New Flyer Initiating

Table of Contents
Rpt. 27513415
20-Nov-2015
NEW FLYER INDUSTRIES-INITIATING COVERAGE

ALTACORP CAPITAL
- MURRAY, CHRIS, ET AL
5 - 12
Rpt. 27471998
16-Nov-2015

ALTACORP CAPITAL
13 - 19
Rpt. 27421224
11-Nov-2015

ALTACORP CAPITAL
20 - 30
Rpt. 27396447
09-Nov-2015

ALTACORP CAPITAL
31 - 40
Rpt. 26730768
10-Aug-2015

ALTACORP CAPITAL
- RESEARCH DEPARTMENT
41 - 53
Rpt. 26029265
08-May-2015

ALTACORP CAPITAL
54 - 62
Rpt. 25821445
15-Apr-2015

ALTACORP CAPITAL
63 - 67
Rpt. 25746318
02-Apr-2015

ALTACORP CAPITAL
68 - 75
Rpt. 25669158
20-Mar-2015

ALTACORP CAPITAL
76 - 84
Rpt. 25259005
19-Jan-2015

ALTACORP CAPITAL
85 - 90
These reports were compiled using a product of Thomson Reuters
www.thomsonreuters.com
Table of Contents
Rpt. 24866260
07-Nov-2014

ALTACORP CAPITAL
91 - 97
Rpt. 24316098
07-Aug-2014

ALTACORP CAPITAL
98 - 114
Rpt. 23788093
12-May-2014

ALTACORP CAPITAL
115 - 122
Rpt. 23468683
24-Mar-2014

ALTACORP CAPITAL
123 - 130
Rpt. 23294913
18-Feb-2014

ALTACORP CAPITAL
131 - 137
Rpt. 23050822
07-Jan-2014

ALTACORP CAPITAL
138 - 173
Rpt. 22122995
04-Jul-2013
NEW FLYER INDUSTRIES: INITIATING COVERAGE WITH MARKET PERFORM RATING(REPORT)

BMO CAPITAL MARKETS
- POWELL, BERT, ET AL
174 - 204
Rpt. 22122996
04-Jul-2013

BMO CAPITAL MARKETS
- POWELL, BERT, ET AL
205 - 209
Rpt. 21194032
13-Dec-2012

CIBC WORLD MARKETS INC. (CANADA)
- CHIANG, KEVIN
210 - 221
Rpt. 21194033
13-Dec-2012

- CHIANG, KEVIN
222 - 269
Table of Contents
Rpt. 16572088
30-Aug-2010
NEW FLYER INDUSTRIES - INITIATING COVERAGE-INITIATING COVERAGE

- WILLEMSE, MICHAEL, ET AL
270 - 305
Rpt. 16572110
30-Aug-2010
NEW FLYER INDUSTRIES - INITIATING COVERAGE-INITIATING COVERAGE

- WILLEMSE, MICHAEL, ET AL
306 - 321
Rpt. 15851033
09-Feb-2010
NEW FLYER INDUSTRIES - INITIATING COVERAGE

DUNDEE SECURITIES CORP
- STONEMAN, RICHARD, ET AL
322 - 324
Rpt. 15851034
09-Feb-2010

DUNDEE SECURITIES CORP
- STONEMAN, RICHARD, ET AL
325 - 344
Rpt. 15999822
01-Feb-2010

NATIONAL BANK FINANCIAL
- JOHNSON, TREVOR
345 - 347
Rpt. 14260718
17-Dec-2008

CLARUS SECURITIES INC
- ABBOUD, YOUSSEF
348 - 371
Rpt. 13900140
10-Sep-2008
NEW FLYER INDUSTRIES - REINITIATING COVERAGE

SCOTIABANK GBM
- TYERMAN, DAVID
372 - 377
Rpt. 13879399
03-Sep-2008

- HOLDEN, PAUL
378 - 386
Rpt. 12604789
04-Sep-2007

SCOTIABANK GBM
- TYERMAN, DAVID
387 - 392
Rpt. 12434923
16-Jul-2007

- HOLDEN, PAUL, ET AL
393 - 404
Table of Contents
Rpt. 11784936
23-Nov-2006

405 - 413
Rpt. 11785250
22-Nov-2006

414 - 445
Rpt. 11252294
29-May-2006

- DUNNING, A.S., ET AL
446 - 454
Rpt. 11251195
26-May-2006

- DUNNING, A.S., ET AL
455 - 512
INSTITUTIONAL EQUITY RESEARCH: DIVERSIFIED INDUSTRIES
COMPANY UPDATE
NFI | TSX
New Flyer Industries Inc.
$26.07
Rating: Outperform
One Year Target: C$35.00
Total Return: 36.9%
Yield: 2.6%
November 20, 2015
Notes from Toronto

Solid Meetings Explain Rationale for MCI Transaction: We had the opportunity
to host institutional investor meetings with senior management of New Flyer Industries
Inc. The company addressed a number of questions related to the recent acquisition of
MCI along with commentary on the demand and pricing environment.
Financial Metrics (US$)

52-w eek High/ Low :
C$26.30 / C$12.05
2.6%
Dividend Yield:
Shares Outstanding ($mm):
55.5 (basic)
Market Capitalization ($mm):

Float ($mm)
C$1446.0
55.5 (fd)
39.7
151.0
3-Month Avg. Daily Volume ('000):

Por Forma Net Debt (Q4/15) ($mm):
Enterprise Value Incl. OBSD ($mm):
(Assumes Acquisition of MCI Closes in Q4/15)
$651.9
$1744.9
(FYE Dec 31)
2016e
2014
Revenue ($mm)
2015e
$1,451.1 $1,552.1 $2,450.7
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$144.8
$243.6
$0.65
$0.99
$1.65
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3
$37.9e
2016
$51.9e
$52.8e
$69.0e
$69.8e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.20
$0.30
$0.26
$0.23e
2016
$0.29e
$0.31e
$0.52e
$0.53e
$30
$25

Volume ('000)
1200
Last Sale Price
1000
$20
800
$15
600
$10
400
$5
200
0
$0
Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15
Chris Murray, P. Eng., CFA

Managing Director
647.776.8246
cmurray@altacorpcapital.com
We Expect Synergies to Materially Grow: When announcing the transaction to

acquire MCI, NFI management indicated an expectation of synergies of $10mm. We
believe this number is very low, with management acknowledging during meetings that
while they believed the combination stood on its own from a financial perspective, they
would run a process similar to how the integration of NABI progressed. For reference,
when the company announced the decision to move NABI to the Xcelsior platform, the
expectation was for a two to three-year payback implying $7mm to $10mm in savings.
Since that point, management has increased estimates of run rate savings indicating that
savings were expected to be $16.5mm with Q3/15 reporting and updating that number to
$18.0mm with marketing. We believe with a combined ~$1.6bn purchasing spend, the
ability to leverage Marcopolos global sourcing network in the private market, weak IT
systems at MCI and an acknowledgement that MCI is only in the early stage of lean
optimization relative to NFI operations that significant further savings are available.
Underlying Margin Improvement Continues: We continue to expect the trend in
underlying margin per equivalent unit to continue to improve in 2016 and 2017. At
Q3/15 EBITDA margin per EU on a trailing basis stood at $33.2k/EU, which marks a
high point since early 2011. We believe the synergies derived from NABI, estimated at
$18mm could add ~$6.5k/EU to 2016 and 2017 run rates, which would bias our
estimates higher. Management continues to be conservative in any guidance, also
cautioning there can be significant period to period variation, however during meeting
did acknowledge the trend toward improved pricing in backlog has begun to materialize
as competition normalizes indicating that the average margin in backlog expected to be
produced in 2016 and 2017 is better than what was experienced through 2014 and 2015.
Maintain Outperform and $35.00 Target: Based on our discussions with
management, we believe the MCI acquisition has significant potential to improve the
earnings and cash flow profile of the company. We see a number of opportunities to
increase returns with higher synergies, while we continue to see improving fundamentals
in core bus manufacturing operations and the aftermarket segment. We maintain our
Outperform rating and our 12-month price target of C$35.00. Our target price is based
on a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending
Q3/17 reflecting our 12-month forward valuation period as well as an exchange rate of
C$1.32/$US.
Samarth Modwal, Associate

647.776.8245
smodwal@altacorpcapital.com
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com
I NSTITUTIONAL
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INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
ALTACORP CAPITAL INC.
Operating & Financial Highlights

Current Valuations
Unit Price (C$)
$26.07
EV/EBITDA
2014
2015
2016
Peer Average
10.4x
12.5x
9.0x
9.3x
7.3x
7.2x
Income Statement
2014
2015e
2016e
2014
2015
2016
Peer Average
14.7x
30.0x
13.7x
19.9x
12.4x
11.9x
Trend Free Cash Flow (FCF)
2014
2015e
2016e
2017e
Revenues
Bus Manufacturing
1,132,066 1,231,170 2,016,079 2,075,781
Aftermarket
319,034 320,916 434,615 455,938
Revenue
1,451,100 1,552,086 2,450,693 2,531,719
Aftermarket % of Total
22.0%
20.7%
17.7%
18.0%
EBITDA - Bus Manufacturing
57,374
82,262 145,663 153,647
5.1%
6.7%
7.2%
7.4%
Margin - Bus Manufacturing
EBITDA - Aftermarket Ops.
49,991
62,531
87,897
92,888
15.7%
19.5%
20.2%
20.4%
Margin - Aftermarket Ops.
Total EBITDA incl. Other/ Synergies
86,457 136,232 243,560 274,816
6.0%
8.8%
9.9%
10.9%
Margin
Adjusted EBITDA
107,365 144,793 243,560 274,816
7.4%
9.3%
9.9%
10.9%
Margin
Amortization
35,837
42,564
60,691
59,052
Operating Earnings
50,620
93,669 182,869 215,763
EBT
37,568
76,452 145,217 190,679
Cash provided by operations

45,823 80,172 100,496
Changes in non-cash working capital
35,255
9,367 62,883
OCF less working capital
81,078 89,538 163,379
Principal portion of capital lease payments
(1,766) (1,908) (2,004)
Net capital expenditures
(10,889) (12,502) (30,278)
Non-operating, non-recurring items affecting FCF 15,398
7,766
Net defined benefit pension funding
FX gain on cash held in foreign currency
(154)
(961)
Free Cash Flow
83,667 81,933 131,098
177,337
16,023
193,360
(2,004)
(36,908)
154,448
Taxes
Net Income
10,849
26,719
23,890
52,562
53,730
91,487
70,551
120,128
Dividends Declared on Common Shares (C$)

Ratio of Dividends Declared to FCF
Reported FD EPS
Adjusted FD EPS
$0.48
$0.65
$0.95
$0.99
$1.65
$1.65
$2.16
$2.16
2015e
2016e
2017e
Growth
2014
Revenue
Weeks of Production
Bus Manufacturing
Aftermarket
52
15.0%
48.4%
21.0%
13.4%
Adjusted EBITDA
52
8.8%
0.6%
7.0%
34.9%
53
63.8%
35.4%
57.9%
68.2%
2017e
Price/Earnings
52
3.0%
4.9%
3.3%
12.8%
Adjusted FD EPS
2.7%
51.0%
66.8%
31.3%
FX Assumptions
2014
2015e
2016e
2017e
0.9057
0.9050
0.7834
0.7463
0.7526
0.7634
0.7783
0.7937
Average CAD/USD Rate

EOP CAD/USD Rate
Free cash flow (C$)

per Share
FCF Yield
FCF per share growth
Trend
92,829 104,615 173,985 198,313

$1.67
$1.88
$3.13
$3.57
6.4%
7.2%
12.0%
13.7%
82.8%
12.6%
66.3%
14.0%
Dividend Per Share (C$)
Dividends on Common Shares

Cash Yield
Trend Key Operating Metrics

Bus Deliveries (Equivalent Units (EU))
Revenue Per EU (US$000's)
EBITDA Per EU (US$000's)
Average Weekly Delivery Rate (EU)
Average Weekly Line Entry Rate (EU)
Book:Bill Ratio (New Orders+Exercised Options)
Option Expiry as % of Opening Options
Trend Leverage
Net Debt (EOP)
Net Debt to Trailing EBITDA
Net Debt to Total Capitalization
2014
2015e
2016e
2017e
32,457
35.0%
33,931
32.4%
38,854
22.3%
38,854
19.6%
$0.585
2.2%
$0.611
2.3%
$0.700
2.7%
$0.700
2.7%
2014
2015e
2016e
2017e
2,437
464.5
23.5
49.2
48.5
0.9x
20.7%
2,503
491.9
32.9
49.1
48.0
1.1x
5.0%
4,065
496.0
35.8
78.2
77.1
1.0x
18.4%
4,170
497.8
36.8
81.8
80.7
1.0x
19.9%
2014
2015e
2016e
2017e
Trend
Trend
Trend
229,034 651,891 610,915 500,725

2.1x
4.5x
2.5x
1.8x
33.6%
57.6%
53.0%
44.2%
Option Expiry of Backlog of 5410 Equivalent Units (EU)
Firm and Option Order Backlog ($bn)

$5.0
Firm
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
$1.0
2017, 10%
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
2018, 26%
Note: All amounts in US$ 000's, unless otherwise specified.

Source: New Flyer Industries Inc., AltaCorp Capital Inc.
New Flyer Industries
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Marketing Highlights from Toronto

We had the opportunity to host institutional investor meetings with senior management of
New Flyer Industries Inc. (NFI-T), including the companys President and CEO, Paul Soubry
and the companys CFO, Glenn Asham. The company addressed a number of questions
related to the recent acquisition of Motor Coach Industries International Inc. (MCI) along
with commentary on the demand and pricing environment. Overall, the tone was consistent
with the companys conference call and we highlight some additional details below:
When announcing the transaction to acquire MCI, NFI management indicated an

expectation of synergies of $10mm coming from certain head office cost savings, the
removal of the CEO at MCI as well as minor purchasing synergies. We believe that this
number is very low, with management acknowledging during meetings that while they
believed the combination stood on its own from a financial perspective, they would run a
process similar to how the integration of NABI progressed. For reference, when the
company announced the decision to move NABI to the Xcelsior platform, the expectation
was for a two to three-year payback implying $7mm to $10mm in savings. Since that
point, management has increased estimates of run rate savings indicating that savings
were expected to be $16.5mm with Q3/15 reporting and updating that number to
$18.0mm with marketing. We believe with a combined ~$1.6bn purchasing spend, the
ability to leverage Marcopolos global sourcing network in the private market, weak IT
systems at MCI and an acknowledgement that MCI is only in the early stage of lean
optimization relative to NFI operations that significant further savings are available. We
do expect higher capital spending through 2016 and 2017 to support a number of
maintenance capex and cost-saving initiatives, which are already included in our
estimates.
Management indicated that lenders were being very supportive with the new credit
facility to support the transaction. Management indicated the $482mm term loan
represents the MCI cash purchase price of $455mm as well as $27mm of transaction and
refinancing costs. The company expects to see proforma leverage at a net debt to
EBITDA ex-convertible debentures at 3.0x on transaction close and expects with the
strong cash flows to be at ~2.0x levered within two years. The corresponding covenant in
the new credit facility limits leverage to 4.0x in the first year, dropping to 3.75x at the
first anniversary and 3.5x at the second anniversary. With internally generated cash flows
adequate to support the acquisition, there is no intention to issue equity to fund the MCI
transaction.
The transaction is expected to close before year-end. There are some accounting
adjustments required due to the differences in standards and functional currencies
between NFI and MCI, which could impact the opening balance sheet, but that were
described as not overly material. Managements early expectation is that a $10mm
working capital adjustment payment is likely at close, with recovery in H1/16.
Management did note that MCI is less working capital intensive than NFI as for
approximately 60% of the business (70% private less two major customers) 100% of the
purchase price of coaches is received prior to shipment although seasonality can play a
factor into inter-period draws.
New Flyer management had approached KPS, the seller of MCI about the acquisition,
which took approximately a 10-month process as opposed to an auction process.
Management believe that NFI was the natural buyer of MCI given the proximity of
operations, and other strategic synergies to be gained.
The sales and service agreement with Daimler has seen sales of 40 to 50 coaches per
year. With the agreement NFI also gets a technology sharing relationship to support the
product.
3
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Most unionised labour contracts at MCI are in place for several years with the exception
of a smaller group of service employees in Illinois whose contract expires in January
2016. The manufacturing operation in Winnipeg represented by IAMAW ratified a threeyear agreement in July 2015. We believe the companys experience with labour relations
as well as intentions to bring plant conditions up to NFI standards with MCI should
mitigate any risk of labour issues.
The majority of management at MCI is expected to stay except the current CEO, who
will be replaced by Mr. Soubry. The intent is to run MCI as a separate organization in
2016 based on its current business plan supplemented by a senior VP from NFI
supporting integration efforts.
MCI carries approximately 325 used buses in inventory. With a process started by
KPS/MCI management to manage refurbishment costs, NFI management believes the fair
market value relative to carrying value of the inventory is appropriate.
The New Jersey Transit Authority for 772 45-foot coaches plus 375 options contract won
in July 2015 is expected to drive incremental growth in sales for MCI. There is an
additional contract MCI is expected to bid for 350 additional 40-foot coaches with
deliveries likely to occur later this decade. We believe cost synergies are likely to be the
primary driver of value creation as opposed to revenue growth.
We continue to expect the trend in underlying margin per equivalent unit to continue to
improve in 2016 and 2017. At Q3/15 EBITDA margin per EU on a trailing basis stood at
$33.2k/EU, which marks a high point since early 2011. We believe the synergies derived
from NABI, estimated at $18mm could add ~$6.5k/EU to 2016 and 2017 run rates, which
would bias our estimates higher. Management continues to be conservative in any
guidance, also cautioning there can be significant period to period variation, however
during meeting did acknowledge the trend toward improved pricing in backlog has begun
to materialize as competition normalizes indicating that the average margin in backlog
expected to be produced in 2016 and 2017 is better than what was experienced through
2014 and 2015.
Bus Manufacturing EBITDA per EU Quarterly and Trailing Basis

50.0
EBITDA Per EU
EBITDA per EU TTM Basis
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
Figure 1 Bus Manufacturing EBITDA per EU Quarterly and Trailing Basis
Source: Bloomberg, AltaCorp Capital Inc.
Based on our discussions with management, we believe the MCI acquisition has significant
potential to improve the earnings and cash flow profile of the company. We see a number of
opportunities to increase returns with higher synergies, while we continue to see improving
fundamentals in core bus manufacturing operations and the aftermarket segment. We maintain
our Outperform rating and our 12-month price target of C$35.00. Our target price is based on
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a blend of a 14.0x earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17
reflecting our 12-month forward valuation period as well as an exchange rate of C$1.32/$US.
Key risks to failing to achieve our price target include, but are not limited to changes in raw
material and component costs, foreign exchange risks, competition risk, changes in public
sector transportation spending, and failure by management to execute on disclosed strategies.
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Appendix 1: Comparables Valuation

Ticker
Rating &
Target

TSX:NFI
OP (C$35.00)
Marcopolo S.A.
BOVESPA:POMO4
NR
Wajax Corporation
TSX: WJX
NR
Ag Growth International Inc.
TSX: AFN
NR
Superior Plus Corp.
TSX: SPB
NR
The Greenbrier Companies, Inc.
GBX
NR
Oshkosh Corporation
OSK
NR
Spartan Motors Inc.
SPAR
NR
Wabash National Corp.
WNC
NR
Thor Industries Inc.
THO
NR
Winnebago Industries, Inc.
WGO
NR
Navistar International Corporation
NAV
NR
Student Transportation Inc.
TSX: STB
NR
Blue Bird Corporation
BLBD
NR
Cubic Corporation
CUB
NR
Average
Trading Local
Market
Currency Price Cap ($mm)
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
26.07
2.43
16.21
29.75
9.98
34.18
42.59
3.65
12.88
55.55
21.55
13.30
5.60
10.47
44.60
1,447.4
2,096.7
323.9
427.8
1,402.9
972.9
3,186.1
125.1
856.5
2,915.4
581.5
1,084.2
540.4
218.6
1,199.0
Net
Debt
EV
($mm)
2014
EPS
2015e
249.8
1,305.5
167.5
323.6
927.2
204.4
896.3
(15.7)
135.8
(176.3)
(70.2)
4,511.0
274.2
188.1
(43.0)
1,342.6
3,436.1
491.5
751.4
2,330.1
1,308.0
4,082.4
109.3
992.3
2,739.1
511.2
5,605.2
910.0
456.7
1,156.2
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.47
0.99
0.16
1.62
1.97
0.58
6.66
2.68
(0.05)
1.39
3.93
1.54
(0.07)
0.04
0.76
2.44
P/E
2016e 2014 2015e 2016e
1.65
0.22
1.68
2.67
0.89
5.62
3.52
0.10
1.38
4.51
1.74
2.30
0.04
1.15
2.79
30.0x
7.3x
6.6x
NM
22.1x
7.4x
12.2x
NM
14.7x
15.7x
13.4x
NM
NM
NM
18.0x
14.7x
19.9x 11.9x
11.4x 8.2x
10.0x 9.6x
15.1x 11.2x
17.3x 11.2x
5.1x
6.1x
15.9x 12.1x
NM
38.4x
9.2x
9.4x
14.1x 12.3x
14.0x 12.4x
NM
5.8x
NM
NM
13.7x 9.1x
18.3x 16.0x
13.7x 12.4x
2014
EBITDA
2015e
2016e
2014
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
144.8
206.1
77.5
72.0
279.0
496.1
494.8
8.1
214.5
333.5
66.1
563.5
70.3
75.5
120.6
243.6
337.1
80.6
91.5
348.1
411.3
589.1
10.9
206.8
390.8
75.3
742.0
86.9
81.7
132.3
12.5x
12.8x
6.0x
11.8x
8.3x
5.1x
6.9x
11.6x
6.2x
9.2x
7.8x
16.9x
13.2x
17.6x
9.7x
10.4x
9.3x
16.7x
6.3x
10.4x
8.4x
2.6x
8.3x
13.5x
4.6x
8.2x
7.7x
9.9x
12.9x
6.1x
9.6x
9.0x
7.2x
10.2x
6.1x
8.2x
6.7x
3.2x
6.9x
10.0x
4.8x
7.0x
6.8x
7.6x
10.5x
5.6x
8.7x
7.3x
2.3x
1.2x
1.0x
1.7x
2.3x
1.3x
1.7x
0.8x
2.0x
2.7x
2.6x
NM
2.2x
NM
1.6x
1.8x
7.0%
2.3%
7.9%
4.1%
6.0%
21.5%
8.7%
0.8%
13.7%
17.7%
18.1%
9.7%
2.5%
4.5%
5.8%
8.7%
10.2%
8.2%
11.7%
(9.6%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
1.8%
NM
4.6%
10.8%
Source: Capital IQ, Company Reports, AltaCorp Capital Inc.

NFI 2016e EV/EBITDA is based on pro forma Enterprise Value of $1744.7, assuming close of MCI acquisition in Q4/15
As of November 20, 2015. All figures in millions, unless otherwise noted.
10
I NSTITUTIONAL EQUITY R ESEARCH: DIVERSIFIED INDUSTRIES
Disclosure Requirements

NFI
C$26.07
Rating:
Outperform
12 Month Target:
C$35.00
Is this an issuer related or industry related publication?
Does the analyst, a member of the analyst's household, associate or employee who prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives? If yes, state name and
the nature of the interest:
Issuer
N
Is AltaCorp Capital making a market in an equity or equity related security of the issuer?
Does AltaCorp Capital and its affiliates collectively beneficially own more than 1% of any class of common
equity of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, please
explain:
Does any director, officer, employee of AltaCorp Capital or member of their household serve as a director or
officer or advisory capacity of the issuer? If yes, state name:
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Has the analyst received any compensation based on a specific investment banking transaction relative to this
issuer?
10 Has any director, officer or employee who prepared this research report received any compensation from the
subject company in the past 12 months?
11 Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
12 Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
13 Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
predecessor in the 12 months prior to the date of this report?
Rating System
AltaCorp's rating system reflects our outlook for expected
performance of an issuer's equity securities relative to its
peer group over the next 12 months.
Ranking
% IB
Distribution
Clients
Outperform
59%
26%
Sector Perform
25%
12%
Underperform
2%
0%
Speculative Buy
2%
0%
Restricted
3%
25%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total
An Outperform (Buy) rating represents a security

expected to provide a return greater than the peer group
average.
A Sector Perform (Hold) rating represents a security
expected to provide a return in line with the peer group
average.
An Underperform (Sell) rating represents a security
expected to provide a return less than the peer group
average.
A Speculative Buy rating represents a security where the
return potential is high, but the risk of a significant loss is
material.
The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the
sale or purchase of securities. While the accuracy or completeness of the information contained in this document cannot be
guaranteed by AltaCorp Capital Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or its
officers, directors and employees may from time to time acquire, hold or sell positions in the securities mentioned herein as
principal or agent.
410, 585 8 Avenue SW

Calgary, Alberta T2P 1G1
Tel: 403 539 8600
TD Tower
66 Wellington Street West, Suite 3530
Toronto, Ontario M5K 1A1
Tel: 403 539 8600
www.altacorpcapital.com
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about
the subject security and issuer.
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the
specific recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under
research coverage within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets
Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied
upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts
responsibility for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report must contact AltaCorp Capital
(USA) Inc. at 403-539-8600.
11
Direct
@altacorpcapital.com
__________________________________________________________________________________________________________
Institutional Equity Research

E&P- Domestic
Patrick J. ORourke, CFA, Analyst
Yasir Siddiqi, Associate
Nicholas Lupick, CFA, Analyst
Sunneva Bernhardsdottir, Associate
Thomas Matthews, P.Eng., CFA, Analyst
Christian Erana, Associate
403 539 8615

403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
Energy Infrastructure
Dirk Lever, CA, Senior Analyst
Ward Hallett, CA, Associate
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
Dana Benner, CFA, Senior Analyst
Karim Merali, Associate
Mark Westby, Analyst
403 539 8620

403 539 8594
403 539 8591
dbenner
kmerali
mwestby
Dave Mowat
Diversified Industries
Chris Murray, P.Eng., CFA, Senior Analyst
647 776 8246

647 776 8245
cmurray
smodwal
President & CEO

780 408 7181
dmowat@atb.com
Agriculture
Peter Prattas, CPA, CA, CFA, Analyst
Stuart Pattillo, Associate
647 776 8240

647 776 8254
pprattas
spattillo
Ian Wild
All Sectors
Victoria Hoa, Research Assistant
403 539 8607
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601
ggosbee@altacorpcapital.com
Paul Sarachman, CFA, FCSI

President
Managing Director Capital Markets
647 776 8250
psarachman@altacorpcapital.com
ATB Financial
Executive Vice President

403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Institutional Trading
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
647 776 8040

647 776 8235
647 776 8231
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
Calgary AB Canada T2P 1G1
403 539 8600 Main
403 539 8575 Fax
TORONTO
Toronto, ON Canada M5K 1A1
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee
Debt Capital Markets

Jason Caldarelli
647 776 8243
jcaldarelli
Exploration & Production

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Jesse Hardage
403 539 8628
jhardage
Agriculture & Diversified Industries

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

647 776 8223
403 539 8595
647 776 8072
403 539 8614
403 539 8609
647 776 8224
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________
Acquisitions & Divestitures

Leslie Kende, P.Eng.
Bruce Alexander, P.Geol.
Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
member CIPF IIROC FINRA SIPC
Private Wealth
David Lush, Head of Private Wealth
Vojtech Krb, Investment Advisor
Tomasz Okuszko, Investment Advisor
Michelle Hennebery, Client & Marketing Coordinator
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
mhennebery
12
COMPANY UPDATE
NFI | TSX
$24.36
Rating: Outperform
Total Return: 46.5%
Yield: 2.8%
November 16, 2015
Index Implications of the Recent Move in Share Prices

C$25.52 / C$12.05
2.8%
Dividend Yield:
55.5 (basic)

Float ($mm)
C$1351.2
55.5 (fd)
39.7
145.3

$651.9
$1665.6
(FYE Dec 31)
2016e
2014
Revenue ($mm)
2015e
$1,451.1 $1,552.1 $2,450.7
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$144.8
$243.6
$0.65
$0.99
$1.65
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3
$37.9e
2016
$51.9e
$52.8e
$69.0e
$69.8e
Adjusted FD EPS
2014
Q1
$0.10
Q2
Q3
Q4
$0.16
$0.15
$0.24
2015
$0.20
$0.30
$0.26
$0.23e
2016
$0.29e
$0.31e
$0.52e
$0.53e
$25

Volume ('000)
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0

Managing Director
647.776.8246
Index Inclusion Could Provide the Next Catalyst: With the recent move in New
Flyer Industries share prices and increase in market capitalization, we believe the
company is increasingly eligible for inclusion in the S&P/TSX Composite Index, which
we believe could provide a catalyst for share prices. The next rebalance announcement is
expected after market close on December 11, with implementation scheduled for
December 18 after market close.
Major Criteria for Inclusion: The major criteria to be included in the S&P/TSX
Composite include a float adjusted market cap greater than 0.05% of the index float
weighted market cap after including the weight of the companys own addition, a
volume test that calls for a float turnover of greater than 0.5x of the trailing 12-month
period volume and a predominate domicile in Canada.
Early Signs Point to Meeting Thresholds: We estimate NFI shares would have to
trade above $21.75 during the measurement period in order to be eligible for inclusion.
We also estimate the companys trailing float turnover at 1.09x.
Previous Inclusions Indicate Positive Impact: We believe the discussion around
New Flyers possible inclusion in the S&P/TSX Composite Index could create a nearterm catalyst for share prices. We have reviewed share price behaviour of other
companies added to this index since 2012, looking at performance at various intervals
relative to the announcement date of their inclusion. Generally, we have seen strong
returns across sectors leading into the announcement date as we believe investors take
positions in advance of the announcement in anticipation of inclusion. We believe the
inclusion on a company in such a key index increases the breadth of potential
institutional investors and enhances trading liquidity. Within the industrial subgroup, our
data set showed a return of 9.4% 30 days prior to the announcement date. While
individual stock fundamentals are important to consider, we believe this trend is
instructive for New Flyer holders.
Maintain Outperform and $35.00 Target: While we remain positively biased on
our fundamental outlook for New Flyer shares, we believe investors should consider the
impact of the near-term tactical allocation of a positon given the historical performance
of shares considered for addition to major indices. We caution however that this can be a
double edged sword should NFI fail to be included we would expect a sharp reversal
in share prices. We maintain our Outperform rating and our 12-month price target of
C$35.00. Our target price is based on a blend of a 14.0x earnings and 7.5x EBITDA
multiple of the four quarters ending Q3/17 reflecting our 12-month forward valuation
period as well as an exchange rate of C$1.32/$US.

647.776.8245
13
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES

Current Valuations
Unit Price (C$)
$24.36
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.2x
8.8x
7.2x
Peer Average
14.3x
13.3x
12.0x
11.8x
8.7x
6.8x
27.9x
18.5x
11.1x
Incom e Statem ent
2014
2015e
2016e
2015e
2016e
2017e
Trend
Bus Manufacturing
Aftermarket
Revenue
Free Cash Flow (FCF)
2014
Revenues
1,132,066 1,231,170 2,016,079 2,075,781
319,034
320,916
434,615
455,938
1,451,100 1,552,086 2,450,693 2,531,719
45,823
2017e
Changes in non-cash w orking capital
35,255
OCF less w orking capital
81,078
89,538 163,379 193,360
(1,766)
(1,908)
9,367
62,883
(2,004)
16,023
(2,004)
22.0%
20.7%
17.7%
18.0%
57,374
82,262
145,663
153,647
5.1%
6.7%
7.2%
7.4%
49,991
62,531
87,897
92,888
15.7%
19.5%
20.2%
20.4%
Free Cash Flow
83,667
86,457
136,232
243,560
274,816
6.0%
8.8%
9.9%
10.9%
Free cash flow (C$)
92,829 104,615 173,985 198,313
107,365
144,793
243,560
274,816
per Share
7.4%
9.3%
9.9%
10.9%
FCF Yield
Amortization
35,837
42,564
60,691
59,052
FCF per share grow th
Operating Earnings
50,620
93,669
182,869
215,763
EBT
37,568
76,452
145,217
190,679
Taxes
10,849
23,890
53,730
70,551
Net Income
26,719
52,562
91,487
120,128
Reported FD EPS
$0.48
$0.95
$1.65
$2.16
Adjusted FD EPS
$0.65
$0.99
$1.65
$2.16
2015e
2016e
2017e

Margin
Adjusted EBITDA
Margin
Grow th
2014
(10,889) (12,502) (30,278) (36,908)


Revenue
7,766
(154)
(961)
81,933 131,098 154,448
$1.67
Trend
$1.88
$3.13
$3.57
6.9%
7.7%
12.9%
14.7%
82.8%
12.6%
66.3%
14.0%
2014
2015e
2016e
2017e
32,457
33,931
38,854
38,854
35.0%
$0.585
32.4%
$0.611
22.3%
$0.700
19.6%
Cash Yield
2.4%
2.5%
2.9%
2.9%
Key Operating Metrics
2014
2015e
2016e
2017e
2,437
2,503
4,065
4,170
52
52
53
52
464.5
491.9
496.0
497.8
15.0%
8.8%
63.8%
3.0%
23.5
32.9
35.8
36.8
Aftermarket
48.4%
0.6%
35.4%
4.9%
49.2
49.1
78.2
81.8
Adjusted EBITDA
21.0%
13.4%
7.0%
34.9%
57.9%
68.2%
3.3%
12.8%

48.5
0.9x
48.0
1.1x
77.1
1.0x
80.7
1.0x
Adjusted FD EPS
2.7%
51.0%
66.8%
31.3%
2014
0.9057
2015e
0.7834
2016e
0.7526
2017e
0.7783
EOP CAD/USD Rate
0.9050
0.7463
0.7634
0.7937
FX Assum ptions

Trend
Leverage
Net Debt (EOP)
Trend
$0.700
Bus Manufacturing
Weeks of Production
Trend
80,172 100,496 177,337
20.7%
5.0%
18.4%
19.9%
2014
2015e
2016e
2017e
Trend
Trend
229,034 651,891 610,915 500,725

2.1x
4.5x
2.5x
1.8x
33.6%
57.6%
53.0%
44.2%

$5.0
Firm
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
2018, 26%
Note: All amounts in US$ 000's, unless otherw ise specified.

14
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Looking at Index Implications of the MCI Acquisition

With the recent move in New Flyer Industries share prices and increase in market
capitalization, we believe the company is increasingly eligible for inclusion in the S&P/TSX
Composite Index, which we believe could provide a catalyst for share prices. The next
rebalance announcement is expected after market close on December 11, with implementation
scheduled for December 18 after market close.
The major criteria to be included in the S&P/TSX Composite include a float adjusted market
cap greater than 0.05% of the index float weighted market cap after including the weight of
the companys own addition, a volume test that calls for a float turnover of greater than 0.5x
of the trailing 12-month period volume and a predominate domicile in Canada.
Threshold Calculations for Index Inclusion
Last Price
S&P/TSX Composite Index
13,075.42
Estimated Float Weighted Market Cap for 0.05% inclusion

1,629,664,500
815,240
$24.36
Float Turnover (>0.50x)
1.09x
Share Price >$1
TRUE
Units Outstanding (mm)
Market Cap
55.520
Float Adjustment Factor
0.6751
Share Price Needed to make threshold
$21.75
Figure 1 Threshold Calculations for Index Inclusion

Source: Bloomberg, AltaCorp Capital Inc.
In replicating these criteria based on Fridays closing prices, we estimate NFI shares would
have to trade above $21.75 during the measurement period in order to be eligible for
inclusion. In our calculations, we have used the float adjustment factor provided by
Bloomberg of 0.6751, which reflects the large blocks held by Marcopolo S.A. as well as
Coliseum Capital along with insider holdings as reported through SEDI. We also estimate the
companys trailing float turnover at 1.09x. With its headquarters in Winnipeg and operations
across Canada, reinforced with the addition of MCI we do not see an issue with domicile. We
note NFI shares and debentures currently have their primary listing on the TSX, which is an
additional criteria for consideration.
15
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
We believe the discussion around New Flyers possible inclusion in the S&P/TSX Composite
Index could create a near-term catalyst for share prices. We have reviewed share price
behaviour of other companies added to this index since 2012, looking at performance at
various intervals relative to the announcement date of their inclusion. Generally, we have seen
strong returns across sectors leading into the announcement date as we believe investors take
positions in advance of the announcement in anticipation of inclusion. We believe the
inclusion on a company in such a key index increases the breadth of potential institutional
investors and enhances trading liquidity. Within the industrial subgroup, our data set showed a
return of 9.4% 30 days prior to the announcement date. While individual stock fundamentals
are important to consider, we believe this trend is instructive for New Flyer holders.
Impact of Index Additions on Share Prices
Figure 2 Impact of Index Additions on Share Prices

Source: Capital IQ, S&P Dow Jones Indices, AltaCorp Capital Inc.
While we remain positively biased on our fundamental outlook for New Flyer shares, we
believe investors should consider the impact of the near-term tactical allocation of a positon
given the historical performance of shares considered for addition to major indices. We
caution however that this can be a double edged sword should NFI fail to be included we
would expect a sharp reversal in share prices. We maintain our Outperform rating and our 12month price target of C$35.00. Our target price is based on a blend of a 14.0x earnings and
7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward
valuation period as well as an exchange rate of C$1.32/$US.
16
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]

Ticker
Marcopolo S.A.
Wajax Corporation
Ag Grow th International Inc.
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Average
Rating &
Target
TSX:NFI
OP (C$35.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
24.36
2.34
17.36
30.61
9.98
31.95
40.96
3.70
12.67
53.55
20.40
12.16
5.46
10.75
43.42
Market
Cap ($m m )
1,352.5
2,054.1
346.9
439.7
1,402.9
909.4
3,251.8
126.8
842.5
2,810.4
550.4
991.3
526.9
224.4
1,167.3
P/E
EV
EV/EBITDA
Net
Debt
($m m )
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
249.8
1,305.5
167.5
323.6
927.2
204.4
896.3
(15.7)
135.8
(176.3)
(70.2)
4,511.0
274.2
188.1
(43.0)
1,263.5
3,393.4
514.4
768.3
2,330.1
1,244.5
4,147.4
111.0
978.3
2,634.1
480.2
5,512.3
896.5
462.5
1,124.5
27.9x
7.0x
7.1x
NM
22.1x
6.9x
11.7x
NM
14.4x
15.1x
12.7x
NM
NM
NM
17.6x
14.3x
18.5x
10.5x
10.7x
14.3x
17.3x
4.8x
15.3x
NM
9.1x
13.6x
13.3x
NM
NM
14.1x
17.8x
13.3x
11.1x
7.8x
10.3x
9.3x
10.7x
5.7x
11.6x
38.9x
9.2x
11.9x
11.7x
4.8x
NM
9.3x
15.6x
12.0x
11.8x
12.6x
6.2x
12.1x
8.3x
4.8x
7.0x
11.8x
6.1x
8.8x
7.3x
16.7x
13.0x
17.8x
9.4x
10.2x
8.7x
16.2x
6.6x
10.2x
8.3x
2.5x
8.4x
13.7x
4.6x
7.9x
7.3x
9.8x
12.8x
6.1x
9.3x
8.8x
6.8x
9.9x
6.4x
7.5x
6.8x
3.0x
7.0x
10.2x
4.7x
6.7x
6.4x
7.3x
10.3x
5.7x
8.5x
7.2x
2.1x
1.1x
1.1x
1.7x
2.3x
1.3x
1.6x
0.8x
2.0x
2.6x
2.5x
NM
2.2x
NM
1.5x
1.8x
7.0%
2.3%
7.9%
4.1%
6.0%
21.5%
8.7%
0.8%
13.7%
17.7%
18.1%
9.7%
2.5%
4.5%
5.8%
8.7%
10.2%
8.2%
11.7%
(9.6%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
1.8%
NM
4.6%
10.8%

NFI 2016e EV/EBITDA is based on pro forma Enterprise Value of $1665.6, assuming close of MCI acquisition in Q4/15
17

NFI
C$24.36
Rating:
Outperform
12 Month Target:
C$35.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
59%
25%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative Buy
2%
0%
Restricted
4%
20%
Not Rated
5%
0%
Tender
3%
0%
100%
18%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
18
Direct
__________________________________________________________________________________________________________

E&P- Domestic
403 539 8615

403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
403 539 8620

403 539 8594
403 539 8591
dbenner
kmerali
mwestby
Dave Mowat
647 776 8246

647 776 8245
cmurray
smodwal
President & CEO

780 408 7181
dmowat@atb.com
Agriculture
647 776 8240

647 776 8254
pprattas
spattillo
Ian Wild
All Sectors
403 539 8607
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial

403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
647 776 8040

647 776 8235
647 776 8231
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Jesse Hardage
403 539 8628
jhardage

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

647 776 8223
403 539 8595
647 776 8072
403 539 8614
403 539 8609
647 776 8224
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
mhennebery
19
COMPANY UPDATE
NFI | TSX
$23.90
Rating: Outperform
(previously $26.00)
Total Return: 49.3%
Yield: 2.8%
November 11, 2015
Executing on the Promise of the Strategy The Acquisition

of MCI Builds a Diversified Transportation Leader

C$24.40 / C$12.05
2.8%
Dividend Yield:
55.5 (basic)

Float ($mm)
C$1325.7
Buying MCI: New Flyer announced that the company has entered into a definitive
agreement to acquire Motor Coach Industries International Inc. (MCI) from an affiliate
of KPS Capital L.P. and Daimler. The cash purchase price of $455mm represents an
implied multiple of 6.0x 2015e EBITDA although we note there are likely a number of
other minor working capital and pension adjustments to be reconciled. Management
expects the transaction to close by the end of 2015 subject to customary closing
conditions including clearing competition regulators.
55.5 (fd)
39.7
133.7

$651.9
$1652.0
(FYE Dec 31)
2016e
2014
Revenue ($mm)
2015e
$1,451.1 $1,552.1 $2,450.7
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$144.8
$243.6
$0.65
$0.99
$1.65
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3e
$37.9e
2016
$51.9e
$52.8e
$69.0e
$69.8e
Q2
Q3
Q4
$0.16
$0.15
$0.24
Adjusted FD EPS
2014
Q1
$0.10
2015
$0.20
$0.30
$0.26e
$0.23e
2016
$0.29e
$0.31e
$0.52e
$0.53e
$25

Volume ('000)
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0

Managing Director
647.776.8246
About MCI: MCI is a leading motor coach manufacturer and parts and service supplier
in North America with an installed base of ~28,000 units and a 42% motor coach market
share. The company is ~2x the size of its nearest competitor and the leading coach
provider both in the public and private sectors. For the nine months ended September 30,
2015, MCI delivered 576 new coaches (EU), representing ~$315mm in revenue with
aftermarket parts and service business contributing ~$128mm.
Highly Accretive to Estimates: We update our estimates to reflect the effect of the
acquisition and respective additional debt. Our 2016e EBITDA increases to $243.6mm
from $157.7mm with no material change in our 2015 estimate. Our 2017e estimate for
Adjusted EBITDA increases to $274.8mm from $168.6mm, which includes $22mm in
synergies. We also believe it important to mention the considerable increase in free cash
flow despite our expectations for additional capital spending at MCI. We forecast a
33.1% and 45.6% increase in free cash flow on an absolute and per share basis with
2016 free cash flow at $174.0mm and 2017 at $198.3mm, up from $104.6mm in 2015.
Maintain Outperform; Increasing Target to C$35.00: The acquisition of MCI
fulfills the long-held promise of the benefits of operational excellence as well as
building the next phase of the story. We expect the combination should lead to improved
margins, cash flows, returns on capital deployed and ultimately on share prices. We also
expect the move to a higher market cap as well as the possible inclusion in a number of
indices including the S&P/TSX Composite with a threshold on float weight at
approximately $22 during the December / January rebalance should be constructive for
share prices. Despite a number of positive trading biases however, the companys
fundamental outlook greatly improved in our opinion with the announcement of the MCI
transaction and we continue to recommend investors evaluate a position at current
levels. We maintain our Outperform rating and are increasing our 12-month price target
to C$35.00 from C$26.00, previously. Our target price is based on a blend of a 14.0x
earnings and 7.5x EBITDA multiple of the four quarters ending Q3/17 reflecting our 12month forward valuation period as well as an exchange rate of C$1.32/$US.
647.776.8245
20
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES

Current Valuations
Unit Price (C$)
$23.90
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.3x
8.8x
7.2x
Peer Average
14.6x
13.8x
12.3x
11.7x
8.6x
6.8x
27.5x
18.2x
10.9x
Incom e Statem ent
2014
2015e
2016e
2015e
2016e
2017e
Trend
Bus Manufacturing
Aftermarket
Revenue
2014
Revenues
1,132,066 1,231,170 2,016,079 2,075,781
319,034
320,916
434,615
455,938
1,451,100 1,552,086 2,450,693 2,531,719
45,823
2017e
35,255
81,078
89,538 163,379 193,360
(1,766)
(1,908)
9,367
62,883
(2,004)
16,023
(2,004)
22.0%
20.7%
17.7%
18.0%
57,374
82,262
145,663
153,647
5.1%
6.7%
7.2%
7.4%
49,991
62,531
87,897
92,888
15.7%
19.5%
20.2%
20.4%
Free Cash Flow
83,667
86,457
136,232
243,560
274,816
6.0%
8.8%
9.9%
10.9%
Free cash flow (C$)
92,829 104,615 173,985 198,313
107,365
144,793
243,560
274,816
per Share
7.4%
9.3%
9.9%
10.9%
FCF Yield
Amortization
35,837
42,564
60,691
59,052
Operating Earnings
50,620
93,669
182,869
215,763
EBT
37,568
76,452
145,217
190,679
Taxes
10,849
23,890
53,730
70,551
Net Income
26,719
52,562
91,487
120,128
Reported FD EPS
$0.48
$0.95
$1.65
$2.16
Adjusted FD EPS
$0.65
$0.99
$1.65
$2.16
2015e
2016e
2017e

Margin
Adjusted EBITDA
Margin
Grow th
2014
(10,889) (12,502) (30,278) (36,908)


