalent units or 9% increase over fiscal 2016. New awards received in the fourth quarter totaled 2,520 equivalent units while for the full year – sorry, for a LTM full year 5,820.

And at the end of 2017, our total backlog was 12,157 equivalent units, 4,186 of which are firm orders and 7,971 were options. That altogether totaled $6.02 billion or approximately 2.8x our current annual production rate.

It’s important to know also that a further 273 equivalent units were in award pending where we've been notified by our customer that New Flyer or MCI is a successful bidder but have not yet received formal documentation and therefore we have not yet added it to our backlog. From an organizational perspective, 2017 was our first full year of business units led by divisional presidents who have dedicated strategic and management teams supported by a strong function of matrix.

We’re very comfortable that we now have ownership, focus, decision making at the right level in our organization. And we continue to make prudent investments in several areas to enhance our competitiveness that range from new product development, facility upgrades, manufacturing optimization, part fabrication capability, support operations and IT harmonization.

And as we’ve mentioned before, for 2018, an increased level of capital investment will continue. In 2017, we also executed on a strategy to control the majority of our fiberglass reinforced plastic supply or FRP.

First we acquired Carlson Composites and then Sintex-Wausaukee Composites to combine with our existing FRP business called Frank Fair Industries that was part of the MCI acquisition. We now have nearly 700 people in seven facilities building FRP parts and have recently launched a comprehensive operational excellence effort at Carfair to optimize this critical source of supply.

We also successfully adapted our sourcing efforts for U.S. public customers that utilize FTA funds to comply with a newly increased Buy America requirements of 65% of U.S.

material content. 2017 was also another successful year for our electrification agenda.

New Flyer launched their next-generation Xcelsior CHARGE transit bus and continues to lead the U.S. and Canadian zero-emission bus or ZEB market with 40% of the 2017 ZEB award and 30% of the 2017 ZEB deliveries.

MCI had a milestone year in product development by introducing a significant model '18 enhancements and unveiling their revolutionary D45 CRT vestibule motor coach with significantly improved accessibility. In addition, they made solid progress on the development of 35-foot model J coach and a battery-electric coach.

And in the fourth quarter of last year, MCI also expanded their service network and opened a state-of-the-art service center in Hayward, California to support the Bay Area coach operators and tech company employee shuttles. Finally, on December 1 of 2017, we acquired ARBOC Specialty Vehicles, LLC located in Middlebury, Indiana.

ARBOC is the North American leader in low-floor body-on-chassis or cutaway bus technology. ARBOC provides us with exciting and patented low-floor products in a new market segment for us and allows us to reenter the medium duty transit or shuttle segment with a U.S.

designed, sourced and built product at a significantly more competitive price point compared to our previous MiDi offering. Our New Flyer and MCI parts teams continue to evolve their business to address the needs of their diverse customer base.

We made the decision to combine those parts business into one organization and it has now been branded NFI Parts and maintains its folks on supporting the NFI OEM bus businesses while also targeting new market opportunities. We soon plan to investigate the opportunity to support the ARBOC and cutaway parts market from that business.

Finally, in this overview section, we’re really proud to host our second-ever NFI Investor Day in January of 2018 which was held at New Flyer of America’s manufacturing facility and Vehicle Innovation Center or what we call the VIC in Anniston, Alabama. The VIC is North America’s first innovation lab dedicated to the advancement of bus technology in the areas of electrification, autonomous drive and telematics.

Its state-of-the-art manufacturing labs, virtual reality learning spaces, bus driving simulator and other interactive exhibits were on full display for nearly 50 investors and analysts attendees. The electrification of transit fleet will happen over the long run, but is not cheap nor is it trivial and one approach does not fit all.

Our investment in this space is paying dividends. Glenn will now take us through the highlights of our financial results for the quarter and year.

And following that, I’ll provide some insight into our outlook including an update on our market share, and then we’ll open the call to your questions. Over to you, Glenn.

Thanks, Paul, and good afternoon, everyone. I’ll be highlighting certain Q4 2017 and fiscal year 2017 results and provide comparisons to the same period last year focusing my commentary on key financial insights allowing for more time and attention on our market, business and strategic efforts.

I would like to direct you to the company's financial statements and management discussion and analysis of financial statements which are available on SEDAR or the company's Web site. I do want to remind you that New Flyer’s audited 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.

I also want to note that effective January 2, 2017, the service function which was previously managed as part of the aftermarket operations is now the responsibility of the manufacturing operations. To improve the comparability, the related prior year segment information has been restated to reflect these changes.

In the fourth quarter of 2017, the company generated consolidated revenue of $654.6 million, an increase of 5.1% compared to $622.6 million in the fourth quarter of 2016. Revenue from manufacturing operations increased 4.9% for the Q4 '17 period compared to the Q4 '16 period.