Revenue
7,766
(154)
(961)
81,933 131,098 154,448
$1.67
Trend
$1.88
$3.13
$3.57
7.0%
7.9%
13.1%
14.9%
82.8%
12.6%
66.3%
14.0%
2014
2015e
2016e
2017e
32,457
33,931
38,854
38,854
35.0%
$0.585
32.4%
$0.611
22.3%
$0.700
19.6%
Cash Yield
2.4%
2.6%
2.9%
2.9%
2014
2015e
2016e
2017e
2,437
2,503
4,065
4,170
52
52
53
52
464.5
491.9
496.0
497.8
15.0%
8.8%
63.8%
3.0%
23.5
32.9
35.8
36.8
Aftermarket
48.4%
0.6%
35.4%
4.9%
49.2
49.1
78.2
81.8
Adjusted EBITDA
21.0%
13.4%
7.0%
34.9%
57.9%
68.2%
3.3%
12.8%

48.5
0.9x
48.0
1.1x
77.1
1.0x
80.7
1.0x
Adjusted FD EPS
2.7%
51.0%
66.8%
31.3%
2014
0.9057
2015e
0.7834
2016e
0.7526
2017e
0.7783
EOP CAD/USD Rate
0.9050
0.7463
0.7634
0.7937
FX Assum ptions

Trend
Leverage
Net Debt (EOP)
Trend
$0.700
Bus Manufacturing
Weeks of Production
Trend
80,172 100,496 177,337
20.7%
5.0%
18.4%
19.9%
2014
2015e
2016e
2017e
Trend
Trend
229,034 651,891 610,915 500,725

2.1x
4.5x
2.5x
1.8x
33.6%
57.6%
53.0%
44.2%

$5.0
Firm
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15
2018, 26%

21
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DIVERSIFIED
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COVERAGE
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]
New Flyer Announces the Acquisition of MCI

New Flyer (NFI-T) announced that the company has entered into a definitive agreement to
acquire Motor Coach Industries International Inc. (MCI) from an affiliate of KPS Capital L.P.
and Daimler. The cash purchase price of $455mm represents an implied multiple of 6.0x
2015e EBITDA although we note there are likely a number of other minor working capital
and pension adjustments to be reconciled. Management expects the transaction to close by the
end of 2015 subject to customary closing conditions including clearing competition
regulators.
The transaction is expected to be funded through a new $825mm senior secured credit
facilities comprising of a four year maturity of a $482mm term loan and a US$343mm
revolver. Management expects the revolver to be ~$135mm drawn which would represent a
pro forma debt to Adjusted EBITDA of ~3.0x at closing assuming the outstanding debentures
are treated as equity.
About MCI
MCI is a leading motor coach manufacturer and parts and service supplier in North America
with an installed base of ~28,000 units and a 42% motor coach market share. The company is
~2x the size of its nearest competitor and the leading coach provider both in the public and
private sectors. For the nine months ended September 30, 2015, MCI delivered 576 new
coaches (EU), representing ~$315mm in revenue with aftermarket parts and service business
contributing ~$128mm.
MCI Key Market Statistics
Figure 1 MCI Key Market Statistics

MCIs revenue streams are split into three main segments, New Coach (public and private),
Pre-Owned Coach and Aftermarket. Within the New Coach segment, MCI targets the
mid-range to luxury segments for private and the mid-range for public clients, including
transit authorities, universities, Federal Government and Correctional Facilities. The PreOwned segment caters to value customers within the private market as well as small private
fleet operations. Coaches are refurbished at MCIs service centres and a trade-in option is also
available. The Aftermarket segment provides support to an installed coach fleet of 28,000
buses with a North American footprint which includes six service centres, three distribution
facilities and over 3,000 emergency response partners.
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MCIs Revenue Streams and Target Markets
Figure 1 MCIs Revenue Streams and Target Markets

MCI has long-standing relationships with major transit authorities in North America, some of
whom are also long-time New Flyer customers. There is limited concentration in the market
with the 10 largest operators in North America accounting for ~44% of new coach volume in
2014. Of particular importance is the recent $395mm award for 722 coaches ($512k/unit)
over a five-year period by the New Jersey Transit Authority (NJTA) to replace the majority of
the existing fleet. MCIs relationship dates back to 1982 with the company having been
awarded the largest public transit award in North American history for 1,400 coaches in 2000.
We believe MCI remains ideally positioned for new contract wins from NJTA as well as other
transit authorities. In addition, the contract calls for an average of 75 buses per year over the
five-year term.
Within the private market, the company has strong relationships with key fleet operators
including Coach USA and Greyhound. While private coach orders have limited visibility,
NFIs management highlighted the historical consistent growth within the segment.
MCIs Customer Base
Figure 2 MCIs Customer Base

Source: New Flyer Industries Inc.
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MCIs revenues have grown consistently over the last four years with robust growth in both
pricing and volumes. Revenue per EU has increased to $446K YTD, highlighting the higher
margins in the private market segment. We note the NJTA contract is expected to contribute
to 2016 volume and beyond.
MCI Historical Financial Performance
Figure 2 MCI Historical Financial Performance

Acquisition Expands New Flyers Portfolio in a Healthy Demand Environment

The demand environment for the motor coach industry continues to look strong with expected
deliveries of ~2,100 coaches in 2015, up ~9% y/y. Management expects population growth
and urbanization to continue to support moderate growth rate within the segment. We note
demand across transit authorities is expected to stabilize with the private sectors driving
majority of the growth in the coming years, including an increasing corporate use of buses.
Canada and US Motor Coach Industry Annual Deliveries of New Coaches
Figure 3 Canada and US Motor Coach Industry Annual Deliveries of New Coaches
The acquisition of MCI diversifies NFIs product offering by not only providing significant
exposure to the private coach industry but also materially expanding NFIs aftermarket parts
and service business. The transaction is expected to be highly accretive to EPS and free cash
flow per share before synergies. The combined entity will employ~4,800 people and support
an installed base of over 42,000 transit buses and 28,000 motor coaches across North
America.
The acquisition of MCI will allow New Flyer access to the private market while building on a
significant aftermarket segment. MCI will introduce new capabilities, including preventative
maintenance, spare parts and accident repair. MCI has over 3,000 approved independent
service locations to support their fleet. The company is also the North American distributor of
Daimlers Setra coaches, considered a premium product positioned above the MCI brands
and also provides exclusive sales and service support for the fleet in Canada and the U.S.
Management expects the present relationship to continue noting that any anti-trust issues are
24
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unlikely given that Setra is a differentiated offering, outside of MCIs target mid-range
coaches.
There remains a complementary geographic footprint of the two companies noting that MCIs
manufacturing locations are closely aligned with NFIs in both US and Canada. With the
expected completion of the acquisition, the combined entity will have manufacturing facilities
in North Dakota, Alabama, Minnesota and Manitoba.
Combined Manufacturing, Parts & Service Footprint
Figure 3 Combined Manufacturing, Parts & Service Footprint

The company is targeting annual synergies of ~$10mm expected to be realized through

operational initiatives and rationalization of corporate costs. NFIs management highlighted
that the company will seek to standardize the IT systems in MCI as the first priority.
Management declined to comment on expected synergies, especially from the aftermarkets
segment, stating that further updates will be announced as the company moves forward in the
integration process. We believe that management is remaining decidedly conservative in its
estimate for synergies given the geographic proximity of certain manufacturing facilities as
well as possible sourcing and operational efficiencies from the synchronization of MCIs
aftermarket segment. Management also believe that revenue synergies are limited with both
companies sharing a majority of the customers.
Our core belief with regards to synergies and our scepticism in managements target comes
from our understanding of the progress the company has made in becoming a world-class
manufacturer. At a minimum, bringing the MCI operation up to current standard should afford
a multiple of the proposed synergies. We remind investors that the initial $20mm investment
planned to integrate NABI called for a two to three-year payback. At Q3/15, management
revised expected synergies at $16.5mm and indicated it likely that further gains were possible.
We find it difficult to believe that a significantly larger organization, which essentially
emerged from bankruptcy in 2010 and that has significant information systems issues does not
offer dramatically higher levels of opportunities. One of the hallmarks of our thesis
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surrounding New Flyer remains our previous experience of the financial gains of the
implementation of lean principles in a manufacturing operation, reinforced only by the higher
level of standard production of the MCI product portfolio. Ultimately, we believe the
synergies from this transaction, with the core competencies demonstrated by the management
team at NFI to be able to integrate discreet manufacturing operations are likely to be multiples
of the initial base. We believe it important to note that this does not imply material head count
changes rather this is very much is a Demingesqe shift in the ability of management to
radically improve the operating system. We expect a combination of process improvements,
internalization of work where accretive, purchasing synergies, efficiencies garnered from
information systems and employee engagement offer a host of margin enhancement
opportunities; all we expect which drive margin expansion.
Forecast and Outlook
Management noted that there is considerable seasonality in MCIs revenues, particularly on
the private side with ~70% of total sales in H2. We estimate 2015e revenue from MCI to be
~$661mm assuming that 65% of the companys bus manufacturing revenues and 75% of
aftermarket revenues were realized by Q3/15. Using a 6.0x EBITDA multiple of the purchase
price, we estimate 2015e MCI EBITDA of $75.8mm, implying an ~11.5% EBITDA margin.
Although no backlog or production rate details were provided for MCI, we assume the
company remains on track to deliver ~1,174 EU in 2015. In our 2016 estimates, the most
important impact stems from the New Jersey contract, which likely represents the majority of
y/y improvement stemming from an average sell price of $512k/unit as well as our forecast
for the shipment of 1,356 units which represents the base and options order from the NJT
contract. We expect further growth in 2017, with production rates normalising with 1,435
units delivered.
With the closing of the acquisition, New Flyer intends to increase dividends by 12.9% from
C$0.62 to C$0.70 per share. The company has also moved from a monthly to a quarterly
payment schedule, consistent with other large mid-cap companies.
We update our estimates to reflect the effect of the acquisition and additional debt on the
balance sheet. Our 2016e EBITDA increases to $243.6mm from $157.7mm with no material
change in our 2015 estimate. Our 2017e estimate for Adjusted EBITDA increases to
$274.8mm from $168.6mm, which includes $22mm in synergies. We also believe it important
to mention the considerable increase in free cash flow despite our expectations for additional
capital spending at MCI. We forecast a 33.1% and 45.6% increase in free cash flow on an
absolute and per share basis with 2016 free cash flow at $174.0mm and 2017 at $198.3mm,
up from $104.6mm in 2015. A summary of our key changes to estimates is provided in the
figure below.
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Change in Estimates ($000s, except per share)

Revenue
Bus Manufacturing
Aftermarket
Revenue
ACC Old Estim ates

2015e
2016e
2017e
ACC New Estim ates

2015e
2016e
2017e
2015e
Change
2016e
2017e
1,231,170 1,399,122 1,419,613

320,916 298,615 314,498
1,552,086 1,697,736 1,734,111
20.7%
17.6%
18.1%
1,231,170 2,016,079 2,075,781

320,916 434,615 455,938
1,552,086 2,450,693 2,531,719
20.7%
17.7%
18.0%
0.0%
0.0%
0.0%
0 bps
44.1%
45.5%
44.4%
15 bps
46.2%
45.0%
46.0%
(13) bps
EBITDA
Margin
82,262
6.7%
62,531
19.5%
136,232
8.8%
93,528
6.7%
64,199
21.5%
157,726
9.3%
99,373
7.0%
69,190
22.0%
168,562
9.7%
82,262
6.7%
62,531
19.5%
136,232
8.8%
145,663
7.2%
87,897
20.2%
243,560
9.9%
153,647
7.4%
92,888
20.4%
274,816
10.9%
0.0%
55.7%
54.6%
0 bps
54 bps
40 bps
0.0%
36.9%
34.3%
0 bps (127) bps (163) bps
0.0%
54.4%
63.0%
0 bps
65 bps 113 bps
Adjusted EBITDA
Margin
144,793
9.3%
157,726
9.3%
168,562
9.7%
144,793
9.3%
243,560
9.9%
274,816
10.9%
0.0%
0 bps
54.4%
65 bps
63.0%
113 bps
Operating Earnings
EBT
96,873
80,931
118,318
106,633
130,053
118,749
93,669
76,452
182,869
145,217
215,763
190,679
(3.3%)
(5.5%)
54.6%
36.2%
65.9%
60.6%
Net Incom e
Reported FD EPS
Adjusted FD EPS
55,383
$1.00
$1.04
67,179
$1.21
$1.21
74,812
$1.35
$1.35
52,562
$0.95
$0.99
91,487
$1.65
$1.65
120,128
$2.16
$2.16
(5.1%)
(5.1%)
(4.9%)
36.2%
36.2%
36.2%
60.6%
60.6%
60.6%
Free Cash Flow

Free Cash Flow
80,121
89,487
(12,502)
81,882
126,851
114,933
(14,556)
98,373
111,492
122,178
(14,070)
106,104
80,172
89,538
(12,502)
81,933
100,496
163,379
(30,278)
131,098
177,337
193,360
(36,908)
154,448
0.1%
0.1%
0.0%
0.1%
(20.8%)
42.2%
108.0%
33.3%
59.1%
58.3%
162.3%
45.6%
Free cash flow (C$)

per Share
FCF Yield
104,547
$1.88
9.4%
130,702
$2.35
11.8%
136,341
$2.46
12.3%
104,615
$1.88
8.9%
173,985
$3.13
14.8%
198,313
$3.57
16.8%
0.1%
0.1%
(54) bps
33.1%
33.1%
299 bps
45.5%
45.5%
455 bps
33,931
32.5%
$0.61
34,413
26.3%
$0.62
34,413
25.2%
$0.62
33,931
32.4%
$0.61
38,854
22.3%
$0.70
38,854
19.6%
$0.70
196,942
1.4x
29.0%
110,547
0.7x
17.4%
39,908
0.2x
6.5%
651,891
4.5x
57.6%
610,915
2.5x
53.0%
500,725
1.8x
44.2%
231.0%
231.0%
98.8%
452.6%
257.9%
204.2%
1154.7%
669.6%
578.1%
2,503
491.9
32.9
48.0
1.1x
5.0%
2,709
516.5
34.5
50.7
1.0x
18.4%
2,735
519.1
36.3
51.6
1.0x
19.9%
2,503
491.9
32.9
48.0
1.1x
5.0%
4,065
496.0
35.8
77.1
1.0x
18.4%
4,170
497.8
36.8
80.7
1.0x
19.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0 bps
50.1%
(4.0%)
3.8%
52.1%
0.0%
0 bps
52.5%
(4.1%)
1.4%
56.4%
0.0%
0 bps

Leverage
Net Debt (EOP)
0.0%
12.9%
12.9%
(2) bps (400) bps (565) bps
0.0%
12.9%
12.9%
Figure 4 Change in Estimates

Source: AltaCorp Capital Inc.
The acquisition of MCI fulfills the long-held promise of the benefits of operational excellence
as well as building the next phase of the story. We expect the combination should lead to
improved margins, cash flows, returns on capital deployed and ultimately on share prices. We
also expect the move to a higher market cap as well as the possible inclusion in a number of
indices including the S&P/TSX Composite with a threshold on float weight at approximately
$22 during the December / January rebalance should be constructive for share prices. Despite
a number of positive trading biases however, the companys fundamental outlook greatly
improved in our opinion with the announcement of the MCI transaction and we continue to
recommend investors evaluate a position at current levels.
We maintain our Outperform rating and are increasing our 12-month price target to C$35.00
from C$26.00, previously. Our target price is based on a blend of a 14.0x earnings and 7.5x
EBITDA multiple of the four quarters ending Q3/17 reflecting our 12-month forward
valuation period as well as an exchange rate of C$1.32/$US.
27
R ESEARCH:
DIVERSIFIED
INDUSTRIES
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]

Ticker
Marcopolo S.A.
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Average
Rating &
Target
TSX:NFI
OP (C$35.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
23.90
2.32
17.72
30.56
10.53
35.30
41.98
3.87
12.70
56.25
21.08
12.77
5.54
10.68
44.39
P/E
Market
EV/EBITDA
Cap ($m m ) 2014 2015e 2016e

1,326.9
1,922.6
354.1
438.9
1,480.2
1,004.8
3,287.8
132.7
844.5
2,952.1
568.8
1,041.0
528.7
222.9
1,193.3
27.5x
7.0x
7.2x
NM
23.4x
7.6x
12.0x
NM
14.5x
15.8x
13.1x
NM
NM
NM
18.0x
14.6x
18.2x
13.2x
10.9x
14.3x
18.2x
5.3x
15.7x
NM
9.1x
14.3x
13.7x
NM
NM
14.0x
18.2x
13.8x
10.9x
7.8x
10.5x
9.3x
11.3x
6.3x
11.9x
40.7x
9.2x
12.5x
12.1x
5.1x
NM
9.3x
15.9x
12.3x
2014
2015e
2016e
Price
to BV
ROIC
ROE
11.7x
12.1x
6.3x
12.1x
8.5x
5.2x
7.1x
12.4x
6.1x
9.3x
7.6x
16.8x
11.6x
17.8x
9.6x
10.3x
8.6x
14.7x
6.7x
10.2x
8.6x
2.7x
8.5x
14.4x
4.6x
8.3x
7.5x
9.9x
11.4x
6.1x
9.5x
8.8x
6.8x
9.5x
6.5x
7.5x
7.1x
3.3x
7.1x
10.7x
4.7x
7.1x
6.6x
7.4x
9.0x
5.6x
8.7x
7.2x
2.1x
1.1x
1.1x
1.7x
2.4x
1.4x
1.7x
0.8x
2.0x
2.8x
2.6x
NM
2.0x
NM
1.5x
1.8x
7.0%
2.3%
7.9%
6.1%
6.0%
21.5%
8.7%
0.8%
13.7%
17.7%
18.1%
9.7%
2.6%
4.5%
5.8%
8.8%
10.2%
8.2%
11.7%
(2.5%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
NA
NM
4.6%
12.1%

28

NFI
C$23.90
Rating:
Outperform
12 Month Target:
C$35.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
60%
26%
Sector Perform
24%
10%
Underperform
2%
0%
Speculative Buy
2%
0%
Restricted
4%
20%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
10
29
Direct
__________________________________________________________________________________________________________

E&P- Domestic
403 539 8615

403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
403 539 8620

403 539 8594
403 539 8591
dbenner
kmerali
mwestby
Dave Mowat
647 776 8246

647 776 8245
cmurray
smodwal
President & CEO

780 408 7181
dmowat@atb.com
Agriculture
647 776 8240

647 776 8254
pprattas
spattillo
Ian Wild
All Sectors
403 539 8607
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial

403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
647 776 8040

647 776 8235
647 776 8231
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Jesse Hardage
403 539 8628
jhardage

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

647 776 8223
403 539 8595
647 776 8072
403 539 8614
403 539 8609
647 776 8224
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
mhennebery
30
INSTITUTIONAL EQUITY R ESEARCH : DIVERSIFIED INDUSTRIES
COMPANY UPDATE
NFI | TSX
$20.00
Rating: Outperform
(previously $23.00)
Total Return: 33.1%
Yield: 3.1%
November 9, 2015
A Solid Quarter Adds Evidence of a Margin Expansion

Trend

C$20.86 / C$12.05
3.1%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$1109.3

Float ($mm)
39.7
135.0
$248.6
$1083.2
Net Debt (MRQ) ($mm):

(FYE Dec 31)
2014
Revenue ($mm)
2015e
2016e
FD EPS
EBITDA ($m m )
Q1
2014
$19.7
$107.4
$144.8
$157.7
$0.65
$1.04
$1.21
Q2
Q3
Q4
$27.0
$25.7
$35.0
2015
$31.4
$39.2
$36.3e
$37.9e
2016
$39.5e
$38.4e
$39.5e
$40.3e
Q2
Q3
Q4
$0.16
$0.15
$0.24
Adjusted FD EPS
Q1
$0.10
2015
$0.20
$0.30
$0.26e
$0.28e
2016
$0.30e
$0.29e
$0.30e
$0.31e
$25
We Believe Underlying Margin Performance Is Becoming Sustainable: We

believe the bus manufacturing margins should expand with a combination of normalized
pricing and improved synergies from product rationalization, now at $16.5mm annually,
up $2mm from prior estimates, should contribute to higher margins levels. As well, we
expect aftermarket margins are likely to expand later in 2016 as the company completes
IT systems implementation and a full analysis of the aftermarket business completing
the integration of the legacy NFI, Orion, and NABI aftermarket businesses.
$1,451.1 $1,552.1 $1,697.7
EBITDA ($mm)
2014
Strong Q3/15 Results: New Flyer announced Q3/15 results reporting revenue,
Adjusted EBITDA and Adjusted FD EPS of $364.7mm, $36.3mm and $0.26 as
compared to our estimates of $387.8mm, $32.1mm and $0.22, respectively. Consensus
expectations for revenue, Adjusted EBITDA and Adjus ted FD EPS were $371.8mm,
$31.4mm and $0.23.

Volume ('000)
1000
Last Sale Price
$20
800
$15
600
$10
400
$5
200
$0
0

Managing Director
647.776.8246

647.776.8245
More Disclosure around Return on Capital Shows Strong Positive Trend:

For the first time, NFI reported LTM return on invested capital with the company
generating returns in excess of 11% in Q3/15. With the transition to Xcelsior now
complete and moderating capital needs, we expect the positive trend to continue through
2016. The company continues to experience price normalization in bus manufacturing
providing substantial lift to EBITDA margins. We believe that mid-$30K EBITDA per
EU remains quite achievable on a sustainable basis.
Estimate Changes: We are updating our estimates to reflect the strong quarter and
revising our margin expectations upwards in 2016. Our 2015e and 2016e EBITDA
increase to $144.8mm and $157.7mm from $140.3mm and $154.8mm, respectively. Our
expectations for Adjusted 2015e and 2016e EPS increase to $1.04 and $1.21 from $0.99
and $1.18, respectively.
Maintain Outperform; Increasing Target to C$23.00: We expect continued
operational improvements should positively impact EBITDA margins even as the
company continues to see price normalization through 2016. We expect management
and the Board are likely to discuss the return of capital to shareholders in the form of
higher dividends or buybacks along with the possibility of an upwards revision to the
average corporate line entry rate should bookings continue at the current pace. We also
believe that as returns on capital trend higher that multiples should expand, noting the
positive trend that now has metrics above 10% and expected to increase further. W e
maintain our Outperform rating and are increasing our 12-month price target to C$26.00
from C$23.00. Our target price is based on a blend of a 15.0x earnings and 7.5x
EBITDA multiple of the four quarters ending Q3/17 (+1Q) reflecting our 12-month
forward valuation period as well as an exchange rate of C$1.32/$US.
31
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES
I NSTITUTIONAL
EQUITY
R ESEARCH:
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INDUSTRIES

Current Valuations
Unit Price (C$)
$20.00
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.3x
9.2x
7.3x
Peer Average
14.3x
13.4x
10.4x
10.1x
7.5x
6.9x
23.0x
14.5x
12.4x
Incom e Statem ent
2014
2015e
2016e
2015e
2016e
2017e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
1,132,066 1,231,170 1,399,122 1,419,613

319,034
320,916
298,615
314,498
1,451,100 1,552,086 1,697,736 1,734,111
2014
45,823
35,255
81,078
89,487 114,933 122,178
(1,766)
(1,908)
22.0%
20.7%
17.6%
18.1%
57,374
82,262
93,528
99,373
5.1%
6.7%
6.7%
7.0%
49,991
62,531
64,199
69,190
15.7%
19.5%
21.5%
22.0%
86,457
136,232
157,726
168,562
6.0%
8.8%
9.3%
9.7%
107,365
144,793
157,726
168,562
per Share
7.4%
9.3%
9.3%
9.7%
FCF Yield
Amortization
35,837
39,360
39,408
38,509
Operating Earnings
50,620
96,873
118,318
130,053
EBT
37,568
80,931
106,633
118,749
Taxes
10,849
25,547
39,454
43,937
Net Income
26,719
55,383
67,179
74,812
Reported FD EPS
$0.48
$1.00
$1.21
$1.35
Adjusted FD EPS
$0.65
$1.04
$1.21
$1.35
2015e
2016e
2017e

Total EBITDA incl. Other
Margin
Adjusted EBITDA
Margin
Grow th
2014
9,367 (11,918)
(2,004)
10,686
(2,004)
7,766
(154)
(961)
Free Cash Flow
83,667
81,882
Free cash flow (C$)
92,829 104,547 130,702 136,341

$1.67

Revenue
$1.88
98,373 106,104
$2.35
$2.46
8.4%
9.4%
11.8%
12.3%
82.8%
12.6%
25.0%
4.3%
2014
2015e
2016e
2017e
32,457
33,931
34,413
34,413
35.0%
$0.585
32.5%
$0.611
26.3%
$0.620
25.2%
Cash Yield
2.9%
3.1%
3.1%
3.1%
2014
2015e
2016e
2017e
2,437
2,503
2,709
2,735
52
52
53
52
464.5
491.9
516.5
519.1
15.0%
8.8%
13.6%
1.5%
23.5
32.9
34.5
36.3
Aftermarket
48.4%
0.6%
(6.9%)
5.3%
49.2
50.1
53.1
54.7
Adjusted EBITDA
21.0%
13.4%
7.0%
34.9%
9.4%
8.9%
2.1%
6.9%

48.5
0.9x
48.0
1.1x
50.7
1.0x
51.6
1.0x
Adjusted FD EPS
2.7%
58.7%
16.5%
11.4%
20.7%
5.0%
18.4%
19.9%
2015e
0.7834
2016e
0.7526
2017e
0.7783
2014
2015e
2016e
2017e
2014
0.9057
229,034 196,942 110,547
39,908
EOP CAD/USD Rate
0.9050
0.7463
0.7634
0.7937
FX Assum ptions

Trend
Leverage
Net Debt (EOP)

$5.0
Trend
$0.620
Bus Manufacturing
Weeks of Production
Trend
80,121 126,851 111,492
(10,889) (12,502) (14,556) (14,070)
Trend
2017e
2.1x
1.4x
0.7x
0.2x
33.6%
29.0%
17.4%
6.5%
Trend
Trend
Firm
Option
2020, 12%
2015, 8%
$4.0
2016, 16%
$3.0
2019, 28%
$2.0
2017, 10%
$1.0
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15
2018, 26%

32
COVERAGE
: [INDUSTRY
]
R ESEARCH:
DIVERSIFIED
INDUSTRIES
Q3/15 Earnings Beat Driven By Strong Margin Improvement

in Both Segments
New Flyer announced Q3/15 results reporting revenue, Adjusted EBITDA and Adjusted FD
EPS of $364.7mm, $36.3mm and $0.26 as compared to our estimates of $387.8mm, $32.1mm
and $0.22, respectively. Consensus expectations for revenue, Adjusted EBITDA and Adjus ted
FD EPS were $371.8mm, $31.4mm and $0.23.
Q3/15 Highlights ($000s, except per share)
Q3/15
Q3/14
y/y
Grow th
Q2/15 y/y
Grow th

Backlog End of Period (US$mm)
625.0
468.8
34.6
3,590.0
621.0
448.8
20.2
3,069.5
0.6%
4.4%
71.0%
17.0%
2.1%
5.3%
58.1%
(1.5%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
EBITDA Margin Reported
EBITDA Margin Normalized
292,970
21,606
7.4%
7.4%
278,713
12,557
4.5%
4.9%
5.1%
72.1%
2.9%
2.4%
7.5%
65.1%
2.6%
2.4%
71,713
14,671
20.5%
82,049
13,140
16.0%
(12.6%)
11.7%
4.4%
10.6%
28.3%
2.6%
364,683
36,277
16,559
360,762
25,697
10,245
1.1%
41.2%
61.6%
8.2%
45.3%
247.2%
$0.30
$0.26
$0.18
$0.15
61.5%
75.2%
246.9%
81.4%
Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Fully Diluted Earnings Per Share
Reported
Adjusted
Figure 1 Q3/15 Highlights
Source: Company reports, AltaCorp Capital Inc.
Items of Note
During the quarter, revenues increased by 1.1% y/y while Adjusted EBITDA increased by
41.2%. The company attributes the growth to a favorable produ ct mix as well as several
initiatives aimed at improving operational efficiencies which are starting to positively impact
margins.
Bus manufacturing revenues grew 5.1% y/y with a 0.6% increase in deliveries and a 4.5%
increase in average selling price per EU to $468.8K. Adjusted EBITDA increased by 72.1%
y/y representing a margin expansion of 290bps attributable to a favorable sales mix as well as
increased efficiencies and cost savings achieved from the transition to the Xcelsior platform.
Management indicated in the report that savings from the transition are now estimated at
$16.5mm, up from $14mm previously. EBITDA per EU increased to $34.6K from $20.2K in
Q3/14 and well above our estimate for $29.2K.
33
COVERAGE
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]
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Evolution of Revenue per EU
Figure 2 Evolution of Revenue per EU

While aftermarket revenues declined expectedly as a result of the completion of the Chicago
Transit Authority mid-life overhaul program, EBITDA increased by 11.7% y/y to $14.7mm
representing a margin of 20.5%. The increase is attributable to a broader portfolio of products
and services in an improved market.
Production outlook remains relatively strong with management noting that the number of
filled production slots is up by ~20% y/y. The company currently has no plans to increase
production instead focusing its efforts on improving program management, optimizing the
supply chain and enhancing financial performance. We note that with the conversion to
Oracle R12 application, the entire bus segment is running on a common platform. Within the
aftermarkets segment, the legacy parts business and Orion are already running on Oracle R12
application with the NABI parts business expected to complete the transition by mid-2016
under Project Convergence. The company expects the synchronization to drive further
efficiencies in the supply chain, including in parts sourcing, project bidding, reporting and
delivery. We expect the completion of Project Convergence to be incrementally impact
margins as well as lower working capital needs.
Backlog in Q3/15 was 7,290EU valued at $3.59bn versus 7,011EU ($3.49bn) in Q2/15 and
6,239EU ($3.07bn) in Q3/14. Of the 1,169 pending new firm and option orders, the company
has received a contract for 725 EU from the Massachusetts Bay Transportation Authority
which include a firm order for 175 CNG XN40 and 150 diesel-electric hybrid XDE40 buses
as well as options for an additional 200 clean diesel buses XD40 and 200 diesel-electric
hybrid XDE40 buses. On a TTM basis, the company reported a book-to-bill ratio of 1.00x in
Q3/15.
The companys liquidity position of $68mm comprised of $6.5mm in cash and $61.5mm in
available revolving credit facility. At the end of the quarter, the company had $44.0mm in
direct borrowing and $9.5mm in outstanding letters of credit related to the credit facility. We
note the company is intentionally carrying additional inventory to smooth the transition of
NABI to the Xcelsior platform which it expects to deliver by the end of 2015.
34
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INDUSTRIES

Management continues to expect an average corporate line entry rate of ~50EU per available
production week for 2015 and 2016. We note that in the first week of July, there were no
scheduled assembly line entries which impacted production by ~35EU. The company
continues to see normalization in pricing guiding towards higher 2015 EBITDA margins as
compared to 2014. In the aftermarket segment, parts revenue should grow by 5% y/y in 2015
along with an expected improvement in margins as the company continues to synchronize the
systems and processes in place.
For the first time, NFI reported LTM return on invested capital noting that the company has
generated returns in excess of 11% in Q3/15. With the transition to Xcelsior now complete
and moderating capital needs, we expect the positive trend to continue through 2016.
Furthermore, the company continues to experience price normalization in bus manufacturing
along with various operating expenses providing substantial lift to the EBITDA margins. We
believe that a mid-$30K EBITDA per EU remains quite achievable in the current environment
as transit authorities in the US continue to find ways to replace older fleets. We expect any
long-term transportation funding bill will allow planning flexibility and drive quicker fleet
decisions which should provide an incremental lift to the share prices.
Trailing Return on Invested Capital (ROIC)
Figure 3 Trailing Return on Invested Capital (ROIC)

We are updating our estimates to reflect the strong quarter and revising our margin
expectations upwards in 2016. We believe the bus manufacturing margins should expand with
a combination of normalized pricing and improved synergies from product rationalization
should contribute to higher margins levels. As well, we expect aftermarket margins are likely
to expand later in 2016 as the company completes IT systems implementation and a full
analysis of the aftermarket business completing the integration of the legacy NFI, Orion, and
NABI aftermarket businesses. Our 2015e and 2016e EBITDA increase to $144.8mm and
$157.7mm from $140.3mm and $154.8mm, respectively. Our expectations for Adjusted
2015e and 2016e EPS increase to $1.04 and $1.21 from $0.99 and $1.18, respectively. A
summary of our key changes to estimates is provided in the figure below.
35
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INDUSTRIES

Revenue
Bus Manufacturing
Aftermarket
Revenue
ACC Old Estim ates

2015e
2016e
2017e
ACC New Estim ates

2015e
2016e
2017e
2015e
Change
2016e
2017e
1,285,164 1,451,643 1,435,601

320,186 300,069 316,975
1,605,350 1,751,712 1,752,577
19.9%
17.1%
18.1%
1,231,170 1,399,122 1,419,613

320,916 298,615 314,498
1,552,086 1,697,736 1,734,111
20.7%
17.6%
18.1%
(4.2%)
0.2%
(3.3%)
73 bps
(3.6%)
(0.5%)
(3.1%)
46 bps
(1.1%)
(0.8%)
(1.1%)
5 bps
EBITDA
Margin
78,872
6.1%
61,380
19.2%
132,963
8.3%
92,564
6.4%
62,252
20.7%
154,816
8.8%
93,314
6.5%
66,565
21.0%
159,879
9.1%
82,262
6.7%
62,531
19.5%
136,232
8.8%
93,528
6.7%
64,199
21.5%
157,726
9.3%
99,373
7.0%
69,190
22.0%
168,562
9.7%
4.3%
54 bps
1.9%
32 bps
2.5%
49 bps
1.0%
31 bps
3.1%
75 bps
1.9%
45 bps
6.5%
50 bps
3.9%
100 bps
5.4%
60 bps
Adjusted EBITDA
Margin
140,251
8.7%
154,816
8.8%
159,879
9.1%
144,793
9.3%
157,726
9.3%
168,562
9.7%
3.2%
59 bps
1.9%
45 bps
5.4%
60 bps
Operating Earnings
EBT
93,923
79,188
115,923
104,017
121,826
110,189
96,873
80,931
118,318
106,633
130,053
118,749
3.1%
2.2%
2.1%
2.5%
6.8%
7.8%
Net Incom e
Reported FD EPS
Adjusted FD EPS
50,648
$0.91
$0.99
65,530
$1.18
$1.18
69,419
$1.25
$1.25
55,383
$1.00
$1.04
67,179
$1.21
$1.21
74,812
$1.35
$1.35
9.3%
9.3%
4.6%
2.5%
2.5%
2.5%
7.8%
7.8%
7.8%
Free Cash Flow

Free Cash Flow
68,870
94,596
(15,069)
84,256
92,515
112,449
(14,187)
96,451
61,729
115,676
(13,689)
100,175
80,121
89,487
(12,502)
81,882
126,851
114,933
(14,556)
98,373
111,492
122,178
(14,070)
106,104
16.3%
(5.4%)
(17.0%)
(2.8%)
37.1%
2.2%
2.6%
2.0%
80.6%
5.6%
2.8%
5.9%
Free cash flow (C$)

per Share
FCF Yield
105,267
$1.90
9.5%
121,225
$2.18
10.9%
120,162
$2.16
10.9%
104,547
$1.88
9.4%
130,702
$2.35
11.8%
136,341
$2.46
12.3%
(0.7%)
(0.7%)
(9) bps
7.8%
7.8%
83 bps
13.5%
13.5%
143 bps
33,928
32.2%
$0.61
34,413
28.4%
$0.62
34,413
28.6%
$0.62
33,931
32.5%
$0.61
34,413
26.3%
$0.62
34,413
25.2%
$0.62
0.0%
0.0%
0.0%
22 bps (206) bps (340) bps
0.0%
0.0%
0.0%
208,046
1.5x
0.3x
157,087
1.0x
0.2x
137,729
0.9x
0.2x
196,942
1.4x
0.3x
110,547
0.7x
0.2x
39,908
0.2x
0.1x
(5.3%)
(8.3%)
(4.6%)
(29.6%)
(30.9%)
(25.5%)
(71.0%)
(72.5%)
(67.2%)
2,561
501.8
30.8
48.5
1.1x
5.0%
2,755
526.9
33.6
52.6
1.0x
18.7%
2,711
529.5
34.4
52.6
1.0x
20.0%
2,503
491.9
32.9
48.0
1.1x
5.0%
2,709
516.5
34.5
50.7
1.0x
18.4%
2,735
519.1
36.3
51.6
1.0x
19.9%
(2.3%)
(2.0%)
6.7%
(1.0%)
(0.5%)
0 bps
(1.7%)
(2.0%)
2.8%
(3.7%)
0.0%
(26) bps
0.9%
(2.0%)
5.6%
(1.8%)
0.0%
(9) bps

Leverage
Net Debt (EOP)

We are also rolling forward our valuation period by one quarter which now represents the four
quarters ending Q3/17. We note our valuation remains sensitive to the multiple applied to
estimates as shown in the figure below.
Sensitivity of Target Price to EBITDA and EBITDA Multiple
% Variance
Valuation Period EBITDA ($000s)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
149,758
158,078
166,398
174,718
183,038
6.50x
7.00x
$19.89
$21.68
$21.18
$23.06
$22.47
$24.45
$23.75
$25.83
$25.04
$27.22
7.50x
$23.46
$24.94
$26.42
$27.91
$29.39
8.00x
8.50x
$25.24
$27.02
$26.82
$28.70
$28.40
$30.38
$29.99
$32.06
$31.57
$33.74
Figure 5 Sensitivity of Target Price to EBITDA and EBITDA Multiple

We expect continued operational improvements should positively impact EBITDA margins

even as the company continues to see price normalization through 2016. We expect
management and the Board are likely to discuss the return of capital to shareholders in the
form of higher dividends or buybacks along with the possibility of an upwards revision to the
36
COVERAGE
: [INDUSTRY
]
R ESEARCH:
DIVERSIFIED
INDUSTRIES
average corporate line entry rate should bookings continue at the current pace. We also
believe that as returns on capital trend higher that multiples should expand, noting the positive
trend that now has metrics above 10% and expected to increase further. We maintain our
Outperform rating and are increasing our 12-month price target to C$26.00 from C$23.00.
Our target price is based on a blend of a 15.0x earnings and 7.5x EBITDA multiple of the four
quarters ending Q3/17 (+1Q) reflecting our 12-month forward valuation period as well as an
exchange rate of C$1.32/$US.
37
COVERAGE
: [INDUSTRY
]
R ESEARCH:
DIVERSIFIED
INDUSTRIES

Ticker
Marcopolo S.A.
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Average
Rating &
Target
Trading
Local
Currency Price
TSX:NFI
OP (C$26.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
20.00
2.28
18.99
30.62
10.39
36.87
42.28
4.10
12.95
55.66
21.48
14.12
5.45
10.83
45.75
Market
Cap ($m m )
1,110.4
1,959.7
379.5
439.8
1,460.5
1,049.5
3,311.3
140.5
861.1
2,921.2
579.6
1,151.1
524.0
226.1
1,229.9
EPS
EV
Net
Debt
($m m )
2014
2015e
249.8
1,305.5
167.5
328.7
927.2
204.4
895.6
(15.7)
135.8
(176.3)
(70.2)
4,511.0
199.6
188.1
(43.0)
1,084.9
3,299.0
547.0
768.5
2,387.7
1,384.5
4,206.9
124.6
996.9
2,744.8
509.3
5,672.1
794.0
464.2
1,187.1
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.47
1.04
0.14
1.62
2.14
0.65
6.62
2.68
-0.05
1.39
3.93
1.54
-0.07
0.02
0.76
2.44
P/E
EBITDA
2016e 2014 2015e 2016e

1.21
0.23
1.68
3.28
0.93
5.61
3.53
0.10
1.38
4.51
1.75
2.51
0.05
1.15
2.79
23.0x
6.9x
7.7x
NM
23.0x
8.0x
12.1x
NM
14.8x
15.7x
13.3x
NM
NM
NM
18.5x
14.3x
14.5x
12.3x
11.7x
14.3x
16.0x
5.6x
15.8x
NM
9.3x
14.2x
14.0x
NM
NM
14.2x
18.7x
13.4x
12.4x
7.4x
11.3x
9.3x
11.2x
6.6x
12.0x
NM
9.4x
12.3x
12.3x
5.6x
NM
9.4x
16.4x
10.4x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
144.8
170.0
77.5
75.5
277.7
489.3
494.8
8.1
214.5
333.5
66.1
566.1
70.3
75.5
120.6
157.7
343.0
80.6
101.8
342.7
441.6
589.1
10.9
206.8
390.8
75.3
758.0
88.6
81.7
132.3
10.1x
12.3x
6.6x
12.1x
8.5x
5.4x
7.1x
13.2x
6.2x
9.2x
7.7x
17.1x
11.5x
17.9x
10.0x
10.3x
7.5x
19.4x
7.1x
10.2x
8.6x
2.8x
8.5x
15.4x
4.6x
8.2x
7.7x
10.0x
11.3x
6.2x
9.8x
9.2x
6.9x
9.6x
6.8x
7.5x
7.0x
3.1x
7.1x
11.4x
4.8x
7.0x
6.8x
7.5x
9.0x
5.7x
9.0x
7.3x
1.7x
1.0x
1.2x
1.7x
2.4x
1.5x
1.7x
0.9x
2.0x
2.7x
2.6x
NM
2.0x
NM
1.6x
1.8x
7.0%
2.3%
7.9%
6.1%
6.0%
21.5%
8.7%
(0.0%)
13.7%
17.7%
18.1%
9.7%
2.6%
4.5%
5.8%
8.8%
10.2%
8.2%
11.7%
(2.5%)
7.2%
36.9%
11.8%
(4.7%)
22.6%
19.8%
19.9%
NM
NA
NM
4.6%
12.1%

38

NFI
C$20.00
Rating:
Outperform
12 Month Target:
C$26.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
61%
26%
Sector Perform
25%
9%
Underperform
2%
0%
Speculative Buy
3%
0%
Restricted
2%
50%
Not Rated
5%
0%
Tender
3%
0%
100%
19%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
39
Direct
__________________________________________________________________________________________________________

E&P- Domestic
403 539 8615

403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
porourke
ysiddiqi
nlupick
sbernhardsdottir
tmatthews
cerana
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
403 539 8620

403 539 8594
403 539 8591
dbenner
kmerali
mwestby
Dave Mowat
647 776 8246

647 776 8245
cmurray
smodwal
President & CEO

780 408 7181
dmowat@atb.com
Agriculture
647 776 8240

647 776 8254
pprattas
spattillo
Ian Wild
All Sectors
403 539 8607
vhoa
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial

403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Mervin Kopeck
Jon Varley
Michael Capobianco
647 776 8040

647 776 8235
647 776 8231
mkopeck
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Jesse Hardage
403 539 8628
jhardage

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

647 776 8223
403 539 8595
647 776 8072
403 539 8614
403 539 8609
647 776 8224
pstables
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
mhennebery
40
COMPANY UPDATE
NFI | TSX
$17.88
Rating: Outperform
(previously $18.50)
Total Return: 32.1%
Yield: 3.5%
August 10, 2015
A Solid Quarter Foreshadows a Margin Expansion Trend

Adjusted EBITDA and Adjusted FD EPS of $375.0mm, $39.1mm and $0.30. The
results were well ahead of our expectations for revenue, Adjusted EBITDA and
Adjusted FD EPS of $377.1mm, $31.0mm and $0.18 versus consensus estimates of
$386.9mm, $31.3mm and $0.22.

Dividend Yield:

C$17.16 / C$12.04
3.5%
55.5 (basic)
55.5 (fd)
C$991.7
39.7
103.4
$248.5
$1005.8
(FYE Dec 31)
2015e

Float ($mm)
2014
Revenue ($mm)
EBITDA ($mm)
FD EPS
EBITDA ($mm)
Q1
2014
2015
2016
$19.7
$31.4
$39.4e
Adjusted FD EPS
2014
2015
2016
Q1
$0.10
$0.20
$0.30e
Q2
Q3
Q4
$27.0
$39.2
$36.5e
$25.7
$33.3e
$36.3e
$35.0
$37.5e
$42.4e
Q2
Q3
Q4
$0.16
$0.30
$0.27e
$0.15
$0.23e
$0.27e
$0.24
$0.28e
$0.34e

$15
2016e
$1,451.1 $1,627.9 $1,751.2

$107.4 $141.4
$154.7
$0.65
$1.01
$1.18
Volume ('000)
1000
Last Sale Price
$10
800
600
400
$5
200
$0
0
Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15

Managing Director
647.776.8246
Very Strong Margin Performance but Treat as One-time for Now: We note
management continues to see normalization in the pricing and demand environment. We
believe with the implementation of various cost-reduction and operational efficiency
initiatives, margin expansion will continue to take place. The company reported an
average EBITDA of $37.7k per EU in the quarter or $295k per EU on a trailing basis, up
from $23.9k in Q2/14. While the number is impressive, and was well in excess of our
expectations, we caution taking any one particular quarter and extrapolating is not
appropriate. We continue to see the combination of rationalized production offering cost
opportunities (the $14mm in synergies implies ~$5k per EU) plus improved selling
prices and margin capture with a more rational environment leading to margins in the
mid $30k per EU range into 2016.
Estimate Changes: We are updating our estimates to reflect the strong quarter and
are revising our expectations for margin performance upwards through the remainder of
the year. Our 2015e EBITDA increases to $141.4mm (+7.8%) while our 2016e EBITDA
increases by 3.4% to $154.7mm. Our expectations for Adjusted 2015e and 2016e EPS
increase to $0.93 and $1.18 from $0.87 and $1.13, respectively. We are also introducing
our estimates for 2017 forecasting revenue, Adjusted EBITDA and Adjusted FD EPS of
$1.75bn, $159.7mm and $1.25. With our 2017 estimates we have remained relatively
conservative in our assumptions keeping production rates relatively flat from 2016
levels and assuming only incremental margin improvements.
Maintain Outperform; Increasing Target to C$23.00: Overall, we believe the
quarter was well ahead of our and consensus expectations with tailwinds for margin
expansion expected to continue in an increasingly rationalized market. We note that as
the companys operational efficiency initiatives mature, discussions around return of
capital to shareholders will start to gain further traction. We also believe that with return
on capital increasing consistently and sustainably, a higher valuation multiple is
warranted. We maintain our Outperform rating and are increasing our 12-month price
target to C$23.00 from C$18.50. Our target price is based on a blend of a 15.0x earnings
(previously 14.0x) and 7.5x EBITDA (previously 7.0x) multiple of the four quarters
ending Q2/17 reflecting our 12-month forward valuation period as well as an exchange
rate of C$1.27/$US.