This increase is primarily a result of a 7.6% increase in deliveries offset by 4.5% decrease in average selling price. Aftermarket revenue increased 6.7% in the fourth quarter 2017, primarily due to increased volume to private customers and midlife overall programs.

Total revenue for fiscal 2017 totaled 2.3 billion which is up 4.7% compared to 2016. Q4 2017 adjusted EBITDA totaled $90.5 million which represents an increase of 17.8% compared to adjusted EBITDA of $76.8 million for Q4 2016.

Manufacturing operations adjusted EBITDA in the quarter increased 25.8% primarily due to increased deliveries and improved margins. Contributors to the increase in margin in the period is a favorable sales mix, cost saving synergies, continued cost reductions achieved through the company’s operational excellence initiatives and the integration of MCI.

Aftermarket operations adjusted EBITDA decreased 9.2% in the quarter primarily as a result of margin pressure. We also made a conscious decision that during the planning and execution of the integration of the New Flyer and MCI parts businesses, the SG&A will remain flat compared to the prior year to maintain the service levels.

For the full year 2017, the company reported adjusted EBITDA of 318 million compared to 289 million in 2016. Net earnings increased by 83.2% and earnings per share increased 77.9%.

The company reported net earnings of 76.1 million in Q4 2017 representing an improvement compared to net earnings of 41.5 million in Q4 2016, primarily as a result of improved earnings from operations and $27 million of income tax recoveries related to the recent U.S. tax reform.

This was partially offset by an increase in interest expense. The net earnings per share in Q4 2016 of $1.21 per share improved compared to $0.68 per share generated during 2016 Q4.

For the full year, we reported net income of 191.3 million and basic earnings per share of $3.06 per share which represents an improvement compared to 2016 of 53% and 46%, respectively. Our December 31, 2017 liquidity position of 222.3 million relates to the amount available under the revolving portion of the company's credit facility, which decreases compared to our liquidity position of 349.6 million at October 1, 2017.

The decreased liquidity relates to the acquisition of ARBOC which we used borrowing from the revolver to finance. Our leverage ratio, which is defined as adjusted EBITDA divided by net debt, closed the year at 1.84x, slightly below our target leverage range of 2x to 2.5x to adjusted EBITDA.

The company generated free cash flow of C$74.4 million during the fourth quarter of 2017, an increase of 65% compared to C$45.1 million in the fourth quarter of 2016, primarily as a result of the increased adjusted EBITDA and decreased current income tax expense which was then offset by increased cash capital expenditures and the impacts of foreign currency translation caused by the changes in the exchange rates. The company declared dividends of C$20.5 million in the fourth quarter of 2017, which increased compared to C$14.9 million in the fourth quarter of 2016.

Property, plant, and equipment cash ventures for Q4 2017 of 21.1 million are approximately 2x the cash capital expenditures in the fourth quarter of 2016, primarily as a result of investments in facility improvements, the company’s recently opened VIC and operational excellence initiatives, in-sourcing and continuous improvement programs. We believe a return on investment capital or ROIC is an important ratio and tool that can be used to access potential investments against a related earnings and capital utilization.

The ROIC during fiscal 2017 was 15.8% as compared to 14.3% during fiscal 2016. As a result of the U.S.

Tax Cuts & Jobs Act enacted in December 2017 and generally effective for tax years beginning after December 31, 2017, the company expects a reduction in its consolidated effective tax rate or ETR. The company's consolidated ETR prior to U.S.

tax reform ranged from 32% to 36%, reflecting benefits related to interest deductions and the domestic production activities deduction which will no longer be available. Although the U.S.

federal statutory tax rate decreased from 35% to 21%, the company's ETR for 2018 and subsequent years is expected to range between 29% and 31%. This range includes U.S.

state taxes which brings the combined U.S. federal and state statutory tax rate to approximately 27% and the impact related to the fact that the company's most significant Canadian operating entity, New Flyer Industries Canada ULC, as an entity taxed in both the U.S.

and Canada, will not be able to fully utilize foreign tax credits as the Canadian tax rate is now higher than the U.S. Federal tax rate.

The fiscal 2017 ETR decreased when compared to fiscal 2016, primarily as a result of the net impact of the revaluation of deferred tax balances due to the recently announced lowering of the U.S. corporate federal tax rate which contributed to an income tax recovery of $33 million offset by the write-down of foreign tax credit carryover pool of $6 million, for a net income tax recovery of $27 million.

These two items decrease our fiscal 2017 effective tax rate by 11.2%. With that, I’ll turn it back to Paul.

Thanks, Glenn. So New Flyer’s strategic or NFI’s strategic plan remains focused on profitably growing our leading market position in bus manufacturing and aftermarket parts and we want to do that through enhanced competiveness with a focus on quality, customer and employee satisfaction and operating efficiency.