647.776.8245
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Current Valuations
Unit Price (C$)
$17.88
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.8x
8.4x
7.0x
Peer Average
14.3x
13.3x
11.0x
8.8x
6.7x
6.1x
20.8x
13.5x
11.6x
Incom e Statem ent
2014
2015e
2016e
2017e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
1,132,066 1,308,532 1,451,959 1,435,913

319,034
319,390
299,235
316,092
1,451,100 1,627,922 1,751,194 1,752,005
2014
2015e
2016e
45,823
76,111
93,835 151,588
35,255
19,320
18,505 (36,029)
81,078
95,431 112,340 115,560
(1,766)
(1,812)
22.0%
19.6%
17.1%
18.0%
57,374
80,216
92,584
93,334
5.1%
6.1%
6.4%
6.5%
49,991
61,222
62,077
66,379
15.7%
19.2%
20.7%
21.0%
86,457
134,150
154,661
159,714
6.0%
8.2%
8.8%
9.1%
107,365
141,438
154,661
159,714
per Share
7.4%
8.7%
8.8%
9.1%
FCF Yield
Amortization
35,837
39,040
38,893
38,052
Operating Earnings
50,620
95,110
115,768
121,661
EBT
37,568
80,374
103,862
110,024
Taxes
10,849
28,979
38,429
40,709
Net Income
26,719
51,396
65,433
69,315
Reported FD EPS
$0.48
$0.93
$1.18
$1.25
Adjusted FD EPS
$0.65
$1.01
$1.18
$1.25
2015e
2016e
2017e

Margin
Adjusted EBITDA
Margin
Grow th
2014
Weeks of Production
6,765
(154)
(223)
Free Cash Flow
83,667
85,092
Free cash flow (C$)
92,829 106,319 121,087 120,023

$1.67
96,342 100,059
$1.92
$2.18
9.4%
10.7%
12.2%
$2.16
12.1%
82.8%
14.5%
13.9%
(0.9%)
2014
2015e
2016e
2017e
32,457
33,928
34,413
34,413
35.0%
$0.585
31.9%
$0.611
28.4%
$0.620
28.7%
Cash Yield
3.3%
3.4%
3.5%
3.5%
2014
2015e
2016e
2017e
2,437
2,607
2,755
2,711
464.5
501.9
527.0
529.7
23.5
30.8
33.6
34.4
5.6%
49.2
52.1
54.0
54.2
0.0%
3.3%

48.5
0.9x
49.6
1.3x
52.6
1.0x
52.6
1.0x
20.7%
9.5%
17.8%
20.1%
2014
2015e
2016e
2017e
229,034 200,806 148,526
39,309
52
53
52
15.0%
15.6%
11.0%
(1.1%)
Aftermarket
48.4%
0.1%
(6.3%)
Adjusted EBITDA
21.0%
13.4%
12.2%
31.7%
7.6%
9.3%
Adjusted FD EPS
2.7%
53.9%
17.0%
5.9%
2014
0.9057
2015e
0.8004
2016e
0.7953
2017e
0.8335
EOP CAD/USD Rate
0.9050
0.7874
0.8130
0.8547

Trend
Leverage
Net Debt (EOP)

$5.0
Trend
$0.620
52
Bus Manufacturing
FX Assum ptions
(1,812)
Revenue
(1,812)
Trend
(10,889) (15,069) (14,187) (13,689)
Trend
2017e
2.1x
1.4x
1.0x
0.2x
33.6%
29.6%
22.3%
6.6%
Trend
Trend
Firm
Option
2020, 11%
2015, 14%
$4.0
2016, 12%
$3.0
2019, 23%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Q1/15
2018, 29%

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Record Quarter on Significant Margin Expansion

EPS of $375.0mm, $39.1mm and $0.30. The results were well ahead of our expectations for
revenue, Adjusted EBITDA and Adjusted FD EPS of $377.1mm, $31.0mm and $0.18 versus
consensus estimates of $386.9mm, $31.3mm and $0.22.
Q2/15
Q2/14
y/y
Growth
Q1/15 y/y
Growth

594
481.1
37.7
3,487.1
582
456.8
23.9
3,538.5
2.1%
5.3%
58.1%
(1.5%)
3.2%
12.2%
84.1%
(3.3%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
285,793
22,412
7.8%
7.8%
265,831
13,889
5.2%
5.5%
7.5%
61.4%
2.6%
2.4%
15.9%
167.3%
2.0%
2.0%
89,219
16,779
18.8%
80,653
13,077
16.2%
10.6%
28.3%
2.6%
22.8%
40.0%
2.3%
375,012
39,191
12,370
346,484
26,966
3,563
8.2%
45.3%
247.2%
17.4%
59.7%
97.9%
$0.22
$0.30
$0.06
$0.16
247.0%
81.4%
97.8%
105.5%
Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
Items of Note
NFI reported record Q2/15 results with total revenue up 8.2% y/y and Adjusted EBITDA up
45.3% y/y. The companys upgrade to the latest version of Oracle R-12 is progressing well
along with the transition of the NABI bus manufacturing line to the Xcelsior platform.
Management indicated annualized savings of $14mm should begin to appear later this year
and throughout 2016. Project Convergence also appears to remain on-track with the goal to
better integrate the spare parts businesses between NABI and New Flyer on a common IT
platform, which is expected to be completed in H1/16 and we expect to be incrementally
positive for margins and working capital requirements.
The company realized a 7.5% y/y growth in bus manufacturing revenues as a result of 2.1%
increase in total bus deliveries and 5.3% increase in average selling price due to a more
favourable mix. Adjusted EBITDA increased by 61.3% y/y due to a favorable mix and cost
savings achieved from Xcelsior transition.
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In the aftermarket segment, revenue increased by 10.6% y/y as a result of incremental revenue
from the Chicago Transit Authority (CTA) midlife overhaul program. Excluding the CTA
contract, revenue from aftermarket segment was $72.4mm, flat y/y. The company continues
to benefit from a broader portfolio of services and parts offerings with EBITDA up 28.3%
y/y. We estimate core aftermarket margins were approximately 19.7% in the quarter
demonstrating the solid performance the company is delivering and a trend we anticipate to
continue through the balance of the year. Management reiterated its guidance for the
aftermarket segment expecting core growth, excluding the CTA contract rate of 5.0% in 2015.
The CTA mid-life upgrade program ended in June 2015 and represented 18.6% of the total
2014 aftermarket revenues, which will impact H2/15 comparable periods.
The company increased its borrowings from the revolving credit facility by $35.0mm during
the quarter to fund working capital requirements cause by increase in inventories and decrease
in accounts payables. At the end of Q2/15, the company had $48.0mm in direct borrowings
and 17.3mm of outstanding letters of credit related to the revolving credit facility. The
company is intentionally carrying additional inventory related to the changeover in production
from NABI platforms to Xcelsior. This excess inventory is expected to be delivered by year
end.
At June 30, 2015 the company became eligible to accelerate the redemption of its US$
denominated 6.25% convertible debentures, due June 30, 2017. The company has the right to
accelerate the redemption, effectively forcing holders to convert to equity should share prices
trade at greater than 125% of the US$10 exercise price for 20 days on a VWAP basis.
Management indicated that barring some change in the business they would be content to hold
the debt to maturity given the tax shield of the interest payments results in a lower cash
impact than paying additional dividends.
The company reported a total backlog of 7,011equivalent units (EU) valued at $3.49bn as
compared to 7,193 EU valued at $3.57bn at the end of Q1/15. Of the 1,238 pending new firm
and option orders highlighted during Q2 orders and backlog update, the company has now
received contracts for 513 EU. On a TTM basis, the company reported a book-to-bill ratio of
0.99x however we expect the book to bill ratio to be well in excess of 1.0x in Q3/15.
The company announced the appointment of Mr. Paulo Cezar da Silva Nunes to the Board of
Directors. The appointment was proposed by Marcopolo, pursuant to the Investment
Agreement between the two companies dated January 23, 2013. Mr. Nunes has almost 40
years of leadership experience in manufacturing, distribution and automotive-related sectors.
Presently, he is an independent automotive business consultant to Brazilian companies and
also a member of the Board of Directors for Cesbe S.A. On the call, management suggested
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that Mr. Nunes appointment does not in their opinion signify any change in intent for
Marcopolo and welcomed the addition of his global experience in automotive and
manufacturing sectors.
Management maintained an H2/15 deadline for the completion of transition of NABI to the
Xcelsior platform. The company expects to invest ~$20.0mm in direct operating costs and
capital expenditures to fund this transition, of which $13.2mm have already been incurred
with $6.0mm in direct operating costs and $7.2mm in capital expenditures. The company
expects annualized cost savings of ~14.0mm. Management continues to guide towards higher
y/y margins in buses. The company anticipates a corporate average line entry rate of ~50EU
per production week for 2015, however this does imply a higher line entry rate of
approximately 56 EU/week in H2/15 allowing for two weeks of shutdown, one in each of
Q3/15 and Q4/15.
We note management continues to see normalization in the pricing and demand environment.
We believe with the implementation of various cost-reduction and operational efficiency
initiatives, margin expansion will continue to take place. The company reported an average
EBITDA of $37.7k per EU in the quarter or $295k per EU on a trailing basis, up from $23.9k
in Q2/14. While the number is impressive, and was well in excess of our expectations, we
caution taking any one particular quarter and extrapolating is not appropriate. We continue to
see the combination of rationalized production offering cost opportunities (the $14mm in
synergies implies ~$5k per EU) plus improved selling prices and margin capture with a
more rational environment leading to margins in the mid $30k per EU range into 2016.
We are updating our estimates to reflect the strong quarter and are revising our expectations
for margin performance upwards through the remainder of the year. Our 2015e EBITDA
increases to $141.4mm (+7.8%) while our 2016e EBITDA increases by 3.4% to $154.7mm.
Our expectations for Adjusted 2015e and 2016e EPS increase to $0.93 and $1.18 from $0.87
and $1.13, respectively.
We are also introducing our estimates for 2017 forecasting revenue, Adjusted EBITDA and
Adjusted FD EPS of $1.75bn, $159.7mm and $1.25. With our 2017 estimates we have
remained relatively conservative in our assumptions keeping production rates relatively flat
from 2016 levels and assuming only incremental margin improvements. We believe it
important to note the reduction in 2017 revenue and earnings over 2016 levels in bus
manufacturing stems from 2016 having 53 production weeks in the fiscal year, an event that
happens once every four years, while 2017 is expected to have the normal 52 weeks. We
believe the extra week will be included in Q1/16, however the company has not yet released
the formal fiscal schedule for 2016.
We note however, while we remain conservative in our forecasts, should book to bill ratios
continue to trend above 1.0x for a sustained period, that we believe a production rate increase
is likely. We believe the companys existing footprint in the context of its much improved
operational capability could see rates as high at 60EU/week be feasible with only additional
variable costs for materials and direct labour, affording a meaningful improvement in margins
as overheads are more fully absorbed. A summary of our key changes to estimates is provided
in Figure 3.
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Revenue
Bus Manufacturing
Aftermarket
Revenue
ACC Old Estim ates

2015e
2016e
ACC New Estim ates

2015e
2016e
2017e
1,294,477 1,414,167
305,404 296,999
1,599,881 1,711,165
19.1%
17.4%
1,308,532 1,451,959 1,435,913

319,390 299,235 316,092
1,627,922 1,751,194 1,752,005
19.6%
17.1%
18.0%
Change
2015e
2016e
1.1%
4.6%
1.8%
53 bps
2.7%
0.8%
2.3%
(27) bps
EBITDA
Margin
72,617
5.6%
58,598
19.2%
129,461
8.1%
90,116
6.4%
59,400
20.0%
149,516
8.7%
80,216
6.1%
61,222
19.2%
134,150
8.2%
92,584
6.4%
62,077
20.7%
154,661
8.8%
93,334
6.5%
66,379
21.0%
159,714
9.1%
10.5%
52 bps
4.5%
(2) bps
3.6%
15 bps
2.7%
0 bps
4.5%
75 bps
3.4%
9 bps
Adjusted EBITDA
Margin
131,215
8.2%
149,516
8.7%
141,438
8.7%
154,661
8.8%
159,714
9.1%
7.8%
49 bps
3.4%
9 bps
Operating Earnings
EBT
89,643
73,313
112,124
99,354
95,110
80,374
115,768
103,862
121,661
110,024
6.1%
9.6%
3.3%
4.5%
Net Incom e
Reported FD EPS
Adjusted FD EPS
48,154
$0.87
$0.87
62,593
$1.13
$1.13
51,396
$0.93
$1.01
65,433
$1.18
$1.18
69,315
$1.25
$1.25
6.7%
6.7%
15.3%
4.5%
4.5%
4.5%
78,345
96,987
(16,931)
79,568
108,643
107,570
(13,890)
91,867
76,111
95,431
(15,069)
85,092
93,835
112,340
(14,187)
96,342
151,588
115,560
(13,689)
100,059
(2.9%)
(1.6%)
(11.0%)
6.9%
(13.6%)
4.4%
2.1%
4.9%
Free cash flow (C$)

per Share
FCF Yield
99,425
$1.79
11.4%
115,489
$2.08
13.2%
106,319
$1.92
11.3%
121,087
$2.18
12.9%
120,023
$2.16
12.7%
6.9%
4.8%
6.9%
4.8%
(6) bps (33) bps

33,928
34.1%
$0.61
34,413
29.8%
$0.62
33,928
31.9%
$0.61
34,413
28.4%
$0.62
34,413
28.7%
$0.62
0.0%
0.0%
(221) bps (138) bps
0.0%
0.0%
195,660
1.5x
0.3x
171,641
1.2x
0.3x
200,806
1.4x
0.3x
148,526
1.0x
0.2x
39,309
0.2x
0.1x
2.6%
(4.8%)
1.2%
(13.5%)
(22.7%)
(14.7%)
2,547
508.2
28.5
50.9
1.2x
9.5%
2,650
533.6
34.0
52.0
1.0x
16.5%
2,607
501.9
30.8
49.6
1.3x
9.5%
2,755
527.0
33.6
52.6
1.0x
17.8%
2,711
529.7
34.4
52.6
1.0x
20.1%
2.4%
(1.2%)
7.9%
(2.7%)
10.8%
0 bps
4.0%
(1.2%)
(1.2%)
1.3%
0.0%
129 bps
Free Cash Flow

Free Cash Flow
Leverage
Net Debt (EOP)

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We highlight that the companys ROIC on a trailing basis has continued to trend higher even
as capital needs moderate and long-term growth remains at a sustainable level. We estimate a
trailing ROIC of 6.4% in Q2/15 as compared to 5.1% in Q1/15 and 4.9% in December 2014.
Trailing Return on Invested Capital (ROIC)
Figure 4 Trailing Return on Invested Capital (ROIC)

We believe that with return on capital increasing consistently and sustainably, a higher
valuation multiple is warranted. We are rebasing our valuation using a 7.5x forward
EV/EBITDA (from 7.0x) and 15.0x forward P/E multiple (from 14.0x). Our price target
increases to C$23.00 as a result of a higher multiple, the shift in our C$/US$ exchange rate
from C$1.22 to C$ 1.27 /$US as well as a result of rolling forward our valuation period by
two quarters now ending in Q2/17. We note our valuation remains sensitive to the multiple
applied to estimates as shown in the figure below.
% Variance
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
141,379
149,233
157,088
164,942
172,797
6.50x
7.00x
$16.82
$18.44
$17.99
$19.70
$19.16
$20.96
$20.33
$22.21
$21.49
$23.47
7.50x
$20.06
$21.40
$22.75
$24.10
$25.45
8.00x
8.50x
$21.67
$23.29
$23.11
$24.82
$24.55
$26.35
$25.99
$27.87
$27.43
$29.40

Overall, we believe the quarter was well ahead of our and consensus expectations with
tailwinds for margin expansion expected to continue in an increasingly rationalized market.
We note that as the companys operational efficiency initiatives mature, discussions around
return of capital to shareholders will start to gain further traction. We maintain our
Outperform rating and are increasing our 12-month price target to C$23.00 from C$18.50.
Our target price is based on a blend of a 15.0x earnings and 7.5x EBITDA multiple of the four
quarters ending Q2/17 reflecting our 12-month forward valuation period as well as an
exchange rate of C$1.27/$US.
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Ticker
Marcopolo S.A.
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Average
Rating &
Target
TSX:NFI
OP (C$23.00)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
17.88
2.10
21.77
44.45
10.95
43.63
36.96
4.85
13.58
56.00
21.93
16.75
5.56
13.05
43.62
Market
Cap ($m m )
941.6
1,839.1
404.5
652.2
1,412.5
1,287.7
2,878.2
160.0
911.5
2,915.2
592.0
1,369.2
533.6
269.4
1,243.3
EPS
EV
Net
Debt
($m m )
2014
2015e
249.4
1,268.6
167.3
165.9
939.9
316.0
854.2
(15.4)
196.5
(259.4)
(49.2)
4,419.0
220.9
195.6
(43.0)
949.2
3,133.8
656.5
818.1
2,352.4
1,714.3
3,732.4
144.5
1,108.0
2,655.8
542.8
5,821.2
816.4
515.1
1,200.6
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.47
1.01
0.19
1.92
2.81
0.60
6.16
3.28
0.07
1.29
3.99
1.62
1.05
0.02
0.00
2.25
P/E
EBITDA
2016e 2014 2015e 2016e

1.18
0.27
2.18
3.91
1.11
6.32
3.70
0.19
1.35
4.58
1.90
2.42
0.06
0.00
0.00
20.8x
6.4x
8.9x
NM
24.3x
9.4x
10.6x
NM
15.5x
15.8x
13.6x
NM
NM
NM
17.6x
14.3x
13.5x
8.4x
11.4x
15.8x
18.2x
7.1x
11.3x
NM
10.5x
14.0x
13.5x
15.9x
NM
NM
19.4x
13.3x
11.6x
6.0x
10.0x
11.4x
9.9x
6.9x
10.0x
25.5x
10.1x
12.2x
11.6x
6.9x
NM
NM
NM
11.0x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
119.3
141.4
260.3
83.4
91.2
275.4
458.4
540.0
12.4
206.6
344.1
68.3
648.8
79.1
0.0
114.3
154.7
373.7
92.5
115.8
314.2
473.2
585.2
17.0
208.7
392.0
81.2
852.0
94.4
0.0
139.6
8.8x
11.7x
8.0x
12.9x
8.3x
6.7x
6.3x
15.3x
6.9x
8.9x
8.3x
17.6x
11.8x
19.9x
10.1x
10.8x
6.7x
12.0x
7.9x
9.0x
8.5x
3.7x
6.9x
11.6x
5.4x
7.7x
7.9x
9.0x
10.3x
NM
10.5x
8.4x
6.1x
8.4x
7.1x
7.1x
7.5x
3.6x
6.4x
8.5x
5.3x
6.8x
6.7x
6.8x
8.6x
NM
8.6x
7.0x
1.7x
1.1x
1.1x
2.9x
2.5x
1.9x
1.4x
1.0x
2.3x
2.8x
2.8x
NM
2.1x
NM
1.6x
1.9x
6.4%
3.2%
9.0%
8.4%
6.2%
18.1%
8.9%
1.6%
12.1%
17.8%
19.4%
13.7%
2.9%
NA
5.9%
9.5%
9.0%
11.8%
13.0%
(0.2%)
5.7%
34.7%
12.2%
0.7%
20.6%
20.1%
21.5%
NM
0.7%
NM
4.6%
11.9%

As of August 7, 2015. All figures in millions, unless otherwise noted.
48
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DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Appendix 2: Financial Statements

INCOME STATEMENT (Figures in US$000s)
2014
2015
2016
2017
Revenue
Bus Manufacturing
$1,132,066 $1,308,532 $1,451,959 $1,435,913
Aftermarket
319,034
319,390
299,235
316,092
Revenue
1,451,100 1,627,922 1,751,194 1,752,005
Operating Costs And Expenses
1,276,980 1,430,740 1,519,720 1,515,568
Sales, General Administration Costs And Other Operating Expenses
81,285
83,151
76,813
76,723
Bus Manufacturing
57,374
80,216
92,584
93,334
Aftermarket
49,991
61,222
62,077
66,379
EBITDA Excluding Realized FX Gain/Loss
88,004
133,383
154,661
159,714
Foreign Exchange Loss (gain)
1,547
(767)
EBITDA including realized FX gain/loss
86,457
134,150
154,661
159,714
Follow -On Offering Cost
Fair Market Value Adjustment To Deferred Revenue
Fair Market Value Adjustment To Accounts Payables And Accrued Liabilities
Fair Market Value Adjustment To Inventory
Fair Market Value Adjustment To Prepaid Expenses
Other (Embedded Derivative)
(20,908)
(7,288)
Adjustm ents To EBITDA
(20,908)
(7,288)
Adjusted EBITDA
107,365
141,438
154,661
159,714
Adjusted EBITDA (C$)
118,865
176,725
194,396
191,588
Amortization & Depreciation
35,837
39,040
38,893
38,052
Earnings from Operations
50,620
95,110
Other
Unrealized FX Loss On Non-Current Monetary Items And Forw ard Foreign Exchange(820)
Contracts 1,085
Follow -On Offering Related Costs
Gain On Disposition Of PPE
Fair Value Adjustment To Embedded Derivative
Fair Value Adjustment To Other Liabilities, Class B And C Common Shares
EBIT
Interest On Long-Term Debt

Accretion In Carrying Value Of Long-Term Debt
Other Interest And Bank Charges (Recovered)
Fair Market Value Adjustment On Cross-Currency Interest Rate Sw ap
Other
Interest Expense
Distributions On Class B And Class C Common Shares
EBT
Current Income Tax

Future Income Tax
Income Tax Expense
Net Incom e
Deficit - Beginning Of Period
Net Earnings (Loss) For The Period
Dividends Declared
Other Comprehensive loss for the period
Deficit - End Of Period
115,768
121,661
51,440
94,025
115,768
121,661
8,897
2,229
3,521
(775)
8,942
1,786
2,745
177
8,829
329
2,749
-
8,833
50
2,754
-
13,872
13,650
11,906
11,637
37,568
80,374
103,862
110,024
25,691
(14,842)
10,849
26,719
39,494
(10,515)
28,979
51,396
30,743
7,686
38,429
65,433
32,567
8,142
40,709
69,315
(133,167)
26,719
(29,333)
(135,781)
(135,781)
51,396
(26,971)
(111,356)
(111,356)
65,433
(27,370)
(73,293)
(73,293)
69,315
(28,682)
(32,660)
Reported Net Earnings (Loss) Per Unit
0.48
0.93
1.18
1.25
Net Earnings (Loss) Per Unit Adjusted (Excl. Non-cash charges,

Unrealized FX gains/losses, Tax Norm alized)
0.65
1.01
1.18
1.25
49
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
BALANCE SHEET (Figures in US$000s)

2014
2015
2016
2017
17,456
212,125
230,002
4,393
689
778
465,443
55,581
264,144
250,260
4,925
240
575,151
106,049
277,683
273,311
5,178
240
662,460
213,454
292,739
213,428
5,459
240
725,319
63,804
544,464
62,235
169
1,136,115
64,256
523,127
65,300
1,227,834
61,010
501,667
57,614
1,282,751
58,106
480,207
49,473
1,313,105
LIABILITIES AND UNITHOLDERS EQUITY

Current Liabilities
Bank Indebtedness
Accounts Payable And Accrued Liabilities
Income Taxes Payable
Deferred Revenue
Provision For Warranty Costs
Derivative Financial Instruments
Current Portion Of performance unit plan liability
Current Portion Of Obligations Under Capital Lease
Current Portion Of Long-Term Debt
Other
Total Current Liabilities
233,073
45,923
32,330
6,090
1,551
40,000
358,967
253,240
6,492
72,257
40,901
3,888
48,000
424,778
266,220
6,492
71,625
46,890
3,888
48,000
443,116
280,655
6,492
44,976
50,587
3,888
48,000
434,598
Accrued Benefit Liability

Obligations Under Capital Lease
Deferred Compensation Obligation
Future Income Tax Liability
Long-Term Debt
Other Liabilities, Class B & C Common Shares
Other
Total Liabilities
1,026
3,225
2,939
108,465
140,747
1,733
6,677
683,493
4,117
5,813
3,533
102,520
141,612
1,911
4,871
749,730
4,117
4,001
3,533
102,520
141,941
1,911
4,871
766,583
4,117
2,189
3,533
102,520
141,991
1,911
4,871
756,304
589,586
(135,781)
452,622
1,136,115
589,701
(111,356)
478,105
1,227,834
589,701
(73,293)
516,168
1,282,751
589,701
(32,660)
556,801
1,313,105
ASSETS
Current Assets
Cash
Accounts Receivable
Inventory
Prepaid Expenses And Other Assets
Embedded Derivative Instrument
Due From Related Party
Future Income Tax Assets + Derivatives
Other
Total Current Assets
Property, Plant & Equipment
Long-term receivable
Intangible Assets
Future Income Tax Assets
Goodw ill
Other Assets & Foreign Exchange Contracts
Unused Investment Tax Credits
Other
Total Assets
Unitholder's Equity
Share Capital
Surplus (Deficit)
Total Equity
10
50
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
CASH FLOW STATEMENT (Figures in US$000s)

2014
Operating Activities
Net Earnings
26,719
Amortization Of Plant & Equipment
15,372
Amortization Of Intangible Assets
20,465
Loss From Equity Accounted Investment
Loss (Gain) On Disposal Of PP&E
Future Income Taxes
Unrealized (Gain) Loss On Cross-Currency Interest Rate Sw ap
Unrealized Foreign Exchange (Gain) On Non-Current Monetary Items And
(820)
Forw ard Foreign Exchange Contracts
Foreign Exchange Loss (Gain) On Cash Held In Foreign Currency
154
Non-Cash Impact Of Embedded Derivative
Net Defined Benefit Expense
Other
5,510
Cash From Operating Activities Before Changes In Non-Cash Working Capital Items
67,400
Changes In Non-Cash Working Capital Items
(35,255)
32,145
Financing Activities
Repayment Of Obligations Under Capital Lease
(1,766)
Share Issuance
26
Costs Associated With Share Issuance
Proceeds (Repayment) of Long-Term Debt
5,000
Costs Associated With Debt Issuance
Proceeds of issue of convertible debentures/other LT liabilities
Repayment Of Other Liabilities, Class B And C Common Shares
(2,948)
Due From Related Parties
Dividend Paid To IDS And Common Shares
(29,532)
(29,220)
Investing Activities
Cash Provided From Consolidation Of New Flyer Holdings Inc
Proceeds From Disposition Of Property, Plant And Equipment
Acquisitons
Capital Expenditures
Maintenance
(2,589)
Grow th
(8,300)
Acquisitions
Total Capital Expenditures
(10,889)
(10,889)
Effect Of Foreign Exchange Rate On Cash
(154)
Increase In Cash
5,560
Cash - Beginning Of Period
11,896
Cash - End Of Period
17,456
2015
2016
2017
51,396
17,629
21,411
3,309
-
65,433
17,433
21,460
7,686
-
69,315
16,592
21,460
8,142
-
1,085
223
604
523
96,180
(19,320)
76,860
329
112,340
(18,505)
93,835
50
115,560
36,029
151,588
(1,812)
8,000
(1,923)
(26,862)
(22,597)
(1,812)
(27,370)
(29,182)
(1,812)
(28,682)
(30,494)
(96)
(3,585)
(11,484)
(15,069)
(15,165)
(223)
38,125
17,456
55,581
(3,375)
(10,812)
(14,187)
(14,187)
50,467
55,581
106,049
(3,256)
(10,433)
(13,689)
(13,689)
107,405
106,049
213,454
11
51

NFI
C$17.88
Rating:
Outperform
12 Month Target:
C$23.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
64%
25%
Sector Perform
21%
4%
Underperform
2%
0%
Speculative
1%
0%
Restricted
2%
50%
Not Rated
6%
12%
Tender
4%
0%
100%
18%
Total

average.
average.
average.
A Speculative rating represents a security where the
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
12
52
Direct
__________________________________________________________________________________________________________
Chairman & CEO

403 539 8601
E&P- Domestic
Kate-Lynn Gordey, Associate
Thomas Matthews, P.Eng., Analyst
403 539 8615

403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
403 539 8620

403 539 8591
dbenner
mwestby
647 776 8246

647 776 8245
cmurray
smodwal
Agriculture
647 776 8240

647 776 8254
pprattas
spattillo
All Sectors
403 539 8607
vhoa
George FJ Gosbee
President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
647 776 8244

647 776 8235
647 776 8231
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

403 539 8628
647 776 8223
403 539 8595
647 776 8072
403 539 8614
403 539 8609
647 776 8224
pstables
jhardage
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
Private Wealth
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________

403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
mhennebery
53
COMPANY UPDATE
NFI | TSX
$14.32
Rating: Outperform
(previously $17.50)
Total Return: 26.5%
Yield: 4.2%
May 8, 2015
Aftermarket Margins Jump Demonstrating Sustainable

Improvement

C$14.90 / C$11.53
4.3%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$794.3

Float ($mm)
33.6
82.0
$212.1
$866.6

(FYE Dec 31)
2014
Revenue ($mm)
2015e
2016e
$1,451.1 $1,597.8 $1,710.8
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$130.9
$149.4
$0.65
$0.87
$1.13
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$31.4
$33.1e
$31.3e
$35.1e
2016
$38.0e
$36.9e
$35.8e
$38.8e
Q2
Q3
Q4
$0.16
$0.15
$0.24
Adjusted FD EPS
2014
Q1
$0.10
2015
$0.20
$0.20e
$0.21e
$0.25e
2016
$0.29e
$0.28e
$0.26e
$0.30e

$15
Volume ('000)
800
Last Sale Price
Adjusted EBITDA and Adjusted FD EPS of $380.3mm, $31.4mm and $0.20. The
results were well ahead of our expectations for revenue, Adjusted EBITDA and
Adjusted FD EPS of $363.2mm, $27.8mm and $0.15 versus consensus estimates of
$349.6mm, $25.3mm and $0.16.
Boosting Dividend Shows Confidence in Outlook: The company announced an
increase in annual dividend rate from C$0.585 to C$0.62 effective for dividends
declared subsequent to May 6, 2015, an increase of 6.0%. Management was hesitant to
disclose any specific metrics related to the increase, however we believe it indicates an
expectation of continuing financial improvement. On the conference call, the company
disclosed that review of the dividend has become a more of a regular process at the
board level, which we believe is constructive for future increases in line with earnings
growth.
Estimate Changes Driven by Aftermarket Margin Expansion: The most
impactful item in the quarter was the remarkably strong EBITDA margin in aftermarket
at 18.6%, which is significantly stronger than the company's recent performance over the
past several quarters. Management explained that the improvement came about as a
result of a number of concerted efforts with the ongoing integration of the various
components of the aftermarket business. Our estimate changes stem from our revised
expectation for margin performance for the companys aftermarket business, where we
have increased margin expectations to 19.1% (+286bps) and 20.0% (+300bps)
respectively. Our 2015e EBITDA increases to $131.3mm (+7.8%) while our 2016e
EBITDA increases by 9.0% to $151.0mm.
600
$10
$5
400
200
$0
0
May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15

Managing Director
647.776.8246

647.776.8245
Maintain Outperform; Increasing Target to C$18.50: While guidance and the

companys outlook for the remainder of 2015 remained consistent the step jump in
aftermarket margins, which we believe are sustainable, leads us to increase estimates.
We believe the introduction of the higher dividend is an indication in managements
confidence that continuous improvement activities should lead to improved financial
performance which coupled with a 4.3% yield offers an attractive return. We believe as
the company completes integration of both the manufacturing and aftermarket segments
of the business that there are a number of opportunities to drive improvements in return
on invested capital, which we believe could drive the next leg of share price
appreciation. We maintain our Outperform rating and are increasing our 12-month target
price to C$18.50 from C$17.50. Our target price is based on a blend of a 15.0x earnings
and 7.0x EBITDA multiple of the four quarters ending Q4/16 reflecting our 12-month
forward valuation period as well as an exchange rate of C$1.22/$US.
54
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES

Current Valuations
Unit Price (C$)
$14.32
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
11.3x
8.5x
7.6x
Peer Average
16.1x
13.6x
12.1x
8.2x
6.7x
5.9x
18.0x
13.6x
10.5x
Incom e Statem ent
2014
2015e
2016e
2015e
2016e
Trend
Revenues
Bus Manufacturing
Aftermarket
Revenue
1,132,066 1,292,952 1,414,167

319,034
303,118
294,666
1,451,100 1,596,071 1,708,833
2014
45,823
78,432 114,728
35,255
18,073
81,078
96,504 107,236
(1,766)
(1,812)
(7,492)
(1,812)
22.0%
19.0%
17.2%
57,374
72,378
90,108
5.1%
5.6%
6.4%
49,991
58,151
58,933
15.7%
19.2%
20.0%
86,457
128,775
149,041
6.0%
8.1%
8.7%
107,365
130,529
149,041
per Share
7.4%
8.2%
8.7%
Amortization
35,837
39,818
37,392
Operating Earnings
50,620
88,958
111,649
EBT
37,568
72,628
98,880
2014
2015e
2016e
Taxes
10,849
24,905
36,585
32,457
33,928
34,413
Net Income
26,719
47,723
62,294
35.0%
34.0%
29.9%
Reported FD EPS
$0.48
$0.86
$1.12
Adjusted FD EPS
$0.65
$0.87
$1.12
Cash Yield

Margin
Adjusted EBITDA
Margin
2014
2015e
2016e
Revenue
21.0%
10.0%
7.1%
Adjusted EBITDA
Adjusted FD EPS
FX Assum ptions
13.4%
2.7%
2014
0.9057
0.9050
21.6%
32.3%
2015e
0.7916
0.7813
14.2%
29.6%
2016e
0.7945
0.8130
Trend
2014
2015e
2016e
Trend
229,034
195,271
167,270
2.1x
1.5x
1.2x
33.6%
29.2%
25.7%
EOP CAD/USD Rate

Leverage
Net Debt (EOP)

$5.0
(10,889) (16,931) (13,890)

1,486
(154)
(162)
Free Cash Flow
83,667
79,085
91,533
Free cash flow (C$)
92,829
99,885 115,200
$1.67
$1.80
$2.08
FCF Yield
11.7%
12.6%
14.5%
82.8%
7.6%
15.3%
Grow th
Trend
Trend
$0.585
$0.611
$0.620
4.1%
4.3%
4.3%
2014
2015e
2016e
2,437
2,544
2,650

464.5
23.5
49.2
0.9x
508.2
28.5
50.9
1.0x
533.6
34.0
52.0
1.0x
20.7%
11.0%
17.7%
Trend
Trend

Firm
Option
2020, 8%
2015, 18%
$4.0
2019, 21%
$3.0
2016, 11%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315
2018, 31%

55
R ESEARCH:
DIVERSIFIED
INDUSTRIES
COVERAGE
: [INDUSTRY
]
Q1/15 Results Well Ahead of Expectations

EPS of $380.3mm, $31.4mm and $0.20. The results were well ahead of our expectations for
revenue, Adjusted EBITDA and Adjusted FD EPS of $363.2mm, $27.8mm and $0.15 versus
consensus estimates of $349.6mm, $25.3mm and $0.16.
Q1/15
Q1/14
y/y
Growth
Q4/14 y/y
Growth
572
508.2
25.8
554
452.9
14.0
3.2%
12.2%
84.1%
7.1%
0.4%
5.9%
3,568.8
3,689.5
(3.3%)
(7.2%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
290,711
14,734
5.1%
5.3%
250,889
7,751
3.1%
3.3%
15.9%
90.1%
2.0%
2.0%
7.5%
11.6%
0.4%
0.5%
89,590
16,680
18.6%
72,976
11,915
16.3%
22.8%
40.0%
2.3%
22.6%
24.6%
0.2%
380,301
31,414
10,855
323,865
19,666
5,484
17.4%
59.7%
97.9%
10.2%
(4.9%)
(45.9%)
$0.20
$0.20
$0.10
$0.10
97.8%
105.5%
(46.0%)
(18.0%)

Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
Items of Note
The company announced an increase in annual dividend rate from C$0.585 to C$0.62
effective for dividends declared subsequent to May 6, 2015, an increase of 6.0%.
Management was hesitant to disclose any specific metrics related to the increase, however we
believe it indicates an expectation of continuing financial improvement. On the conference
call, the company disclosed that review of the dividend has become a more of a regular
process at the board level, which we believe is constructive for future increases in line with
earnings growth.
NFI reported a 15.9% y/y increase in bus manufacturing revenue at $290.7mm as a result of
increased deliveries and higher average selling price. The company realized a price of
$508.2k/EU during the quarter, 12.2% higher than previous quarter. We highlight the
companys historical revenue per EU in the graph below. We note the overall positive trend in
56
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pricing although are mindful of the fact that sales mix can materially impact the average
price/EU during the quarters.

The companys aftermarket revenue increased to $89.6mm (+22.8% y/y) as a result of higher
volume associated the Chicago Transit Authority (CTA) contract. We note excluding the CTA
mid-life overhaul program, the companys aftermarket revenue for Q1/15 was $73.1mm, up
10.1% from Q1/14, which was stronger than expected.
Adjusted EBITDA margin in bus manufacturing was weaker than we had expected at 5.1% of
revenue or $25.8k/EU compared to our estimate for a 5.5% margin and $27.6K/EU, although
we note quarters can be lumpy. The most impactful item in the quarter however, was the
remarkably strong EBITDA margin in aftermarket at 18.6%, which is significantly stronger
than the company's recent performance over the past several quarters and our 15.7% estimate,
made more surprising by the mix of CTA contract work, which we estimate is several
percentage points lower in margin. In discussions with management on the companys
conference call we were left with the impression that the underlying performance of the core
aftermarket business was very strong at 19.5%, assuming an approximate 5% reduction for
CTA contract work. Management explained that the improvement came about as a result of a
number of concerted efforts with the ongoing integration of the various components of the
aftermarket business.
During the quarter, the companys liquidity position increased to $90.3mm compared to
$73.2mm in Q4/14 as a result of increased cash flows from operating activities attributable to
change in non-cash working capital. The company reported a decrease in accounts receivables
and an increase in income taxes payable offset by a decrease in deferred revenue and accounts
payable.
NFI announced the member of the UNIFOR main collective bargaining unit at the companys
Winnipegs facility had ratified a new three year collective bargaining agreement through
March 31, 2018 replacing the previous agreement that expired on March 31, 2015
Management maintained the Q2/15 date for the completing the transition of NABI bus
product lines to Xcelsior platform at the Anniston facility. In the last quarter, the company
had guided to $20.0mm in capex and direct operating costs of which $4.4mm of costs were
incurred this quarter and NFI invested $4.8mm in capex. The company has revised upwards
the cost reductions and synergies from to $12.2mm (from $11.9mm) in annualized cost
savings. NFI realized a final $0.2mm credit in Q1/15 related to investment tax credits. NFI
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continues to target an average corporate entry line rate of ~51EU per production week.
although we note that production rates may vary during the quarter. Order intake is expected
to remain strong with management describing the demand environment as "robust". The
primary change to our estimates stems from our revised expectation for margin performance
for the companys aftermarket business, where we have increased margin expectations to
19.1% and 20.0% respectively. Our 2015e EBITDA increases to $131.3mm (+7.8%) while
our 2016e EBITDA increases by 9.0% to $151.0mm.
Revenue
Bus Manufacturing
Aftermarket
Revenue
ACC Old Estim ates

2015e
2016e
ACC New Estim ates

2015e
2016e
Change
2015e
2016e
1,281,330 1,397,547
295,968 291,698
1,577,298 1,689,245
18.8%
17.3%
1,292,952 1,414,167
309,279 304,635
1,602,231 1,718,801
19.3%
17.7%
0.9%
4.5%
1.6%
54 bps
1.2%
4.4%
1.7%
46 bps
EBITDA
Margin
73,812
5.8%
47,968
16.2%
121,780
7.7%
89,036
6.4%
49,589
17.0%
138,625
8.2%
72,378
5.6%
58,958
19.1%
129,582
8.1%
90,108
6.4%
60,927
20.0%
151,035
8.8%
(1.9%)
(16) bps
22.9%
286 bps
6.4%
37 bps
1.2%
0 bps
22.9%
300 bps
9.0%
58 bps
Adjusted EBITDA
Margin
121,780
7.7%
138,625
8.2%
131,336
8.2%
151,035
8.8%
7.8%
48 bps
9.0%
58 bps
Operating Earnings
EBT
82,046
68,794
102,644
90,307
89,764
73,434
113,643
100,873
9.4%
6.7%
10.7%
11.7%
Net Incom e
Reported FD EPS
Adjusted FD EPS
43,340
$0.78
$0.78
56,893
$1.02
$1.02
48,231
$0.87
$0.88
63,550
$1.14
$1.14
11.3%
11.3%
12.1%
11.7%
11.7%
11.7%
66,392
89,226
(26,436)
62,223
108,679
99,719
(12,599)
86,552
78,107
97,072
(16,931)
79,653
116,126
108,639
(13,890)
92,937
17.6%
8.8%
(36.0%)
28.0%
6.9%
8.9%
10.3%
7.4%
Free cash flow (C$)

per Share
FCF Yield
75,168
$1.35
9.3%
103,853
$1.87
12.9%
96,048
$1.73
11.9%
111,520
$2.01
13.8%
27.8%
27.8%
259 bps
7.4%
7.4%
95 bps

32,471
43.2%
$0.59
32,471
31.3%
$0.59
33,928
35.3%
$0.61
34,413
30.9%
$0.62
4.5%
(787) bps
4.5%
6.0%
(41) bps
6.0%
215,997
1.8x
0.3x
145,345
1.1x
0.2x
196,538
1.5x
0.3x
168,803
1.2x
0.3x
(9.0%)
(15.6%)
(7.0%)
16.1%
7.7%
10.8%
2,554
501.7
28.9
51.1
1.0x
0.0%
2,653
526.8
33.6
52.0
1.0x
19.6%
2,544
508.2
28.5
50.9
1.0x
0.0%
2,650
533.6
34.0
52.0
1.0x
19.6%
(0.4%)
1.3%
(1.6%)
(0.4%)
(0.1%)
0 bps
(0.1%)
1.3%
1.3%
(0.1%)
0.0%
0 bps
Free Cash Flow

Free Cash Flow
Leverage
Net Debt (EOP)

58
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We note our valuation is sensitive to the multiple applied to estimates. We believe as the
company completes integration of both the manufacturing and aftermarket segments of the
business that there are a number of opportunities to drive improvements in return on invested
capital, which we believe could drive the next leg of share price appreciation. In decomposing
multiples a number of factors play into our fair value assessment including the companys
long-term growth rate (low), cost of capital (moderate), tax rate (typical), level of capital
intensity and required reinvestment (extremely low a <1% of revenue) leaving the remaining
key driver being the return on capital. A more efficient balance sheet, utilizing less capital in
the form of working capital, a different capital mix or higher operating earnings all can
contribute to improvements in total returns. In Figure 4, we show our estimate of the
companys ROIC on a trailing basis, where we believe we are at an inflection point which
ultimately could result in higher multiples. We estimate trailing ROIC was 5.1% at Q1/15.
Trailing Return on Invested Capital
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Q1/07 Q1/08 Q1/09 Q1/10 Q1/11
Figure 4 Trailing Return on Invested Capital
Q1/12
Q1/13
Q1/14
Q1/15
Q1/16
The impact of higher multiples on fair value estimates is shown in Figure 5. While we
currently value NFI at a 7.0x EBITDA multiple, we note peers currently trade at 8.5x on
2015e and 7.6x on 2016e.
% Variance
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
134,485
141,957
149,428
156,899
164,371
6.50x
7.00x
7.50x
8.00x
8.50x
$14.90
$16.38
$17.86
$19.33
$20.81
$15.97
$17.53
$19.09
$20.65
$22.21
$17.04
$18.68
$20.32
$21.96
$23.60
$18.10
$19.83
$21.55
$23.28
$25.00
$19.17
$20.98
$22.78
$24.59
$26.40

While guidance and the companys outlook for the remainder of 2015 remained consistent the
step jump in aftermarket margins, which we believe are sustainable, leads us to increase
estimates. We believe the introduction of the higher dividend is an indication in
managements confidence that continuous improvement activities should lead to improved
financial performance which coupled with a 4.3% yield offers an attractive return. We
maintain our Outperform rating and are increasing our 12-month target price to C$18.50 from
C$17.50. Our target price is based on a blend of a 15.0x earnings and 7.0x EBITDA multiple
of the four quarters ending Q4/16 reflecting our 12-month forward valuation period as well as
an exchange rate of C$1.22/$US.
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Ticker
Rating &
Target

TSX:NFI
OP (C$18.50)
Marcopolo S.A.
BOVESPA:POMO4
NR
Wajax Corporation
TSX: WJX
NR
TSX: AFN
NR
Superior Plus Corp.
TSX: SPB
NR
GBX
NR
Oshkosh Corporation
OSK
NR
Spartan Motors Inc.
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
Cubic Corporation
CUB
NR
Average
Trading Local
Market
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
14.32
2.95
24.84
50.27
13.90
63.25
52.54
4.35
14.73
59.99
20.99
29.62
6.59
11.72
48.03
794.9
2,387.7
416.8
663.0
1,754.3
1,669.4
4,109.2
149.1
1,000.4
3,202.9
565.3
2,413.6
550.4
242.5
1,290.1
Net
Debt
EV
($mm)
2014
EPS
2015e
213.2
1,200.3
252.0
132.3
933.6
386.4
845.3
(6.7)
210.3
(248.3)
(7.9)
4,349.0
311.1
197.1
(114.7)
875.3
3,616.2
668.8
795.3
2,687.9
2,149.0
4,954.5
142.2
1,210.7
2,954.6
557.3
6,796.6
913.5
439.6
1,175.7
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.77
0.87
0.23
2.04
3.26
0.88
6.28
4.18
0.08
1.18
4.01
1.60
1.82
0.07
0.00
2.93
P/E
2016e 2014 2015e 2016e
1.13
0.29
2.44
4.01
1.19
0.00
4.55
0.23
1.24
4.60
1.86
2.95
0.07
0.00
3.31
18.0x
9.7x
10.1x
NM
30.8x
13.7x
15.1x
NM
16.8x
16.9x
13.0x
NM
NM
NM
17.3x
16.1x
13.6x 10.5x
10.6x 8.3x
12.2x 10.2x
15.4x 12.5x
15.8x 11.7x
10.1x NM
12.6x 11.5x
NM
19.3x
12.4x 11.9x
15.0x 13.1x
13.1x 11.3x
16.3x 10.0x
NM
NM
NM
NM
16.4x 14.5x
13.6x 12.1x
2014
EBITDA
2015e
2016e
2014
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
128.8
130.9
315.1
84.3
98.8
308.8
433.3
651.0
10.6
198.7
345.8
69.3
756.7
88.3
0.0
142.0
149.4
401.5
93.0
117.4
328.9
0.0
679.0
16.2
199.1
389.5
79.8
904.6
89.7
0.0
155.7
8.2x
13.5x
8.1x
12.5x
9.5x
8.3x
8.4x
15.1x
7.5x
9.9x
8.5x
20.5x
13.2x
17.0x
9.1x
11.3x
6.7x
11.5x
7.9x
8.0x
8.7x
5.0x
7.6x
13.4x
6.1x
8.5x
8.0x
9.0x
10.4x
NM
8.3x
8.5x
5.9x
9.0x
7.2x
6.8x
8.2x
NM
7.3x
8.8x
6.1x
7.6x
7.0x
7.5x
10.2x
NM
7.6x
7.6x
1.4x
1.5x
1.7x
3.2x
3.1x
3.1x
2.2x
0.9x
2.6x
3.1x
2.8x
NM
3.4x
0.0x
1.6x
2.2x
5.1%
3.6%
9.3%
8.4%
6.9%
16.9%
10.0%
0.5%
11.4%
17.9%
19.9%
9.2%
2.5%
NA
6.9%
9.2%
7.0%
12.7%
16.4%
2.0%
(0.5%)
35.9%
13.6%
0.2%
17.9%
20.2%
22.4%
NM
1.3%
NM
9.3%
12.2%

As of May 7, 2015. All figures in millions, unless otherwise noted.
60

NFI
C$14.32
Rating:
Outperform
12 Month Target:
C$18.50
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
63%
26%
Sector Perform
24%
14%
Underperform
2%
0%
Speculative
1%
0%
Restricted
2%
0%
Not Rated
6%
0%
Tender
2%
0%
100%
20%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
61
INITIATING COVERAGE: [INDUSTRY]
Direct
__________________________________________________________________________________________________________

George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
E&P- Domestic
Jeremy McCrea, CFA, Analyst
Klazina van den Berg, Associate
403 539 8617

403 539 8587
403 539 8615
403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
John Gibson, Associate
Jason Sawatzky, Analyst
Mark Westby, Associate
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
647 776 8246

647 776 8245
cmurray
smodwal
Agriculture
John Chu, CFA, Senior Analyst
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
647 776 8244

647 776 8235
647 776 8231
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Edward Otto
Greg Smiddy
Alex Athanasopoulos
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

403 539 8628
647 776 8223
403 539 8595
647 776 8072
403 539 8614
403 539 8609
647 776 8224
pstables
jhardage
eotto
gsmiddy
aathanasopoulos
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
Ellen McKane, Client and Market Coordinator
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
emckane
62
COMPANY UPDATE
NFI | TSX
$14.52
Rating: Outperform
Total Return: 24.6%
Yield: 4.0%
April 15, 2015
Slow Start to the Year but Expect Production to Pick Up

Q1/15 Orders and Deliveries: New Flyer released orders and backlog data for
Q1/15. The company delivered 572 equivalent units (EU), up 3.2% y/y but below our
649 EU estimate. The WIP for the quarter was 384 EU, up 26 EU from the previous
quarter and 20 EU above our estimate for 364 EU for Q1/15. The total firm orders and
options for the quarter stood at 1,020 EU.

C$14.90 / C$11.20
4.0%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$805.4

Float ($mm)
33.6
79.6
$229.0
$868.0

(FYE Dec 31)
2014
Revenue ($mm)
2015e
2016e
$1,451.1 $1,577.3 $1,689.2
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$121.8
$138.6
$0.65
$0.78
$1.02
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$27.8e
$31.6e
$29.8e
$32.6e
2016
$34.5e
$34.4e
$33.8e
$35.9e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.15e
$0.20e
$0.20e
$0.23e
2016
$0.25e
$0.25e
$0.25e
$0.27e

$15
Volume ('000)
800
Last Sale Price
600
$10
$5
400
200
$0
0
Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15

Managing Director
647.776.8246

647.776.8245
Quarterly Deliveries Down But Expect Improvement: The company reported a

TTM book to bill ratio of 0.72x, lower than our estimate of 0.86x on a TTM basis. The
company received new firm orders for 235 EUs valued at $102.6mm with options for
785 EUs, valued at $360.2mm. New Flyer also reported that options for 157 EUs, valued
at $68.3mm were converted to firm orders. No option EU expired in Q1/15. We note
unit revenue for new firm and converted options at ~$436.7K/EU was below our
estimates for $515.4K/EU. Backlog at the end of Q1/15 was 7,193 EU valued at $3.57bn
as compared to 7,683 EU ($3.69bn) at the end of Q1/14. The company has an additional
494 EU of new firm orders and options pending from customers where approval has not
been granted and thus, not included in the backlog. We note the companys order
pipeline continues to show strength. While New Flyers bid universe decreased by 9.7%
q/q, the total number of active EU were up 338 EU (5%) from Q4/14 to 7,067 EU.
Strong Aftermarket Growth Continues: The aftermarket parts business showed
strong growth during the quarter, partially offset by the slowdown of sales for the
Chicago Transit Authority mid-life upgrade program which is expected to be complete
in Q2/15. While gross parts orders decreased 6.1% as compared to Q1/14, parts
shipments increased 22.6% y/y. On a sequential quarter basis, gross parts ordered
decreased 23.5% while parts shipments were up 6.7% as compared to Q4/14.
Estimate Changes: We note management has maintained guidance for a corporate
average line entry rate of approximately 51 EU/ production week. As such, we expect
the lower than estimated number of deliveries in Q1 to be solely a timing issue with
production picking up in H2/15. Overall, our estimates move only slightly with no
material impact on our valuation. Our total revenue estimates for 2015 decreases by
0.1% to $1.58bn with no material change in 2016 estimates. Our EBITDA margins for
2015 and 2016 remain relatively stable as compared to previous estimates.
Maintain Outperform and C$17.50 Target: Overall, we remain confident of New
Flyers growth and margin improvement story, especially with the rationalization of the
NABI bus line to Xcelsior and cost synergies from a common IT platform in the
aftermarket business. We maintain our Outperform rating and our 12-month target price
of C$17.50. Our target price is based on a blend of a 15.0x earnings and 7.0x EBITDA
multiple of the four quarters ending Q4/16 reflecting our 12-month forward valuation
period as well as an exchange rate of C$1.25/$US.
63
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES

Current Valuations
Unit Price (C$)
$14.52
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
11.2x
8.2x
7.2x
Peer Average
16.0x
13.3x
11.7x
8.0x
7.1x
6.2x
17.8x
14.9x
11.4x
2014
2015e
2016e
2015e
2016e

Incom e Statem ent
2013
Trend
Revenues
2013
2014
29,979
45,823
66,392 108,679
Bus Manufacturing
984,425 1,132,066 1,281,330 1,397,547
22,988
35,255
22,834
(8,960)
Aftermarket
214,999
52,967
81,078
89,226
99,719
(2,003)
(1,766)
(568)
(568)
Revenue
319,034
295,968
291,698
1,199,424 1,451,100 1,577,298 1,689,245
17.9%
22.0%
18.8%
17.3%
56,776
57,374
73,812
89,036
Non-operating, non-recurring items affecting FCF
5.8%
5.1%
5.8%
6.4%
(20,951) (10,889) (26,436) (12,599)
31,036
49,991
47,968
14.4%
15.7%
79,110
6.6%
15,276
15,398
49,589
192
(154)
16.2%
17.0%
Free Cash Flow
45,481
83,667
62,223
86,552
86,457
121,780
138,625
6.0%
7.7%
8.2%
Free cash flow (C$)
47,334
92,972
75,168 103,853
94,685
107,365
121,780
138,625
per Share
$0.92
$1.68
$1.35
7.9%
7.4%
7.7%
8.2%
FCF Yield
Amortization
28,001
35,837
39,734
35,981
Operating Earnings
51,109
50,620
82,046
102,644
EBT
34,617
37,568
68,794
90,307
7,856
10,849
25,454
33,413
Net Income
26,761
26,719
43,340
56,893
Reported FD EPS
$0.52
$0.48
$0.78
$1.02
Adjusted FD EPS
$0.64
$0.65

Margin
Adjusted EBITDA
Margin
Taxes
$0.78
$1.02
2013
2014
2015e
2016e
Revenue
38.6%
21.0%
8.7%
7.1%
55.7%
108.7%
2013
0.9714
0.9414
13.4%
2.7%
2014
0.9049
0.9050
13.4%
19.3%
2015e
0.8290
0.8264
13.8%
31.3%
2016e
0.8333
0.8403
Trend
2013
2014
2015e
2016e
Trend
226,479
229,034
215,997
145,345
2.4x
2.1x
1.8x
1.1x
33.2%
33.6%
31.5%
23.4%
Adjusted EBITDA
Adjusted FD EPS
FX Assum ptions
EOP CAD/USD Rate
Leverage
Net Debt (EOP)
6.3%
Grow th
Trend
108.3%
11.5%
$1.87
9.3%
12.9%
83.1% (19.2%)
38.2%
2013
2014
2015e
2016e
30,255
32,457
32,471
32,471
63.9%
$0.585
34.9%
$0.585
43.2%
$0.585
31.3%
4.0%
4.0%
4.0%
4.0%
2013
2014
2015e
2016e
2,191
2,437
2,554
2,653

449.3
25.9
43.8
1.2x
464.5
23.5
49.2
0.9x
501.7
28.9
51.1
1.0x
526.8
33.6
52.0
1.0x
18.8%
20.7%
0.0%
19.6%
Trend
$0.585
Cash Yield

$5.0
Trend
Trend

Firm
Option
2020, 8%
2015, 18%
$4.0
2019, 21%
$3.0
2016, 11%
$2.0
$1.0
2017, 11%
$0.0
Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315
2018, 31%

64
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DIVERSIFIED
INDUSTRIES
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]

Ticker
Marcopolo S.A.
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Average
Rating &
Target
TSX:NFI
OP (C$17.50)
BOVESPA:POMO4
NR
TSX: WJX
NR
TSX: AFN
NR
TSX: SPB
NR
GBX
NR
OSK
NR
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
CUB
NR
Trading
Local
Currency Price
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
14.52
2.50
24.97
50.25
14.66
63.15
48.43
4.98
14.10
62.23
20.94
27.96
6.85
11.80
50.22
Market
Cap ($m m )
806.0
2,115.2
419.0
662.8
1,850.2
1,666.7
3,784.3
169.5
963.1
3,322.5
563.9
2,278.3
572.1
244.2
1,348.9
EPS
EV
Net
Debt
($m m )
2014
2015e
229.5
1,227.4
201.0
132.3
986.3
386.4
779.0
(23.3)
186.4
(248.3)
(7.9)
4,349.0
311.1
197.1
(114.7)
859.8
3,366.0
619.9
795.0
2,836.5
2,146.4
4,563.3
146.1
1,149.5
3,074.2
556.0
6,661.3
935.2
441.3
1,234.5
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
-5.07
0.03
0.00
2.82
0.78
0.23
2.26
3.26
1.01
6.28
4.13
0.11
1.13
3.92
1.60
1.75
0.07
0.00
3.06
P/E
EBITDA
2016e 2014 2015e 2016e

1.02
0.29
2.55
4.02
1.19
0.00
4.36
0.34
1.20
4.63
1.86
2.95
0.08
0.00
3.26
17.8x
8.0x
10.2x
NM
32.5x
13.7x
13.9x
NM
16.1x
17.5x
13.0x
NM
NM
NM
17.8x
16.0x
14.9x
8.6x
11.0x
15.4x
14.5x
10.1x
11.7x
NM
12.5x
15.9x
13.1x
16.0x
NM
NM
16.4x
13.3x
11.4x
6.9x
9.8x
12.5x
12.3x
NM
11.1x
14.6x
11.7x
13.4x
11.3x
9.5x
NM
NM
15.4x
11.7x
EV/EBITDA
2014
2015e
2016e
2014
2015e
2016e
Price
to BV
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
128.8
121.8
313.3
88.7
99.8
304.9
433.3
640.4
15.9
188.4
341.7
69.3
761.6
91.2
0.0
142.0
138.6
400.1
96.0
117.8
327.5
0.0
657.8
28.5
193.1
0.0
79.8
922.6
94.1
0.0
155.7
8.0x
12.5x
7.5x
12.5x
10.0x
8.3x
7.7x
15.5x
7.2x
10.3x
8.5x
20.1x
13.5x
17.0x
9.6x
11.2x
7.1x
10.7x
7.0x
8.0x
9.3x
5.0x
7.1x
9.2x
6.1x
9.0x
8.0x
8.7x
10.3x
NM
8.7x
8.2x
6.2x
8.4x
6.5x
6.7x
8.7x
NM
6.9x
5.1x
6.0x
NM
7.0x
7.2x
9.9x
NM
7.9x
7.2x
1.5x
1.4x
1.7x
3.2x
3.4x
3.1x
2.0x
1.0x
2.5x
3.3x
2.8x
NM
3.5x
0.0x
1.7x
2.2x

As of April 14, 2015. All figures in millions, unless otherwise noted.
65

NFI
C$14.52
Rating:
Outperform
12 Month Target:
C$17.50
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
61%
27%
Sector Perform
25%
13%
Underperform
2%
0%
Speculative
1%
0%
Restricted
4%
20%
Not Rated
6%
0%
Tender
2%
0%
100%
20%
Total

average.
average.
average.
material.
principal or agent.
1100, 888 3rd Street SW

Calgary, Alberta T2P 5C5
Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
66
Direct
__________________________________________________________________________________________________________

George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
E&P- Domestic
403 539 8617

403 539 8587
403 539 8615
403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
403 539 8606

403 539 8598
dlever
whallett
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
Alex Athanasopoulos, Associate
647 776 8246

647 776 8245
647 776 8072
cmurray
smodwal
aathanasopoulos
Agriculture
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
647 776 8244

647 776 8235
647 776 8231
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
1100, 888 - 3rd Street SW
Calgary AB Canada T2P 5C5
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Greg Smiddy
Edward Otto
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

403 539 8628
403 539 8595
647 776 8223
403 539 8614
403 539 8609
647 776 8224
pstables
jhardage
gsmiddy
eotto
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
emckane
67
COMPANY UPDATE
NFI | TSX
$14.11
Rating: Outperform
Total Return: 28.2%
Yield: 4.1%
April 2, 2015
Notes from Montreal

Positive Tone from Meetings: We had the opportunity to host institutional investor
meetings with senior management of New Flyer Industries Inc., including the
companys President and CEO, Mr. Paul Soubry and the CFO, Mr. Glenn Asham in
Montreal early this week, subsequent to the company reporting Q4/14 results. We found
the tone positive on the companys outlook and expectations for 2015.

C$14.44 / C$11.20
4.1%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$782.6

Float ($mm)
39.7
52.5
$229.0
$849.9

(FYE Dec 31)
2014
Revenue ($mm)
2015e
2016e
$1,451.1 $1,579.3 $1,689.2
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$121.8
$138.6
$0.65
$0.78
$1.02
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$29.9e
$30.9e
$29.2e
$31.8e
2016
$34.5e
$34.4e
$33.8e
$35.9e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.18e
$0.19e
$0.19e
$0.22e
2016
$0.25e
$0.25e
$0.25e
$0.27e

$15
Volume ('000)
800
Last Sale Price
600
$10
$5
400
200
$0
0

Managing Director
647.776.8246
Focus on Integration: Management continues to see the focus in 2015 being the
integration of the NABI facility in Anniston, Alabama and the transition to the Xcelsior
product line. The integration is expected to be complete in Q3/15, with the last of the
legacy NABI product delivered. Management expects to spend approximately $20mm
for the changeover with $3.1mm spent in 2014 and $7.0mm expected in Q1/15,
primarily in capital investments to complete the integration. Guidance is for annualized
savings from the streamlining of $11.9mm, or less than a 2 year payback on the
investment, which is an increase from a two to three year payback initially projected
when announced. Savings come from a variety of purchasing, inventory and overhead
synergies. We were left with the impression that savings above the identified $11.9mm
are likely as management continues to refine the integration plan. Similarly, the
aftermarket business remains in a period of transition as the company completes a
systems upgrade for the NFI parts business and adds the Orion parts database and
transitions NABIs parts aftermarket business to a common information system platform
with integration expected to be complete in Q1/16.
Still Considering Value Enhancing Activities: Management remains focused on
shareholder returns with a more stable outlook and solid financial position. Expectations
are the companys revolver will continue to be used to manage working capital
fluctuations, with operating cash flow used for minimal capital spending, dividends and
debt repayment. Management continues to review adjacent markets and vertical
integration opportunities as well as further acquisitions in aftermarket, although noted
that remaining opportunities would be smaller tuck-in transactions. Barring
acquisitions, management indicated the board would continue to review the dividend
policy on a regular basis as well as share repurchases.
Maintain Outperform; Target to C$17.50: Overall, we believe New Flyer will
continue to demonstrate improved margin and earnings generation in 2015 and 2016
through the combination of internal improvements, the conversion of the Anniston
facility to the Xcelsior platform, the integration of the aftermarket business to a common
IT infrastructure and an improved quality in backlog. We maintain our Outperform
rating and our 12-month target price of C$17.50. Our target price is based on a blend of
a 15.0x earnings and 7.0x EBITDA multiple of the four quarters ending Q4/16 reflecting
our 12-month forward valuation period as well as an exchange rate of C$1.25/$US.
647.776.8245
68
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EQUITY
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INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES

Current Valuations
Unit Price (C$)
$14.11
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
11.1x
7.8x
8.1x
6.8x
7.2x
6.0x
Peer Average
15.7x
17.1x
13.2x
14.3x
11.6x
10.9x
2014
2015e
2016e
2014
2015e
2016e
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
2013
2013
984,425 1,132,066 1,283,336 1,397,547

214,999 319,034 295,968 291,698
1,199,424 1,451,100 1,579,305 1,689,245
17.9%
22.0%
18.7%
17.3%
56,776
57,374
73,799
89,036
5.8%
5.1%
5.8%
6.4%
31,036
49,991
47,968
49,589
14.4%
15.7%
16.2%
17.0%
79,110
86,457 121,767 138,625
6.6%
6.0%
7.7%
8.2%
94,685 107,365 121,767 138,625
7.9%
7.4%
7.7%
8.2%
28,001
35,837
39,734
35,981
51,109
50,620
82,033 102,644
34,617
37,568
68,781
90,307
Free cash flow (C$)

per Share
FCF Yield
47,334
$0.92
6.5%
108.3%
Taxes
Net Income
7,856
26,761
10,849
26,719
25,449
43,332
33,413
56,893

Reported FD EPS
Adjusted FD EPS
$0.52
$0.64
$0.48
$0.65
$0.78
$0.78
$1.02
$1.02

Cash Yield
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
FX Assumptions
EOP CAD/USD Rate
Leverage
Net Debt (EOP)
2013
2014
2015e
2016e
38.6%
55.7%
108.7%
21.0%
13.4%
2.7%
8.8%
13.4%
19.2%
7.0%
13.8%
31.3%
2013
2014
2015e
2016e
0.9714
0.9414
0.9049
0.9050
0.8290
0.8264
0.8333
0.8403

Trend Average Weekly Line Entry Rate (EU)
Trend
2013
2014
2015e
2016e
226,479
2.4x
33.2%
229,034
2.1x
33.6%
208,384
1.7x
30.8%
139,597
1.1x
22.7%
Firm
Option
Trend

29,979 45,823 74,005 106,804
22,988 35,255 15,213 (7,086)
52,967 81,078 89,218 99,719
(2,003) (1,766)
(568)
(568)
(20,951) (10,889) (26,436) (12,599)
Non-operating, non-recurring items affecting FCF 15,276 15,398
192
(154)
Free Cash Flow
45,481 83,667 62,214 86,552

$5.0
92,972 75,106 103,853

$1.68
$1.35
$1.87
11.9%
9.6%
13.3%
83.1% (19.3%)
38.3%
2013
2014
2015e
2016e
30,255
63.9%
32,457
34.9%
32,471
43.2%
32,471
31.3%
$0.585 $0.585
4.1%
4.1%
$0.585
4.1%
$0.585
4.1%
2013
2014
2015e
2016e
2,191
449.3
25.9
43.8
1.2x
18.8%
2,437
464.5
23.5
49.2
0.9x
20.7%
2,558
501.7
28.9
51.2
1.1x
12.9%
2,653
526.8
33.6
52.0
1.0x
17.4%
Trend
Trend

2015, 20%
2019, 20%
$4.0
$3.0
2016, 13%
$2.0
$1.0
2018, 35%
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2017, 12%

69
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Marketing Highlights from Montreal

We had the opportunity to host institutional investor meetings with senior management of
New Flyer Industries Inc., including the companys President and CEO, Mr. Paul Soubry and
the CFO, Mr. Glenn Asham in Montreal early this week, subsequent to the company reporting
Q4/14 results. We found the tone positive on the companys outlook and expectations for
2015. We summarise our key takeaways below.
Management continues to see the focus in 2015 being the integration of the NABI facility
in Anniston, Alabama and the transition to the Xcelsior product line. The integration is
expected to be complete in Q3/15, with the last of the legacy NABI product delivered.
All production from Q4/15 forward is expected to be from the Xcelsior platform. Existing
customers either agreed to earlier delivery of the NABI product or in some cases agreed
to switch to the Xcelsior platform. Management expects to spend approximately $20mm
for the changeover with $3.1mm spent in 2014 and $7.0mm expected in Q1/15, primarily
in capital investments to complete the integration. Management displayed a number of
exhibits showing the progress made to date, which gives us some confidence on the state
of the initiative. Guidance is for annualized savings from the streamlining of $11.9mm, or
less than a 2 year payback on the investment, which is an increase from a two to three
year payback initially projected when announced. Savings come from a variety of
purchasing, inventory and overhead synergies. We were left with the impression that
savings above the identified $11.9mm are likely as management continues to refine the
integration plan.
Similarly, the aftermarket business remains in a period of transition as the company

completes a systems upgrade for the NFI parts business and adds the Orion parts database
and transitions NABIs parts aftermarket business to a common information system
platform with integration expected to be complete in Q1/16. Having the entire
aftermarket parts business on a common platform is expected to drive a number of
margin and working capital synergies allowing for more optimal stocking levels both in
terms of quantity across the system and location as well as improved working capital
needs. Management estimated the aftermarket business currently carries approximately
$75mm in inventory today, which is estimated to turn approximately 2.5x per year.
Management believes with the implementation of the common IT platform they could see
turns increases to 4.0x or better, which would represent both higher sales and lower
inventory levels.
For 2015, the company has approximately 83% of available slots sold out, holding some
slots open in order to facilitate option conversions and near-term sales from customers
with more urgent delivery needs. Management continues to see heathy demand as
measured by the bid universe which has continued to expand through 2014. Expected
annual demand is forecast to remain in the ~5,100 EU range through 2015 and 2016 with
management indicating that transit authorities continue to order in smaller more frequent
batches, leveling out industry variability. Management expects NFI likely retains an
approximate 50% market share over the coming years, similar to the 48% recorded in
2014.
The expectation is to continue to run production at approximately 51 equivalent units per

week for 2015. Management indicated that they expect maximum production from
existing facilities is likely 60 EU / week with the addition of some variable labour, but
continue to be cautious on the impact a changing production rate has on employees and
the supply chain.
70
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New Flyer Heavy Duty Bus Bid Universe
Figure 1 New Flyer Heavy Duty Bus Bid Universe

The competitive dynamics of the industry are not expected to change significantly with
management continuing to indicate pricing is continuing to normalize. Both Nova Bus
and Gillig continue to be more rational actors, although management indicated they
continue to see price remaining one of the primary drivers of new wins. Gillig is currently
expanding its production facilities reducing some capacity constraints. Management
continues to actively work to improve its cost profile through the operational excellence
program and the integration of NABI, as it believes cost reduction is the more likely lever
of margin expansion in bus manufacturing margins than price increases.
The company continues to see demand for the all-electric bus design with a larger tender
this year expected from Long Beach, CA for with 10 to 15 EU of firm orders and
approximately 40 units in options. New competitors BYD and Proterra continue to
penetrate the space, however the market size to date is small. Current programs in
Winnipeg and Chicago are progressing well and have afforded a number of product
development opportunities. Management continues to believe having a standardized
design of chassis, with a range of propulsion options offers the best total value and
quality to operators.
US Federal funding for transit, which currently supports 80% of the capital cost of
acquisition under the 12-year/500,000 mile rule continues to be an area of discussion in
the US Congress. The US Administration released its new proposal for transit funding,
calling for a substantial increase in spending to approximately $17bn annually from the
current $10.7bn level. Both we and management remain sceptical that this proposal as it
stands is passed, expecting a new funding bill or an extension of existing legislation at
current levels plus inflation. The Administration bill is similar to one put forward last
fiscal year, which also called for an increase in US content to 100% over time. This level
of content remains an industry issue as major suppliers to the industry for major drive
train, propulsion, HVAC and other accessories all have global supply chains typically
supporting not just transit bus but also truck industries, which have demand orders of
magnitude larger than the transit bus industry making it unlikely that supplier could or
would change.
71
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The company continues to have labour relations that management described as positive.
One concern that emerged during meetings was the expiry of the companys agreement
with its Union in Winnipeg as of March 31, 2015. Last evening, the company announced
a tentative three-year agreement with a ratification vote set for April 11, which we expect
should pass.
Management continues to remain focused on shareholder returns with a more stable

outlook and solid financial position. Expectations are the companys revolver will
continue to be used to manage working capital fluctuations, with operating cash flow
used for minimal capital spending (maintenance capital is expected to run ~$10mm per
year), dividends and debt repayment. Management continues to review adjacent markets
and vertical integration opportunities as well as further acquisitions in aftermarket,
although noted that remaining opportunities would be smaller tuck-in transactions.
Barring acquisition opportunities presenting themselves, management indicated the board
would continue to review the dividend policy on a regular basis including normal or
special dividends as well as share repurchases. We believe share repurchases are unlikely
given liquidity issues around the companys common shares. The companys US$
denominated debentures would be redeemable should share prices exceed US$12.50 per
share.
Overall, we believe New Flyer will continue to demonstrate improved margin and earnings
generation in 2015 and 2016 through the combination of internal improvements, the
conversion of the Anniston facility to the Xcelsior platform, the integration of the aftermarket
business to a common IT infrastructure and an improved quality in backlog. We maintain our
Outperform rating and our 12-month target price of C$17.50. Our target price is based on a
blend of a 15.0x earnings and 7.0x EBITDA multiple of the four quarters ending Q4/16
reflecting our 12-month forward valuation period as well as an exchange rate of C$1.25/$US.
72
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Ticker
Rating &
Target

TSX:NFI
OP (C$17.50)
Marcopolo S.A.
BOVESPA:POMO4
NR
Wajax Corporation
TSX: WJX
NR
TSX: AFN
NR
Superior Plus Corp.
TSX: SPB
NR
GBX
NR
Oshkosh Corporation
OSK
NR
Spartan Motors Inc.
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
Cubic Corporation
CUB
NR
Average
Trading Local
Market
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
14.11
2.37
23.87
51.23
14.22
58.65
48.34
4.93
14.13
62.97
20.94
28.81
6.84
9.93
51.27
783.2
1,932.5
400.5
675.3
1,794.7
1,553.2
3,812.5
167.8
970.3
3,362.0
563.9
2,347.6
571.3
205.5
1,445.0
Net
Debt
EV
($mm)
2014e
EPS
2015e
229.5
1,227.4
201.0
132.3
986.3
370.9
779.0
(23.3)
186.4
(248.3)
(7.9)
4,349.0
311.1
197.1
(114.7)
832.2
3,183.3
601.5
807.5
2,781.0
2,000.3
4,591.5
144.4
1,156.7
3,113.7
556.0
6,730.6
934.4
402.6
1,330.6
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.82
0.78
0.23
2.29
3.26
1.01
5.71
4.16
0.11
1.13
4.01
1.62
1.79
0.07
0.00
3.06
P/E
2016e 2014e 2015e 2016e
1.02
0.29
2.57
4.02
1.17
0.00
4.37
0.34
1.20
4.65
1.89
2.95
0.08
0.00
3.26
17.1x
7.5x
9.7x
NM
31.5x
12.7x
13.8x
NM
16.1x
17.7x
13.0x
NM
NM
NM
18.2x
15.7x
14.3x 10.9x
8.1x
6.5x
10.4x 9.3x
15.7x 12.8x
14.0x 12.1x
10.3x NM
11.6x 11.1x
NM
14.5x
12.5x 11.8x
15.7x 13.5x
13.0x 11.1x
16.1x 9.8x
NM
NM
NM
NM
16.8x 15.7x
13.2x 11.6x
2014e
EBITDA
2015e
2016e
2014e
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
25.9
129.0
121.8
313.3
88.9
99.8
304.9
409.8
646.6
15.9
188.6
341.7
68.7
761.6
91.2
0.0
142.5
138.6
400.1
96.0
117.8
325.4
0.0
657.7
28.5
193.3
0.0
79.8
922.8
94.1
0.0
155.7
7.8x
11.8x
7.3x
12.7x
9.8x
7.8x
7.8x
15.3x
7.2x
10.4x
8.5x
20.3x
13.5x
15.5x
10.3x
11.1x
6.8x
10.2x
6.8x
8.1x
9.1x
4.9x
7.1x
9.1x
6.1x
9.1x
8.1x
8.8x
10.2x
NM
9.3x
8.1x
6.0x
8.0x
6.3x
6.9x
8.5x
NM
7.0x
5.1x
6.0x
NM
7.0x
7.3x
9.9x
NM
8.5x
7.2x
1.5x
1.3x
1.6x
3.2x
3.3x
3.0x
2.0x
1.0x
2.5x
3.3x
2.8x
NM
3.5x
0.0x
1.8x
2.2x
5.4%
4.0%
10.0%
8.4%
7.2%
13.6%
10.2%
0.4%
10.8%
17.9%
19.9%
9.2%
2.5%
NA
6.9%
9.0%
5.9%
14.0%
16.6%
2.0%
10.4%
30.2%
14.7%
0.6%
17.1%
20.2%
22.4%
NM
1.3%
NM
9.3%
12.7%

As of April 1, 2015. All figures in millions, unless otherwise noted.
73

NFI
C$14.11
Rating:
Outperform
12 Month Target:
C$17.50
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
65%
27%
Sector Perform
26%
12%
Underperform
2%
0%
Speculative
0%
0%
Restricted
2%
0%
Not Rated
2%
0%
Tender
2%
0%
100%
21%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
74
Direct
__________________________________________________________________________________________________________

George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
E&P- Domestic
403 539 8617

403 539 8587
403 539 8615
403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
403 539 8606
dlever
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
Wojtek Nowak, CFA, Analyst
647 776 8246

647 776 8245
647 776 8240
647 776 8072
cmurray
smodwal
wnowak
aathanasopoulos
Agriculture
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
647 776 8244

647 776 8235
647 776 8231
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Greg Smiddy
Edward Otto
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

403 539 8628
403 539 8595
647 776 8223
403 539 8614
403 539 8609
647 776 8224
pstables
jhardage
gsmiddy
eotto
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
emckane
75
COMPANY UPDATE
NFI | TSX
$13.92
Rating: Outperform
(previously $15.00)
Total Return: 29.9%
Yield: 4.2%
March 20, 2015
Improving Margins and A Solid Backlog A Good Combo

to Drive With Into 2015

C$14.20 / C$11.14
4.2%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$772.1

Float ($mm)
38.7
48.1
$229.0
$835.1

(FYE Dec 31)
2014
Revenue ($mm)
2015e
2016e
$1,451.1 $1,579.3 $1,689.2
EBITDA ($mm)
FD EPS
EBITDA ($m m )
Q1
$107.4
$121.8
$138.6
$0.65
$0.78
$1.02
Q2
Q3
Q4
2014
$19.7
$27.0
$25.7
$35.0
2015
$29.9e
$30.9e
$29.2e
$31.8e
2016
$34.5e
$34.4e
$33.8e
$35.9e
Q2
Q3
Q4
Adjusted FD EPS
Q1
2014
$0.10
$0.16
$0.15
$0.24
2015
$0.18e
$0.19e
$0.19e
$0.22e
2016
$0.25e
$0.25e
$0.25e
$0.27e

$15
Volume ('000)
Adjusted EBITDA and Adjusted FD EPS of $420.0mm and $35.0mm and $0.24
respectively. Included in Adjusted EBITDA was $5.6mm in realized investment tax
credits. The results were ahead of our estimates for revenue, Adjusted EBITDA and
Adjusted FD EPS of $385.8mm, $30.9mm and $0.21, respectively as compared to
consensus expectations of $376.8mm, $28.0mm and $0.16.
800
Last Sale Price
600
$10
$5
647.776.8246

647.776.8245
Estimate Changes: We are reducing our estimates for EBITDA in 2015 given the
change in the timing of the CTA contract, which reduces both aftermarket revenue and
EBITDA, while we maintain our estimate for 2015e EBITDA in bus manufacturing as
we hold our 2015 unit EBITDA estimate but increase our revenue expectations based on
current backlog. Management continues to provide conservative guidance on margins,
although we continue to expect given the rationalization, the strong operational
excellence program, better quality order intake and higher production rates that margins
will expand y/y. Our 2015e EBITDA falls to $121.7mm from $125.3mm while our
2016e EBITDA increases by 1.2% to $138.6mm. Our EPS estimates in 2015 are also
impacted by the accelerated depreciation associated with the wind-down of NABI
production reducing 2015e EPS to $0.78 from $0.87.
400
200
$0
0

Managing Director
Very Strong Backlog Metrics: The company has filled nearly 80% of its 2015
production schedule, a level similar to the beginning of 2014. We note however that the
2015 production rate is higher than that of 2014. Management maintained guidance for a
corporate average line entry rate of approximately 51 EUs per week. At quarter end, the
company's backlog of 6,745 EU was valued at $3.4bn or $503.2 thousand per EU.
Notably, firm backlog is now valued at an average of $531.6 thousand per EU. The
companys current backlog carries a higher mix of more expensive trolleys and hybrid
buses and we assume also carry an improved margin component.
Maintain Outperform; Target to C$17.50: We believe the company should see

improvements in the quality of orders coming from backlog in in 2015, which is positive
for earnings growth and cash generation. We expect one of the next catalysts for
investors is some decision on some form of additional return to shareholders as the
company continues to generate significant free cash flow. We maintain our Outperform
rating and are increasing our 12-month target price to C$17.50 from C$15.00. The
increase in our target price reflects both a shift forward one quarter of our valuation
period, our revised 2016 estimates and an increase in our translation rate due to FX. Our
target price is based on a blend of a 15.0x earnings and 7.0x EBITDA multiple of the
four quarters ending Q4/16 reflecting our 12-month forward valuation period as well as
an exchange rate of C$1.25/$US.
76
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INDUSTRIES

Current Valuations
Unit Price (C$)
$13.92
EV/EBITDA
2014
2015
2016
Price/Earnings
2014
2015
2016
Peer Average
10.9x
7.6x
8.2x
6.7x
7.3x
5.9x
Peer Average
15.9x
16.7x
13.3x
14.0x
11.6x
10.7x
2014
2015e
2016e
2014
2015e
2016e
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
2013
2013
984,425 1,132,066 1,283,336 1,397,547

214,999 319,034 295,968 291,698
1,199,424 1,451,100 1,579,305 1,689,245
17.9%
22.0%
18.7%
17.3%
56,776
57,374
73,799
89,036
5.8%
5.1%
5.8%
6.4%
31,036
49,991
47,968
49,589
14.4%
15.7%
16.2%
17.0%
79,110
86,457 121,767 138,625
6.6%
6.0%
7.7%
8.2%
94,685 107,365 121,767 138,625
7.9%
7.4%
7.7%
8.2%
28,001
35,837
39,734
35,981
51,109
50,620
82,033 102,644
34,617
37,568
68,781
90,307
Free cash flow (C$)

per Share
FCF Yield
47,334
$0.92
6.6%
108.3%
Taxes
Net Income
7,856
26,761
10,849
26,719
25,449
43,332
33,413
56,893

Reported FD EPS
Adjusted FD EPS
$0.52
$0.64
$0.48
$0.65
$0.78
$0.78
$1.02
$1.02

Cash Yield
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
FX Assumptions
EOP CAD/USD Rate
Leverage
Net Debt (EOP)
2013
2014
2015e
2016e
38.6%
55.7%
108.7%
21.0%
13.4%
2.7%
8.8%
13.4%
19.2%
7.0%
13.8%
31.3%
2013
2014
2015e
2016e
0.9714
0.9414
0.9049
0.9050
0.8290
0.8264
0.8333
0.8403

Trend Average Weekly Line Entry Rate (EU)
Trend
2013
2014
2015e
2016e
226,479
2.4x
33.2%
229,034
2.1x
33.6%
208,384
1.7x
30.8%
139,597
1.1x
22.7%
Firm
Option
Trend

29,979 45,823 74,005 106,804
22,988 35,255 15,213 (7,086)
52,967 81,078 89,218 99,719
(2,003) (1,766)
(568)
(568)
(20,951) (10,889) (26,436) (12,599)
Non-operating, non-recurring items affecting FCF 15,276 15,398
192
(154)
Free Cash Flow
45,481 83,667 62,214 86,552
92,972 75,106 103,853
$1.68
$1.35
$1.87
12.0%
9.7%
13.4%
83.1% (19.3%)
38.3%
2013
2014
2015e
2016e
30,255
63.9%
32,457
34.9%
32,471
43.2%
32,471
31.3%
$0.585 $0.585
4.2%
4.2%
$0.585
4.2%
$0.585
4.2%
2013
2014
2015e
2016e
2,191
449.3
25.9
43.8
1.2x
18.8%
2,437
464.5
23.5
49.2
0.9x
20.7%
2,558
501.7
28.9
51.2
1.1x
12.9%
2,653
526.8
33.6
52.0
1.0x
17.4%
Trend
Trend

$5.0
2015, 20%
2019, 20%
$4.0
$3.0
2016, 13%
$2.0
$1.0
2018, 35%
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2017, 12%

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Q4/14 Results Continue to Show Progress

EPS of $420.0mm and $35.0mm and $0.24 respectively. Included in Adjusted EBITDA was
$5.6mm in realized investment tax credits. The results were ahead of our estimates for
revenue, Adjusted EBITDA and Adjusted FD EPS of $385.8mm, $30.9mm and $0.21,
respectively as compared to consensus expectations of $376.8mm, $28.0mm and $0.16. The
companys reported EPS for the quarter was $0.13.
Q4/14
Q4/13
y/y
Growth
Q314 y/y
Growth

680
680
635
7.1%
448.8
495.0
493.3
0.4%
26.9
34.1
32.2
5.9%
3,393.6
3,393.9
3,657.2
(7.2%)
Revenue
305,193
336,633
313,222
7.5%
EBITDA
18,312
23,177
20,440
13.4%
6.0%
6.9%
6.5%
0.4%
6.0%
6.0%
6.7%
(0.7%)
Revenue
80,652
83,356
67,982
22.6%
EBITDA
12,554
11,859
9,517
24.6%
EBITDA Margin
15.6%
14.2%
14.0%
0.2%

Operating Segments
Bus Manufacturing
Aftermarket
Total
Revenue
385,845
419,989
381,204
10.2%
Adjusted EBITDA
30,866
35,036
36,830
(4.9%)
Reported Net Income
11,696
7,427
13,732
(45.9%)
Reported
$0.21
$0.13
$0.25
(46.0%)
Adjusted
$0.21
$0.24
$0.30
(18.0%)

Items of Note
The company reported a 7.5% y/y increase in revenues in the bus manufacturing segment in
Q4/14. The increase is attributable to a 7.1% y/y increase in new bus sales and a 0.3%
increase in average selling price y/y although selling prices were up sharply on a sequential
basis. In the aftermarket segment, the quarterly revenue was up 22.6% y/y as a result of higher
volumes and the incremental revenue from the Chicago Transit Authority (CTA) midlife
overhaul program.
New Flyer estimates the companys market share in Canada and the United States for 2014
was approximately 48% as compared to 43% in 2013. The increase represents the acquisition
of NABI in June 2013 and the introduction of MiDi. In the aftermarket segment, the
78
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companys market share increased to 33% as compared to 28% in 2013. Overall, the total
number of deliveries for heavy-duty buses in North America increased slightly y/y to 5,125
EUs but within the 15-year historical range of 4,000-6,000 EUs.
The company has filled nearly 80% of its 2015 production schedule, a level similar to the
beginning of 2014. We note however that the 2015 production rate is higher than that of 2014.
Management maintained guidance for a corporate average line entry rate of approximately 51
EUs (including MiDi) per week. At quarter end, the company's backlog of 6,745 EU was
valued at $3.4bn or $503.2 thousand per EU. Notably, firm backlog is now valued at an
average of $531.6 thousand per EU. The companys current backlog carries a higher mix of
more expensive trolleys and hybrid buses and we assume also carry an improved margin
component.
$550
Revenue Per EU - Delivered

Revenue Per EU - Firm Backlog
Revenue per EU - Total Backlog
$500
$450
$400
$350
Q4/08
Q4/09
Q4/10
Q4/11
Q4/12
Q4/13
Q4/14
Management highlighted that the company remains open to possible acquisition opportunities
either in its own sector or adjacent segments. However, as previously guided, the companys
focus remains on cost reduction and operational improvements through reduction in overhead
costs, expense management and realization of sourcing efficiencies as well as finalizing the
standardization of NABI onto the Xcelsior platform and completion of the integration of the
NABI parts business.
The company expects to complete the transition of NABI bus lines to the Xcelsior platform
during the second half of 2015. Management anticipates ~$20.0mm in direct operating costs
and capex for the transition which will be funded from cash flow from operations and the
companys credit facilities, which had been previously disclosed. As at December 28, 2014,
the company had incurred $3.1mm of these costs. The company estimates annualized savings
of $11.9mm and expects to recover the costs associated with the transition through cost
reductions and synergies within two to three years. The majority of the costs are expected to
be reflected in higher capital spending in H1/15. In conjunction with the changeover, the
company disclosed accelerated depreciation charges of $4.35mm in H1/15 should be expected
to reflect the shortened useful life of existing NABI tooling.
Management anticipates 5% y/y core growth in 2015 in the aftermarket segment. We note
nearly 14.8% of the 2014 aftermarket revenue was due to the mid-life upgrade program with
CTA involving over 1,000 New Flyer buses, which is now expected to end in June 2015,
which is approximately a year earlier than we had anticipated. Average margin for the CTA
midlife overhaul program is lower than parts so we expect margins should increase reflecting
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only the core parts business. We are adjusting our estimates reflecting the end of this program.
Management indicated they did not expect to see a similar program materialize in 2015. We
expect margins in the core aftermarket business remain in the mid to high-teens in 2015 and
continue to show improvement, particularly with the completion of Project Convergence,
which moves all the parts businesses to a common IT platform in early 2016.
ACC Old Estimates
2015e
2016e
Revenue
Bus Manufacturing
Aftermarket
Revenue
1,152,880 1,204,716
322,411 312,960
1,475,290 1,517,676
21.9%
20.6%
2014
ACC New Estimates

2015e
2016e
1,132,066 1,283,336 1,397,547

319,034 295,968 291,698
1,451,100 1,579,305 1,689,245
22.0%
18.7%
17.3%
Change
2015e
2016e
11.3%
16.0%
(8.2%)
(6.8%)
7.1%
11.3%
(311) bps (335) bps
EBITDA
Margin
73,523
6.4%
51,798
16.1%
125,321
8.5%
84,330
7.0%
52,703
16.8%
137,033
9.0%
57,374
5.1%
49,991
15.7%
86,457
6.0%
73,799
5.8%
47,968
16.2%
121,767
7.7%
89,036
6.4%
49,589
17.0%
138,625
8.2%
0.4%
(63) bps
(7.4%)
14 bps
(2.8%)
(78) bps
5.6%
(63) bps
(5.9%)
16 bps
1.2%
(82) bps
Adjusted EBITDA
Margin
125,321
8.5%
137,033
9.0%
107,365
7.4%
121,767
7.7%
138,625
8.2%
(2.8%)
(78) bps
1.2%
(82) bps
Operating Earnings
EBT
89,497
76,449
100,105
87,693
50,620
37,568
82,033
68,781
102,644
90,307
(8.3%)
(10.0%)
2.5%
3.0%
Net Income
Reported FD EPS
Adjusted FD EPS
48,163
$0.87
$0.87
55,246
$1.00
$1.00
26,719
$0.48
$0.65
43,332
$0.78
$0.78
56,893
$1.02
$1.02
(10.0%)
(10.1%)
(10.1%)
3.0%
2.9%
2.9%
95,682
90,375
(13,940)
69,628
91,608
93,863
(17,284)
73,106
45,823
81,078
(10,889)
83,667
74,005
89,218
(26,436)
62,214
106,804
99,719
(12,599)
86,552
(22.7%)
(1.3%)
89.6%
(10.6%)
16.6%
6.2%
(27.1%)
18.4%
Free cash flow (C$)

per Share
FCF Yield
79,741
$1.44
$0.11
83,987
$1.51
$0.11
92,972
$1.68
$0.12
75,106
$1.35
$0.10
103,853
$1.87
$0.13
(5.8%)
(5.9%)
(8.7%)
23.7%
23.6%
19.8%

32,448
40.7%
$0.59
32,448
38.6%
$0.59
32,457
34.9%
$0.59
32,471
43.2%
$0.59
32,471
31.3%
$0.59
172,353
1.4x
0.3x
153,242
1.2x
0.2x
229,034
2.1x
0.3x
208,384
1.7x
0.3x
139,597
1.1x
0.2x
20.9%
24.4%
18.5%
(8.9%)
(6.1%)
(3.6%)
2,540
453.9
28.9
50.8
1.1x
12.9%
2,641
456.2
31.9
51.8
1.0x
15.6%
2,437
464.5
23.5
49.2
0.9x
20.7%
2,558
501.7
28.9
51.2
1.1x
12.9%
2,653
526.8
33.6
52.0
1.0x
17.4%
0.7%
10.5%
(0.3%)
0.7%
3.5%
0 bps
0.5%
15.5%
5.1%
0.5%
0.0%
181 bps
Free Cash Flow