We estimate that in New Flyer’s market share of heavy-duty transit bus delivered in Canada and United States for 2017 was approximately 43%. As well, we estimate the MCI 2017 market share of motor coaches delivered in Canada and United States has increased to approximately 43% as well; very pleased with the recovery in share on the MCI front.

We continue to expect bus procurement throughout Canada and United States to remain stable through 2018 based on the aging fleet, overall healthy economic conditions, expected customer fleet replacement plans and active or anticipated procurement. As the population ages and excessively becomes more of a focus, we also believe that the advance for low-floor cutaway busses will grow from its current level, similar to what we saw in the heavy-duty transit bus space in the 1990s.

We estimate that our bus delivered nearly 70% of all low-floor cutaway busses in 2017. For 2018, our master production plan and schedule combined with our current backlog in orders anticipated to be awarded in 2018 of the new recurrence [ph] is expected to enable us to deliver approximately 4,350 equivalent new units during fiscal 2018 and production rates obviously varied quarter-to-quarter due to product mix and award timing.

I’m really pleased with the efforts of our teams at both MCI and New Flyer Parts or NFI Parts on the information systems front as they work to harmonize to one common Oracle IT platform across the business. MCI continues with its efforts to prepare for the ultimate product line harmonization of our successful model J and new model D in the next few years.

The transit bus business of New Flyer is also very heavily focused on establishing its new 300,000 square foot parts and components fabrication facility in Shepherdsville, Kentucky that will supply U.S.-made parts to New Flyer/MCI and NFI Parts and we’ll soon investigate how they can assist ARBOC. The NFI Parts business experienced some volume and margin headwinds in 2017 but continued laser-focused on its mission of customer service and support.

Our first opportunity for rationalization of facilities as we announced earlier this year is the closure of our Hebron, Kentucky parts warehouse that will happen in July of 2018, and we will synchronize this up with our Louisville, Kentucky warehouse. We introduced a completely new Web store for NFI customers in 2017 and are now exploring a number of very exciting vendor managed inventory or what we call VMI opportunities directly with customers.

So with a solid balance sheet, reduced leverage and significant debt capacity, we continue to research opportunities for additional growth and diversification. We often get asked; will we pursue additional acquisitions?

And our answer is for sure both in current markets, adjacent markets, in our supply chain, in our forward service opportunities. But we want to ensure that any future transactions are a good fit for our company and will provide significant, strategic and accretive value to our shareholders but also have good to grow.

And let there be no misunderstanding. Look, while we continue to look to grow and diversify delivering on our current business, enhancing our customer relationship, the quality of our products and performance is without question our job number one.

And when it comes to other issues such as NAFTA or steel and aluminum tariffs and those kinds of things and the impact it has on our business, a couple of comments. Steel for us is all about commodity prices and the direct impact to our bus cost is really not that much and not that significant.

And in fact will likely impact all manufacturers to a very similar extent. As for NAFTA, more than two-thirds of our productive capacity is already located in the U.S.

and we’re well positioned to adjust and to work to mitigation any of these disruptive impacts that may come as a result of any changes to NAFTA. We closely monitor the U.S.

products environment, the funding mechanism, economic reaction, tax collection base, currency exchange rates, et cetera. But the bottom line is we can and we will adapt accordingly.

We remain committed to making all parts of our company a great place to work and we will continue investing in safety and training, employee survey, social communities and those types of things to make sure that we build a sustainable engagement and a relationship with our team. I’m really proud of our people and I’m really proud to be part of this team.

Ladies and gentlemen, thanks for joining us today. Glenn and I now look forward to providing you with any questions that you may have or answer any of the questions you may have.

So with that, I’ll turn it over to Denise.

Hi. This is Kris [ph] on for Kevin.

Hello.

Just a question on the aftermarket margins. As you mentioned, you saw some headwinds related to elevated overhead costs in restructuring.

How long will these elevated costs continue to run through the P&L? And when these costs exit the system, how should we think of aftermarket margins trending?

Is this still a 20% plus business?

So I guess it’s kind of hard to get an expectation on what margins will be going forward but I can talk to some of the SG&A costs. We cautiously defined it as we went into all the work around the integration of the parts business that we weren’t going above the tax SG&A costs at a time that we would need resources.

So even though the revenue – the volume has come down, we maintain that level of SG&A support to help us with the integration of the IT systems and the integration of the business. Should we see some of that come down?

Yes, we’ll see that come down primarily once we get the IT harmonization complete. But right now we are targeting to have full completion I believe by the end of this year.

So we should see some level of SG&A be able to exit the system early next year.

Perfect. Thank you.

And just another one. You saw record margins per EU in 2017.

Was there anything in the full year delivery cycle that was abnormal and suggest this level of profitability isn’t sustainable into 2018, excluding the mix impact of adding ARBOC?

Again, it’s always very contract specific and what specific products are out there that we’re actually building in any one year. So there are some maybe more unique products where we don’t see the same level of – has more complexity and therefore we price it a little bit higher to deal with that complexity.

So there maybe some of that in 2017 and then going into 2018 that we would see coming off in 2019, but nothing in 2018.

Thanks. And just one last one.

After 2018, how should we think about normalized CapEx? Are you still in the 20 million to 25 million range?

Yes, so what we look at from a maintenance CapEx call it 25 million-ish; 25 million maybe, 30 million top end, we were looking to spend between 56 million and 65 million in CapEx last year. We only spent 52 million.

So if you look at the top end, there’s going to be about $10 million of carryover from last year coming into 2017. And then as we said, we had sort of the same level of enhancement projects for this year.

So in terms of CapEx, I would say we’re probably going to be in the range of $75 million plus this year. And again depending on our ability to hit all the timing of the items.

So we have definitely projects that are up to the $75 million total CapEx which will include the maintenance, but the question always is what’s the time to get them done and will there be any flow into 2019?

With your question about maintenance and ongoing CapEx, yes, kind of plus or minus 25 million is a good assumption.

Perfect. Thanks very much.

Thank you.

Thanks, guys, good afternoon.

Hi, Chris.

I guess a couple of things just to check in on. First thing, just thinking about we’ve had our discussions about strategic initiatives and growth for the last probably year, year and a half.

We’ve seen these guys go forward with the ARBOC acquisition. We’ve talked a little bit about maybe international plays, school busses, different product categories.

At the time we first started announcing this, you basically made the comment, look, we need some time to evaluate this stuff and we’re going to hold off maybe on dividends and stuff like that to give ourselves some dry powder. You just want to come back and maybe revisit at what point you are in that evaluation cycle and if you basically exhausted some of these possibilities or they’re still opportunities that you see out there and how that goes?

And then I guess the other piece of it is how that plays into how we should be thinking about dividend growth especially as we go into Q1 where I think you guys have a formal review?

Good question, Chris, and obviously where we’re at and we try to reflect it in our remarks today. It’s not like we don’t have stuff to do and it’s not like we don’t believe that there is opportunity in our current business for growth for EBITDA enhancement or margin enhancement or cash flow improvement projects and on and on.

So we’re – we got a full slate and we’re investing in certain things. The Shepherdsville facility hire 400 people, stand up a 300,000 square foot facility, make all kinds of commodity.

To us that’s almost like an acquisition. But having said that, we have a strategic framework that we shared a little bit with the market on in terms of the types of things that’s important to us that are similar to the attributes of our current business.

We have spent time and effort and continue to look at pieces, whether they’re transformational in size or whether they’re tuck-in type things that might make sense. Some are projects and opportunities that are well known to the street and for the interested parties and some of them are ones you got to develop over long periods of time.

And so it’s not like we stopped, it’s not like we saw deals on the altars that we’re ready to close, but we are deeply working on things that could make sense for our business going forward. And I think our track record has shown that we’re willing to be patient and prudent to do the right thing.

And I’ll just point to it took us three years to get NABI done, it took us a year and a bit to get MCI done and so we’re going to be prudent with our shareholders’ money. At the same time we’re going to be very strategic on that.

So nothing formally to report other than we continue to look for things that makes sense for our business. With respect to returning capital to shareholders, we continue to have a conversation with the Board about an MCI being in those kinds of instruments that might make sense.

And so we’re continuing to constantly evaluate if that’s a tool we want in our toolkit. And as we’ve said many times now for the last couple of years, we’re trying to get into a normal cycle of dividend review and the next review of that is as we head into our annual general meeting here in early May.

So that’s the way we’re looking at it. We had a good healthy conversation this morning with the Board about where we want to be dividend wise, what we think yield ranges makes sense for our type of business that still allow us to be acquisitive if we can find the right opportunities and so forth.

So not answering your question around quantum but there’s a good indication that that dividend review is very, very active and ongoing here.

Okay, fair enough. One of the things that came out of the Investor Day and something that I think we were talking about was ARBOC and the potential for growth.

And I think part of the comment that you made at the time is that you were still trying to get your head around what were the opportunities of market share, the ability of you taking your manufacturing folks and supply chain folks into that facility and the scaling of it. And I think the comment you made is, still early days.

We’re still trying to figure this out a little bit. Just wondering if you’ve had any more success in getting a better handle on how we should think about growth maybe longer term with that business?

You referenced the fact that you see the market converting over to low floor and I think if you look back at the transit business that was about 12 years that it took to go from like all high floor to mainly low floor. I guess what we’re trying to figure out is, you’re going to go from call it the roughly 360 units to 500 this year but what’s the potential or how should we think about the potential as we start looking kind of '19, '20 kind of broader picture?

Yes, so again good question and you’ve followed us for a long time so you know the business well enough. There’s a couple of angles here.

One is the volume, no question. We think the low-floor product makes sense in that space and the dynamics around it.