Free Cash Flow
Leverage
Net Debt (EOP)
0.1%
0.1%
254 bps (737) bps
0.0%
0.0%

During 2014, the company recognized $11.7mm in investment tax credits related to the
production of CNG powered buses in previous years, which reflects the cash tax impact for
the period including $5.6mm recognized in Q4/14. The company has $0.2mm of credits
remaining and the related program has ended.
Management indicated they expect Bus segment margin improvement in 2015, which should
see an expansion in EBITDA that we forecast more than offset the loss of ITCs included in
2014 EBITDA. In 2014, the company faced a number of challenges with production that was
initially booked in the 2012 and 2013 time-frame with highly pressured margins. We believe a
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significantly lower level of low margin backlog produced in 2015, higher throughput and the
completion of Project United, the conversion of NABI to the Xcelsior platform should be
supportive of margin expansion. We forecast EBITDA per EU of $28.9 thousand in 2015 and
expect EBITDA per EU to further expand in 2016 to $33.6 thousand per EU.
We believe higher production rates are possible in 2016. We note that based on orders
reported to date in Q1/15 we estimate the companys book to bill ratio, at higher production
rates is likely 1.25x or higher assuming a normal level of option conversions.
We are reducing our estimates for EBITDA in 2015 given the change in the timing of the
CTA contract, which reduces both aftermarket revenue and EBITDA, while we maintain our
estimate for 2015e EBITDA in bus manufacturing as we hold our 2015 unit EBITDA estimate
but increase our revenue expectations based on current amounts in backlog. Management
continues to provide conservative guidance on margins, although we continue to expect given
the rationalization, the strong operational excellence program, better quality order intake and
higher production rates that margins will expand y/y. Our 2015e EBITDA falls to $121.7mm
from $125.3mm while our 2016e EBITDA increases by 1.2% to $138.6mm. Our EPS
estimates in 2015 are also impacted by the accelerated depreciation associated with the winddown of NABI production reducing 2015e EPS to $0.78 from $0.87. Our 2016 estimates are
not impacted.
We believe the company should see improvements in the quality of orders coming from
backlog in in 2015, which is positive for earnings growth and cash generation. The company
continues to be well positioned with a dominant market share, solid products and a strong
balance sheet. We expect one of the next catalysts for investors is some decision on some
form of additional return to shareholders as the company continues to generate significant free
cash flow. We maintain our Outperform rating and are increasing our 12-month target price to
C$17.50 from C$15.00. The increase in our target price reflects both a shift forward one
quarter of our valuation period to encompass 2016, our revised 2016 estimates and an increase
in our translation rate due to FX with an increase in our C$/US exchange rate to C$1.25/US$
from C$1.13/$US. Our target price is based on a blend of a 15.0x earnings and 7.0x EBITDA
multiple of the four quarters ending Q4/16 reflecting our 12-month forward valuation period
as well as an exchange rate of C$1.25/$US.
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Ticker
Rating &
Target

TSX:NFI
OP (C$17.50)
Marcopolo S.A.
BOVESPA:POMO4
NR
Wajax Corporation
TSX: WJX
NR
TSX: AFN
NR
Superior Plus Corp.
TSX: SPB
NR
GBX
NR
Oshkosh Corporation
OSK
NR
Spartan Motors Inc.
SPAR
NR
WNC
NR
THO
NR
WGO
NR
NAV
NR
TSX: STB
NR
BLBD
NR
Cubic Corporation
CUB
NR
Average
Trading Local
Market
CAD
BRL
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
CAD
USD
USD
13.92
2.22
24.18
54.09
14.35
56.44
47.54
5.12
14.55
63.39
22.70
28.28
6.97
9.36
52.67
772.7
1,907.0
405.7
713.0
1,811.1
1,494.6
3,714.8
174.3
999.1
3,384.4
611.1
2,304.4
582.2
193.7
1,484.5
Net
Debt
243.2
1,227.4
201.0
132.3
986.3
370.9
779.0
(23.3)
186.4
(248.3)
(27.8)
4,349.0
311.1
197.1
(114.7)
EV
($mm)
818.9
3,157.8
606.7
845.2
2,797.4
1,941.8
4,493.8
150.8
1,185.6
3,136.1
583.3
6,687.4
945.3
390.8
1,370.1
2014e
EPS
2015e
0.65
0.25
2.46
0.31
0.45
4.62
3.49
0.03
0.88
3.55
1.61
(5.07)
0.03
0.00
2.80
0.78
0.22
2.29
3.26
1.02
5.71
4.24
0.11
1.13
4.01
1.75
1.84
0.07
0.00
2.93
P/E
2016e 2014e 2015e 2016e
1.02
0.29
2.57
4.02
1.17
0.00
4.37
0.34
1.20
4.65
1.95
3.41
0.08
0.00
3.31
16.7x 14.0x 10.7x

7.0x
7.8x
6.0x
9.8x 10.6x 9.4x
NM 16.6x 13.5x
31.8x 14.1x 12.2x
12.2x 9.9x
NM
13.6x 11.2x 10.9x
NM
NM 15.1x
16.6x 12.8x 12.1x
17.9x 15.8x 13.6x
14.1x 12.9x 11.7x
NM 15.4x 8.3x
NM
NM
NM
NM
NM
NM
18.8x 18.0x 15.9x
15.9x 13.3x 11.6x
2014e
EBITDA
2015e
2016e
2014e
EV/EBITDA
2015e
2016e
Price
to BV
ROIC
ROE
107.4
268.8
82.4
63.4
282.4
257.4
591.2
9.4
160.7
298.8
65.8
331.0
69.0
0.0
129.0
121.8
313.7
88.9
99.8
304.9
430.4
646.7
15.9
188.7
341.7
72.8
763.8
91.2
0.0
142.5
138.6
418.9
96.0
117.8
325.4
0.0
663.6
28.5
193.2
0.0
0.0
906.9
94.1
0.0
155.7
7.6x
11.7x
7.4x
13.3x
9.9x
7.5x
7.6x
16.0x
7.4x
10.5x
8.9x
20.2x
13.7x
NM
10.6x
10.9x
6.7x
10.1x
6.8x
8.5x
9.2x
4.5x
6.9x
9.5x
6.3x
9.2x
8.0x
8.8x
10.4x
NM
9.6x
8.2x
5.9x
7.5x
6.3x
7.2x
8.6x
NM
6.8x
5.3x
6.1x
NM
NM
7.4x
10.0x
NM
8.8x
7.3x
1.5x
1.2x
1.6x
3.4x
3.3x
2.9x
2.0x
1.0x
2.6x
3.3x
3.1x
NM
3.6x
0.0x
1.8x
2.2x
5.5%
4.0%
10.0%
8.4%
7.2%
13.6%
10.2%
0.4%
10.8%
17.9%
20.5%
9.2%
2.5%
NA
6.9%
9.1%
7.3%
14.0%
16.6%
2.0%
10.4%
30.2%
14.7%
0.6%
17.1%
20.2%
23.3%
NM
1.3%
NM
9.3%
12.8%

As of March 19, 2015. All figures in millions, unless otherwise noted.
82

NFI
C$13.92
Rating:
Outperform
12 Month Target:
C$17.50
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
67%
29%
Sector Perform
24%
10%
Underperform
2%
0%
Speculative
0%
0%
Restricted
2%
0%
Not Rated
2%
0%
Tender
2%
0%
100%
22%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
83
Direct
__________________________________________________________________________________________________________

George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
E&P- Domestic
403 539 8617

403 539 8587
403 539 8615
403 539 8626
403 539 8592
403 539 8635
403 539 8621
403 539 8581
jmccrea
kvandenberg
porourke
ysiddiqi
nlupick
kgordey
tmatthews
cerana
403 539 8606
dlever
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
647 776 8246

647 776 8245
647 776 8240
647 776 8072
cmurray
smodwal
wnowak
aathanasopoulos
Agriculture
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
__________________________________________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Adam Carlson
Jamie Riff
Tim Miller
647 776 8250

647 776 8242
647 776 8233
647 776 8237
psarachman
acarlson
jriff
tmiller
__________________________________________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
Jon Varley
Michael Capobianco
647 776 8244

647 776 8235
647 776 8231
cpolan
jvarley
mcapobianco
__________________________________________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
Jesse Hardage
Greg Smiddy
Edward Otto
Yi Huang
Blake Eshleman
Tyler Press
403 539 8604

403 539 8628
403 539 8595
647 776 8223
403 539 8614
403 539 8609
647 776 8224
pstables
jhardage
gsmiddy
eotto
yhuang
beshleman
tpress
__________________________________________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
__________________________________________________________________________________________________________
Private Wealth
403 539 8634

403 539 8611
403 539 8603
403 539 8632
dlush
vkrb
tokuszko
emckane
84
COMPANY UPDATE
NFI | TSX
$13.00
Rating: Outperform
Total Return: 19.9%
January 16, 2015
One Bus, Two Bus, Three Bus, Four. Five Bus, Six Bus, 74

C$14.09 / C$10.80
4.5%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$732.2

Float ($mm)
38.7
68.6
$242.8

(FYE Dec 31)
$845.0
2013A
Revenue ($mm)
2014E
FD EPS
EBITDA ($m m )
Q1
$94.7
$103.2
$125.5
$0.64
$0.62
$0.87
Q2
Q3
Q4
2013
$15.4
$18.1
$24.4
$36.8
2014
$19.7
$27.0
$25.7E
$30.9E
2015
$29.8E
$30.7E
$31.2E
$33.7E
Q2
Q3
Q4
Adjusted FD EPS
Q1
2013
$0.08
$0.09
$0.15
$0.30
2014
$0.10
$0.16
$0.15E
$0.21E
2015
$0.20E
$0.21E
$0.22E
$0.24E
$15

Volume ('000)
800
Last Sale Price
600
$10
400
$5
200
$0
Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14

Managing Director
647.776.8246

647.776.8245
Strong New Orders Update: The company reported strong bookings in the quarter
with a book to bill ratio of 1.12x as compared to 0.70x in Q3/14. The company received
new firm orders for 596 EU with options for 729 EU, valued at $404.4mm and 163 EUs
valued at $81.9mm were converted to firm orders. Unit revenue for new firm and
converted options at ~$491.0K/EU continues to trend above our $453.9K/EU average
for 2015. Backlog at the end of Q4/14 was 6,745 EU valued at $3.39bn.
2015E
$1,199.4 $1,417.0 $1,476.1
EBITDA ($mm)
NFI Trading Halted: NFI shares were halted on the TSX Friday as the company
released revised Q4/14 O&D data, restating deliveries from the initial press release on
January 13, 2015, increasing deliveries for the quarter by 74 equivalent units (EU) to
680 EU, from 606 EU previously, 45 EU higher y/y.
Aftermarket Beats Again: The higher margin aftermarket segment saw parts
shipments (most correlated to revenues) increase 23.6% over Q4/13, which is well above
our estimate of a 1.1% increase y/y. Sequentially, growth was 2.8%.
Pipeline Gets Stronger: Industry conditions remain supportive for new orders with
the order pipeline expanding to a 23,068 EU was up 24.1% y/y and 5.9% q/q. The more
important metric of total active EU increased to 6,729, up 7.1% sequentially and 7.8%
y/y implying very strong order intake is likely in H1/15.
New Flyer Management at AltaCorp Conference: We hosted New Flyer
management at the 3rd Annual AltaCorp/ATB Corporate Financial Services Energy,
Diversified Industries and Agri-Industries Institutional Investor Conference on
Thursday, January 15. Mr. Paul Soubry, President and CEO, talked about the companys
growth strategy and the expectation with respect to pricing and margins. We were left
with a favourable impression of the company and its prospects as we move into 2016.
Updating Q4 estimates: We are updating Q4/14 estimates reflecting lower bus
manufacturing deliveries and higher aftermarket growth than expected. Our Q4/14
EBITDA estimate remains at $30.9mm with an FD EPS estimate of $0.21.
Maintain Outperform and C$15.00 target: While deliveries were lower than
expected, the strong showing in aftermarket as well as the continued order pipeline build
is supportive of our outlook as was commentary from management. We maintain our
Outperform rating and our 12-month target price of C$15.00. Our target price is based
on a blend of a 15.0x earnings and 7.25x EBITDA multiple of the four quarters ending
Q3/16 reflecting our 12-month forward valuation period as well as an exchange rate of
C$1.13 per $US.
85
I NSTITUTIONAL
EQUITY
R ESEARCH:
DIVERSIFIED
INDUSTRIES
INITIATING
COVERAGE
: DIVERSIFIED
INDUSTRIES

Current Valuations
Unit Price (C$)
$13.00
EV/EBITDA
2014e
2015e
9.5x
8.0x
7.3x
6.7x
Peer Average
2014e
2015e
2016e Free Cash Flow (FCF)
Peer Average
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
Taxes
Net Income
Reported FD EPS
Adjusted FD EPS
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
2012
2013
Price/Earnings
2012
2013
2014e
2015e
15.2x
17.5x
13.6x
12.7x
2014e
2015e
2016e

5,523 29,979 39,351 95,567 91,505
24,003 22,988 34,751 (5,192)
2,358
29,526 52,967 74,102 90,375 93,863
(2,418) (2,003) (1,589)
(568)
(568)
(10,972) (20,951) (12,505) (13,940) (17,284)
2,540 15,276
6,983
(1,318)
2,150
192
(23)
Free Cash Flow
19,508 45,481 66,968 69,628 73,106
746,200 984,425 1,100,626 1,152,880 1,204,716

119,050 214,999 316,330 322,411 312,960
865,250 1,199,424 1,416,956 1,475,290 1,517,676
13.8%
17.9%
22.3%
21.9%
20.6%
41,248
56,776
52,509
73,523
84,330
5.5%
5.8%
4.8%
6.4%
7.0%
19,517
31,036
50,686
51,798
52,703
16.4%
14.4%
16.0%
16.1%
16.8%
57,817
79,110
91,772 125,321 137,033
6.7%
6.6%
6.5%
8.5%
9.0% Free cash flow (C$)
60,825
94,685 103,195 125,321 137,033
per Share
7.0%
7.9%
7.3%
8.5%
9.0%
FCF Yield
24,326
28,001
34,625
35,824
36,928
33,491
51,109
57,147
89,497 100,105
10,013
34,617
43,738
76,449
87,693 Dividend Per Share (C$)
723
9,290
$0.21
$0.31
19,495
$0.44
3.4%
(45.6%)
47,334
$0.92
7.0%
108.4%
73,668
$1.33
10.2%
45.1%
79,741
$1.44
11.1%
8.2%
83,987
$1.51
11.6%
5.3%
2012
2013
2014e
2015e
2016e
7,856
26,761
12,750
30,988
28,286
48,163
32,446 Dividends Declared on Common Shares (C$)

55,246 Ratio of Dividends Declared to FCF
33,081
169.7%
30,255
63.9%
32,448
44.0%
32,448
40.7%
32,448
38.6%
$0.52
$0.64
$0.56
$0.62
$0.87
$0.87
$1.00
$1.00
$0.745
5.7%
$0.585 $0.585
4.5%
4.5%
$0.585
4.5%
$0.585
4.5%

Cash Yield
2012
2013
2014e
2015e
2016e Key Operating Metrics
2012
2013
2014e
2015e
2016e
(5.6%)
(24.1%)
(34.9%)
38.6%
55.7%
108.7%
18.1%
9.0%
(2.6%)
4.1%
21.4%
39.9%
2.9% Bus Deliveries (Equivalent Units (EU))

9.3% Revenue Per EU (US$000's)
14.7% EBITDA Per EU (US$000's)
1,656
450.6
24.9
2,191
449.3
25.9
2,437
451.6
21.5
2,540
453.9
28.9
2,641
456.2
31.9
2012
2013
2014e
2015e
211,784
3.5x
38.1%
226,479
2.4x
33.2%
219,521
2.1x
31.8%
172,474
1.4x
26.0%
2016e FX Assumptions
153,401 Average CAD/USD Rate
1.2x EOP CAD/USD Rate
23.5%
Firm and Option Order Backlog ($B)

$5.0
2012
2013
2014e
2015e
2016e
1.0006
1.0051
0.9714
0.9409
0.9079
0.9059
0.8734
0.8696
0.8696
0.8696

Firm
Option
2014, 0%
2015, 20%
2019, 20%
$4.0
$3.0
$2.0
2016, 13%
$1.0
2018, 35%
$0.0
2017, 12%
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
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O&D Data Highlights & Updates

New Flyer released O&D data for Q4/14, delivering 680 equivalent units (EU), down 4.7%
y/y and below our 753 EU estimate, which had anticipated some recovery this quarter.
Recovery of deliveries on a contract where the customer had delayed inspection and
acceptance resulted in 358 EUs in WIP, 41 EUs lower than the previous quarter but up 85
EUs y/y and up 52 EUs from our quarterly estimate.
The company reported strong bookings in the quarter with a book to bill ratio of 1.12x as
compared to 0.70x in Q4/13 and lower than our 1.50x estimate. For the year ended 2014, the
company posted a book to bill ratio of 0.9x compared to our 1.00x estimate. The company
received new firm orders for 596 EUs valued at $290.6mm with options for 729 EUs, valued
at $404.4mm. The new orders include the San Francisco Municipal Railway order for 61
diesel-electric hybrid 60-foot heavy-duty Xcelsior buses (122 EUs) with a 5-year purchase
option for up to an additional 363 diesel-electric hybrid 40-foot and 60 foot Xcelsior buses
(526 EUs) as well as the order for 202 XN40 Xcelsior 40-foot buses by Orange County
Transportation Authority with a 3-year option for an additional 10 buses. The company has
also been approved for an additional 278 EUs for new firm and option orders. New Flyer also
reported that options for 163 EUs, valued at $81.9mm were converted to firm orders.
Compared to 33% in 2013, New Flyer converted approximately 40% of the options due to
expire in 2014. Unit revenue for new firm and converted options at ~$491.0K/EU continues
to trend above out $458.2K/EU average for 2015. Backlog at the end of Q4/14 was 6,819 EU
at Q4//14 valued at $3.43bn as compared to 6,239 EU and a value of $3.07bn at Q3/14.
Management has guided to a corporate average line entry rate of approximately 51 EUs
(including MIDI) per production week for 2015. The company will also execute on the
phasing out of the NABI bus product lines, with the Anniston, AL facility transitioning to
Xcelsior platform.
The higher margin aftermarket segment saw parts shipments (most correlated to revenues)
increase 23.6% over Q4/13, which is well above our estimate of a 1.1% increase y/y.
Sequentially, shipments have begun to flatten up 2.3% q/q.
Industry conditions remain supportive for new orders with the order pipeline expanding to a
23,068 EU was up 24.1% y/y and 5.9% q/q. The more important metric of total active EU
increased to 6,729, up 7.1% sequentially and 7.8% y/y implying very strong order intake is
likely in H1/15.
AltaCorp ATB Institutional Investor Conference Highlights
We hosted New Flyer management at the 3rd Annual AltaCorp/ATB Corporate Financial
Services Energy, Diversified Industries and Agri-Industries Institutional Investor Conference
on Thursday, January 15. Mr. Paul Soubry, President and CEO provided commentary on
NFIs operational initiatives as well as the companys growth strategy.
Mr. Soubry provided updates on integration of Orion and NABI acquisitions. In the Orion
acquisition, the company bought the contracts, spare parts and IP and was able to successfully
integrate them with NFI buses. With the NABI bus acquisition, the company decided to
integrate in order to support a much larger fleet in order to take advantage of sourcing and
cost synergies. The company is building shells and shipping them to the Aniston facility from
Xcelsiors perspective. Mr. Soubry expects induction of full builds by June 2015 and
complete conversion to New Flyer build by end of 2015 including IT systems as well as
purchasing systems. The company expects $7-10mm per year in synergies with an upfront
cost of ~$20mm. The company is on track in terms of delivery.
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In the after-market segment of the business, the companys margins are coming back up from
the pressure during the downturn. With the acquisitions of NABI and Orion, New Flyer
controls IP associated with ~53% of installed base. The company will integrate the spare parts
business on the same IT platform, thereby reducing costs.
The companys Chicago contract is expected to end mid-2015. The Chicago contract is
unique in the sense that it allows the NFI to manage the fleet of 1,029 buses for Chicago
including upgrades. Despite thin margins, Mr. Soubry is of the view that it allows the
company to sell New Flyer parts to New Flyer buses, in effect creating barriers to entry.
Chicago may extend the same contract for their 60-foot buses.
The companys order pipeline has been fairly strong and the bid universe is holding up.
Pricing pressures have eased and the company is realizing better prices compared to those two
years back. The company has faced margin pressures due to downward pressure in prices. The
company feels that sourcing efficiency and reduction in overhead along with the vertical
integration of NABI and sourcing efficiency, will allow it to realize some margin expansion in
2015. Mr. Soubry expects free cash flow generation in late 2015 to 2016.
In terms of further acquisition guidance, the company will actively look to add additional
business. At the same time, Mr. Soubry is open to a special dividend, dividend increase or
increasing share buyback should no accretive acquisition opportunity exist. The company also
discussed about the collective bargaining agreement (CBA) at the end of Q4/14 with Unifor
which Mr. Soubry feels will be a non-issue.
Mr. Soubry also highlighted the fact that NFI is the only company offering different
propulsion systems across all platforms without any loss in seating capacity. The company
also allows modularity in terms of battery on electric buses. The company does not expect the
sales of electric buses to be material in the short term but views this as a long term growth
potential, given that most almost all of the R&D costs are funded.
Maintaining Estimates for Q4/14
We are updating Q4/14 estimates reflecting lower bus manufacturing deliveries and higher
aftermarket growth than expected. Our Q4/14 EBITDA estimate remains at $30.9mm with an
FD EPS estimate of $0.21.
While deliveries were lower than expected, the strong showing in aftermarket as well as the
continued order pipeline build is supportive of our outlook as was commentary from
management. We maintain our Outperform rating and our 12-month target price of C$15.00.
Our target price is based on a blend of a 15.0x earnings and 7.25x EBITDA multiple of the
four quarters ending Q3/16 reflecting our 12-month forward valuation period as well as an
exchange rate of C$1.13 per $US.
88

NFI
$13.20
Rating:
Outperform
12 Month Target:
$15.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
79%
27%
Sector Perform
18%
0%
Underperform
1%
0%
Speculative
0%
0%
Restricted
1%
0%
Not Rated
1%
0%
Tender
1%
0%
100%
21%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
89

Direct
_________________________________________________________________________
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
E&P- Domestic
403 539 8617

403 539 8587
403 539 8615
403 539 8635
403 539 8592
403 539 8621
403 539 8581
jmccrea
kvandenberg
porourke
kgordey
nlupick
tmatthews
cerana
Zaakir Karim, CFA, Associate
403 539 8606

403 539 8598
dlever
zkarim
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
647 776 8246

647 776 8245
647 776 8240
647 776 8072
cmurray
smodwal
wnowak
aathanasopoulos
Agriculture
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
_________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
647 776 8250
psarachman
Adam Carlson
647 776 8242
acarlson
Jamie Riff
647 776 8233
jriff
Tim Miller
647 776 8237
tmiller
_________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
647 776 8244
cpolan
Jon Varley
647 776 8235
jvarley
Michael Capobianco
647 776 8231
mcapobianco
_______________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
403 539 8604
pstables
Jesse Hardage
403 539 8628
jhardage
Greg Smiddy
403 539 8595
gsmiddy
Edward Otto
647 776 8223
eotto
Yi Huang
403 539 8614
yhuang
Blake Eshleman
403 539 8609
beshleman
Tyler Press
647 776 8224
tpress
________________________________________________________________________

Amy Trynor, P.Eng.
Kelly Wylie
403 539 8622

403 539 8616
403 539 8623
403 539 8589
lkende
balexander
atrynor
kwylie
90
COMPANY UPDATE
NFI | TSX
C$13.61
Rating: Outperform
Total Return: 14.4%
November 7, 2014
Drive by the Quarter, Focus on a New Year

C$14.09 / C$9.84
4.3%
Dividend Yield:
55.5 (basic)
55.5 (fd)
C$754.9

Float ($mm)
39.8
61.1
$242.8

(FYE Dec 31)
$903.3
2013A
Revenue ($mm)
2014E
2015E
$1,199.4 $1,437.8 $1,471.7
EBITDA ($mm)
$94.7
$103.3
$123.9
FD EPS
$0.64
$0.62
$0.85
Q2
Q3
Q4
EBITDA ($m m )
Q1
2013
$15.4
$18.1
$24.4
$36.8
2014
$19.7
$27.0
$25.7E
$30.9E
2015
$30.4E
$31.7E
$31.2E
$30.6E
Q2
Q3
Q4
Adjusted FD EPS
Q1
2013
$0.08
$0.09
$0.15
$0.30
2014
$0.10
$0.16
$0.15E
$0.21E
2015
$0.21E
$0.22E
$0.22E
$0.21E
$15

Volume ('000)
800
Last Sale Price
600
$10
400
$5
200
$0
Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14

Managing Director
647.776.8246
George Ulybyshev, Associate

647.776.8245
gulybyshev@altacorpcapital.com
Q3/14 Results Light: New Flyer reported Q3/14 results that were below consensus
and our estimates. The company reported revenue, adjusted EBITDA, and adjusted FD
EPS of $360.8mm, $25.7mm, and $0.18 for the quarter, versus our estimates of
$360.7mm, $29.0mm, and $0.20, and consensus estimates of $400.7mm, $27.7mm and
$0.28, respectively. Adjusted EBITDA margin for the quarter stood at 7.1%, 90bps
below our estimates of 8.0%, as a result of lower than expected performance in the Bus
Manufacturing segment.
Mixed Margin Performance: Adjusted EBITDA margin in the aftermarket business
of 16.0% (normalized for $0.1 million of non-recurring costs relating to business
acquisition) came in 140bps higher than last year and 50bps higher than our estimates of
15.5% primarily as a result of improved market fundamentals in the space. Revenue in
the aftermarket segment was up 40.7% y/y reflecting increased volumes on the back of
an improving market. In Bus manufacturing, y/y increases in segment revenue of 12.3%
for the quarter was mainly driven by an increase in deliveries (up 7.6.% y/y) and a more
favorable sales mix that resulted in higher average prices per EU during the quarter (up
4.3% y/y). However, adjusted EBITDA margin of 4.5% in the segment came in 190bps
lower y/y and 150bps lower than our estimate of 6.0% for the quarter reflecting
managements previous guidance, as well as an accounting provision made for the
expected payment of $2.6mm for the 2012 performance share units.
No Material Change in Estimates: Management continues to expect the corporate
average line entry rate to remain stable at the current 51EUs (including MiDi) per
production week for fiscal 2014 and 2015. We expect the companys announced
decision to phase out production of NABI Bus LFW and BRT models from NABIs
Anniston, AL facility and transition to the Xcelsior, anticipated to occur in H2/15, to
make its operations more efficient over time. During the transition period, management
expects to invest approximately $20mm in direct operating costs and capital
expenditures to complete the transition, utilizing operating cash flow and current credit
facilities, which is anticipated to be paid back through captured cost reductions and
synergies within approximately 2-3 years. Our estimates for 2014 and 2015 remain
largely unchanged post the quarter.
Maintain Outperform Rating and C$15.00 Target: We continue to focus on the
opportunities in front of the company, including an improving core North American bus
market, the introduction of the medium duty bus, the all-electric propulsion design,
further acquisitions, and other potential catalysts, including the pace of order intake and
further margin expansion. We maintain our Outperform rating and our 12-month target
price of C$15.00. Our target price is based on a blend of a 15.0x earnings and 7.25x
EBITDA multiple of the four quarters ending Q3/16 reflecting our 12-month forward
valuation period as well as an exchange rate of C$1.13 per $US.
91
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Current Valuations
Unit Price (C$)
$13.61
EV/EBITDA
2014
2015
Price/Earnings
2014
2015
9.2x
8.7x
7.3x
7.3x
Peer Average
21.8x
19.2x
13.5x
14.0x
2014E
2015E
2016E Free Cash Flow (FCF)
2014E
2015E
Peer Average
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
Taxes
Net Income
Reported FD EPS
Adjusted FD EPS
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
2012
2013
2012
2013
2016E

5,523 29,979 43,537 106,882 95,599
24,003 22,988 30,608 (17,522) (2,843)
29,526 52,967 74,145 89,360 92,756
(2,418) (2,003) (1,589)
(568)
(568)
(10,972) (20,951) (12,505) (13,940) (17,284)
2,540 15,276
6,983
(1,318)
2,150
192
(23)
Free Cash Flow
19,508 45,481 67,011 68,613 71,999
746,200 984,425 1,133,389 1,160,839 1,209,970

119,050 214,999 304,424 310,906 301,179
865,250 1,199,424 1,437,813 1,471,745 1,511,149
13.8%
17.9%
21.2%
21.1%
19.9%
41,248
56,776
54,474
73,980
84,698
5.5%
5.8%
4.8%
6.4%
7.0%
19,517
31,036
48,781
49,899
50,700
16.4%
14.4%
16.0%
16.0%
16.8%
57,817
79,110
91,833 123,879 135,398
6.7%
6.6%
6.4%
8.4%
60,825
94,685 103,256 123,879 135,398
per Share
7.0%
7.9%
7.2%
8.4%
9.0%
FCF Yield
24,326
28,001
34,625
35,824
36,928
33,491
51,109
57,208
88,055
98,470
10,013
34,617
43,799
75,007
723
9,290
$0.21
$0.31
19,495
$0.44
3.2%
(45.6%)
47,334
$0.92
6.7%
108.4%
73,630
$1.33
9.8%
45.0%
77,621
$1.40
10.3%
5.4%
81,582
$1.47
10.8%
5.1%
2012
2013
2014E
2015E
2016E
7,856
26,761
12,772
31,026
27,752
47,254

33,081
169.7%
30,255
63.9%
32,448
44.1%
32,448
41.8%
32,448
39.8%
$0.52
$0.64
$0.56
$0.62
$0.85
$0.85
$0.98
$0.98
$0.745
5.5%
$0.585 $0.585
4.3%
4.3%
$0.585
4.3%
$0.585
4.3%

Cash Yield
2012
2013
2014E
2015E
2016E Key Operating Metrics
2012
2013
2014E
2015E
2016E
(5.6%)
(24.1%)
(34.9%)
38.6%
55.7%
108.7%
19.9%
9.1%
(2.5%)
2.4%
20.0%
37.1%

1,656
450.6
24.9
2,191
449.3
25.9
2,510
451.5
21.7
2,558
453.8
28.9
2,653
456.1
31.9
2012
2013
2014E
2015E
211,784
3.5x
38.1%
226,479
2.4x
33.2%
215,368
2.1x
31.4%
157,350
1.3x
24.3%
2016E FX Assumptions
21.2%

$5.0
2012
2013
2014E
2015E
2016E
1.0006
1.0051
0.9714
0.9409
0.9089
0.9059
0.8840
0.8850
0.8811
0.8772

Firm
Option
2019, 9%
2014, 10%
$4.0
2015, 22%
$3.0
$2.0
2018, 38%
$1.0
2016, 8%
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2017, 13%

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Q3/14 Results Incrementally Ahead On Revenues and Margins

New Flyer reported Q3/14 results that were below consensus and our estimates. The company
reported revenue, adjusted EBITDA, and adjusted FD EPS of $360.8mm, $25.7mm, and
$0.18 for the quarter, versus our estimates of $360.7mm, $29.0mm, and $0.20, and consensus
estimates of $400.7mm, $27.7mm and $0.28, respectively. Adjusted EBITDA margin for the
quarter stood at 7.1%, 90bps below our estimates of 8.0%, as a result of lower than expected
performance in the Bus Manufacturing segment.
Q3/14
Q3/13
y/y
Growth
Q114 y/y
Growth
621
448.8
20.2
577
430.1
27.5
7.6%
4.3%
(26.5%)
19.0%
3.8%
10.6%
3,069.5
4,635.2
(33.8%)
(5.4%)
Operating Segments
Bus Manufacturing
Revenue
EBITDA
278,713
12,557
4.5%
6.0%
248,178
15,882
6.4%
6.6%
12.3%
(20.9%)
(1.9%)
(0.6%)
23.5%
68.5%
0.3%
0.4%
82,049
13,140
16.0%
58,331
8,534
14.6%
40.7%
54.0%
1.4%
57.1%
74.1%
1.6%
360,762
25,697
10,245
306,509
24,416
7,832
17.7%
5.2%
30.8%
30.0%
49.3%
111.6%
$0.18
$0.15
$0.14
$0.15
30.8%
0.1%
90.4%
82.7%

Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
Figure 1. Q3/14 Highlights
Adjusted EBITDA margin in the aftermarket business of 16.0% (normalized for $0.1 million
of non-recurring costs relating to business acquisition) came in 140bps higher than last year
and 50bps higher than our estimates of 15.5% primarily as a result of improved market
fundamentals in the space. We estimate a 1.0% increase in EBITDA margin in the segment
results in approximately a $2.9mm improvement in EBITDA, making it one of the more
prominent levers to earnings growth after a production rate increase. Revenue in the
aftermarket segment was up 40.7% y/y reflecting increased volumes on the back of an
improving market. Parts shipments and gross orders received in the quarter were up 41% and
50% y/y respectively. Shipments were up 3% q/q, with gross parts orders up 18% from Q2/14
levels.
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In Bus Manufacturing, segment revenues for the quarter were up 12.3% driven mainly by an
increase in deliveries (up 7.6.% y/y) and a more favorable sales mix that resulted in higher
average prices per EU during the quarter (up 4.3% y/y at $448.8K). However, adjusted
EBITDA margin of 4.5% in the segment came in 190bps lower y/y and 150bps lower than our
estimate of 6.0% for the quarter reflecting managements previous guidance, as well as an
accounting provision made for the expected payment of $2.6mm for the 2012 performance
share units. WIP at the end of the quarter stood at 309 EUs. We expect margins in both,
Aftermarkets and Bus manufacturing segments to improve in Q4/14, supported by improving
fundamentals and further cost cutting initiatives at the company level.
The companys total bid pipeline at the end of the quarter amounted to 21,773 EUs, up 9% y/y
(with active EUs down 22.6% y/y). TTM reported Book-to-Bill ratio as of Q3/14 stood at
0.8x, falling below 1.0x first time after seven consecutive quarters of TTM Book-to-Bill ratio
above 1.0x. We forecast 2014 book to bill at 1.05x, expecting additional orders through
Q4/14.
Management continues to expect the corporate average line entry rate to remain stable at the
current 51EUs (including MiDi) per production week for fiscal 2014 and 2015. We expect the
companys announced decision to phase out production of NABI Bus LFW and BRT models
from NABIs Anniston, AL facility and transition to the Xcelsior, anticipated to occur in
H2/15, to make its operations more efficient over time. During the transition period,
management expects to invest approximately $20mm in direct operating costs and capital
expenditures to complete the transition, utilizing operating cash flow and current credit
facilities, which is anticipated to be paid back through captured cost reductions and synergies
within approximately 2-3 years. Our estimates for 2014 and 2015 remain largely unchanged
post the quarter. We expect the large WIP and finished goods build up should clear by year
end.
Changes in Key Estimates ($mm's, except per share)
ACC New Estimates
Revenue
Adjusted EBITDA
Adjusted FD EPS
2014E
2015E
$1,437.8
$103.3
$0.62
$1,471.7
$123.9
$0.85
2016E
$1,511.1
$135.4
$0.98
ACC Old Estimates

2014E
2015E
$1,444.0
$107.0
$0.68
$1,478.4
$123.8
$0.88
2016E
$1,518.9
$135.6
$1.00
Figure 2. Changes in Key Estimates ($mm's, unless otherwise noted)

We continue to focus on the opportunities in front of the company, including an improving

core North American bus market, the introduction of the medium duty bus, the all-electric
propulsion design, further acquisitions, and other potential catalysts, including the pace of
order intake and further margin expansion. We maintain our Outperform rating and our 12month target price of C$15.00. Our target price is based on a blend of a 15.0x earnings and
7.25x EBITDA multiple of the four quarters ending Q3/16 reflecting our 12-month forward
valuation period as well as an exchange rate of C$1.13 per $US.
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Ticker
Company
TSX: ARF Armtec Infrastructure Inc
TSX: VIC Vicwest Inc
TSX: WJX Wajax Corporation
TSX: AFN Ag Growth International Inc.
TSX: SPB Superior Plus Corp.
GBX
OSK
Oshkosh Corporation
SPAR
Spartan Motors Inc.
WNC
THO
WGO
NAV
TSX: STB Student Transportation, Inc.
CUB
Cubic Corporation
Average
TSX:NFI
New Flyer Industries Inc. *
Last
Quarter
6/30/14
6/30/14
9/30/14
6/30/14
9/30/14
8/31/14
9/30/14
9/30/14
9/30/14
7/31/14
8/30/14
7/31/14
9/30/14
6/30/14
9/28/14
Price
11/07/14
$0.46
$10.50
$35.42
$47.14
$12.19
$60.13
$44.81
$5.56
$10.55
$54.78
$22.52
$36.09
$7.08
$48.10
Shares
Out. (M)
24.1
17.6
16.8
13.1
126.2
27.4
85.0
34.1
69.0
53.4
27.0
81.4
82.8
26.8
$13.61
55.5
* ACC Rating: OP, $15.00 target. Total Expected Return: 14.4%
Market
Enterprise
Cap ($mm) Value ($mm)
11
343
185
310
594
819
619
744
1,538
2,488
1,646
1,982
3,809
4,391
190
166
728
980
2,925
2,635
607
549
2,937
7,079
586
884
1,289
1,233
755
898
As of:
11/07/14
Price / EPS
FY+1
FY+2
NM
NM
13.6x
12.9x
11.3x
16.8x
14.1x
16.1x
11.2x
13.4x
11.3x
11.0x
9.6x
92.7x
24.5x
13.3x
11.2x
13.7x
11.8x
12.4x
11.1x
NM
16.4x
NM
NM
15.1x
18.1x
14.9x
16.9x
22.0x
13.4x
EV/EBITDA
FY+1 FY+2
11.0x 7.6x
12.4x 8.0x
8.4x 7.5x
9.4x 8.7x
8.8x 8.1x
5.7x 4.8x
6.7x 6.2x
17.6x 7.7x
6.2x 5.6x
7.8x 6.7x
7.1x 6.6x
8.3x
9.1x 8.2x
10.5x 8.8x
9.3x 7.3x
13.5x
8.7x
NTM
NM
21.7x
11.7x
15.1x
13.3x
13.4x
11.0x
32.7x
12.1x
13.7x
12.4x
30.2x
19.2x
14.0x
7.3x
LTM EBITDA Dividend Net Debt to

Margin
Yield
EBITDA
6.5%
0.0%
11.6x
3.2%
5.7%
8.7x
5.9%
6.7%
2.6x
17.8%
5.1%
1.7x
6.5%
5.9%
3.6x
10.8%
1.0%
1.2x
9.3%
1.6%
0.9x
2.2%
1.8%
nmf
8.4%
0.0%
1.7x
7.8%
2.0%
nmf
7.1%
1.6%
nmf
-1.1%
0.0%
nmf
14.3%
7.8%
3.6x
6.8%
0.5%
nmf
7.5%
2.8%
4.0x
7.7%
4.2%
2.2x
Return On
Capital
3.5%
2.2%
9.8%
11.0%
7.0%
12.9%
10.6%
0.8%
10.0%
16.6%
21.8%
(22.6%)
2.1%
4.5%
6.4%
Total Debt
to Capital
111.3%
83.9%
47.5%
37.1%
65.6%
44.4%
31.1%
3.0%
47.3%
0.0%
0.0%
450.2%
62.9%
12.5%
71.2%
YTD Share
Price Return
(64.5%)
(19.8%)
(2.9%)
5.6%
(1.3%)
83.1%
(11.1%)
(17.0%)
(14.6%)
(0.8%)
(18.0%)
(5.5%)
7.6%
(8.7%)
(4.8%)
6.0%
35.7%
28.5%
95

NFI
$13.61
Rating:
Outperform
12 Month Target:
$15.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
74%
32%
Sector Perform
21%
0%
Underperform
2%
0%
Speculative
1%
0%
Restricted
3%
33%
Not Rated
0%
0%
Tender
0%
0%
100%
25%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
96

Direct
_________________________________________________________________________
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
E&P- Domestic
403 539 8617

403 539 8587
403 539 8615
403 539 8635
403 539 8592
403 539 8621
403 539 8581
jmccrea
kvandenberg
porourke
kgordey
nlupick
tmatthews
cerana
403 539 8606

403 539 8598
dlever
zkarim
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
647 776 8246

647 776 8245
647 776 8240
cmurray
gulybyshev
wnowak
Agriculture
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
_________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
647 776 8250
psarachman
Adam Carlson
647 776 8242
acarlson
Jamie Riff
647 776 8233
jriff
Tim Miller
647 776 8237
tmiller
_________________________________________________________________________
Calgary
Tate Pinder
Shane Dungey
403 539 8613

403 539 8605
tpinder
sdungey
Toronto
Cheryl Polan
647 776 8244
cpolan
Jon Varley
647 776 8235
jvarley
Michael Capobianco
647 776 8231
mcapobianco
_______________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
Mark Reynolds, CFA
403 539 8618

403 539 8619
ggill
mreynolds
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
403 539 8604
pstables
Jesse Hardage
403 539 8628
jhardage
Greg Smiddy
403 539 8595
gsmiddy
Edward Otto
647 776 8223
eotto
Yi Huang
403 539 8614
yhuang
Blake Eshleman
403 539 8609
beshleman
Tyler Press
647-776-8224
tpress
________________________________________________________________________

Bruce Alexander
Kelly Wylie
403 539 8622

403 539 8616
403 539 8589
lkende
balexander
kwylie
97
COMPANY UPDATE
NFI | TSX
$13.17
Rating: Outperform
One Year Target: C$15.00 (from
C$13.25 previously)
Total Return: 18.4%
August 7, 2014
C$13.14 / C$9.84
4.5%
Dividend Yield:
55.5 (basic)
55.5 (fd)
38.8
72.4
$230.8

$884.8
2013A
Revenue ($mm)
2014E
2015E
$1,199.4 $1,440.7 $1,492.3
EBITDA ($mm)
$94.7
$105.9
$123.8
FD EPS
$0.64
$0.67
$0.88
Q2
Q3
Q4
$14.5
EBITDA ($m m )
Q1
2012
$15.9
$16.4
$14.1
2013
$15.4
$18.1
$24.4
$36.8
2014
$19.7
$27.0
$29.6E
$29.7E
Q2
Q3
Q4
$0.06
$0.07
Adjusted FD EPS
Q1
2012
$0.09
$0.09
2013
$0.08
$0.09
$0.15
$0.30
2014
$0.10
$0.16
$0.20E
$0.21E
$15

Volume ('000)
Q2/14 Results Incrementally Ahead Top Line and Margins: New Flyer
reported Q2/14 results that were ahead of our and consensus estimates for revenue,
adjusted FD EPS and adjusted EBITDA. The company reported revenue, adjusted
EBITDA, and adjusted FD EPS of $346.5mm, $27.0mm, and $0.16 (headline EPS of
$0.06) for the quarter, versus our estimates of $341.2mm, $23.9mm, and $0.14, and
consensus estimates of $348.9mm, $21.7mm and $0.14, respectively. Adjusted EBITDA
margin for the quarter was 7.8%, 80bps above our estimates, as a result of better than
expected performance in both Bus Manufacturing and Aftermarket segments.
C$730.5

Float ($mm)
(FYE Dec 31)
Strong Q2/14 Results Increase Confidence in Outlook
800
Last Sale Price
600
$10
400
$5
200
$0
Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14

Managing Director
647.776.8246
Higher Production Rates Materializing: We believe the two key takeaways from
the quarter are the continuing progression of margin improvement in both aftermarket
and bus manufacturing and the increase in the pace of manufacturing in H2/14 to see
FY2014 line rates average 51 EU/week. We are continuing to expect a recovery in bus
manufacturing margins over the coming years. While we are maintaining our 2015
production rate and moving our 2014 rate higher, we are increasingly comfortable given
the previous tone from management that the new build rate is sustainable.
Introducing 2016 Estimates: Our 2014 estimates increase reflecting Q2/14 results
as well as higher build rates in H2/14, and improved aftermarket margins in both 2014
and 2015. Our 2014 and 2015 adjusted EBITDA increases to $105.9mm in 2014 and
$123.8mm in 2015, a $4.8mm and $4.7mm improvement respectively. With our
increased confidence in our outlook, we are introducing our 2016 estimates. Our
forecasts continue to build in a 53 EU/week line-entry rate, a continued trend in
improved bus margins, growth in core aftermarket sales in line with GDP and the end of
the Chicago contract mid-year 2016, which should see aftermarket margins improve
while aftermarket revenues contract. Our 2016 initial forecasts are for EBITDA of
$134.0mm, on revenues of $1.5bn and adjusted FD EPS of $0.99.
Maintain Outperform Rating and Increase Target to C$15.00: We continue to
focus on the opportunities in front of the company, including an improving core North
American bus market, the introduction of the medium duty bus, the all-electric
propulsion design, further acquisitions, and other potential catalysts, including the pace
of order intake and further margin expansion. Based on our revised estimates as well as
shifting our valuation period forward, we are maintaining our Outperform rating and
increasing our 12-month target price to C$15.00 from C$13.25 previously. Our target
price is based on a blend of a 15.0x earnings and 7.25x EBITDA multiple of the four
647.776.8245
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Current Valuations
Unit Price (C$)
$13.17
EV/EBITDA
2014
2015
Price/Earnings
2014
2015
Peer Average
9.3x
7.5x
Peer Average
26.7x
13.6x
8.4x
7.2x
18.0x
13.7x
2014E
2015E
Incom e Statem ent
2012
2013
Revenues
2012
2013
2014E
2015E
2016E
5,523
29,979
54,938
93,653
95,177
Bus Manufacturing
746,200
984,425 1,149,781 1,194,934 1,221,630 Changes in non-cash w orking capital
24,003
22,988
17,004
(5,403)
(3,716)
Aftermarket
119,050
214,999
29,526
52,967
71,943
88,250
91,461
Revenue
865,250 1,199,424 1,440,721 1,492,287 1,509,669 Principal portion of capital lease payments
(2,418)
(2,003)
(1,315)
(568)
(568)
290,939
297,353
288,039 OCF less w orking capital
13.8%
17.9%
20.2%
19.9%
19.1%
41,248
56,776
59,624
76,153
85,514 Non-operating, non-recurring items affecting FCF
5.5%
5.8%
5.2%
6.4%
19,517
31,036
46,262
47,663
48,467 FX gain on cash held in foreign currency
16.4%
14.4%
15.9%
16.0%
16.8%
57,817
79,110
97,249
123,816
133,981
6.7%
6.6%
6.8%
8.3%
8.9%
60,825
94,685
105,885
123,816
133,981
per Share
7.0%
7.9%
7.3%
8.3%
8.9%
FCF Yield
Amortization
24,326
28,001
32,186
33,311
34,314
Operating Earnings
33,491
51,109
65,064
90,506
99,667
EBT
10,013
34,617
50,989
77,278
723
7,856
19,324
28,593
9,290