We think that we can really help ARBOC convert from a job, shop, lower volume kind of product to build facility to higher velocity production lines. And the fact Wayne Joseph, the President of our transit bus business that he’s responsible for, ARBOC gave an update to the Board today about the work that he and his team are doing with Don Roberts and his team at ARBOC around addressing that factory, layout issues, looking at the make, body type things, looking at what New Flyer facilities can source for them, looking at paint capability and so on and so forth.

We continue to feel very comfortable around a forecast of just around 500 if not a little bit more this year, so we’re very pleased about market demand. And it’s a bit of a self fulfilling prophesy, if you’ll pardon the simplicity of my comment, but if we can continue to get the factory to grow at a pace that we’re comfortable with, if we can continue to try and work on their cost base that maybe minimizes some of the delta between a low floor and a high floor and therefore improves our ability to help market take up, this thing has legs for growth and for real profitability for our business.

But at the same time we’re not interested in just jerking it for short term or quick volume that isn’t sustainable whether it’s with production works or the culture of the facilities and so forth. So I’m really pleased to see that we can think we can go from kind of 350 to 500 and north of that over the next couple of years.

I still don’t believe we have a good handle yet on how fast take up of low floor will be relative to high floor, but I think that has a lot to do with us getting the cost down and therefore the price points culture in line and that will take time. It’s not going to happen tomorrow.

Okay. And then one last one for me on the medium duty that ARBOC has been developing.

I think that was heading to Altoona. Any updates on the status of that and its ability to go into production?

Yes, Wayne also gave us an update on that. The Altoona test has gone extremely well.

There’s always issues you find in Altoona and as much as you want to leave there with no, to the same time you want to push your bus to make sure that you really understand it in service. And so the testing has gone extremely well.

And then part of the facility readiness is the setting up of a dedicated line that is in process at ARBOC in Indiana. A rough order of magnitude I think of the 500 units because I think we’re planning 20 or 25 this year that are going to be the equises [ph].

So we’re right on track with what we expected.

Okay. Thanks, guys.

Thanks, Chris.

Thanks. Good afternoon.

I actually just wanted to follow up on some of the questions that Chris had on the ARBOC. Can you maybe just talk a little bit about the cadence of deliveries there?

Should we expect kind of a similar I guess delivery rate in the early part of the year before it ramps up in the back half of the year? And maybe just talk about what your expectations are there?

How we can ramp up to the 500 number and sort of by quarter?

Glenn?

I don’t have the quarterly forecast in front of me, but I would say that it’s definitely back half loaded in terms of the pace of deliveries. So if we did 350 in 2017 to get to 500, it’s guessing would be H2 loaded.

Maybe that’s something we can follow up with you on, but it’s definitely not even by quarter, the second half on a higher percentage.

Okay. And just on I guess the average selling price, if we look back at 2017, I think there was about $100,000 a unit.

Is there any reason to think it’s going to be any different in 2018? And if we get beyond that with the new medium-duty, how does that affect average selling price for the ARBOC units?

Yes, it’s a really good question and it’s something we got to figure out how to help you guys with your models on it. Just a comment of reminder.

When it comes to the cutaways, our selling price does not include the chassis because the chassis is sold directly to the bus dealer and then we sell an invoice for the body and then they sell to the end customer one invoice for the combined unit. So that’s why the selling prices are so much lower.

The equises, however, will be sold as a full bus because it’s our chassis and so we’ll have both the body and the chassis on the same invoice. So rough order of magnitude of the equises in the 20 or 25 we’re going to sell this year is somewhere north of 250,000 U.S.

as opposed to 100,000. And then as we go forward we’ll try and get some color about the mix between cutaway work and medium-duty work.

Today, we’re seeing it as relatively immaterial for 2018.

Okay, that’s very helpful. And maybe just finally very quickly just on the aftermarket, we’re fairly close to being at the end of Q1 here.

I’m just maybe wondering if you can talk a bit about what you’re seeing there so far this year and what degree of visibility do you have into the market as we look ahead for the remainder of the year? I think you sort of talked about it being a stable business from a revenue point of view, but just any kind of trends you’re seeing so far this year.

Yes, the first quarter we have daily sales reports and so forth. And so Brian Dewsnup, the President of that business reported today that he’s seeing again kind of stable volume, so no overall drop off or no real massive recovery.

Just kind of that stable – remember that and we’ve talked about this in a number of calls. It’s really hard to predict because the visibility of what we’re selling is relatively small, maybe 30% or maximum 40% of that business is contractual.

The rest of it is opportunistic or a quote-based business or I need a part tomorrow type stuff or can you quote on 50 windshield wipers and that kind of stuff. And there’s no way to plan the volume of it.

We try our best to go back and look into transit agencies and reverse their spare parts, budget and all that kind of stuff, reverse engineer that’s hard to do. The other dynamic is you can buy a windshield wiper from me or my competitor or from Walmart or from a truck dealer or whatever, so there’s lots of sources which make market size counts difficult, market share counts difficult but also predictability of volume.

And so that’s why we chose our word carefully that we think it to be stable. So far there’s no indication that 2018 is going to be any real different than 2017.

For us we’re carrying, as Glenn described earlier, a bit of an elevated cost base to make sure we don’t drop the ball or don’t provide service level of customers as we integrate these two businesses into one company but also into one IT system. And then as we did comment in some of our notes and in the MD&A about one of the new trends that we’re seeing and it’s been talked a lot about is this concept of vendor managed inventories, whether it’s a basket of parts or a certain type of parts like a whole family of brake parts for example and so forth.

And we’re seeing a lot more transit agencies have real active conversations and actually RFPs on the street around vendor managed inventory. And if we can get some real take up on that, that will allow for a way better visibility of what we’re having to buy and what we’re selling and the replacement factors and so forth as opposed to guessing what people need, putting in our shelf and then hoping we have it and win the competition.

So a bit of a long answer to your question but I think the color is helpful. The parts business is – it continues to do well from a customer perspective.

We’re very pleased with the integration efforts that are going on, rebranding that business and the harmonization of the IT. And then there’s the massive headwind that we just cannot underestimate that some of our large, large transit customers or public customers like Jersey or New York City or others have been buying good batches of new busses.

And if you take 500 18-year-old busses off the road, you put 500 new busses on the road in the span of a year or two, you’re not going to sell the same level of spare parts. It doesn’t matter what you do.

All those things conspired to us to say, spare parts is a good solid business but we’re not too excited if there’s volatility in volume and margin in the short term.

Okay, very good. Thanks very much.

Thank you.

Good afternoon, gentlemen.

Hi, Steve.

Hi. So I just had one follow-up question as all of my questions are already answered, but you guys have been busy on internal initiatives to enhance margins across the whole business and you got a bunch of internal CapEx programs on the way, you got the new parts facility, you’ve in-sourced your composite manufacturing.

And if you take all of that together as a basket of margin enhancement activities and some of its underway, some of its still to come and you use the baseball analogy, where are you in this? Are we in the sort of second and third inning of margin enhancement here or more like the fifth or sixth?

Where are we in the evolution of what you’ve already announced? And I guess as a follow up, is there more to be done beyond what you’ve talked about?

Well, we’re careful to be too transparent about the kind of stuff we’re working on. But I think your baseball analogy is a fair one.

And you almost have to look at it in the different segments or parts of the business, so let’s just kind of digest for a sec. New Flyer is definitely more mature in both the facility optimization as well as the level of – and quantum of stuff that we make for ourselves.

Having said that, in the last year we jumped on the fiberglass story and we jumped on the more parts – U.S. part manufacturer story that does two things for us.

It gives us control of cost, time and quality but also gives us more U.S. content for our Buy America type thing.

So New Flyer is probably in the fifth or sixth inning in terms of its margin enhancement opportunity. MCI is in a different place.

MCI has both the combination of catch up in terms of the facilities and some of the investment. They have been doing some really good stuff on in-sourcing.

The problem with MCI is that we’re kind of stuck in limbo for a while here with these legacy D model, a new D model that we want to build on the J line, but you can’t harmonize the line. And so therefore you have a sub-optimized part fabrication element where you’re making parts for the one model and the other model as opposed to a harmonized model.

So I would say MCI is more in the second/third inning of that kind of thing, but it’s not like it’s a light switch that we can go get tomorrow. It’s going to transpire over the next couple of years.

The parts business is again a story where you got elevated cost to make sure they won’t screw this up while we harmonize the businesses. It’s unlikely that the parts business itself will ever make anything in-sourcing because it’s going to buy from third parties and resellers.

It’s going to buy stuff that we make for ourselves. ARBOC is really in the first inning.

In fact, it’s not even at the plate to be quite honest with you because ARBOC is today an assembler. And we’re trying to decide whether we want it to make some of its own parts or whether Flyer or MCI can make parts for it and whether the issue of growing volume as well as in-sourcing at the same time can be a bit of a delicate thing.

So back to Chris’ questions earlier, we still got – we’re still pretty very excited about where ARBOC – we’re very cautious not to go too fast. At the same time there is definitely a cost opportunity that we’re going to go after.

Again, hopefully, Steve, that gives you kind of context of the different elements.

That’s perfect. Thank you.

Hi, Paul. Hi, Glenn.

Hi.

Nice quarter, nice year, nice long-term record. I think we’re talking about the largest bus manufacturing company in North America with a superb record and yet for reasons I don’t follow, you’re virtually unknown in the investment community in the U.S.

And I’m just wondering is there anything you can do, list on the New York or some other way of getting any Wall Street coverage? And I’d think you’d get a higher multiple if you had Wall Street coverage?