Margin
Adjusted EBITDA
Margin
Taxes
Net Income
7.0%
(10,972) (20,951) (13,616) (14,606) (17,500)

15,276
4,354
2,150
192
379
Free Cash Flow
19,508
45,481
61,745
68,896
71,714
Free cash flow (C$)
19,495
47,334
67,531
77,160
80,202
$0.44
$0.92
$1.22
$1.39
$1.45
2,540
(1,318)
3.3%
6.9%
9.2%
10.6%
11.0%
(45.6%)
108.4%
33.0%
14.3%
3.9%
2012
2013
2014E
2015E
2016E
33,081
30,255
32,448
32,448
32,448
26,761
31,665
48,685
169.7%
Reported FD EPS
$0.21
$0.52
$0.57
$0.88
$0.99
$0.745
Adjusted FD EPS
$0.31
$0.64
Cash Yield
Grow th
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
$0.67
$0.88
$0.99
2012
2013
2014E
2015E
(5.6%)
38.6%
20.1%
3.6%
1.2%
(24.1%)
(34.9%)
55.7%
108.7%
11.8%
5.1%
16.9%
31.0%
8.2%
12.4%
2012
2013
2014E
2015E
211,784
226,479
217,531
171,639
3.5x
2.4x
2.1x
1.4x
38.1%
33.2%
32.2%
26.4%
63.9%
$0.585
48.0%
$0.585
42.1%
$0.585
40.5%
$0.585
5.7%
4.4%
4.4%
4.4%
4.4%
2012
2013
2014E
2015E
2016E
1,656
2,191
2,522
2,608
2,653

450.6
24.9
449.3
25.9
455.9
23.6
458.2
29.2
460.5
32.2
2012
1.0006
2013
0.9714
2014E
0.9131
2015E
0.8930
2016E
0.9009
1.0051
0.9409
0.9059
0.9009
0.9009
2016E FX Assum ptions

23.6%

$5.0

Firm
2019, 7%
Option
2014, 22%
$4.0
$3.0
$2.0
2015, 19%
2018, 35%
$1.0
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2017, 11%
2016, 6%

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New Flyer reported Q2/14 results that were ahead of our and consensus estimates for revenue,
adjusted FD EPS and Adjusted EBITDA. The company reported revenue, adjusted EBITDA,
and adjusted FD EPS of $346.5mm, $27.0mm, and $0.16 (headline EPS of $0.06) for the
quarter, versus our estimates of $341.2mm, $23.9mm, and $0.14, and consensus estimates of
$348.9mm, $21.7mm and $0.14, respectively. Adjusted EBITDA margin for the quarter was
7.8%, 80bps above our estimates, as a result of better than expected performance in both Bus
Manufacturing and Aftermarket segments. The companys reported EPS was negatively
impacted by higher income tax expenses (realized investment tax credit of $2.7mm) and a
$3.9mm non-cash impairment charge related to product rationalization of the NABI bus
platform.
Q2/14
Q2/13
y/y
Growth
Q114 y/y
Growth
582
456.8
23.9
489
440.1
21.6
19.0%
3.8%
10.6%
13.1%
6.8%
(30.8%)
3,538.5
3,741.7
(5.4%)
11.9%
Operating Segments
Bus Manufacturing
Revenue
EBITDA
265,831
13,889
5.2%
4.5%
215,230
10,553
4.9%
5.0%
23.5%
31.6%
0.3%
(0.5%)
20.7%
51.0%
(1.7%)
(1.9%)
80,653
13,077
16.2%
51,346
7,510
14.6%
57.1%
74.1%
1.6%
95.4%
117.6%
1.7%
346,484
26,966
3,563
266,576
18,063
1,684
30.0%
49.3%
111.6%
32.1%
27.9%
56.1%
$0.06
$0.16
$0.03
$0.09
90.4%
82.7%
29.5%
20.4%

Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
Revenue in the Aftermarket segment was $80.7mm, up 57.1% y/y and 3.9% higher than our
estimates reflecting increased volumes from the CTA midlife overhaul program, the Orion
parts business and NABI. Adjusted EBITDA margin of 16.2% (normalized for $0.1mm of
non-recurring costs relating to business acquisitions) came in 160bps higher than last year and
70bps higher than our estimates, primarily as a result of improved market fundamentals, and
the benefits to the product mix that has resulted from a broader portfolio of services and parts
offerings to customers post recent acquisitions. We estimate a 1.0% increase in EBITDA
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margin in the segment results in approximately a $2.9mm improvement in EBITDA, making

it one of the more prominent levers to earnings growth after a production rate increase. Parts
shipments and gross orders received in the quarter were up 55% and 42% y/y respectively.
Shipments were up 11% q/q, with gross parts orders falling 1% from Q1/14 levels.
In Bus Manufacturing, segment revenues for the quarter were up of 23.5% y/y, reflecting an
increase in deliveries (up 19.0% y/y to 582 EUs, primarily due to the addition of NABI) and a
more favorable sales mix that resulted in higher average prices per EU during the quarter (up
3.8% y/y at $456.8K for the quarter). Deliveries in the quarter were negatively impacted by
60 EUs that were not delivered as a result of delayed customer inspection and acceptance in
respect of a few low margin contracts, which management currently expects to recover by the
end of the year. WIP at the end of the quarter stood at 366 EUs.
Adjusted EBITDA margin of 5.2% in the segment came in 30bps higher y/y and 70bps higher
than our estimate of 4.5% for the quarter reflecting managements incremental efforts to
recover margins through cost reductions, improved labor efficiency and beneficial price
change orders with customers. We expect margins in both, Aftermarkets and Bus
manufacturing segments to continue to improve going into H2/14, supported by improving
Other Items of Note:
The company disclosed it now expects to increase production, mainly due to product mix
to see an average of 51 EU/week for fiscal 2014, implying an acceleration in the back
half as the company averaged ~49 EU per week in H1/14. No disclosure on 2015 run
rates was provided but we expect it likely that the pace is maintained, consistent with our
current forecasts.
The companys total bid pipeline at the end of the quarter amounted to 19,728 EUs, up
9% y/y (with active EUs down 44.7% y/y). TTM reported Book-to-Bill ratio as of Q2/14
stood at 1.1x, marking the 7th consecutive quarter with a TTM Book-to-Bill ratio above
1.0x. We forecast 2014 book to bill at 1.15x, expecting additional orders through the
year.
The company used $18.8mm in working capital, mainly as a result of the inventory build
of 60 EU as well as lower accounts payable. We continue to expect to see ongoing
working capital recoveries through 2014.
In May 2014, the company successfully delivered its first MiDi bus to a Canadian private
bus operator and also completed Altoona testing, during the quarter which allows sales
using US FTA funding. While sales of the MiDi bus to date have been weaker than
expected, management expects sales and cash flows from the product line should
improve now that a number of key milestones have been met. Expectations remain for
approximately 60 deliveries in 2014, consistent with current production rates. In June
2014, NFI delivered its first two production battery-electric buses to a public transit
agency in the U.S., as part of a technology demonstration program. Four additional
battery-electric buses have been manufactured and are in the process of completing a
comprehensive test protocol, including Altoona Testing, with an expectation to enter
service with Winnipeg Transit in a few months.
On July 15, 2014, the U.S. House of Representatives approved a bill to temporarily fund
and ensure solvency of the highway Trust Fund (HTF; funded via fuel taxes) through
May 2015 and on July 31, 2014, the U.S. Senate approved the legislation passed by the
House. The HTF extension bill must now be approved by U.S. President Barak Obama.
As we mentioned in our previous report, one part of the debate in a new funding bill, but
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not a new discussion, is the level of domestic content for federally funded purchases,
increasing from the current 60% to up to 100% domestic content, which is unrealistic in
our opinion as there is not sufficient capability in the supply chain to meet the
requirement. Management believes they have adequate capacity in the US to meet most
new requirements, although we note the production flow which utilizes a Winnipeg St.
Cloud shell manufacturer / final assembly could be negatively impacted, creating some
cost pressures and could require restructuring. We also believe a 100% requirement for
US content may also face a NATFA or other FTA challenge.
We believe the two key takeaways from the quarter are the continuing progression of margin
improvement in both aftermarket and bus manufacturing and the increase in the pace of
manufacturing. We are continuing to expect a recovery in bus manufacturing margins driven
by three key factors 1) improved margins and pricing on new orders with a return to more
rational market conditions, 2) the fundamental improvement the company has made with
implementing lean manufacturing processes, which still offer further improvement
opportunities, particularly at the NABI operation and 3) the absorption impact higher
throughput brings with a production increase. While the cost profile of an incremental unit is
still highly variable (~70% of unit costs are materials), higher volumes should be able to be
achieved without additional overhead.
With the company announcing a production rate increase to average 51 EU / week for 2014,
we estimate the company will need to run at a 55 EU/week line rate to meet the announced
target in H2/14, which includes two weeks of shutdown in the period. Our previous 2015
estimates had incorporated our expectation that a higher production rate would average 53
EU/week. While we are maintaining our 2015 production rate and moving our 2014 rate
higher, we are increasingly comfortable given the previous tone from management on its
reticence to increase production rates until it was confident of not having to jerk around the
line rate that the new build rate is sustainable. On the conference call, management indicated
all but 100 slots through year end are booked with the remaining slots soft designated for
customers planning to exercise options, consistent with prior comments that management
wanted to see three to four forward quarters booked prior to changing line rates. While a great
deal hinges on H2/14 bookings, management once again confirmed its expectations regarding
the outlook for new order intake in H2/14 and into 2015.
Our 2014 estimates increase reflecting Q2/14 results as well as higher build rates in H2/14,
and improved aftermarket margins. Excluding the Chicago refurbishment project we believe
core EBITDA margins were approximately 16.8%, the second quarter at this level.
Commentary suggests the overall market continues to show better than previously expected
margin performance. We continue to expect y/y growth rates to slow in H2/14 however still
see 2014 aftermarket revenues at $290.9mm, up ~$4.0mm with margins incrementally
improving by 20 bps. We expect margins continue to improve in 2015 and are increasing our
expectations for EBITDA margins to 16.0% from 15.0%. The improvement in aftermarket is
offset by a slight decrease in margins expectations for bus manufacturing in H2/15 with
higher articulated production planned. In 2015, we are maintaining our 53 EU / week rate and
expect to continue to see slightly improved overall margins. Overall our 2014 and 2015
adjusted EBITDA increases to $105.9mm in 2014 and $123.8mm in 2015, a $4.8mm and
$4.7mm improvement respectively. We are also making minor increases to our capex
expectations to reflect additional investments at NABI.
With our increase confidence in our estimates, we are also introducing our 2016 estimates.
Our forecasts continue to build in a 53 EU/week line-entry rate, a continued trend in improved
bus margins, growth in core aftermarket sales in line with GDP, and the end of the Chicago
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contract mid-year 2016, which should see aftermarket margins improve while aftermarket
revenues contract. Our 2016 initial forecasts are for EBITDA of $134.0mm, on revenues of
$1.5bn and adjusted FD EPS 0f $0.99.
We are maintaining our expectations for dividends at C$0.585 per share, however we note
that payout ratios are poised to drop further even with the increase in capital expenditures. We
expect management and the board will continue to review dividend policy on a regular basis
and believe it is more likely, particularly as we move into 2015 that some consideration of an
increase in the dividend is possible, absent another substantial use of funds.
ACC New Estimates
Revenue
Adjusted EBITDA
Adjusted FD EPS
2014E
2015E
$1,440.7
$105.9
$0.67
$1,492.3
$123.8
$0.88
ACC Old Estimates
2016E
2014E
2015E
$1,509.7
$134.0
$0.99
$1,360.3
$101.0
$0.65
$1,493.8
$119.1
$0.86

We believe the disclosure of higher production rates and increased confidence in our outlook
as well as comparable trading multiples warrants a slight increase in valuation multiples,
particularly as we expect to see sustainably higher capital efficiency metrics. Industrial peers
continue to trade higher, now at approximately 8.4x forward EBITDA. We believe continued
demonstration of improved performance by the company is still required, however we are
increasing multiples to 7.25x (+0.25x) EBITDA and 15.0x EPS (+1.0x) reflecting the
companys improving profitability and risk profile. With the release of our 2016 estimates and
additional confidence in our 2015 estimates, we are moving our forward valuation period to
reflect the four quarters ending Q2/16 from the four quarters ending at Q4/15 as well as
estimates of net debt and shares outstanding at that time, including the dilutive impact of
convertible debentures and share options.
order intake and further margin expansion. Based on our revised estimates as well as shifting
of our valuation period forward, we are maintaining our Outperform rating and increasing our
12-month target price to C$15.00 from C$13.25 previously. Our target price is based on a
reflecting our 12-month forward valuation period as well as an exchange rate of C$1.10 per
$US.
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Price
Ticker
TSX: ARF
TSX: VIC
TSX: WJX
TSX: AFN
TSX: SPB
GBX
OSK
SPAR
WNC
THO
WGO
NAV
TSX: STB
CUB
Average
Com pany
Armtec Infrastructure Inc
Vicw est Inc
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Student Transportation, Inc.
Cubic Corporation
Last
Quarter
3/31/2014
3/31/2014
6/30/2014
3/31/2014
6/30/2014
5/31/2014
6/30/2014
6/30/2014
6/30/2014
4/30/2014
5/31/2014
4/30/2014
3/31/2014
6/30/2014
$0.67
$10.37
$35.91
$47.61
$13.84
$61.36
$46.32
$4.51
$13.35
$51.08
$23.72
$34.60
$7.00
$43.28
Shares
Out. (M)
24.1
17.6
16.8
13.1
126.2
27.5
85.0
34.3
69.0
53.3
27.1
81.3
82.5
26.8
TSX:NFI
6/29/2014
$13.17
55.5
Market
Enterprise
Cap ($m m ) Value ($m m )
16
335
183
308
603
820
624
746
1,747
2,772
1,686
2,005
3,938
4,312
155
130
921
1,190
2,723
2,602
642
591
2,814
6,889
577
890
1,159
1,103
731
895
Price / EPS
13.4x
15.6x
13.5x
15.8x
15.4x
19.8x
13.1x
135.3x
15.5x
15.5x
14.6x
NM
NM
17.5x
27.6x
FY+2
5.0x
14.4x
11.2x
14.0x
10.9x
15.0x
10.9x
17.3x
12.4x
12.4x
12.9x
26.1x
NM
13.3x
13.5x
EV/EBITDA
FY+1 FY+2
9.9x 7.0x
12.5x 8.2x
8.6x 7.6x
9.6x 8.7x
9.6x 8.7x
8.0x 6.4x
6.8x 6.1x
12.1x 5.3x
7.1x 6.3x
9.2x 7.4x
8.7x 7.4x
8.3x
10.5x 9.5x
9.4x 7.7x
9.4x 7.5x
16.8x
18.0x
13.7x
8.4x
NTM
NM
26.6x
12.5x
15.5x
13.9x
14.9x
11.3x
22.9x
13.8x
13.0x
13.5x
NM
FY+1
NM
7.2x
LTM EBITDA Dividend Net Debt to Return On

Margin
EBITDA
Capital
Yield
7.1%
0.0%
10.1x
4.4%
3.6%
5.8%
8.2x
2.5%
5.6%
6.9%
2.7x
9.4%
16.7%
4.9%
1.9x
9.9%
6.4%
4.3%
3.7x
6.6%
9.7%
0.9%
1.3x
10.6%
8.4%
1.3%
0.6x
9.4%
1.7%
2.2%
nmf
(0.3%)
8.5%
0.0%
1.8x
9.9%
7.9%
3.8%
nmf
17.3%
7.1%
0.0%
nmf
22.0%
-3.3%
0.0%
nmf
(34.0%)
13.7%
7.9%
4.4x
2.3%
6.8%
0.6%
nmf
4.5%
7.1%
2.8%
3.9x
5.3%
7.9%
4.5%
2.1x
6.2%
Total Debt
to Capital
YTD Share
Price Return
112.3%
80.3%
47.2%
37.8%
63.9%
46.8%
28.8%
3.1%
50.1%
0.0%
0.0%
497.1%
63.2%
12.5%
74.5%
(47.7%)
(20.8%)
(1.6%)
6.6%
12.1%
86.8%
(8.1%)
(32.7%)
8.1%
(7.5%)
(13.6%)
(9.4%)
6.4%
(17.8%)
(2.8%)
34.3%
24.4%
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COMPANY UPDATE
NFI | TSX
$13.17
Rating: Outperform
One Year Target: C$15.00 (from
C$13.25 previously)
Total Return: 18.4%
August 7, 2014
C$13.14 / C$9.84
4.5%
Dividend Yield:
55.5 (basic)
55.5 (fd)
38.8
72.4
$230.8

$884.8
2013A
Revenue ($mm)
2014E
2015E
$1,199.4 $1,440.7 $1,492.3
EBITDA ($mm)
$94.7
$105.9
$123.8
FD EPS
$0.64
$0.67
$0.88
Q2
Q3
Q4
$14.5
EBITDA ($m m )
Q1
2012
$15.9
$16.4
$14.1
2013
$15.4
$18.1
$24.4
$36.8
2014
$19.7
$27.0
$29.6E
$29.7E
Q2
Q3
Q4
$0.06
$0.07
Adjusted FD EPS
Q1
2012
$0.09
$0.09
2013
$0.08
$0.09
$0.15
$0.30
2014
$0.10
$0.16
$0.20E
$0.21E
$15

Volume ('000)
Q2/14 Results Incrementally Ahead Top Line and Margins: New Flyer
reported Q2/14 results that were ahead of our and consensus estimates for revenue,
adjusted FD EPS and adjusted EBITDA. The company reported revenue, adjusted
EBITDA, and adjusted FD EPS of $346.5mm, $27.0mm, and $0.16 (headline EPS of
$0.06) for the quarter, versus our estimates of $341.2mm, $23.9mm, and $0.14, and
consensus estimates of $348.9mm, $21.7mm and $0.14, respectively. Adjusted EBITDA
margin for the quarter was 7.8%, 80bps above our estimates, as a result of better than
expected performance in both Bus Manufacturing and Aftermarket segments.
C$730.5

Float ($mm)
(FYE Dec 31)
Strong Q2/14 Results Increase Confidence in Outlook
800
Last Sale Price
600
$10
400
$5
200
$0
Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14

Managing Director
647.776.8246
Higher Production Rates Materializing: We believe the two key takeaways from
the quarter are the continuing progression of margin improvement in both aftermarket
and bus manufacturing and the increase in the pace of manufacturing in H2/14 to see
FY2014 line rates average 51 EU/week. We are continuing to expect a recovery in bus
manufacturing margins over the coming years. While we are maintaining our 2015
production rate and moving our 2014 rate higher, we are increasingly comfortable given
the previous tone from management that the new build rate is sustainable.
Introducing 2016 Estimates: Our 2014 estimates increase reflecting Q2/14 results
as well as higher build rates in H2/14, and improved aftermarket margins in both 2014
and 2015. Our 2014 and 2015 adjusted EBITDA increases to $105.9mm in 2014 and
$123.8mm in 2015, a $4.8mm and $4.7mm improvement respectively. With our
increased confidence in our outlook, we are introducing our 2016 estimates. Our
forecasts continue to build in a 53 EU/week line-entry rate, a continued trend in
improved bus margins, growth in core aftermarket sales in line with GDP and the end of
the Chicago contract mid-year 2016, which should see aftermarket margins improve
while aftermarket revenues contract. Our 2016 initial forecasts are for EBITDA of
$134.0mm, on revenues of $1.5bn and adjusted FD EPS of $0.99.
Maintain Outperform Rating and Increase Target to C$15.00: We continue to
focus on the opportunities in front of the company, including an improving core North
American bus market, the introduction of the medium duty bus, the all-electric
propulsion design, further acquisitions, and other potential catalysts, including the pace
of order intake and further margin expansion. Based on our revised estimates as well as
shifting our valuation period forward, we are maintaining our Outperform rating and
increasing our 12-month target price to C$15.00 from C$13.25 previously. Our target
price is based on a blend of a 15.0x earnings and 7.25x EBITDA multiple of the four
647.776.8245
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Current Valuations
Unit Price (C$)
$13.17
EV/EBITDA
2014
2015
Price/Earnings
2014
2015
Peer Average
9.3x
7.5x
Peer Average
26.7x
13.6x
8.4x
7.2x
18.0x
13.7x
2014E
2015E
Incom e Statem ent
2012
2013
Revenues
2012
2013
2014E
2015E
2016E
5,523
29,979
54,938
93,653
95,177
Bus Manufacturing
746,200
984,425 1,149,781 1,194,934 1,221,630 Changes in non-cash w orking capital
24,003
22,988
17,004
(5,403)
(3,716)
Aftermarket
119,050
214,999
29,526
52,967
71,943
88,250
91,461
Revenue
865,250 1,199,424 1,440,721 1,492,287 1,509,669 Principal portion of capital lease payments
(2,418)
(2,003)
(1,315)
(568)
(568)
290,939
297,353
288,039 OCF less w orking capital
13.8%
17.9%
20.2%
19.9%
19.1%
41,248
56,776
59,624
76,153
85,514 Non-operating, non-recurring items affecting FCF
5.5%
5.8%
5.2%
6.4%
19,517
31,036
46,262
47,663
48,467 FX gain on cash held in foreign currency
16.4%
14.4%
15.9%
16.0%
16.8%
57,817
79,110
97,249
123,816
133,981
6.7%
6.6%
6.8%
8.3%
8.9%
60,825
94,685
105,885
123,816
133,981
per Share
7.0%
7.9%
7.3%
8.3%
8.9%
FCF Yield
Amortization
24,326
28,001
32,186
33,311
34,314
Operating Earnings
33,491
51,109
65,064
90,506
99,667
EBT
10,013
34,617
50,989
77,278
723
7,856
19,324
28,593
9,290

Margin
Adjusted EBITDA
Margin
Taxes
Net Income
7.0%
(10,972) (20,951) (13,616) (14,606) (17,500)

15,276
4,354
2,150
192
379
Free Cash Flow
19,508
45,481
61,745
68,896
71,714
Free cash flow (C$)
19,495
47,334
67,531
77,160
80,202
$0.44
$0.92
$1.22
$1.39
$1.45
2,540
(1,318)
3.3%
6.9%
9.2%
10.6%
11.0%
(45.6%)
108.4%
33.0%
14.3%
3.9%
2012
2013
2014E
2015E
2016E
33,081
30,255
32,448
32,448
32,448
26,761
31,665
48,685
169.7%
Reported FD EPS
$0.21
$0.52
$0.57
$0.88
$0.99
$0.745
Adjusted FD EPS
$0.31
$0.64
Cash Yield
Grow th
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
$0.67
$0.88
$0.99
2012
2013
2014E
2015E
(5.6%)
38.6%
20.1%
3.6%
1.2%
(24.1%)
(34.9%)
55.7%
108.7%
11.8%
5.1%
16.9%
31.0%
8.2%
12.4%
2012
2013
2014E
2015E
211,784
226,479
217,531
171,639
3.5x
2.4x
2.1x
1.4x
38.1%
33.2%
32.2%
26.4%
63.9%
$0.585
48.0%
$0.585
42.1%
$0.585
40.5%
$0.585
5.7%
4.4%
4.4%
4.4%
4.4%
2012
2013
2014E
2015E
2016E
1,656
2,191
2,522
2,608
2,653

450.6
24.9
449.3
25.9
455.9
23.6
458.2
29.2
460.5
32.2
2012
1.0006
2013
0.9714
2014E
0.9131
2015E
0.8930
2016E
0.9009
1.0051
0.9409
0.9059
0.9009
0.9009
2016E FX Assum ptions

23.6%

$5.0

Firm
2019, 7%
Option
2014, 22%
$4.0
$3.0
$2.0
2015, 19%
2018, 35%
$1.0
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2017, 11%
2016, 6%

10
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New Flyer reported Q2/14 results that were ahead of our and consensus estimates for revenue,
adjusted FD EPS and Adjusted EBITDA. The company reported revenue, adjusted EBITDA,
and adjusted FD EPS of $346.5mm, $27.0mm, and $0.16 (headline EPS of $0.06) for the
quarter, versus our estimates of $341.2mm, $23.9mm, and $0.14, and consensus estimates of
$348.9mm, $21.7mm and $0.14, respectively. Adjusted EBITDA margin for the quarter was
7.8%, 80bps above our estimates, as a result of better than expected performance in both Bus
Manufacturing and Aftermarket segments. The companys reported EPS was negatively
impacted by higher income tax expenses (realized investment tax credit of $2.7mm) and a
$3.9mm non-cash impairment charge related to product rationalization of the NABI bus
platform.
Q2/14
Q2/13
y/y
Growth
Q114 y/y
Growth
582
456.8
23.9
489
440.1
21.6
19.0%
3.8%
10.6%
13.1%
6.8%
(30.8%)
3,538.5
3,741.7
(5.4%)
11.9%
Operating Segments
Bus Manufacturing
Revenue
EBITDA
265,831
13,889
5.2%
4.5%
215,230
10,553
4.9%
5.0%
23.5%
31.6%
0.3%
(0.5%)
20.7%
51.0%
(1.7%)
(1.9%)
80,653
13,077
16.2%
51,346
7,510
14.6%
57.1%
74.1%
1.6%
95.4%
117.6%
1.7%
346,484
26,966
3,563
266,576
18,063
1,684
30.0%
49.3%
111.6%
32.1%
27.9%
56.1%
$0.06
$0.16
$0.03
$0.09
90.4%
82.7%
29.5%
20.4%

Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
Revenue in the Aftermarket segment was $80.7mm, up 57.1% y/y and 3.9% higher than our
estimates reflecting increased volumes from the CTA midlife overhaul program, the Orion
parts business and NABI. Adjusted EBITDA margin of 16.2% (normalized for $0.1mm of
non-recurring costs relating to business acquisitions) came in 160bps higher than last year and
70bps higher than our estimates, primarily as a result of improved market fundamentals, and
the benefits to the product mix that has resulted from a broader portfolio of services and parts
offerings to customers post recent acquisitions. We estimate a 1.0% increase in EBITDA
11
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margin in the segment results in approximately a $2.9mm improvement in EBITDA, making

it one of the more prominent levers to earnings growth after a production rate increase. Parts
shipments and gross orders received in the quarter were up 55% and 42% y/y respectively.
Shipments were up 11% q/q, with gross parts orders falling 1% from Q1/14 levels.
In Bus Manufacturing, segment revenues for the quarter were up of 23.5% y/y, reflecting an
increase in deliveries (up 19.0% y/y to 582 EUs, primarily due to the addition of NABI) and a
more favorable sales mix that resulted in higher average prices per EU during the quarter (up
3.8% y/y at $456.8K for the quarter). Deliveries in the quarter were negatively impacted by
60 EUs that were not delivered as a result of delayed customer inspection and acceptance in
respect of a few low margin contracts, which management currently expects to recover by the
end of the year. WIP at the end of the quarter stood at 366 EUs.
Adjusted EBITDA margin of 5.2% in the segment came in 30bps higher y/y and 70bps higher
than our estimate of 4.5% for the quarter reflecting managements incremental efforts to
recover margins through cost reductions, improved labor efficiency and beneficial price
change orders with customers. We expect margins in both, Aftermarkets and Bus
manufacturing segments to continue to improve going into H2/14, supported by improving
The company disclosed it now expects to increase production, mainly due to product mix
to see an average of 51 EU/week for fiscal 2014, implying an acceleration in the back
half as the company averaged ~49 EU per week in H1/14. No disclosure on 2015 run
rates was provided but we expect it likely that the pace is maintained, consistent with our
current forecasts.
1.0x. We forecast 2014 book to bill at 1.15x, expecting additional orders through the
year.
The company used $18.8mm in working capital, mainly as a result of the inventory build
of 60 EU as well as lower accounts payable. We continue to expect to see ongoing
working capital recoveries through 2014.
In May 2014, the company successfully delivered its first MiDi bus to a Canadian private
bus operator and also completed Altoona testing, during the quarter which allows sales
using US FTA funding. While sales of the MiDi bus to date have been weaker than
expected, management expects sales and cash flows from the product line should
improve now that a number of key milestones have been met. Expectations remain for
approximately 60 deliveries in 2014, consistent with current production rates. In June
2014, NFI delivered its first two production battery-electric buses to a public transit
agency in the U.S., as part of a technology demonstration program. Four additional
battery-electric buses have been manufactured and are in the process of completing a
comprehensive test protocol, including Altoona Testing, with an expectation to enter
service with Winnipeg Transit in a few months.
On July 15, 2014, the U.S. House of Representatives approved a bill to temporarily fund
and ensure solvency of the highway Trust Fund (HTF; funded via fuel taxes) through
May 2015 and on July 31, 2014, the U.S. Senate approved the legislation passed by the
House. The HTF extension bill must now be approved by U.S. President Barak Obama.
As we mentioned in our previous report, one part of the debate in a new funding bill, but
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not a new discussion, is the level of domestic content for federally funded purchases,
increasing from the current 60% to up to 100% domestic content, which is unrealistic in
our opinion as there is not sufficient capability in the supply chain to meet the
requirement. Management believes they have adequate capacity in the US to meet most
new requirements, although we note the production flow which utilizes a Winnipeg St.
Cloud shell manufacturer / final assembly could be negatively impacted, creating some
cost pressures and could require restructuring. We also believe a 100% requirement for
US content may also face a NATFA or other FTA challenge.
We believe the two key takeaways from the quarter are the continuing progression of margin
improvement in both aftermarket and bus manufacturing and the increase in the pace of
manufacturing. We are continuing to expect a recovery in bus manufacturing margins driven
by three key factors 1) improved margins and pricing on new orders with a return to more
rational market conditions, 2) the fundamental improvement the company has made with
implementing lean manufacturing processes, which still offer further improvement
opportunities, particularly at the NABI operation and 3) the absorption impact higher
throughput brings with a production increase. While the cost profile of an incremental unit is
still highly variable (~70% of unit costs are materials), higher volumes should be able to be
achieved without additional overhead.
With the company announcing a production rate increase to average 51 EU / week for 2014,
we estimate the company will need to run at a 55 EU/week line rate to meet the announced
target in H2/14, which includes two weeks of shutdown in the period. Our previous 2015
estimates had incorporated our expectation that a higher production rate would average 53
EU/week. While we are maintaining our 2015 production rate and moving our 2014 rate
higher, we are increasingly comfortable given the previous tone from management on its
reticence to increase production rates until it was confident of not having to jerk around the
line rate that the new build rate is sustainable. On the conference call, management indicated
all but 100 slots through year end are booked with the remaining slots soft designated for
customers planning to exercise options, consistent with prior comments that management
wanted to see three to four forward quarters booked prior to changing line rates. While a great
deal hinges on H2/14 bookings, management once again confirmed its expectations regarding
the outlook for new order intake in H2/14 and into 2015.
Our 2014 estimates increase reflecting Q2/14 results as well as higher build rates in H2/14,
and improved aftermarket margins. Excluding the Chicago refurbishment project we believe
core EBITDA margins were approximately 16.8%, the second quarter at this level.
Commentary suggests the overall market continues to show better than previously expected
margin performance. We continue to expect y/y growth rates to slow in H2/14 however still
see 2014 aftermarket revenues at $290.9mm, up ~$4.0mm with margins incrementally
improving by 20 bps. We expect margins continue to improve in 2015 and are increasing our
expectations for EBITDA margins to 16.0% from 15.0%. The improvement in aftermarket is
offset by a slight decrease in margins expectations for bus manufacturing in H2/15 with
higher articulated production planned. In 2015, we are maintaining our 53 EU / week rate and
expect to continue to see slightly improved overall margins. Overall our 2014 and 2015
adjusted EBITDA increases to $105.9mm in 2014 and $123.8mm in 2015, a $4.8mm and
$4.7mm improvement respectively. We are also making minor increases to our capex
expectations to reflect additional investments at NABI.
With our increase confidence in our estimates, we are also introducing our 2016 estimates.
Our forecasts continue to build in a 53 EU/week line-entry rate, a continued trend in improved
bus margins, growth in core aftermarket sales in line with GDP, and the end of the Chicago
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contract mid-year 2016, which should see aftermarket margins improve while aftermarket
revenues contract. Our 2016 initial forecasts are for EBITDA of $134.0mm, on revenues of
$1.5bn and adjusted FD EPS 0f $0.99.
We are maintaining our expectations for dividends at C$0.585 per share, however we note
that payout ratios are poised to drop further even with the increase in capital expenditures. We
expect management and the board will continue to review dividend policy on a regular basis
and believe it is more likely, particularly as we move into 2015 that some consideration of an
increase in the dividend is possible, absent another substantial use of funds.
ACC New Estimates
Revenue
Adjusted EBITDA
Adjusted FD EPS
2014E
2015E
$1,440.7
$105.9
$0.67
$1,492.3
$123.8
$0.88
ACC Old Estimates
2016E
2014E
2015E
$1,509.7
$134.0
$0.99
$1,360.3
$101.0
$0.65
$1,493.8
$119.1
$0.86

We believe the disclosure of higher production rates and increased confidence in our outlook
as well as comparable trading multiples warrants a slight increase in valuation multiples,
particularly as we expect to see sustainably higher capital efficiency metrics. Industrial peers
continue to trade higher, now at approximately 8.4x forward EBITDA. We believe continued
demonstration of improved performance by the company is still required, however we are
increasing multiples to 7.25x (+0.25x) EBITDA and 15.0x EPS (+1.0x) reflecting the
companys improving profitability and risk profile. With the release of our 2016 estimates and
additional confidence in our 2015 estimates, we are moving our forward valuation period to
reflect the four quarters ending Q2/16 from the four quarters ending at Q4/15 as well as
estimates of net debt and shares outstanding at that time, including the dilutive impact of
convertible debentures and share options.
order intake and further margin expansion. Based on our revised estimates as well as shifting
of our valuation period forward, we are maintaining our Outperform rating and increasing our
12-month target price to C$15.00 from C$13.25 previously. Our target price is based on a
reflecting our 12-month forward valuation period as well as an exchange rate of C$1.10 per
$US.
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Price
Ticker
TSX: ARF
TSX: VIC
TSX: WJX
TSX: AFN
TSX: SPB
GBX
OSK
SPAR
WNC
THO
WGO
NAV
TSX: STB
CUB
Average
Com pany
Vicw est Inc
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Last
Quarter
3/31/2014
3/31/2014
6/30/2014
3/31/2014
6/30/2014
5/31/2014
6/30/2014
6/30/2014
6/30/2014
4/30/2014
5/31/2014
4/30/2014
3/31/2014
6/30/2014
$0.67
$10.37
$35.91
$47.61
$13.84
$61.36
$46.32
$4.51
$13.35
$51.08
$23.72
$34.60
$7.00
$43.28
Shares
Out. (M)
24.1
17.6
16.8
13.1
126.2
27.5
85.0
34.3
69.0
53.3
27.1
81.3
82.5
26.8
TSX:NFI
6/29/2014
$13.17
55.5
Market
Enterprise
16
335
183
308
603
820
624
746
1,747
2,772
1,686
2,005
3,938
4,312
155
130
921
1,190
2,723
2,602
642
591
2,814
6,889
577
890
1,159
1,103
731
895
Price / EPS
13.4x
15.6x
13.5x
15.8x
15.4x
19.8x
13.1x
135.3x
15.5x
15.5x
14.6x
NM
NM
17.5x
27.6x
FY+2
5.0x
14.4x
11.2x
14.0x
10.9x
15.0x
10.9x
17.3x
12.4x
12.4x
12.9x
26.1x
NM
13.3x
13.5x
EV/EBITDA
FY+1 FY+2
9.9x 7.0x
12.5x 8.2x
8.6x 7.6x
9.6x 8.7x
9.6x 8.7x
8.0x 6.4x
6.8x 6.1x
12.1x 5.3x
7.1x 6.3x
9.2x 7.4x
8.7x 7.4x
8.3x
10.5x 9.5x
9.4x 7.7x
9.4x 7.5x
16.8x
18.0x
13.7x
8.4x
NTM
NM
26.6x
12.5x
15.5x
13.9x
14.9x
11.3x
22.9x
13.8x
13.0x
13.5x
NM
FY+1
NM
7.2x

Margin
EBITDA
Capital
Yield
7.1%
0.0%
10.1x
4.4%
3.6%
5.8%
8.2x
2.5%
5.6%
6.9%
2.7x
9.4%
16.7%
4.9%
1.9x
9.9%
6.4%
4.3%
3.7x
6.6%
9.7%
0.9%
1.3x
10.6%
8.4%
1.3%
0.6x
9.4%
1.7%
2.2%
nmf
(0.3%)
8.5%
0.0%
1.8x
9.9%
7.9%
3.8%
nmf
17.3%
7.1%
0.0%
nmf
22.0%
-3.3%
0.0%
nmf
(34.0%)
13.7%
7.9%
4.4x
2.3%
6.8%
0.6%
nmf
4.5%
7.1%
2.8%
3.9x
5.3%
7.9%
4.5%
2.1x
6.2%
Total Debt
to Capital
YTD Share
Price Return
112.3%
80.3%
47.2%
37.8%
63.9%
46.8%
28.8%
3.1%
50.1%
0.0%
0.0%
497.1%
63.2%
12.5%
74.5%
(47.7%)
(20.8%)
(1.6%)
6.6%
12.1%
86.8%
(8.1%)
(32.7%)
8.1%
(7.5%)
(13.6%)
(9.4%)
6.4%
(17.8%)
(2.8%)
34.3%
24.4%
15
112

NFI
$13.17
Rating:
Outperform
12 Month Target:
C$15.00
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
71%
36%
Sector Perform
23%
5%
Underperform
0%
0%
Speculative
1%
0%
Restricted
1%
0%
Not Rated
3%
0%
Tender
0%
0%
100%
27%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Toronto, Ontario M5K 1K7
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
16
113
Direct
_________________________________________________________________________
George FJ Gosbee
Chairman & CEO
403 539 8601

E&P- Domestic
403 539 8606

403 539 8598
403 539 8617
403 539 8587
403 539 8615
403 539 8635
403 539 8592
403 539 8621
403 539 8581
dlever
zkarim
jmccrea
kvandenberg
porourke
kgordey
nlupick
tmatthews
cerana
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
President & CEO

780 408 7181
dmowat@atb.com
647 776 8246

647 776 8245
cmurray
gulybyshev
Ian Wild
Agriculture
647 776 8236

647 776 8254
jchu
spattillo

President
647 776 8250
ATB Financial
Dave Mowat

403 974 5127
iwild@atb.com
All Sectors
403 539 8607
vhoa
_________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
647 776 8250
psarachman
Adam Carlson
647 776 8242
acarlson
Jamie Riff
647 776 8233
jriff
Tim Miller
647 776 8237
tmiller
_________________________________________________________________________
Calgary
Tate Pinder
403 539 8613
tpinder
Toronto
Cheryl Polan
647 776 8244
cpolan
Jon Varley
647 776 8235
jvarley
Michael Capobianco
647 776 8231
mcapobianco
________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
Toronto, ON Canada M5K 1K7
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
403 539 8618
ggill
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
647 776 8221
jfallows
All Sectors
Patrick Stables
403 539 8604
pstables
Jesse Hardage
403 539 8628
jhardage
Greg Smiddy
403 539 8595
gsmiddy
Yi Huang
403 539 8614
yhuang
Edward Otto
647 776 8223
eotto
Blake Eshleman
403 539 8609
beshleman
________________________________________________________________________

Kelly Wylie
403 539 8622

403 539 8589
lkende
kwylie
114
COMPANY UPDATE
NFI | TSX
$11.82
Rating: Outperform
One Year Target: $13.25
Total Return: 17.0%
May 12, 2014
Q1/14 Results: Strong Beat Across the Board

C$11.99 / C$9.58
4.9%
Cash Yield:
55.5 (basic)
55.5 (fd)
C$655.6

Float ($mm)
38.9
44.6
$219.3

$820.9
(FYE Dec 31)
2012A
Revenue ($mm)
$865.3 $1,199.4 $1,371.5
2013E
2014E
EBITDA ($mm)
$60.8
$94.7
$101.8
FD EPS
$0.31
$0.64
$0.65
Q2
Q3
Q4
$16.4
$14.1
$14.5
EBITDA ($m m )
Q1
2012
$15.9
2013
$15.4
$18.1
$24.4
$36.8
2014
$19.7E
$24.7E
$28.7E
$28.8E
Adjusted FD EPS
2012
Q1
$0.09
Q2
Q3
Q4
$0.09
$0.06
$0.07
2013
$0.08
$0.09
$0.15
$0.30
2014
$0.10E
$0.15E
$0.20E
$0.20E
$15

Volume ('000)
Q1/14 Results Strong Beat: New Flyer reported Q1/14 results well ahead of our
and consensus expectations. The company reported revenue, adjusted EBITDA, and
adjusted FD EPS of $323.9mm, $19.7mm, and $0.10 for the quarter, versus our
estimates of $311.9mm, $17.2mm, and $0.07, and consensus estimates of $316.8mm,
$16.2mm and $0.08, respectively. Overall, stronger Q1/14 results were attributed
primarily to high deliveries in the quarter (the number of EUs delivered in Q1/14
exceeded managements previous expectations by 19 EUs).
400
Last Sale Price
300
$10
200
$5
100
$0
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14

Managing Director
647.776.8246
Aftermarket Margins Beginning to Creep Up: Adjusted EBITDA margin in the

aftermarket business of 16.3% came in 160bps higher than last year. While not explicitly
disclosed the margin from the CTA contract likely skewed the blended average down,
leaving us to expect margins on the core aftermarket business were closer to 17%. We
believe the ongoing synergies related to the integration of the businesses should continue
to deliver q/q and y/y improvement as the company continues to implement new systems
and continues to optimize parts and service offerings. Management continues to
maintain some caution around pricing, which we reflect in our estimates, with an
aftermarket margin estimate at 15.7% for 2014 and an estimate of 15.0% in 2015. We
estimate a 1.0% increase in EBITDA margin in the segment results in approximately a
$2.9mm improvement in EBITDA, making it one of the more prominent levers to
earnings growth after a production rate increase.
Minor Estimate Revisions: We are updating our estimates for backlog data and
results of the quarter reflecting stronger Q1/14 results. Our 2014E EBITDA and FD EPS
increase to $101.8mm and $0.65 respectively ($97.5mm, $0.61 previously), while 2015
estimates remain relatively unchanged at $118.2mm in Adjusted EBITDA and FD EPS
of $0.85.
Solid Backdrop with Catalysts Evolving: We continue to focus on the
opportunities in front of the company, including an improving core North American bus
market, the introduction of the medium duty bus, the all-electric propulsion design,
further acquisitions, and other potential catalysts, including the pace of order intake and
what we expect should be an increase in production rate. While management remains
cautious, we expect the rate of order intake is likely to require a rate increase in 2015.
Maintain Outperform Rating and Target: We maintain our Outperform rating and
C$13.25 target. Our target price is based on a blend of a 14.0x earnings and 7.0x
EBITDA multiple of our 2015 earnings, reflecting our 12-month forward valuation
period as well as an exchange rate of C$1.10 per $US.
647.776.8245
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Current Valuations
Unit Price (C$)
$11.82
EV/EBITDA
2014
Peer Average
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
Taxes
Net Income
Reported FD EPS
Adjusted FD EPS
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
2012
2013
2015 Price/Earnings
9.9x
8.1x
7.5x Peer Average

7.0x New Flyer Industries Inc.
2014E
2012
2013
2014
2015
18.5x
16.6x
13.3x
12.7x
2014E
2015E

5,523 29,979 100,780 88,555
24,003 22,988 (32,495) (4,477)
29,526 52,967 68,285 84,078
(2,418) (2,003) (1,432)
(568)
(10,972) (20,951) (11,760) (11,137)
2,540 15,276
1,359
(1,318)
2,150
192
28
Free Cash Flow
19,508 45,481 56,480 71,923
746,200 984,425 1,088,695 1,196,088

119,050 214,999 282,812 289,829
865,250 1,199,424 1,371,507 1,485,917
13.8%
17.9%
20.6%
19.5%
41,248
56,776
57,326
74,685
5.5%
5.8%
5.3%
6.2%
19,517
31,036
44,439
43,523
16.4%
14.4%
15.7%
15.0%
57,817
79,110 100,201 118,208
6.7%
6.6%
7.3%
60,825
94,685 101,765 118,208
per Share
7.0%
7.9%
7.4%
8.0%
FCF Yield
24,326
28,001
30,879
30,853
33,491
51,109
69,322
87,356
10,013
34,617
55,654
723
9,290
$0.21
$0.31
19,495
$0.44
3.7%
(45.6%)
47,334
$0.92
7.7%
108.3%
63,284
$1.14
9.7%
24.7%
81,181
$1.46
12.4%
28.3%
2012
2013
2014E
2015E
7,856
26,761
19,328
36,327

33,081
169.7%
30,255
63.9%
32,448
51.3%
32,448
40.0%
$0.52
$0.64
$0.65
$0.65
$0.85
$0.85
$0.745
6.3%
$0.585 $0.585
4.9%
4.9%
$0.585
4.9%

Cash Yield
2012
2013
2014E
2012
2013
2014E
2015E
(5.6%)
(24.1%)
(34.9%)
38.6%
55.7%
108.7%
14.3%
7.5%
2.6%

1,656
450.6
24.9
2,191
449.3
25.9
2,404
452.9
23.8
2,628
455.1
28.4
2012
2013
2014E
211,784
3.5x
38.1%
226,479
2.4x
33.2%
165,858
1.6x
26.4%
19.6%

$5.0
2012
2013
2014E
2015E
1.0006
1.0079
0.9714
0.9414
0.8949
0.9091
0.8860
0.9009

Firm
2014, 26%
Option
$4.0
$3.0
2018, 36%
$2.0
2015, 20%
$1.0
2017, 11%
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2016, 7%

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Q1/14 Results Ahead of Cautious Guidance