I think you bring up a good point and let’s talk a little bit about it because it too was a great topic of discussion at our Board this week. First of all, we talked about dual listings and so our view is just going do a dual listing for the sake of that right now is difficult and expensive and complex and what are we really going to get from a – a benefit from it at this point in time.

Having said that, if we were able to get a sizable or a transformative opportunity in the U.S. where we may need it to top up our debt capacity with some equity, it might be the time to look at that kind of thing.

So that we’re kind of thinking about. We have started a very targeted and focused investor outreach effort and a target around U.S.

investors specifically. We’re adding some horsepower to our investor IR function that we didn’t have before that will come online here in the next couple of months and we have been doing targeted outreach to Globe and Mail and to Bloomberg and those kinds of things.

But clearly 90% of our business is in the United States and so this is where we want to try and really get some focus, because as we see from some of our not necessary direct comps but businesses like Blue Bird or like Red [ph] and so forth have participated at multiples that have been a little bit higher and yet not had the same operating economics. So we’re clearly focused on trying to make sure that we get the coverage and the valuation that we think we should have.

Okay, great. I just think you could really get some – you’re inexpensive given your track record and so some recognition in the U.S.

community I think could help your multiple. Anyway, thank you.

Yes, it’s good advice. We continue – we’re very deep talking about it and focused and trying to figure out what the right thing is to do.

So thanks for that support.

Sure.

Hi. Good afternoon, guys.

Hi, Mark.

Just want to follow up on the integration and the IT harmonization. You said earlier by year-end, you should be completed.

Has that been pushed back a bit? I guess I thought it was going to be a bit sooner, but maybe I was wrong.

Well, there’s multiple elements to it. So there are things that will start happening right as we get right out of the summer shutdown period in July, certain elements will start to get together.

Remember there’s two major projects. One is the harmonization of the manufacturing at MCI and the other is the harmonization of the spare parts business.

And so there’s two major project teams and they have multiple streams. So we start in earnest like we’re definitely in project effort right now designing, testing and so forth, but the conversion starts in July and we think we’ll be done by the end of the year.

And the – I guess so the way to think about the overhead SG&A, just stays elevated basically full year?

Yes.

Okay. Then I just want to make sure I’m understanding the CapEx comments.

Again, it sounds like it’s pretty project specific. So it’s the stuff you sort of got planned out.

Whether it slips into '19, some of it anyway, that may happen but aside from that, like again if it’s – it’s not a multiyear sort of CapEx cycle here. It’s basically project-specific?

Yes, very much so, Mark. Again, Glenn correct me if my numbers are wrong but we thought we’d spent a little more this year based on our project list.

Some of them didn’t get done, so call it 55 million this year plus or minus. We thought our original target was about 65 next year but we got some carryover, so we’re now saying starting 2018 it’s something like 70 to 75 by the time we’re done.

Some of that if it doesn’t get done this year that’s project based, it will slip to next year and our maintenance capital at this point is around 25 for next year. And at this point no additionally defined CapEx programs that we have hard dollars tied to it yet.

That may change but at this point we do not.

Okay, that helps. And then just on the EBITDA per EU, again it does tend to be a bit lumpy I guess quarter-to-quarter.

But for the year, you did about mid-60s. Just sort of ignoring the mix, and again I think it was to Steven’s question, you mentioned sort of it sounds like there was quite a bit of opportunity in the business.

I guess just how do you think about baseline, sort of where we’re right now? Again, 70 sounds may be a bit high.

So maybe that mid-60 is the right number? And I guess if you think about this business two, three years from now, or when most of this stuff is complete, like a ballpark or a reasonable number that you think you can get to that you’re targeting or anything you want to share on that?

Well, not necessarily anything we want to share but as a color, margin is a function of cost and then a function of what the customers are willing to pay for it. And as we’ve talked about, we’ve got some competitors trying to ramp up capacity or the electrification game and so forth.

So our strategy around cost takeout is that as the game gets played, if we’ve got to be creative on costs and if we can take out some costs, we may have to share some of that. And so there’s a range of margins that we currently also laid in for the last couple of quarters we would say to be our expectation is that would be kind of – our expectation going forward of normal range margins.

There’s always going to be competitions where it’s an absolute horse race and its lowest price wins and if it’s the way to [ph] volume, then we want that and we’ll go after it. But at the same time there’s also projects and programs where we are pole position or we have a unique offering that others can’t do easily or don’t do today and so in those cases we’ll have higher margins.

And so that’s why we always tell everybody, don’t get too excited about one quarter. Try and use an LTM or a multi-quarter type approach.

The good news is that over the last couple of years we’ve been able to get some price recovery on normalized margins and pricing in the marketplace but we’ve also gone after cost and the quality that has given us that competitive margin list.

Okay, that all make sense. Thanks a lot guys and great job.

Okay. Thanks, Mark.

Good afternoon, gentlemen.

Hi, Daryl.

Just a quick one on the electric bus trials in LA and New York right now. I’m just wondering if you guys can maybe give a bit of an update on how that’s progressing and any takeaways you’ve seen so far?

Yes, the LA ones have actually – haven’t got into service, so that’s in the process of production and then delivery and commissioning and so forth. The New York ones, there’s five.

We have two charging stations that have been set up. As we talked at our Investor Day, it was fascinating to watch the process.

We had 12 different city or state agencies that need to sign off. It took us nine months to get approval on putting the charging stations in place.

And so this is just the reality as much as the New York issue, but anywhere this is different than just pulling up to a diesel pumping station. The customers -- New York’s been fantastic.

It’s a very well known customer to us and so the cooperative efforts around commissioning, troubleshooting and service and so forth has been very, very good. We had some news releases about the New York trial I think went out early January and we’ll continue to update that as we get service and performance.

But so far all indications have been very, very good.

And as they work through this into the magnitude of this task or this endeavor, do you think it’s pushing back any of their expectations in terms of some of the lofty goals for full electric by 2030?

That’s a really, really good question and we had an opportunity to have our Chief Engineer, Chris Stoddart, make a presentation at the recent AltaCorp conference and talking about people expectations of just an electric bus. If you really don’t understand the cost, the complexity, the charging systems, the need for substations for the amount of power you need in charging a certain period of time, it’s easy to get romanced around electric busses, the tipping point and cost makes sense.

But it’s that infrastructure that the monies going to have to come from somewhere and it’s not trivial. And so putting us five busses in New York for a project is really good learning and very romantic, but putting 50 or 500 busses then is a massive, massive effort that isn’t just about buying the bus.

I don’t think that’s tempered people’s desires and commitments to try and transform to zero emission, but there’s a reality check around the funding and the complexity that is starting to help people get – that this is not that trivial. The other big dynamic that you’ve heard us talk about a lot is that there still are not standards.

And so the transit agencies are hesitant to put in bigger fleets because there are no standards that we’re all working to. And so might charger and somebody else’s charger and adapter and so forth and nobody wants to buy a charging system that can’t charge everybody’s busses and so forth.

So we talk about the vast majority of those zero-emission battery electric projects we think are proof of concept, R&D, validation and so forth. But until the charging standards, which we’re feeling like the industry will come both operators as well as CSA and ourselves and our competitors, try and come to common standards by the end of the year and into '19, those will help people truly understand that they’re working on a common platform.

And I think some experience as well as some of those standards and some of the reality checks of funding and maybe we’ll get into different types of relationships, three Ps and those kinds of things, but I still believe that ultimately our industry will migrate to a good percentage of battery electric busses.

Got you, okay. Excellent.

And then in terms of the new parts manufacturing facility, what is the expected completion date for that? And then secondly, is there a quantum of cost savings that you can put out that you would expect to see from manufacturing those parts in-house, those specific parts in-house?

Yes, we haven’t put that out. And I’m not sure we’re going to put that out as blatantly as you might like it from a model perspective.

Remember job one on that stuff was about U.S. content for Buy America compliance.

And so that was the first thing. There is definitely a cost opportunity and a solid payback that we put through exactly the same filters that we use for acquisitions and so forth.

And so again back to the previous question, hopefully you’ll see margin enhancement just grow over time as we bring that thing online. But if we get into price commitment dynamics, then it’s a level we can pull that maybe we got to share some of that savings.

And coming online, it won’t be a light switch whether it’s getting phased in. Actually I think the first parts of that facility will start in the second quarter.

But the full phase of the full project will not be completed until the end of the year.

Okay, great. Then just one final question.

In terms of NAFTA, has your thinking or planning change at all over the last kind of three to four months or is it still serving exactly the same views on how it’s going to play out?

Well, David White, our VP of Supply has done a phenomenal job working with our brokers and his supply teams to have really, really deep dive on exactly what parts move and what shelves go in busses across the border and so forth. So we’ve done a lot of stimulation based on actuals to try and understand implications for NAFTA.

We – again, I don’t think we’ve changed our position one bit. If the new – if there’s no NAFTA or a new NAFTA, we may need to move some of what we complete in this location or move or build in that location.

We’ve built some concepts but we haven’t really changed our position that we think we can adapt with relatively good ease or efficient ease to be able to put in place to mitigate any possible impact. Again, it’s not a massive impact for a business but we think we’ve got the capability to respond.

Okay, excellent. That’s all for me.

Congrats on a great year, guys.

Thank you.

Thank you very much, Denise. Ladies and gentlemen, thanks for joining us today.

Glenn and I look forward to talking with you at our next update that will be held in conjunction with our annual general meeting in Toronto on May 10th. Have a great afternoon.

Thank you.