New Flyer reported Q1/14 results well ahead of our and consensus expectations. The
company reported revenue, adjusted EBITDA, and adjusted FD EPS of $323.9mm, $19.7mm,
and $0.10 for the quarter, versus our estimates of $311.9mm, $17.2mm, and $0.07, and
consensus estimates of $316.8mm, $16.2mm and $0.08, respectively. Overall, stronger Q1/14
results were attributed primarily to high deliveries in the quarter (the number of EUs delivered
in Q1/14 exceeded managements previous expectations by 19 EUs).
Q1/14
Q1/13
y/y
Growth
Q413 y/y
Growth
554
452.9
14.0
490
424.1
20.2
13.1%
6.8%
(30.8%)
64.1%
6.5%
22.6%
3,689.5
3,296.0
11.9%
36.8%
Operating Segments
Bus Manufacturing
Revenue
EBITDA
250,889
7,751
3.1%
3.0%
207,795
9,901
4.8%
4.9%
20.7%
(21.7%)
(1.7%)
(1.9%)
74.8%
82.2%
0.9%
0.7%
72,976
11,915
16.3%
37,340
5,475
14.7%
95.4%
117.6%
1.7%
134.9%
125.1%
(0.6%)
323,865
19,666
5,484
245,135
15,376
3,513
32.1%
27.9%
56.1%
83.1%
154.9%
285.7%
$0.10
$0.10
$0.08
$0.08
29.5%
20.4%
208.6%
340.0%

Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
Y/Y increases in bus manufacturing revenue of 20.7% resulted mainly from the increase in
deliveries (up 13.1% y/y at 554 EUs) and a more favorable sales mix that resulted in higher
average prices per EU during the quarter (up 6.8% y/y.), due to higher sales of hybrid buses
and fewer articulated buses. A sequential increase in WIP of 33 EUs for the quarter (including
5 MiDi buses) was less than previously guided by the company, which ultimately resulted in a
higher than expected number of deliveries for the quarter. Y/Y decline in adjusted EBITDA
margins in the bus manufacturing business in Q1/14, was in line with our and the companys
expectations, and is primarily attributed to a lower margin sales mix in the quarter, consistent
with managements previous guidance of margins for orders planned for production in 2014
being on average lower than the average margins achieved last year.
117
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INSTITUTIONAL
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: DIVERSIFIED
INDUSTRIES
In Aftermarket operations, 95.4% y/y growth was attributed to increased volumes including
incremental revenue from the CTA midlife overhaul program, the Orion parts business and
the NABI Parts operations, resulting in the parts business representing 22.5% of the total
revenue for the quarter, up from only 15% a year prior. As aftermarket operations margins are
over double bus manufacturing business, we expect increased topline contributions from the
companys parts business to continue to drive combined margins higher. Adjusted EBITDA
margin in the aftermarket business of 16.3% (normalized for $0.4mm of non-recurring costs
related to acquisitions) for the quarter came in 160bps higher than last year, and above our
estimates of 14.7%, reflecting additional EBITDA contributions from CTA midlife overhaul
program and acquisitions of NABI and Orion parts businesses. While not explicitly disclosed
the margin from the CTA contract likely skewed the blended average down, leaving us to
expect margins on the core aftermarket business were closer to 17%. We believe the ongoing
synergies related to the integration of the businesses should continue to deliver q/q and y/y
improvement as the company continues to implement new systems and continues to optimize
parts and service offerings. Management continues to maintain some caution around pricing,
which we reflect in our estimates, with an aftermarket margin estimate at 15.7% for 2014 and
an estimate of 15.0% in 2015. We estimate a 1.0% increase in EBITDA margin in the
segment results in approximately a $2.9mm improvement in EBITDA, making it one of the
more prominent levers to earnings growth after a production rate increase.
1.0x. We forecast 2014 book to bill at 1.3x, expecting additional orders through the year.
Management indicated that about 200 slots remain open in Q4 (8% of 2014 production),
with potential customers already identified.
FCF of $10.6mm (up 50.1% y/y) in Q1/14 increased the companys liquidity position,
reflecting favorable changes in non-cash working capital for the quarter. We continue to
expect to see ongoing working capital recoveries through 2014 as well as higher earnings,
and capital spending returning to its typical modest pace at less than 1.0% of revenue. We
forecast free cash flow to increase on average by 30% a year through 2015 affording
ample cushion for the dividend as well as the opportunity for a number of strategic
events.
The company shipped the first MiDi bus to a customer in Quebec. At the end of Q1/14,
there were firm orders for 39 buses, with expectations for production of about 70 units in
2014, a pace of approximately 1.25 EU/week. We continue to expect only minor
contribution from the program this year.
The current US funding bill for transit funding, MAP21 expires at the end of September,
which could create some headline risk for the company, although we ultimately believe
that it should not present significant issue. There are a number of issues that need
addressing, including the status of the Highway Trust Fund in the US, which is funded
via fuel taxes, that is expected to be in an underfunded status by August. Various
Congressional, Senate and Executive branch bills have been proposed or are in mark-up,
although with congressional elections scheduled this year, we believe an expect at least
one if not more extensions of a year or more of the existing bill at current funding levels
plus inflation, which is similar to the process for the last two major bills. One part of the
debate in a new funding bill, but not a new discussion, is the level of domestic content for
federally funded purchases, increasing from the current 60% to up to 100% domestic
content, which is unrealistic in our opinion as there is not sufficient capability in the
118
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INDUSTRIES
INSTITUTIONAL
EQUITYERQUITY
ESEARCH
: DIVERSIFIED
INDUSTRIES
supply chain to meet the requirement. Management believes they have adequate capacity
in the US to meet most new requirements, although we note the production flow which
utilizes a Winnipeg St. Cloud shell manufacturer / final assembly could be negatively
impacted, creating some cost pressures and could require restructuring. We also believe a
100% requirement for US content may also face a NATFA or other FTA challenge.
Despite the ongoing pressure on margins, management believes pricing for certain types of
bidding contracts has finally started to normalize. The company maintained production
guidance at 49 EU per week, although we continue to expect an increase is necessary given
the continuing pace of order intake. The company tends to experience large q/q variability in
earnings given the mix of production, and we expect 2014 will likely be more volatile than
other periods as older backlog acquired during the very intense competition period that
occurred in 2012 enters production, a dynamic we also believe to be well understood by the
market.
We are updating our estimates for backlog data and results of the quarter reflecting stronger
Q1/14 results. Our 2014E EBITDA and FD EPS increase to $101.8mm and $0.65 respectively
($97.5mm, $0.61 previously), while 2015 estimates remain relatively unchanged at $118.2mm
in Adjusted EBITDA and FD EPS of $0.85.
ACC New Estimates
Revenue
Adjusted EBITDA
Adjusted FD EPS
ACC Old Estimates
2014E
2015E
2014E
2015E
$1,371.5
$101.8
$0.65
$1,485.9
$118.2
$0.85
$1,365.8
$97.5
$0.61
$1,490.8
$117.6
$0.84


order intake and what we expect should be an increase in production rate. While management
remains cautious, we expect the rate of order intake is likely to require a rate increase in 2015.
We maintain our Outperform rating and C$13.25 target. Our target price is based on a blend
of a 14.0x earnings and 7.0x EBITDA multiple of our 2015 earnings, reflecting our 12-month
forward valuation period as well as an exchange rate of C$1.10 per $US.
119
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EQUITYERQUITY
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: DIVERSIFIED
INDUSTRIES

Ticker
TSX: ARF
TSX: VIC
TSX: WJX
TSX: AFN
TSX: SPB
GBX
OSK
SPAR
WNC
THO
WGO
NAV
TSX: STB
CUB
Average
TSX: NFI
Company
Vicwest Inc
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Last
Quarter
3/31/14
3/31/14
3/31/14
12/31/13
3/31/14
2/28/14
3/31/14
3/31/14
3/31/14
1/31/14
3/01/14
1/31/14
3/31/14
9/30/13
Price
5/09/14
$1.21
$9.53
$32.96
$44.41
$13.64
$50.16
$53.78
$4.89
$13.26
$60.58
$24.04
$34.63
$6.78
$48.30
Shares
Out. (M)
24.1
17.6
16.8
13.1
126.2
27.6
84.9
34.5
68.9
53.3
27.2
81.3
86.7
26.8
3/30/14
$11.82
55.5
Market
Enterprise
32
352
176
302
568
786
584
693
1,706
2,744
1,336
1,632
4,604
5,084
162
140
905
1,210
3,220
3,015
675
658
2,791
6,589
593
894
1,265
1,160
657
829
Price / EPS
FY+1
FY+2
NM
7.2x
12.1x
12.8x
10.5x
15.3x
13.6x
14.4x
11.8x
18.6x
15.1x
15.0x
12.5x
45.9x
17.4x
15.2x
12.3x
17.6x
14.5x
15.6x
13.7x
NM
18.2x
NM
NM
16.7x
16.7x
14.3x
16.4x
18.7x
13.3x
EV/EBITDA
FY+1 FY+2
9.0x 6.9x
11.2x 7.7x
8.2x 7.2x
9.1x 8.5x
9.4x 8.6x
7.6x 6.4x
7.8x 7.1x
8.9x 5.3x
7.1x 6.5x
10.3x 8.6x
9.5x 7.7x
22.4x 7.7x
10.2x 9.7x
9.1x 8.1x
10.0x 7.6x
17.1x
8.1x
NTM
NM
21.1x
11.6x
15.3x
13.6x
15.9x
13.9x
27.6x
14.3x
15.8x
14.4x
NM
16.6x
12.7x
7.0x

Margin
Yield
EBITDA
7.1%
0.0%
10.1x
4.0%
6.0%
7.3x
5.7%
7.1%
2.7x
16.6%
5.4%
1.8x
6.5%
4.4%
4.0x
8.6%
0.0%
1.5x
9.0%
1.1%
0.8x
2.2%
2.1%
nmf
8.7%
0.0%
2.1x
7.8%
3.2%
nmf
6.7%
0.0%
nmf
-5.2%
0.0%
nmf
15.5%
8.1%
3.7x
8.8%
0.5%
nmf
7.3%
2.7%
3.8x
7.7%
4.9%
2.2x
Return On
Capital
4.4%
3.0%
9.5%
8.3%
6.2%
8.3%
11.1%
0.6%
9.6%
17.1%
20.9%
(46.3%)
2.3%
7.9%
4.5%
Total Debt
to Capital
107.5%
73.3%
45.8%
52.5%
65.9%
48.0%
31.2%
3.0%
53.5%
0.0%
0.0%
343.6%
52.8%
12.7%
63.6%
YTD Share
Price Return
(5.5%)
(27.3%)
(9.6%)
(0.5%)
10.4%
52.7%
6.7%
(27.0%)
7.4%
9.7%
(12.4%)
(9.3%)
3.0%
(8.3%)
(0.7%)
5.5%
34.0%
11.6%
120

NFI
C$11.82
Rating:
Outperform
12 Month Target:
C$13.25
Issuer
N
explain:
issuer?
past 12 months?
Rating System
Ranking
% IB
Distribution
Clients
Outperform
69%
31%
Sector Perform
24%
5%
Underperform
1%
0%
Speculative
1%
0%
Restricted
2%
50%
Not Rated
2%
0%
Tender
0%
0%
100%
23%
Total

average.
average.
average.
material.
principal or agent.

Tel: 403 539 8600
TD Tower
Tel: 403 539 8600
(USA) Inc. at 403-539-8600.
121
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
Direct
_________________________________________________________________________

E&P- Domestic
Don Rawson, Senior Analyst
403 539 8606

403 539 8621
403 539 8581
403 539 8617
403 539 8587
403 539 8615
403 539 8592
dlever
drawson
cerana
jmccrea
kvandenberg
porourke
nlupick
Oilfield Services
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
jgibson
jsawatzky
mwestby
647 776 8246

647 776 8245
cmurray
gulybyshev
Agriculture
647 776 8236

647 776 8254
jchu
spattillo
All Sectors
403 539 8607
vhoa
_________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
647 776 8250
psarachman
Adam Carlson
647 776 8242
acarlson
Jamie Riff
647 776 8233
jriff
Tim Miller
647 776 8237
tmiller
_________________________________________________________________________
Calgary
Tate Pinder
403 539 8613
tpinder
Toronto
Cheryl Polan
647 776 8244
cpolan
Jon Varley
647 776 8235
jvarley
Michael Capobianco
647 776 8231
mcapobianco
________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
647 776 8230 Main
647 776 8248 Fax
George Gosbee
403 539 8601
ggosbee

Jason Caldarelli
647 776 8243
jcaldarelli

Gurdeep Gill, CFA
403 539 8618
ggill
Oilfield Services
Matt Colucci
403 539 8597
mcolucci

Jeff Fallows, CFA
Bill Murray, CFA
647 776 8221

647 776 8240
jfallows
bmurray
All Sectors
Patrick Stables
403 539 8604
pstables
Jesse Hardage
403 539 8628
jhardage
Greg Smiddy
403 539 8595
gsmiddy
Yi Huang
403 539 8614
yhuang
________________________________________________________________________

Cliff Johnson
Jim Lee, P.Geol.
Kelly Wylie
403 539 8622

403 539 8593
403 539 8626
403 539 8589
lkende
cjohnson
jlee
kwylie
122
COMPANY UPDATE
NFI | TSX
$11.39
Rating: Outperform
Total Return: 21.5%
March 24, 2014
Looking to Where Were Going, Not Where Weve Been

C$11.85 / C$9.55
5.1%
Cash Yield:
55.5 (basic)
55.5 (fd)
C$631.8

Float ($mm)
37.7
50.8
$226.5

$790.2
(FYE Dec 31)
2012A
Revenue ($mm)
$865.3 $1,199.4 $1,365.8
2013E
2014E
EBITDA ($mm)
$60.8
$94.7
$97.5
FD EPS
$0.31
$0.64
$0.61
Q2
Q3
Q4
$16.4
$14.1
$14.5
EBITDA ($m m )
Q1
2012
$15.9
2013
$15.4
$18.1
$24.4
$36.8
2014
$17.2E
$23.7E
$28.2E
$28.4E
Adjusted FD EPS
2012
Q1
$0.09
Q2
Q3
Q4
$0.09
$0.06
$0.07
2013
$0.08
$0.09
$0.15
$0.30
2014
$0.07E
$0.14E
$0.20E
$0.20E
$15

Volume ('000)
Q4/13 Results Strong Beat: New Flyer reported Q4/13 results well ahead of our
and consensus expectations. The company reported revenue, adjusted EBITDA, and
adjusted FD EPS of $381.2mm, $36.8mm, and $0.30 for the quarter, versus our
estimates of $353.4mm, $28.2mm, and $0.20, and consensus estimates of $354.0mm,
$24.9mm and $0.19, respectively.
1000
Last Sale Price
800
$10
$5
600
400
200
$0
Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14

Managing Director
647.776.8246

647.776.8245
Outlook Remains Positive; Annual Production Rate Remains Intact but

Quarters to be Highly Variable: Despite the ongoing pressure on margins,
management believes pricing for certain types of bidding contracts has finally started to
normalize. However, it did caution Q1/14 adjusted EBITDA was likely to be
significantly lower sequentially and possibly lower y/y as a result of lower deliveries
expected in Q1/14 (~535 EUs) vs. Q4/13 and the impact of lower margins from projects
won in prior years during the competitive bidding environment, which is consistent with
previous guidance released with Q3/13 reporting.
Adjusting Estimates to Reflect Quarterly Twists; But FY Remains Static:
Our previous estimates had reflected lower results for the full year with the
understanding we would have to adjust one or more periods for additional disclosure to
more appropriately shape our estimates for 2014s production profile. Accordingly, we
are significantly reducing our Q1/14 estimates, although we note that full year estimates
remain essentially unchanged at $97.5mm ($97.1mm prior). Our Q1/14 FD EBITDA
drops to $17.2mm from $23.5mm reflecting a EBITDA in bus manufacturing of $13,700
per EU with deliveries of 534 EU, while later periods increase incrementally on higher
production rates.
This Story is About the Potential, Not One Quarters Results: We believe it is
much more important to focus on the opportunities in front of the company, including an
improving core North American bus market, the introduction of the medium duty bus,
the all-electric propulsion design, further acquisitions, etc. than just quarterly results,
which are highly volatile. We understand the reasons for the Q1/14 earnings impacts and
expect they are well understood by the market, leading us to believe any share price
disruption surrounding reporting expected mid-May should be minor.
Increasing Target on Improved Net Debt Position: We maintain our Outperform
rating and we are increasing our 12-month target price to C$13.25 from C$13.00
stemming from our expectation for an improved net debt position due to a more
optimistic forecast for working capital improvements. Our target price is based on a
blend of a 14.0x earnings and 7.0x EBITDA multiple of our 2015 earnings, reflecting
our 12-month forward valuation period as well as an exchange rate of C$1.10 per $US.
Regulatory Disclosures and policy on the dissemination of research: last page or at www.altacorpcapital.com.
123
INITIATING COVERAGE: DIVERSIFIED INDUSTRIES

Current Valuations
Unit Price (C$)
$11.39
EV/EBITDA
2014
Peer Average
10.2x
8.0x
7.7x Peer Average

6.6x New Flyer Industries Inc.
2014E
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
Taxes
Net Income
Reported FD EPS
Adjusted FD EPS
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
2012
2013
2015 Price/Earnings
2012
2013
2014
2015
19.5x
16.8x
14.5x
12.0x
2014E
2015E

5,523 29,979 123,422 91,939
24,003 22,988 (54,916) (9,495)
29,526 52,967 68,506 82,444
(2,418) (2,003) (1,213)
(568)
(10,972) (20,951) (10,182) (10,395)
2,540 15,276
(1,318)
2,150
192
Free Cash Flow
19,508 45,481 57,111 71,466
746,200 984,425 1,092,563 1,210,408

119,050 214,999 273,259 280,411
865,250 1,199,424 1,365,823 1,490,819
13.8%
17.9%
20.0%
18.8%
41,248
63,649
57,511
75,579
5.5%
6.5%
5.3%
6.2%
19,517
31,495
39,973
42,064
16.4%
14.6%
14.6%
15.0%
57,817
79,110
97,484 117,643
6.7%
6.6%
7.1%
60,825
94,685
97,484 117,643
per Share
7.0%
7.9%
7.1%
7.9%
FCF Yield
24,326
28,001
29,745
29,741
33,491
51,109
67,738
87,902
10,013
34,617
53,296
723
9,290
$0.21
$0.31
19,495
$0.44
3.9%
(45.6%)
47,334
$0.92
8.0%
108.3%
62,963
$1.14
10.0%
24.0%
78,973
$1.42
12.5%
25.4%
2012
2013
2014E
2015E
7,856
26,761
19,720
33,577

33,081
169.7%
30,255
63.9%
32,448
51.5%
32,448
41.1%
$0.52
$0.64
$0.61
$0.61
$0.84
$0.84
$0.745
6.5%
$0.585 $0.585
5.1%
5.1%
$0.585
5.1%

Cash Yield
2012
2013
2014E
2012
2013
2014E
2015E
(5.6%)
(24.1%)
(34.9%)
38.6%
55.7%
108.7%
13.9%
3.0%
(5.1%)

1,656
450.6
24.9
2,191
449.3
29.1
2,384
458.3
24.1
2,628
460.6
28.8
2012
2013
2014E
211,784
3.5x
38.1%
226,479
2.4x
33.2%
142,735
1.5x
23.7%
16.0%

$5.0
2012
2013
2014E
2015E
1.0006
1.0079
0.9714
0.9414
0.9090
0.9091
0.9050
0.9009

Firm
Option
2014, 31%
$4.0
$3.0
2018, 38%
$2.0
2015, 16%
$1.0
$0.0
2017, 11%
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2016, 4%

124
Q4/13 Results Ex-Items Still Remarkably Strong

New Flyer reported Q4/13 results well ahead of our and consensus expectations. The
company reported revenue, adjusted EBITDA, and adjusted FD EPS of $381.2mm, $36.8mm,
and $0.30 for the quarter, versus our estimates of $353.4mm, $28.2mm, and $0.20, and
consensus estimates of $354.0mm, $24.9mm and $0.19, respectively. Strong Q4/13 results are
attributed primarily to high deliveries in the quarter, strong margins on specific deliveries, the
reversal of a long-term incentive plan provision (~$2.0mm), and material investment tax
credits (ITCs) realized in the quarter (~$4.9mm, representing more than 50% of the ITCs
realized for the entire year). Currently, about 75% of this years production slots have been
filled (including NABI) which is more than double the number of production slots filled for
2013 at this point last year. Independent of the ITC and incentive plan provision gains, Q4/13
was still a very strong quarter in our opinion.
Q4/13
Q4/12
y/y
Growth
Q313 y/y
Growth
635
493.3
43.0
387
463.0
26.3
64.1%
6.5%
63.8%
49.5%
(6.4%)
10.6%
3,657.2
2,673.6
36.8%
75.2%
Operating Segments
Bus Manufacturing
Revenue
EBITDA
313,222
27,313
8.7%
8.9%
180,927
10,163
5.6%
6.0%
73.1%
168.7%
3.1%
3.0%
39.8%
91.4%
1.0%
1.1%
67,982
9,517
14.0%
28,943
4,228
14.6%
134.9%
124.7%
(0.6%)
100.6%
91.0%
(0.7%)
381,204
36,830
13,732
209,870
15,201
4,028
81.6%
142.3%
240.9%
48.2%
75.8%
364.5%
$0.25
$0.30
$0.09
$0.08
172.8%
280.3%
271.7%
165.9%

Aftermarket
Revenue
EBITDA
EBITDA Margin
Total
Revenue
Adjusted EBITDA
Reported Net Income
Reported
Adjusted
The y/y increase in Bus manufacturing revenue was driven by increased deliveries for the
quarter and a sales mix that included a mix of additional hybrid buses and fewer articulated
buses for the quarter with higher average selling prices per EU (up 6.5% y/y from $463.0k to
$493.3k per EU). Bus deliveries in Q4/13 were positively impacted by the total work in
progress reduction of 47 EUs from the previous quarter. Management believes that NFIs
market share grew to 43% in 2013, up from 32% in 2012. Adjusted EBITDA for the bus
125
manufacturing segment came in above expectations for the quarter due to increased deliveries
from WIP, the NABI acquisition and the realization of $4.9mm of investment tax credits. As a
result, adjusted EBITDA margin for the quarter stood at 8.7% (ACC estimate of 6.5%), up
from 5.7% in Q4/12. Reported EBITDA per equivalent unit in the bus manufacturing segment
was very strong at $43,000 per EU, the highest since Q2/10, up 56% sequentially and 64%
y/y. Adjusting for the non-recurring ITCs and incentive plan gains EBITDA per EU was
$32,200, the highest level in over two years.
EBITDA per Equivalent Unit ($000s)
60.0
EBITDA Per EU
50.0
40.0
30.0
20.0
10.0
0.0
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Figure 2. EBITDA per Equivalent Unit ($000s)

In aftermarket operations, the y/y increase in revenue resulted from increased volumes from
the Chicago Transit Authority (CTA) midlife overhaul program, and incremental revenue
from the Orion parts business and NABI Parts acquisitions in 2013. Management believes that
NFIs market share of the aftermarket grew to 28% in 2013, up from 18% in 2012. Adjusted
EBITDA for the aftermarket operations increased y/y due to the additional EBITDA
generated by the CTA midlife overhaul program (although at lower than average margins),
and the EBITDA generated from the acquisition of NABI Parts and the Orion parts
businesses. While pricing pressures remain, the company is seeing strong sales volumes
which should continue due to the NABI and Orion acquisitions and the CTA refurbishment
contract.
Total Leverage and Interest Coverage ratios as of Q4/13 stood at 1.7x and 9.2x, well ahead of
covenant limits. Liquidity position for the quarter decreased by $21.3mm, primarily as a result
of increased non-cash working capital relating to higher deliveries in the quarter. This is
expected to be reversed early in 2014 improving the overall leverage metrics and supporting
the current dividend level.
Despite the ongoing pressure on margins, management believes pricing for certain types of
bidding contracts has finally started to normalize. However, they did caution Q1/14 adjusted
EBITDA was likely to be significantly lower sequentially and possibly lower y/y as a result of
lower deliveries expected in Q1/14 (~535 EUs) vs. Q4/13 and the impact of lower margins
from projects won in prior years during the competitive bidding environment which is
consistent with previous guidance released with Q3/13 reporting that margins in bus
manufacturing in 2014 are expected to be lower than in 2013. Management indicated that it
intends to maintain the 2014 yearly average production rate flat from 2013 levels at 48 EU per
week (36 at NFI and 12 at NABI) with lower production in Q1/14 offset by an increase to 49
EU/week for the remainder of the year. The company tends to experience large q/q variability
in earnings given the mix of production, although we expect 2014 will likely be more volatile
126
than other periods as older backlog acquired during the very intense competition period that
occurred in 2012 enters production.
Our previous estimates had reflected lower results for the full year with the understanding we
would have to adjust one or more periods for additional disclosure to more appropriately
shape our estimates for 2014s production profile. Accordingly, we are significantly reducing
our Q1/14 estimates, although we note that full year estimates remain essentially unchanged
at $97.5mm ($97.1mm prior). Our Q1/14 FD EBITDA drops to $17.2mm from $23.5mm
reflecting a EBITDA in bus manufacturing of $13,700 per EU with deliveries of 534 EU,
while later periods increase incrementally on higher production rates. We continue to see
strong aftermarket y/y growth in both Canada and the US, although with margins that reflects
the mix of the lower margin CTA refurbishment contract. We are expecting an improvement
in working capital and slightly lower debt levels by year end 2014. Management has indicated
it used some of the available capacity of the balance sheet to support production in 2013 and
with an improvement in slot loading and competitive dynamics we expect to see a stronger
working capital recovery through 2014.
ACC New Estimates
Revenue
Adjusted EBITDA
Adjusted FD EPS
Q1/14E
2014E
2015E
$312.5
$1,365.8
$97.5
$0.61
$1,490.8
$117.6
$0.84
$17.2
$0.07
ACC Old Estimates

Q1/14E
2014E
$345.7 $1,359.4
$23.5
$97.1
$0.62
$0.14
2015E
$1,486.2
$117.5
$0.86

In our opinion, we believe it is much more important to focus on the opportunities in front of
the company, including an improving core North American bus market, the introduction of
the medium duty bus, the all-electric propulsion design, further acquisitions, etc. than just
quarterly results, which are highly volatile. We understand the reasons for the Q1/14 earnings
impacts and expect they are well understood by the market, leading us to believe any share
price disruption surrounding reporting expected mid-May should be minor.
We maintain our Outperform rating and we are increasing our 12-month target price to
C$13.25 from C$13.00 stemming from our expectation for an improved net debt position due
to a more optimistic forecast for working capital improvements. Our target price is based on a
blend of a 14.0x earnings and 7.0x EBITDA multiple of our 2015 earnings, reflecting our 12month forward valuation period as well as an exchange rate of C$1.10 per $US.
127

Ticker
TSX: ARF
TSX: VIC
TSX: WJX
TSX: AFN
TSX: SPB
GBX
OSK
SPAR
WNC
THO
WGO
NAV
TSX: STB
CUB
Average
Com pany
Vicw est Inc
Wajax Corporation
Superior Plus Corp.
Oshkosh Corporation
Spartan Motors Inc.
Cubic Corporation
Last
Quarter
12/31/2013
9/30/2013
12/31/2013
12/31/2013
12/31/2013
11/30/2013
12/31/2013
12/31/2013
12/31/2013
1/31/2014
11/30/2013
1/31/2014
12/31/2013
9/30/2013
Price
3/21/2014
$1.58
$10.81
$37.28
$47.99
$11.83
$45.87
$58.22
$5.36
$14.50
$60.57
$27.64
$33.24
$6.90
$51.61
Shares
Out. (M)
24.1
17.6
16.7
13.1
126.2
28.0
84.1
34.2
68.6
53.3
27.7
81.3
82.1
26.8
TSX: NFI
12/29/2013
$11.39
55.5
Market
Enterprise
38
344
190
284
624
829
627
736
1,493
2,516
1,283
1,648
4,898
5,278
183
158
994
1,251
3,229
3,024
766
716
2,702
6,500
567
857
1,382
1,277
632
781
Price / EPS
18.4x
19.0x
13.0x
15.6x
13.9x
17.2x
15.6x
52.6x
15.7x
17.4x
17.4x
NM
NM
18.4x
19.7x
FY+2
15.7x
12.4x
11.3x
14.0x
11.9x
14.6x
13.0x
20.0x
12.9x
14.6x
15.2x
18.1x
NM
15.7x
14.6x
EV/EBITDA
FY+1 FY+2
8.7x 6.8x
14.1x 7.1x
8.3x 7.6x
9.2x 8.7x
8.8x 8.1x
7.4x 6.7x
8.0x 7.1x
10.1x 6.0x
7.2x 6.6x
10.3x 8.7x
10.4x 8.4x
21.1x 7.7x
9.5x 9.1x
10.1x 9.0x
10.2x 7.7x
16.7x
16.8x
12.0x
8.0x
NTM
NM
15.9x
13.0x
15.6x
13.9x
16.0x
15.2x
52.6x
15.7x
15.7x
16.8x
NM
FY+1
NM
6.6x

Margin
EBITDA
Capital
Yield
8.8%
0.0%
7.6x
6.2%
4.5%
5.6%
5.0x
4.8%
5.9%
6.4%
2.4x
10.6%
16.6%
5.2%
1.8x
8.3%
6.9%
5.0%
4.0x
6.2%
8.6%
0.0%
2.1x
7.8%
8.8%
1.1%
0.6x
11.7%
1.3%
1.9%
nmf
(1.0%)
8.7%
0.0%
1.8x
9.4%
7.8%
3.2%
nmf
17.1%
6.6%
0.0%
nmf
19.3%
-5.2%
0.0%
nmf
(46.3%)
14.4%
8.0%
4.2x
2.6%
8.8%
0.5%
nmf
7.9%
7.3%
2.6%
3.3x
4.6%
7.9%
5.1%
2.4x
5.1%
Total Debt
to Capital
107.5%
60.6%
45.8%
52.5%
65.9%
48.0%
31.2%
3.0%
53.5%
0.0%
0.0%
343.6%
52.8%
12.7%
62.7%
34.4%
128

NFI
$11.39
Rating:
Outperform
12 Month Target: $13.25
Does the analyst, a member of the analyst's household, associate or employee w ho prepared this research
report hold or are short on any of the issuer's securities directly or through derivatives?
If answ er to #2 is yes, state name and the nature of the interest:
Does AltaCorp Capital and it affiliates collectively beneficially ow n more than 1% of any class of common equity
of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest w ith the issuer? If yes,
explain:
officer or advisory capacity of the issuer? (if applicable, list name)
Did the analyst and/or associate w ho prepared this research report receive compensation based solely upon
10
issuer?
11
Has any director, officer or employee w ho prepared this research report received any compensation from the
12
Has AltaCorp Capital provided the issuer or its predecessor w ith non-investment banking securities-related
13
Has AltaCorp Capital managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
14
Has AltaCorp Capital received compensation for investment banking and related services from the issuer or its
Issuer
N
Rating System
Secto r P erfo rm
% IB
C lie nt s
69%
18%
25%
0%
Underperfo rm
1%
0%
Speculative
3%
1%
Restricted
0%
0%
Tender
1%
0%
100%
19%
To tal
$14 .00
An O utpe rform (Buy) rating represents a security

expected to provide a return greater than the peer
group average.
$10 .00
$12 .00
$8.00
A S e c tor P e rform (Hold) rating represents a

security expected to provide a return in line with the
peer group average.
$6.00
An Unde rpe rform (S e ll) rating represents a security

$2.00
14-Mar-24,
$13.25 (OP)
IC: 14-Jan-7,
$13.00 (OP)
$4.00
$0.00
A S pe c ula tive rating represents a security where the

material.
Aug 11
Sep 11
Oct 11
Nov 11
Dec 11
Jan 12
Feb 12
Mar 12
Apr 12
May 12
Jun 12
Jul 12
Aug 12
Sep 12
Oct 12
Nov 12
Dec 12
Jan 13
Feb 13
Mar 13
Apr 13
May 13
Jun 13
Jul 13
Aug 13
Sep 13
Oct 13
Nov 13
Dec 13
Jan 14
Feb 14
Outperfo rm
R a nk ing
D is t ribut io n
AltaCorps rating system reflects our outlook for

expected performance of an issuers equity securities
relative to its peer group over the next 12 months.
The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase
of securities. While the accuracy or completeness of the information contained in this document cannot be guaranteed by AltaCorp Capital
Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or its officers, directors and employees may from time to
time acquire, hold or sell positions in the securities mentioned herein as principal or agent.
The author of this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about the subject
security and issuer.
Tel: 403 539 8600
Suite 4400, 44th Floor

66 Wellington Street West
Tel: 647 776 8230
The author of this report further certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this research report.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under research coverage
within the next three months.
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets Act 2000 as
it is being distributed only to persons who are investment professionals within the meaning of article 19 of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied upon, by any other person.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts responsibility for
the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report, must contact AltaCorp Capital (USA) Inc.
at 403- 539- 8600.
129
George FJ Gosbee
Chairman & CEO
403 539 8601
Direct
_________________________________________________________________________

E&P- Domestic
403 539 8606

403 539 8621
403 539 8581
403 539 8617
403 539 8587
403 539 8615
dlever
drawson
cerana
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kvandenberg
porourke
Oilfield Services
Brodie Woods, Associate
403 539 8620

403 539 8594
403 539 8596
403 539 8591
dbenner
bwoods
jsawatzky
mwestby
President & CEO

780 408 7181
dmowat@atb.com
647 776 8246

647 776 8245
cmurray
gulybyshev
Ian Wild
Agriculture
647 776 8236

647 776 8254
jchu
spattillo

President
647 776 8250
ATB Financial
Dave Mowat

403 974 5127
iwild@atb.com
All Sectors
403 539 8607
vhoa
_________________________________________________________________________
Institutional Sales
Calgary
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403 539 8608
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_________________________________________________________________________
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403 539 8613
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647 776 8244
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jvarley
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647 776 8231
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________________________________________________________________________
Investment Banking
CALGARY
403 539 8600 Main
403 539 8575 Fax
TORONTO
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403 539 8601
ggosbee

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403 539 8618
ggill
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403 539 8597
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647 776 8240
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403 539 8628
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403 539 8604
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________________________________________________________________________

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403 539 8622

403 539 8593
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kwylie
130
COMPANY UPDATE
NFI | TSX
$11.14
Rating: Outperform
Total Return: 21.9%
February 18, 2014
Notes from Toronto

C$11.85 / C$9.54
5.3%
Cash Yield:
55.5 (basic)
55.5 (fd)
C$617.9

Float ($mm)
37.7
53.2
$201.5

$764.8
(FYE Dec 31)
2012A
Revenue ($mm)
$872.9 $1,178.4 $1,359.4
2013E
2014E
EBITDA ($mm)
$61.4
$86.0
$97.1
FD EPS
$0.31
$0.53
$0.62
EBITDA ($m m )
Q1
2012
$15.9
Q2
Q3
Q4
$16.4
$13.9
$15.2
2013
$15.4
$18.1
$24.4
$28.2E
2014
$23.5E
$23.6E
$24.0E
$26.0E
Adjusted FD EPS
2012
Q1
$0.09
Q2
Q3
Q4
$0.09
$0.06
$0.08
2013
$0.08
$0.09
$0.15
$0.20E
2014
$0.14E
$0.15E
$0.15E
$0.18E
$15

Volume ('000)
1000
Last Sale Price
800
$10
$5
600

Managing Director
647.776.8246

647.776.8245
2014 earnings will be impacted by competitive pressures stemming from

two contracts: One of the key issues investors were trying to expand on was the
companys warning when reporting Q3/13 results that bus manufacturing EBITDA per
equivalent unit (EU) in 2014 would be at or below the same level of that of 2013, which
came as a surprise to many given the emerging trend in margin improvement. The issue
is related to a few orders the company won during a period of intense competition that
are scheduled to enter production in 2014, one at NABI and one at NFI.
Feeling very positive about the current production profile: Management
indicated that roughly 80% of 2014 slots are sold out (2,000 of 2,400 EU) with the first
available slot available in about 22 weeks. This compares to the same point in 2013
where only about 1/3 of full year slots were filled. Expectations are that option exercises
should fill the remaining slots in 2014 plus there are a number of large orders currently
being bid that may need small early builds.
What to do with the cash? Expectations are for continued improvement in leverage
levels with continued earnings and more normalized capital spending plans in 2014.
Senior leverage, which excludes the convertible debentures stood at 1.7x at Q3/13 and is
expected to improve. The process of what to do with excess cash flow, either dividend
increases, share buybacks or further tuck-in acquisitions are still being debated
internally. Management indicated that they had a very high level of confidence in being
able to support the current dividend.
400
200
$0
Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13
Two days of strong meetings: We had the opportunity to market with New Flyers
management team in Toronto last week. Overall, managements tone was positive
regarding the current state of the industry, the opportunities for New Flyer and their
outlook for the coming years.
Integrating NABI will be a function of how best to manage brand, market

penetration and product alignment: Management believe the most important
discussion around how to properly integrate and position NABI centres around a number
of difficult and at times conflicting choices around how best to present NABI and NFI in
terms of the types of products offered, brand and alignment on product as each
organization has certain strengths in the eyes of customers.
Valuation & Recommendation Maintain Outperform and $13.00 Target:
We maintain our Outperform rating and our 12-month price target of C$13.00. Our
target price is based on a blend of a 14.0x earnings and 7.0x EBITDA multiple of our
2015 earnings, reflecting our 12-month forward valuation period as well as our
expectation for a C$/US$ exchange rate of C$1.08 per US$ over 2014.
131
Management Meetings Highlights

We had the opportunity to market with New Flyers management team in Toronto last week
including the companys President and CEO, Paul Soubry and the companys CFO, Glenn
Asham. Overall, managements tone was positive regarding the current state of the industry,
the opportunities for New Flyer and their outlook for the coming years. Key highlights
include:
2014 earnings will be impacted by competitive pressures stemming from two

contracts: One of the key issues investors were trying to expand on was the companys
warning when reporting Q3/13 results that bus manufacturing EBITDA per equivalent
unit (EU) in 2014 would be at or below the same level of that of 2013, which came as a
surprise to many given the emerging trend in margin improvement. The issue is related to
a few orders the company won during a period of intense competition that are scheduled
to enter production in 2014, one at NABI and one at NFI. The irony however is that the
competitive dynamic creating the pricing issues were caused by NFI and NABI prior to
NABIs acquisition. We do have increased confidence in our annual estimates post the
discussions, although we caution there is likely to be substantial quarterly variances given
the mix of production in each quarter, which is impossible to forecast. Management
declined to provide further granularity on quarter to quarter expectations that could cause
some temporary share price movements around reporting.
FX is not a major concern: With the sudden shift in the C$/US$ exchange rate there
were a number of questions regarding the impact. Management indicated they have
fairly close to a natural hedge with costs and revenues matched about evenly. As this
juncture, they expect a very small net currency surplus although it remains uncertain in
which currency the surplus could be in. The largest risk remains Canadian contracts with
US$ content that have already been won, however this remains at a historically low level
of approximately 5% of backlog currently.
Feeling very positive about the current production profile: Management indicated
that roughly 80% of 2014 slots are sold out (2,000 of 2,400 EU) with the first available
slot available in about 22 weeks. This compares to the same point in 2013 where only
about 1/3 of full year slots were filled. Expectations are that option exercises should fill
the remaining slots in 2014 plus there are a number of large orders currently being bid
that may need small early builds. Management remains highly cautious regarding any
increase in build rate until they believe a higher line rate is sustainable. To their mind,
they want to see three to four quarters fully booked sequentially prior to moving line
rates. We believe booking rates should continue to remain very robust with a number of
larger tenders recently being let. Management indicated that line rate adjustments would
be slowly increased with about a three to six month lead-time needed to allow for an
orderly increase in the supply chain. Management expects line entry rates could increase
to a build rate of 3,000 to 3,200 EU annually from their current 2,400 EU per annum run
rate within existing facilities through various shift strategies, a process that was described
as being very constructive for margins.
What to do with the cash? Expectations are for continued improvement in leverage
levels with continued earnings and more normalized capital spending plans in 2014. As
well, the company used the balance sheet to support orders in 2013 allowing improved
terms to customers using working capital, which is expected to reverse early in 2014.
Senior leverage, which excludes the convertible debentures stood at 1.7x at Q3/13 and is
expected to improve. Management indicated they believed the appropriate level of
leverage is 2.5x to 2.75x senior debt. The process of what to do with excess cash flow,
132
either dividend increases, share buybacks or further tuck-in acquisitions are still being
debated internally. Management indicated that they had a very high level of confidence in
being able to support the current dividend. The convertible debentures have a call
available in 2015 although management acknowledged they havent considered any
redemption as yet. We were pleased to hear that the company has implemented return on
invested capital metrics in its capital planning and management compensation plans
moving away from metrics such as payout ratios and EBITDA margins solely, as we
believe this should be more constructive for shareholders in the long-term.
Midi Bus gets ready to roll: The medium duty or midi bus developed as part of a joint
venture with the UKs Alexander Dennis has started production at the companys St.
Cloud facility. The midi bus is expected to be sold to smaller transit agencies as well as
private operators like airport shuttle and universities with a potential market of
approximately 1,000 units per year. Carrying a list price of $280k to $300k and a design
life of 10 years, the Midi provides NFI a product line just below its existing heavy-duty
bus offering. First deliveries of the Midi bus are expected in Q2/14 with management
anticipating sales of 63 to 70 units in 2014. The company intends to sell to private
operators through a dealer network, with an announcement expected soon for the first two
dealers selected. The company has received a small number of orders to date that will be
shown as part of backlog in 2014. Overall, we believe the midi bus may provide some
incremental revenue although little margin impact in 2014 given the early stage
production and learning curve costs. As well, the accounting treatment of the joint
venture is still being considered which could see reporting using proportional
consolidation or as an equity pickup. Management indicated they invested approximately
$5mm to develop the program.
The all-electric bus could present some very interesting blue-sky upside: We were
pleasantly surprised to learn more about the companys foray into the development of an
all-electric propulsion system they have branded eBus. The testing has been ongoing with
further refinement of the prototypes with pilot testing now complete. The company is
expected to have a program running the eBus platform bus in service on a dedicated route
in Winnipeg in Q1/14, two additional buses in Chicago in Q2/14 and four additional
eBuses in service with Winnipeg Transit in Q3/14. The interesting point from an
investment perspective is that the development of the eBus architecture offers not only
the potential for the sale of buses in the future, a segment where only a limited on number
of players participate (BYD, Proterra) but also in the expansion to the entire charging
infrastructure, which the company is exploring including the feasibility of offering a
complete turnkey solution. New Flyers current development is focussed around a
conductive charging system, which makes an hour of operation feasible with
approximately six minutes of charging, making this an ideal operation for bus operation
as charging stations can be set along a known bus route with dwell times allowing
passengers to embark and disembark at key route transfer points. The largest hurdle to the
economics of the shift remains the maturity of battery technologies. Despite having a
number of partners in the development of the prototype propulsion system, management
indicated they retain ownership of the intellectual property around the design. The
expectation is that an all-electric design will likely represent the majority of buses
ordered by 2020.
Integrating NABI will be a function of how best to manage brand, market

penetration and product alignment: Management believe the most important
discussion around how to properly integrate and position NABI centres around a number
of difficult and at times conflicting choices around how best to present NABI and NFI in
terms of the types of products offered, brand and alignment on product as each
organization has certain strengths in the eyes of customers. While the sales functions
133
have been aligned and management is actively working on identifying best practices,
including sourcing and manufacturing between the operating groups, they believe the
understanding of how best to present a value proposition to a diverse customer base will
be key for the long-term success of the manufacturing business. Management indicated
that a significant amount of work is currently being undertaken to better understand how
best to optimise the relative strengths of each organisation although they declined to
provide any hard timeline for completion. One interesting chart they did present was the
top 25 fleets in North America showing the relative penetration of each of NABI and
NFI, which shows how the combination of the two segments has expanded the reach of
the organization as a whole.
New Flyer / NABI Fleet Penetration in Largest 25 North American Fleets
6000 26%
Other Manufacturers
New Flyer Fleet
NABI Fleet
5000
4000
87%
70%
51%
13%
0%
2000
71%
59%
45%
9%
64%
65%
86%
5%
57%
1000
91%
22%
44% 19%
94%
Dallas
3%
Miami
50%
Minneapolis
29%
Edmonton
3000
67% 43%
Las Vegas
Orange County
Portland
Calgary
Victoria
Ottawa
Phoenix
Houston
Boston
Denver
Chicago
Washington
Montreal
Vancouver
PACE - Chicago
Philadelphia
Seattle
Toronto
Newark
Los Angeles
New York City
Figure 1. New Flyer / NABI Fleet Penetration in Largest 25 North American Fleets
Integration of the aftermarket business: The integration of the aftermarkets business

continues to make slow progress with Orion being integrated in Q3/13 with a parts
crossover to New Flyer part numbers complete and the parts physically relocated to the
companys parts distribution centers. The integration of the NABI parts business is more
complicated as NFI and NABI are operating on different software platforms. The
company is undertaking a two-step process to optimise the aftermarket business where it
is upgrading the Oracle based ERP system shared with the manufacturing operation, to a
version more oriented to operation of a services and fulfillment business model. Once this
is completed, the expectation is to migrate the NABI service operation to the new
platform and fully integrate the NABI aftermarket business. This integration is expected
to reduce a number of complexities and allow for greater synergies in the business.
Current expectations are for the completion of the project by early 2015. In the interim
NFI is proceeding to reduce duplication where possible including combining the NFI and
NABI service centres in California in Q1/14 as well as looking to other sourcing
opportunities.
Marcopolo remains a cordial and helpful partner: Management was asked

several times about any intent regarding Marcopolos investment in New Flyer where the
134
answer was that they really were not sure what, if any long-term plan Marcopolo has with
its minority investment. They noted that to date, Marcopolo has not appointed a director
to sit on the companys board, although they retain the right to do so. They did indicate
that the relationship with Marcopolo has been extremely cordial with significant technical
capability that has been made available to NFI whenever needed. The company continues
to investigate where they can leverage the Marcopolo product portfolio in North
America, although the chief constraint is the majority of Marcopolos designs use a body
on chassis approach, while New Flyers approach is to construct a full structure. In
addition, management believed there may be some opportunity to transfer some of their
technology around propulsion systems, particularly with CNG and electrification to
Marcopolo as they currently do not have this competency in-house. Sourcing has not
been as successful as initially thought as NFI is still required to meet domestic content
rules in the US and Canada, however they continue to review where they can utilize
technologies and vendors.
We believe the tone and outlook from management was very constructive in our meetings
with the key takeaway that management is dealing with more opportunities than they had in
an improving market and expectations for continued improvement in earnings post the
completion of the two contracts set to impact 2014. We believe as they execute on these
opportunities, that share prices should continue their upward trend. We maintain our
Outperform rating and our 12-month price target of C$13.00. Our target price is based on a
blend of a 14.0x earnings and 7.0x EBITDA multiple of our 2015 earnings, reflecting our 12month forward valuation period as well as our expectation for a C$/US$ exchange rate of
C$1.08 per US$ over 2014.
135

NFI
$11.14
Rating:
Outperform
If answer to #2 is yes, state name and the nature of the interest:
Does AltaCorp Capital and it affiliates collectively beneficially own more than 1% of any class of common equity
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Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, explain:
10
issuer?
11
Has any director, officer or employee who prepared this research report received any compensation from the
12
Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
13
past 12 months?
14
Issuer
N
Rating System
Outperform
Ranking
Distribution
67%
% IB Clients
21%
Sector Perform
29%
0%
Underperform
0%
0%
Speculative
4%
2%
Restricted
0%
0%
Tender
0%
0%
100%
23%
Total

group average.
average.
return potential is high, but the risk of a significant loss
is material.

$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Aug 11
Sep 11
Oct 11
Nov 11
Dec 11
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Feb 12
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Jan 14

The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or
purchase of securities. While the accuracy or completeness of the information contained in this document cannot be guaranteed by
AltaCorp Capital Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or its officers, directors and
employees may from time to time acquire, hold or sell positions in the securities mentioned herein as principal or agent.
Tel: 403 539 8600

Tel: 647 776 8230
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets Act 2000
as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied upon, by any other person.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under research
coverage within the next three months.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts responsibility
for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report, must contact AltaCorp Capital (USA)
Inc. at 403-539-8600.
136
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
Direct
_________________________________________________________________________

E&P- Domestic
Joseph Lee, P. Eng., Associate
403 539 8606

403 539 8598
403 539 8621
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403 539 8615
dlever
jblee
drawson
cerana
jmccrea
kvandenberg
porourke
Oilfield Services
403 539 8620

403 539 8594
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jsawatzky
mwestby
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647 776 8245
cmurray
gulybyshev
Agriculture
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All Sectors
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403 539 8607
jfong
_________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
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khilton
Toronto
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jriff
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_________________________________________________________________________
Calgary
Tate Pinder
403 539 8613
tpinder
Toronto
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________________________________________________________________________
Investment Banking
CALGARY
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________________________________________________________________________

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137
NFI | TSX
$10.51
Rating: Outperform
Total Return: 29.3%
Yield: 5.6%
January 7, 2014
(Priced as of January 6, 2014)
Jump on This Bus Maker to Ride a Cyclical Upturn

Investment Highlights
New Flyer Industries Inc. is the largest
designer and manufacturer of heavy-duty
transit buses in North America. Over the past
three years, the company has undertaken a
number of strategic initiatives with the end
result seeing New Flyer having the dominant
market share in both the bus manufacturing
(42%) and aftermarket segments (34%).
We forecast strong revenue and earnings
growth in 2014 and 2015 driven by y/y
acquisition growth as well as expectations for
higher production rates into 2015. Adjusted
EBITDA and FD EPS also grows as a
function of higher revenues, an improving
backlog quality and synergies generated from
the acquisitions and the Marcopolo
cooperation agreement.
We believe a robust order pipeline,
improving fundamentals, the presence of a
strategic investor and strong growth
opportunities should result in further share
price appreciation, all while offering a
sustainable 5.6% cash yield.

C$11.85 / C$8.50
5.6%
Cash Yield:
55.5 (basic)
55.5 (fd)
C$583.0

Float ($mm)
37.7
57.5
$201.5

$748.4
(FYE Dec 31)
2012A
Revenue ($mm)
$872.9 $1,152.5 $1,359.7
2013E
2014E
EBITDA ($mm)
$61.4
$84.3
$97.2
FD EPS
$0.31
$0.51
$0.62
Q2
Q3
Q4
$16.4
$13.9
$15.2
EBITDA ($m m )
Q1
2012
$15.9
2013
$15.4
$18.1
$24.4
$26.5E
2014
$23.5E
$23.7E
$24.1E
$26.0E
Adjusted FD EPS
2012
Q1
$0.09
Q2
Q3
Q4
$0.09
$0.06
$0.08
2013
$0.08
$0.09
$0.15
$0.18E
2014
$0.14E
$0.15E
$0.15E
$0.18E
$15

Volume ('000)
1000
Last Sale Price
800
$10
Chris Murray, P.Eng., CFA

Managing Director
(647) 776-8246
George Ulybyshev
Associate
With a 29.3% return to target including

dividends, we initiate coverage of New
Flyer Industries with an Outperform
rating. Our target price is based on a blend
of a 14.0x earnings and 7.0x EBITDA
multiple of our 2015 earnings, as well as our
expectation for a C$/US$ exchange rate of
US$1.08 per C$.
$5
600
400
200
$0
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13
(647) 776-8245
138

Current Valuations
Unit Price (C$)
$10.51
EV/EBITDA
2013
2014
Price/Earnings
2013
2014
Peer Average
10.9x
8.8x
7.8x
7.6x
Peer Average
22.0x
19.5x
13.8x
15.9x
2013E
2014E
2013E
2014E
Income Statement
Revenues
Bus Manufacturing
Aftermarket
Revenue
Margin
Adjusted EBITDA
Margin
Amortization
Operating Earnings
EBT
Taxes
Net Income
Reported FD EPS
Adjusted FD EPS
Growth
Revenue
Adjusted EBITDA
Adjusted FD EPS
Leverage
Net Debt (EOP)
2012
2012

5,523
24,003
29,526
(2,418)
(10,972)
2,825
(1,318)
2,150
Free Cash Flow
19,793
753,865 941,110 1,092,632 1,212,470

119,050 211,426 267,049 273,912
872,915 1,152,536 1,359,681 1,486,382
13.6%
18.3%
19.6%
18.4%
41,248
53,439
57,341
75,768
5.5%
5.7%
5.2%
6.2%
19,517
30,910
39,893
41,896
16.4%
14.6%
14.9%
15.3%
58,567
74,323
97,234 117,664
6.7%
6.4%
7.2%
61,392
84,349
97,234 117,664
per Share
7.0%
7.3%
7.2%
7.9%
FCF Yield
24,326
28,541
31,191
31,175
34,241
45,782
66,042
86,489
10,763
31,161
54,449
19,777
$0.45
4.2%
(44.1%)
2015E
50,575 88,102 94,091

(9,320) (17,600) (9,420)
41,255 70,502 84,671
(1,937) (1,213)
(568)
(8,556) (11,210) (11,632)
9,828
689
41,279 58,079 72,353
42,775
$0.83
7.9%
85.6%
62,368
$1.12
10.7%
35.9%
78,142
$1.41
13.4%
25.3%
2012
2013E
2014E
2015E
8,369
22,792
20,146
34,303

33,081
167.3%
30,255
70.7%
32,448
52.0%
32,448
41.5%
$0.44
$0.51
$0.62
$0.62
$0.86
$0.86
$0.745
7.1%
$0.585 $0.585
5.6%
5.6%
$0.585
5.6%
2012
2013E
2014E
2012
2013E
2014E
2015E
(5.8%)
(23.3%)
(33.1%)
32.0%
37.4%
61.4%
18.0%
15.3%
22.2%

1,656
455.2
24.9
2,134
441.0
25.0
2,429
449.8
23.6
2,682
452.1
28.3
1,005
9,758
$0.22
$0.31
2012
2013E
2014E
211,784
3.4x
38.1%
193,385
2.3x
30.1%
146,715
1.5x
24.4%

Cash Yield
16.7%

$5.0
2012
2013E
2014E
2015E
1.0006
1.0079
0.9734
0.9524
0.9314
0.9346
0.9259
0.9259

Firm
2014, 23%
Option
$4.0
2013, 25%
$3.0
2015, 12%
$2.0
2016, 3%
$1.0
2017, 9%
$0.0
Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314
2018, 28%

139
Table of Contents
Investment Summary.................................................................................................... 4
Company Summary ...................................................................................................... 5
Industry Overview ....................................................................................................... 15
Financial Overview ..................................................................................................... 20
Outlook and Valuation ................................................................................................ 24
Risks ........................................................................................................................... 29
140
Investment Summary
New Flyer Industries Inc. is the largest designer and manufacturer of heavy-duty transit buses
in North America, providing finished buses and aftermarket support. Over the past three
years, the company has undertaken a number of strategic initiatives, including a change in
corporate structure, receipt of a strategic investment by the worlds second largest bus
manufacturer and completion of two significant acquisitions with the end result seeing New
Flyer having the dominant market share in both the bus manufacturing (42%) and aftermarket
segments (34%) with a shift by management to a more growth oriented focus from an income
orientation in managing the business.
The supply of buses to the North American market is highly cyclical resulting in significant
y/y shifts in deliveries and orders, with the most recent cycle following the same pattern.
Coupled with pressures on state and local funding, critical for new capital purchases as well
as ongoing uncertainty in the state of US federal funding, orders were substantially lower than
typical between 2010 and 2012. This lack of orders, due to funding pressures did not reflect
underlying demand however, as buses continued to age. At the end of Q3/13, the companys
bid pipeline, reflective of total industry demand stood at a record 19,941 EU. We base our
expectations for near term sales growth on the depth of the backlog, which has seen a unit
book to bill ratio of 1.31x in 2013 and 1.12x in 2012 indicative of an improving order book.
With a 40%+ market share and strong customer loyalty, we expect New Flyer will be
capturing a substantial portion of available orders, which should be in a more orderly market.
Production should continue to expand on a y/y basis supported by the NABI acquisition,
which increases unit production on weekly basis by approximately 33%.
In addition to a positive outlook for the bus manufacturing business, we anticipate strong
growth in the aftermarket segment, which is a strong earnings driver with EBITDA margins
almost twice manufacturing margins. The acquisition of the Orion and NABI aftermarket
businesses in 2013 as well as recent major contract wins should see aftermarket revenue
growth of approximately 26.3% and 2.6% in 2014 and 2015.
We forecast revenue growth of 18.0% in 2014 and 9.3% in 2015 to $1.36bn and $1.49bn
driven by y/y acquisition growth as well as expectations for higher production rates into 2015.
We expect adjusted EBITDA and FD EPS also grows as a function of higher revenues, an
improving backlog quality and synergies generated from the acquisitions and the Marcopolo
cooperation agreement. We estimate adjusted EBITDA to increase to $97.2mm and
$117.7mm in 2014 and 2015 from $84.3mm in 2013 while adjusted FD EPS increases to
$0.62 in 2014 and $0.86 in 2015, a 30.2% CAGR from 2013 levels. We expect dividends to
remain flat at $0.585 per year although expect payout ratios to gradually decline with the
improvement in earnings.
We believe a robust order pipeline, improving fundamentals, the presence of a strategic
investor and strong growth opportunities should result in further share price appreciation, all
while offering a sustainable 5.6% cash yield. As such, we are initiating coverage of New
Flyer Industries Inc. with an Outperform rating and a 12-month target price of C$13.00. Our
target price is based on a blend of a 14.0x earnings and 7.0x EBITDA multiple of our 2015
earnings, reflecting our 12-month forward valuation period as well as our expectation for a
C$/US$ exchange rate of US$1.08 per C$ over 2014.
141
Company Summary
New Flyer Industries Inc. (NFI-T; $10.51) is the largest designer and manufacturer of heavyduty transit buses in North America, providing finished buses and aftermarket support to
American and Canadian public transit authorities. The company was founded in 1930 in
Winnipeg, Manitoba, where it initially focused on building motor coaches and school buses.
The company has manufacturing, warehousing and service facilities located throughout North
America to support end-users and allow compliance with local content requirements.
New Flyer Manufacturing, Warehousing and Aftermarket Service Facilities
Figure 1. New Flyer Manufacturing, Warehousing and Aftermarket Service Facilities

Source: Company reports
New Flyer completed an initial public offering in 2005 issuing an income deposit security
(IDS), which utilized a hybrid debt and equity stapled structure in order to facilitate the exit of
previous U.S. based private equity investors. Although the income trust model was popular at
the time, U.S. tax laws made that structure a poor choice for U.S. investors. The IDS structure
created significant financial pressure for the majority of companies that utilized it, including
New Flyer. In order to mitigate pressures on the companys balance sheet and allow a
transition to a more growth oriented strategy, the company completed a coercive rights
offering transaction in September 2011. The conversion to a more conventional structure with
142
a single class of common shares also saw the retraction of the high-yield debt associated with
the IDS structure and a significant reduction in debt outstanding and cash drains. Concurrent
with the rights offering, the company converted the blend of interest payments and dividends
being made to unit holders to a pure dividend, paying $0.585 per annum, recognizing the
yield orientation of the companys shareholder base where it remains today. In 2012, the
company issued a new set of debentures and terminated all remaining IDS units.
With the conversion of the company to a more conventional structure, management had the
intent to diversify away from the single category, single geography focus the company had
traditionally held. Management believed being locked into just one niche segment in only
North America would be detrimental in the long-term for all stakeholders. To that end, the
company has focused on diversifying the business, particularly in expanding the aftermarket
business which is more stable and carries higher margins offering a wider range of parts and
services as well as considering further vertical, geographical and product diversification
within the manufacturing business.
In January 2013, Marcopolo S.A. (POMO3-BR) made a friendly, strategic investment in the
company acquiring 11.1mm treasury shares of New Flyer, representing a 19.99% stake posttransaction at C$10.50 per share for a total investment of C$116.4mm. Marcopolo is one of
the worlds largest bus manufactures, producing more than 32,000 buses annually as well as a
variety of components from factories around the world. At the time of the investment,
Marcopolo had no exposure to the North American market. Concurrent with the investment
agreement, management also signed a memorandum of understanding (MOU) to cooperate on
a number of technical, sourcing and operational areas, which are expected to offer margin and
product improvements for both companies. Marcopolo has a history of taking smaller
ownership stakes in companies in order to become more familiar with the market and in
certain cases eventually has acquired control. We believe the strategic nature of the
investment and in light of Marcopolos previous transactions implies a higher probability that
the company may eventually be acquired.
The funds received from Marcopolo allowed management to accelerate its growth plans as
funds had few restrictions on their use. Since the investment, the company has made a number
of acquisitions including the manufacturing and aftermarket operations of North American
Bus Industries (NABI) in June 2013 and the aftermarket operations of Orion in 2013 after its
parent company, Daimler Bus North America shut down its manufacturing business in 2012.
With the acquisitions now in place, the company estimates it has approximately a 42% market
share of the heavy-duty transit market and 34% of an approximately $750mm market for
aftermarket parts and services.
143
Pro Forma Transit Bus and Parts Shares
Figure 2. Pro Forma Transit Bus and Parts Shares

Bus Manufacturing
Bus manufacturing operations form the core of the companys operation, representing 83.0%
of trailing revenues and 64.4% of trailing adjusted EBITDA. Transit bus manufacturing for
New Flyer takes place in three main manufacturing facilities with bus shells and frames
manufactured in either the Winnipeg or St. Cloud facility before being moved to assembly
areas within those facilities or being transported to Crookston or St. Cloud from Winnipeg or
from St. Cloud to Crookston. In addition, the recent acquisition of NABI adds a fully
integrated manufacturing facility in Anniston, Alabama. Current production remains split
along historic NFI and NABI operations, although the company is reviewing all operations to
identify best practices and develop synergies since NABIs acquisition. We believe the
company will continue to operate these facilities independently. New Flyer also operates a
smaller components operation in Elkhart, Indiana which was acquired in 2010 which produces
a variety of interior, lighting and other miscellaneous bus parts used in new vehicle
production and sold via the aftermarket business. The companys facility footprint is skewed
to the US, reflecting production demands. At Q3/13, orders for Canadian transit authorities by
value represented only 5% of total backlog, a level typical of previous quarters.
The various manufacturing sites allow sufficient flexibility in order to balance workload and
also to meet legislative or procurement requirements including domestic content rules. The
majority of the cost of a transit bus is related to purchased materials, including engine and
transmission systems resulting in almost 90% of the costs of bus production being variable,
which offers the flexibility to adjust manufacturing rates, either up or down as needed.
144
Bus Manufacturing Cost Breakdown

Labor, 9%
Warranty, 2%
Material, 71%
Other Direct Costs, 5%

Variable Overhead, 3%
Operating Expenses,
4%
Fixed Overhead, 6%
Figure 3. Bus Manufacturing Cost Breakdown

Production in various factories is organized on a weekly basis with a certain number of

equivalent units (EU) planned for entry into production each week. An equivalent unit is a
standardised measure of production in the bus manufacturing industry where a 35 or 40 bus
represents one EU and an articulated 60 bus represents two EU. Generally, production line
entry rates correspond to production line exit and delivery rates although issues with
particular projects, the overall size of the production run, the mix of and issues with final
inspection by customers can result in variances that are absorbed in work in process and
finished goods inventories. Currently management has stated they expect to maintain
production rates similar to the past year with 36 EU/week entered in the NFI plants and an
additional 12 EU/week line entered in the NABI division.
Operational Excellence
One of the specific strategies launched in Q4/08 by the company to improve profitability and
product quality employed a number of lean manufacturing techniques in order to reduce
various costs incurred through the entire bus manufacturing process, including customer
program management, engineering, supply management, manufacturing through delivery and
aftermarket parts and service support. Dubbed Operational Excellence or OPEX, the
company has been able to improve throughput utilizing existing facilities, insource certain
work, reduce overhead and facilities costs, improve quality and reduce the total cycle
production time. In addition, we believe these process improvements serve to prevent a
number of the operational errors that have led to significant cost overruns and production
bottlenecks stemming from design deficiencies and manufacturing errors. Issues like this have
previously impacted the company, with major production interruptions in 2002 and 2009,
which had significant financial impacts.
The effective implementation of lean manufacturing techniques can have significant benefits
to an organization, with many examples showing double-digit improvements in operating
costs derived from a number of factors, including less waste, less capital required, smaller
facilities and the avoidance of errors and rework. A number of these strategies, while
implemented have not as yet seen a positive impact on margins, mainly as a results of the
intense price pressure experienced over the past cycle downturn, although they did allow the
company to survive and prosper. We believe margin expansion in manufacturing is likely
once production volumes increase, given our expectations that the operational improvements
should allow higher build rates with only limited additional overhead required as well as
lower waste and higher efficiencies.
145
Bus Manufacturing Lines
Figure 4. Bus Manufacturing Lines

Production at the companys NFI manufacturing facilities is carried out by unionized labor. In
2006 New Flyer failed to renegotiate a new collective bargaining agreement with the
Canadian Auto Workers (CAW) union at its Winnipeg facility, resulting in a month-long
strike which substantially impacted production and earnings in the period. Labor relations
have significantly improved in recent years, although this remains one of the chief risks to the
company. The NABI operation in Alabama is not unionized.
Long-term Collective Agreements
Number of
Unionized
Employees
Term of Collective Agreements
647
19
April 1, 2012 to March 31, 2015

April 1, 2012 to March 31, 2015
Crookston Communication Workers of America

AFL-CIO, CLC District 7
309
January 1, 2011 to December 31, 2015
St. Cloud
438
April 1, 2013 to March 31, 2017
Location
Union
Winnipeg
CAW Local 3003 (Production Unit)

CAW Local 3003 (Inspection Unit)
Communication Workers of America

Figure 5. Long-term Collective Agreements

A Long History with Customers
The company maintains strong client relationships generating substantial repeat business.
Once a transit authority has selected a supplier, there is a strong tendency to place repeat in
order to standardize fleets, lowering maintenance and operating costs. New Flyer estimates
that approximately 91% of bus manufacturing revenues between 2008 and 2012 were derived
from customers who had previously purchased buses in the preceding five-year time frame.
With the inclusion of NABI, New Flyer has relationships with over 270 transit authorities
146
including all of the top 25 transit agencies except for Montreal, which is highly tied to Nova
Bus based in Quebec and Toronto, which historically was an Orion buyer (based in the
Toronto region), but who recently awarded a long-term contract for articulated buses to Nova
with Orions shutdown.
Top 25 Bus Fleets in North America
4,500
4,426
5,000
4,000
Over 35 ft.
60' Articulating
709
718
725
779
740
817
819
829
878
944
947
1,025
1,030
1,349
1,270
1,507
1,771
1,852
1,856
1,824
1,434
1,099
888
1,000
1,367
1,500
1,863
1,870
2,000
1,882
2,500
Under 35ft.
2,416
3,000
2,370
Buses In Fleet
3,500
500
0
Figure 6. Top 25 Bus Fleets in North America

Source: Metro Magazine, AltaCorp Capital Inc.
One of the advantages the company possesses versus other competitors is the breadth of
transit bus body styles it is able to offer customers, including 30 length standard buses
through 60 articulating designs, leading to further variations for bus rapid transit (BRT)
applications. An articulated bus or arctic is built of two approximately 30 foot sections,
with a mechanical joint that allows the vehicle to swivel while turning.
The company also has the capability to integrate various power plant and transmission
systems and with its track record of previous successful development work remains the
integrator of choice for new systems and drive technologies. We believe these capabilities
support the companys market share growth, especially as we expect hybrid electric and other
clean technologies to come to dominate North American transit fleets over the next several
years. The company currently has an all-electric bus design in testing with the Chicago
Transit Authority. We believe all-electric propulsion is likely to become a higher proportion
of the total deployed fleet over the next decade.
In addition to propulsion systems and sizing, New Flyer has a history of providing
improvements in styling, maintainability and passenger and operator comfort which include a
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number of industry innovations including the sale of the first low-floor buses built in North
America. The company continues to invest in development in these areas with the most recent
product line being the Xcelsior Series, which provides operators with improvements in fuel
efficiency due to lower operating weights, improved on-board electronics and easier
maintainability. All production in 2014 coming from the New Flyer facilities is expected to be
for the Xcelsior design.
The Midi-Bus
In May 2012, New Flyer formed a joint venture with Alexander Dennis Ltd. (ADL) of the UK
to manufacture, distribute, and support midi buses, a category of medium duty, low floor
buses. Under the terms of the joint venture, ADL is responsible for the engineering, test and
prototype development of the new line of buses with New Flyer contributing manufacturing
and sales capability as well as knowledge of the North American market. ADL has supplied
more than 16,000 buses of this design to customers worldwide including in the UK, Hong
Kong, Australia and New Zealand.
New Flyer Midi-Bus
Figure 7. New Flyer Midi-Bus

New Flyer estimates the market for this type of product at approximately 1,000 buses per year
with customers generally being very small public and private transit agencies such as those at
universities, small municipalities, and airport shuttle operators. Similar to the heavy-duty
bus category, there is a medium-duty category available for FTA funding to support
customer purchases. We do not expect this class of buses will cannibalize the existing heavy
duty market given the significantly different operating profile. We expect New Flyer may
capture a portion of this market over time offering an incremental growth opportunity. Initial
builds are expected in the two to three per week range over time with expectations for sales of
approximately 100 to 120 units per year once the market is more fully developed. The Midi
line is being built on a dedicated manufacturing line at the companys St. Cloud facility.
The company received its first purchase orders from a Canadian operator in Q2/13 and
expects to start delivery of new buses early in 2014. Certification testing to allow the midi-bus
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to be eligible for U.S. FTA funding as well as other permitting is expected to be completed
toward the end of 2013. Other competitors in the midi-bus market include Gillig, Allied
Specialty Vehicles, Grande West Transportation (BUS-V) and a number of smaller body-onchassis manufacturers.
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Aftermarket
A key growth area for the company is the Aftermarket segment, which provides replacement
parts for all New Flyer and also for competitor buses as well as specialized services.
Aftermarket represents approximately 17% of trailing revenues, but approximately 36% of
trailing EBITDA reflecting higher margins from this segment. Aftermarket revenues have
been a significant growth area for New Flyer, with revenues growing from approximately
$30.6 million in 2001 to an estimated $175.9mm over the past four quarters. Post the
completion of aftermarket acquisitions, the company estimates it supports an in-service fleet
of almost 42,000 buses in North America.
In addition to parts sales, the aftermarket business is also responsible for providing
maintenance and operating publications and product training as well as product acceptance,
field support, field engineering and service and warranty management. Key to the success of
the aftermarket operation is the ability to offer a wide assortment of parts to transit authorities
on a competitive and timely basis. In addition to OEM parts, New Flyer also offers a house
brand of replacement parts known as Kinetik, which it has designed to be a replacement for
OEM parts, offering customers similar warranties at lower cost and additional sales
opportunity.
New Flyer Primary Aftermarket Service Centers
Figure 8. New Flyer Primary Aftermarket Service Centers

In support of its aftermarket growth strategy, New Flyer opened a new parts distribution
center (PDC) in Kentucky in 2008, a third distribution center opened in Fresno, California, in
2009 and a fourth in Brampton, Ontario in 2011. The goal of the additional facilities is to be
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able to provide customers with the majority of service parts within two business days,
allowing transit authorities to reduce their own inventories and to provide a competitive
advantage to other parts distributors as timeliness of delivery is a key purchasing criteria for
customers. The company also operates service centres in Ottawa and New York City where it
conducts maintenance and upgrades of New Flyer buses on behalf of local transit authorities.
The companys strong top-line growth has been driven by the acquisition of the aftermarket
businesses of Orion and NABI in 2013 as in addition to new products and services introduced
over time. We estimate the addition of Orion added approximately $50mm in revenue, while
the NABI acquisition added approximately $61.0mm in revenue. In addition, New Flyers was
awarded a $75mm refurbishment contract by the Chicago Transit Authority to supply parts,
labour and services. These additions and new contracts have seen 2013 revenues increase
62.1% year to date with growth of 100.6% y/y in Q3/13. These new service offerings
including the refurbishment program as well as other services such as maintenance
monitoring and managed inventory as well as more price-oriented competition have skewed
margins lower over time with aftermarket EBITDA margins stabilising in the 15% range. We
anticipate there are some synergies from the integration of the Orion and NABI aftermarket
businesses available to be captured, however we expect the magnitude to remain modest in
coming years. Nevertheless, the aftermarket offers margins approximately twice those of the
bus manufacturing business and we expect further growth is possible through the introduction
of new services and further market share gains.
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Industry Overview
Historically, New Flyer estimated that it held market shares of delivered buses between the
mid-30 to mid-40% range, with a certain y/y variation. With the acquisition of NABI and the
departure of Orion from the industry, there remain only three major players in the industry
including New Flyer. Other major competitors include the Gillig Corporation, a private
company based in California and Nova Bus, a division of Volvo, which operates
manufacturing plants in Quebec and Plattsburgh, NY. Based on proforma deliveries New
Flyer forecasts it has 42% market share of bus manufacturing and 34% of the aftermarket
business after taking into account the recent acquisitions of Orions aftermarket business and
NABI. While there are other manufacturers in the transit bus market, we believe the strong
customer relationships make entry by other participants in a sizeable way organically
unlikely.
Bus deliveries have historically been cyclical driven by shifts in the replacement cycle among
North American transit authorities. The more pronounced downturn in deliveries in 2011 was
linked to the economic downturn, which impacted particularly local transit authoritys ability
to fund new capital purchases as state and local tax income fell sharply. This type of
cyclicality has typically led to one or more market participants failing during trough periods
as the market rationalized. We expect the limited number of current manufacturers should
lead to reduced competition as we move forward. New Flyer management indicates they
believe industry deliveries for 2013 are anticipated to be similar to 2012 levels at
approximately 5,100 buses.
Historical Industry Deliveries
7,000
6,000 5,347
6,236
6,032 5,933
5,816
5,388
5,009
5,000
5,212
4,723
5,154 5,109 5,100
5,065 5,284
4,333
4,047
4,000
3,000
2,000
1,000
-
1998
2000
2002
Figure 9. Historical Industry Deliveries
2004
2006
2008
2010
2012
Usage Trends & the Accessible Market

The American Public Transportation Association (APTA) publishes data on ridership in the
U.S. Total ridership remains on an upward sloping trend, with U.S. ridership growing to
10.3bn trips in 2011, up 6.9% since 2001.The economic downturn through 2009 and 2010
impacted ridership negatively, which was somewhat expected as approximately 60% of transit
ridership is linked to employment. The trend is similar in Canada, with total transit ridership
increasing to just over 2.03bn riders in 2012, up 32.3% over the past 10 years. We believe
transit demand will continue to increase over the next several years given increasing
population density in urban areas, changes in environmental considerations by riders, and
improving infrastructure.
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U.S. Transit Passenger Trips (bn)

11.0
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
1994
1996
1998
2000
Figure 10. U.S. Transit Passenger Trips (bn)
Source: American Public Transportation Association
2002
2004
2006
2008
2010
Canadian Transit Passenger Trips (bn)

2.2
2.0
1.8
1.6
1.4
1.2
1.0
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Figure 11. Canadian Transit Passenger Trips (bn)

Source: Canadian Urban Transit Association
According to the Canadian Urban Transit Association (CUTA), there were approximately
15,100 active heavy-duty transit buses in Canada in 2012, which New Flyer could have
produced representing a compound annual growth rate of 2.6% since 2002. In the U.S.,
according to FTA National Transit Database there were just over 67,300 heavy duty transit
buses available for service in 2011.
Demographic trends are also supportive of our expectation that demand for new transit buses
will continue at similar levels in the future at the least. Currently more than 80% of
Americans live in metropolitan areas with 65% within the largest 100 metro areas. A 2013
survey on American transit infrastructure by the American Society of Civil Engineers
indicated only 45% of American households have access to public transportation. They
estimate deficient and deteriorating transit systems cost the U.S. economy $90 billion in 2010.
When establishing transit systems, buses are normally the first type of transit mode to be
chosen as they are the most flexible and lowest cost as they require limited specialized
infrastructure or guide ways and are easily and quickly deployable.
Funding Support and Procurement
Capital funding for the purchase of transit buses has typically been provided by a mix of
government jurisdictions in both Canada and the United States. Changes in support levels or
administrative policies or interpretations can have a material impact on New Flyers financial
performance.
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Canada
In Canada, transit authorities are able to obtain funding for capital spending, including the
purchase of new transit buses through a mix of specific funding, i.e. the application by a
transit authority to fund a particular project or from other Federal or Provincial programs.
Historically funding for transit was provided mainly by provincial governments and local
municipalities however over the past decade the Federal government has expanded its support
for capital spending moving from 0% in 2001 to approximately 12% in 2012 excluding debt
service support. Federal funding sources include a number of programs with the most
important of these including the Building Canada Fund, which contained $8.8bn in funding
between 2007 and 2014 for a number of infrastructure investments including transit. The
federal government has indicated it will review further funding post-2014 including making
gas tax related funding permanent. In addition to the Federal government, the majority of
provinces and territories provide direct capital investment for public transit. Unlike the U.S.,
there are no specific replacement guidelines for transit buses although several provinces,
including Ontario have indicated they are considering a number of mechanisms to fund capital
spending including road tolls, new gasoline taxes, and special bond issues for transit.
Capital Funding for Canadian Transit excl. Debt Service Support ($mm)
5,000
Federal
Provincial
Municipal
Other
4,000
3,000
2,000
1,000
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Figure 12. Capital Funding for Canadian Transit excl. Debt Service Support ($mm)
Source: CUTA Summary of Canadian Transit Statistics 2013
The United States

In the U.S., capital funding for transit is primarily provided by the Federal government and
administered by the Federal Transit Authority (FTA) with funding generated mainly from
gasoline taxes. Eligible transit authorities are able to receive 80% of the capital cost to fund
either the purchase of new buses to replace those that are 12 years old or have operated for
500,000 miles or new buses to support fleet growth in areas where demand is higher. To be
eligible for FTA funding for its customers, New Flyer is required to meet certain
requirements, including:
Maintaining compliance with Buy America regulations that require final bus assembly
and manufacture within the U.S. and also require the bus contain at least 60% American
content by cost.
Meet testing requirements to ensure new buses comply with a number of operational and
safety criteria.
Be able to provide financial guarantees to support warranties for buses and in the normal
course of bidding provide guarantees either through surety bonds or letters of credit to
ensure contract performance.
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The surface transport legislation regulates federal funding for public transit in the U.S. and
has historically been revised every five years. The most recent iteration of funding called
MAP-21 took almost three years of extensions of the previous bill, named the Safe,
Accountable, Flexible, Efficient Transportation Act A Legacy for Users (SAFETEA-LU)
before it was finally passed. This bill allocates $10.6bn in 2013 and $10.7bn in 2014 for
transit related funding. We expect that a new transit funding bill will once again require
further extensions before it is passed given previous history. Similar to the delay between
SAFETEA-LU and MAP-21, there was an 18-month delay to approve SAFETEA-LU after
the expiration of the previous funding bill. The most contentious piece of debate surrounding
transit funding revolves around rail transit, leaving us to expect funding for bus transit will
grow at a relatively flat pace, but supportive of the 5,000 to 6,000 units of production each
year.
Capital Funding for U.S. Transit by Year and Authorization Bill ($bn)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1986, STAA of 1982

1987, STURA of 1987
1988, STURA of 1987
1989, STURA of 1987
1990, STURA of 1987
1991, STURA of 1987
1992, ISTEA
1993, ISTEA
1994, ISTEA
1995, ISTEA
1996, ISTEA
1997, ISTEA
1998, TEA 21
1999, TEA 21
2000, TEA 21
2001, TEA 21
2002, TEA 21
2003, TEA 21
2004, SAFETEA-LU
2005, SAFETEA-LU
2006, SAFETEA-LU
2007, SAFETEA-LU
2008, SAFETEA-LU
2009, SAFETEA-LU
2010, SAFETEA-LU
2011, SAFETEA-LU
2012, SAFETEA-LU
2013, MAP 21
2014, MAP 21
Figure 13. Capital Funding for U.S. Transit by Year and Authorization Bill ($bn)
Source: APTA, National Transportation Database
One of the key constraints in the US market was the sharp falloff in state and local taxes,
which created a very high level of pressure on the 20% co-payment required for the
acquisition of new buses, which negatively impacted order intake over between 2009 and
early 2012. Recent quarters have seen a strong recovery in state and local tax revenues driven
improvements in housing prices, consumer consumption and employment. The delay in
procurement however over this period has in our opinion created unusually high pent-up
demand due to delays in the normal replacement cycle for buses. One of the better metrics of
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the demand cycle is the average age of the U.S. fleet of transit buses which has continued to
creep upward to 8.0 years as of 2011, the last reported year, above an expected 6.0 years
based on the 12-year average life cycle. In addition, there was a cycle peak of deliveries
between 1999 and 2001, where normal replacement would have been anticipated between
2011 and 2013, which did not materialize. We believe the industry will experience several
years of catch up as operators look to retire older portions of their fleet. With local transit
authorities responsible for operating costs, we believe there is additional pressure to accelerate
fleet replacement as a cost management exercise as maintenance and fuel costs are two of the
primary gains to be had with new equipment.
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Financial Overview
Ending the Era of the IDS and Rightsizing the Balance Sheet for Growth
Over the past three years, the company has undergone a number of significant changes
including the conversion from the IDS structure to a conventional common share company,
the restructuring of the balance sheet and a change in focus by management from a yield
orientation to a growth orientation. The original IDS structure consisted of a stapled unit
where one common share and C$5.53 face value of 14% subordinated debt were combined
into a single trading vehicle with the intent to create a high-yielding equity attractive to
investors. Unlike Canadian income trusts, which sought to transfer taxable income into the
hands of holders where it could be taxed as distributions, the IDS structure paid both a
dividend and an interest component. Prior to the conversion, New Flyer was paying holders
C$1.17 annualised on a monthly basis consisting of a dividend of C$0.40 per year and C$0.77
of interest on the subordinated debt.
The intent of the IDS structure was by design to grind operating earnings (EBIT) to zero by
paying high interest to the equity holders. While typically not permitted under general antiavoidance and income stripping rules by tax authorities, the company arranged for substantial
legal and accounting representations as to the legitimacy of the payments. The substantial
professional work required at the time of each issuance greatly increased the costs of any
issue and left the company constrained in its ability to issue new units as they were also
required to issue 14% coupon debt concurrently. In addition, in order to support the structure,
the company was also required to maintain at least 10% of the subordinated notes (Bachelor
Bonds) forming part of the IDS to be held by independent third parties as well as a portion of
the equity (Spinster Equity).
The conversion from the IDS to commons share structure made use of a coercive rights
offering process which saw unit holders issued nine common shares in return for tendering
their holding of the debenture. Subsequent to the execution of the rights issue, the company
completed a 10 for one share consolidation returning the number of shares outstanding post
the transaction to the same as prior to the transaction, however with the impact of increasing
previous period reported per share metrics by a factor of 10, which we believe is misleading
and making comparisons unreliable. Since the transaction has completed however, per share
metrics for earnings and cash flow have become more useful and comparable to other
companies. With the completion of the rights offering the company lowered the payout to
shareholders to $0.585, structured as an eligible dividend only. The reduction in dividend
significantly impacted share prices, however they have since recovered. With the companys
focus turning more growth oriented, we believe the current dividend level is likely to persist,
although we do expect payout ratios of free cash flow will continue to trend lower.
The completion of the conversion resulted in a substantial drop in net debt with the retirement
of the subordinated notes. In June 2012, New Flyer issued $65mm in US$ denominated
convertible debentures with a 6.25% coupon and $10.00 conversion price maturing in June
2017. The debentures were denominated in $US to more closely reflect the companys
currency inflows and for tax planning reasons. In addition, the company has revised its credit
facilities a number of times over the past five years, with the most recent amendment
occurring in June 2013 concurrent with the NABI acquisition. The revised facility includes a
blend of term loans, revolving loans supporting working capital fluctuations as well as a letter
of credit facility used to support contractual requirements. As of Q3/13 total leverage was
1.8x proforma trailing EBITDA. With the unwinding of the IDS, the companys capital
structure is greatly simplified with a single class of common shares. At Q3/13, there were
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55.5mm shares outstanding with 19.99% of those held by Marcopolo as part of their strategic
investment made in 2013.
Total Leverage to Trailing EBITDA Ratio & Threshold
7.0x
6.0x
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Figure 14. Total Leverage to Trailing EBITDA Ratio & Threshold

Growing in a Highly Competitive Landscape

In 2009, the company was forced to deal with two significant issues, one related to a deficient
contract where a design error led to the total bus weight exceeding the allowable specification
and the second related to a planned production order from the Chicago Transit Authority
(CTA) where final contract authorization did not materialize as expected for 140 hybrid
articulated buses or 280 EU of production. As a result of the CTA indefinite order deferment,
the company announced in August of 2009 that it was adjusting production levels to 36 EU of
production line entries for H2/09 with a two-week line production halt in December 2009.
The company has maintained this production level on average until the acquisition of NABI,
which added on average an additional 12 EU per week in production to line entry levels.
Revenues tend to fluctuate quarter to quarter due to product mix with the level of cleantechnology (i.e. hybrid, CNG, etc.) and articulated buses scheduled for production. As New
Flyer also recognizes revenue on a completed contract basis, final acceptance is usually
necessary for recognition. Issues with design, quality or the ability of a transit authority to
complete quality certification can impact any particular quarters revenue rate although
typically any lags in one particular quarter are made up over subsequent quarters.
Quarterly Revenue ($000s)
350,000
Bus Manufacturing
Aftermarket
300,000
25.0%
20.0%
250,000
200,000
15.0%
150,000
10.0%
100,000
5.0%
50,000
0
0.0%
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Figure 15. Quarterly Revenue ($000s)

Aftermarket revenues consisting of parts and services have continued to show very strong
growth through both organically and via acquisition. Aftermarket revenues have remained a
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focus for the management team since 2009 with a goal of diversifying revenues sources. For
the majority of OEMs, aftermarket revenues can be multiples of the initial capital cost of a
purchase over the full life cycle. Since 2009, New Flyer has undertaken a number of
initiatives including the introduction of white label parts, the expansion of the parts supply
network by adding new PDCs and the introduction of new services including vendor managed
inventory and maintenance analysis services all to support organic growth. In addition to
more traditional aftermarket activities, New Flyer has also performed significant
refurbishment work though maintenance depots in Ottawa, New York and most recently in
Chicago, as well as new revenue streams. While a number of the refurbishment actions were
related to settling issues related to existing fleets, which has contributed to improved customer
satisfaction, the company has won new business adding to revenue with the most significant
contract to date a mid-life refurbishment project with Chicago estimated to generate $80mm
in revenue over 3 years. The most substantial growth however has come from the acquisition
of the Orion and NABI parts businesses. We expect the addition of these businesses resulted
in a further $105mm in revenue on an annualized run rate basis. Through the first nine months
of 2013, aftermarket revenue has increased 63.2% y/y.
The intense price competition for orders in the manufacturing business between 2009 and mid
2012 placed substantial pressure on margins as competitors sought to maintain production.
The impact of this competition is noticeable on both a margin percentage basis and also on a
unit basis (Figure 17). New Flyer quarterly earnings tend to be highly variable quarter to
quarter given the change in production mix and depending on which particular contract is
being delivered. Looking at absolute margins on a trailing four-quarter basis tends to be more
useful in detecting trends in segment margins. We are beginning to see some recovery on a
trailing basis using these metrics, although at Q3/13, management indicated that they did not
expect 2014 margins to show substantial improvement, which did come as a surprise. We
believe there may be some contracts booked during the period of intense competition that will
be produced in H2/14 that may skew margins per EU downward. Margins in the aftermarket
segment have also come under pressure due to price competition, particularly for parts but
also due to a shift in a mix to more service oriented revenues, which carry lower margins than
part sales. Nevertheless, we note that aftermarket EBITDA margins are almost twice
manufacturing margins, making this an attractive segment to participate in.
EBITDA Margins by Segment
30.0%
Bus Manufacturing
Aftermarket
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Figure 16. EBITDA Margins by Segment

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EBITDA per Equivalent Unit ($000s)

60.0
EBITDA Per EU
50.0
40.0
30.0
20.0
10.0
0.0
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Figure 17. EBITDA per Equivalent Unit ($000s)

Five-Year Revenue and EBITDA Summary ($000, except per share)

2009
Revenues
Bus Manufacturing
Growth
Aftermarket
Growth
Total
Growth
Aftermarket Revenues as a % of Total Revenues
2010
991,703 878,082
14.6% (11.5%)
108,163 105,676
12.7%
(2.3%)
1,099,866 983,758
14.4% (10.6%)
9.8%
10.7%
2011
2012
2013E
810,417 753,865 941,110

(7.7%)
(7.0%)
24.8%
116,006 119,050 211,431
9.8%
2.6%
77.6%
926,423 872,915 1,152,541
(5.8%)
(5.8%)
32.0%
12.5%
13.6%
18.3%
Adjusted EBITDA
Margin
Growth
100,070
9.1%
8.2%
97,118
9.9%
(2.9%)
80,087
8.6%
(17.5%)
61,392
7.0%
(23.3%)
84,350
7.3%
37.4%
FD EPS per share
$4.03
$2.78
$0.47
$0.31
$0.51
$1.17
50.9%
$1.17
63.9%
$1.04
230.2%
$0.75
167.3%
$0.585
70.7%
Actual Cash Payment Per Share / Unit

Payout Ratio
Figure 18. Five-Year Revenue and EBITDA Summary ($000, except per share)
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Outlook and Valuation

Revenue and Earnings are Backlog Driven
One of the key advantages for investors is New Flyers significant backlog and the visibility it
provides into future revenues and earnings as historically firm backlog is normally produced
over the following 12 to 18 months. In addition, option backlogs have reasonably high
exercise rates, which is unusual for many other types of capital equipment manufacturers.
Firm and option backlogs are skewed heavily to supplying U.S. transit authorities, which
represent over 90% of backlogs by value. Under U.S. FTA rules, options may be remarketed
to other transit authorities wishing to make use of them as long as they meet existing FTA
criteria. Firm orders also tend to get built and not cancelled due to the transferability of orders
and more stringent contract review on the part of the company.
There is a number of blanket or framework orders the company has won that allow for an
undetermined number of orders over a period of time, typically issued by a larger region or
transit authority. This type of order is not included in backlog until a formal exercise of part
of the contract is received. Including the expected cancellation of one particular order in
Q4/13, related to the 2009 deferment, we estimate the company should have approximately
2,650 EU of firm backlog and 6,100 EU of option values at $4.1bn. We expect the majority of
2014 production should come from firm and option backlog today, which offers substantial
transparency to our estimates.
New Flyer Backlog ($bn)
$5.0
Firm
Option
$4.0
$3.0
$2.0
$1.0
$0.0
Q1/07 Q3/07 Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13
Figure 19. New Flyer Backlog ($bn)
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A Historically Robust Pipeline Foreshadows a Coming Surge in Orders

To evaluate the status of future sales the company utilizes what it calls its order pipeline
which measures bids for new orders currently in process, bids that have been submitted and
future purchase indications from transit authorities. At the end of Q3/13, the bid pipeline
stood at a record 19,941 EU. We base our expectations for near term sales growth on the
depth of the pipeline, which has shown a strong recovery in orders through 2013, which has
seen a unit book to bill ratio (defined as new orders and new options over shipments) of 1.31x
in 2013 and 1.12x in 2012 indicative of an improving order book. With a 40%+ market share
and strong customer loyalty, we expect New Flyer will be capturing a substantial portion of
available orders, which should be in a more orderly market.
New Flyer Order Pipeline
25,000
Ongoing Bids
Submitted Bids
Universe
20,000
15,000
10,000
5,000
Jan-2009
Jun-2009
Nov-2009 Apr-2010
Sep-2010 Feb-2011
Jul-2011
Dec-2011 May-2012
Oct-2012
Mar-2013 Aug-2013
Figure 20. New Flyer Order Pipeline

With the combination of significant firm backlog and potential additional option conversions
we expect production rates will be required to increase in 2015. Management has indicated
2014 production will begin at a 48 EU/week line entry rate including NABI although we
expect building backlogs will lead to higher run rates although we are currently modelling flat
production through 2014. Based on our estimates for run rates and accounting for the midyear acquisition of NABI, we forecast deliveries of 2,429 EU in 2014 versus our estimate of
2,134 EU for 2013. While management remains cautious about rapidly expanding production,
we believe the process improvements developed over the past two years should afford the
company the ability to expand production with existing resources given our expectations for
industry demand. With managements cautioning on margins during Q3/13 we are remaining
cautious on margins in H1/14 although we do expect some continued improvement coming
from better pricing as well as further integration and synergy gains from NABI and the
Marcopolo cooperation agreement.
In constructing our expectations for the evolution of the companys backlog, we take several
factors into consideration, including option exercises and expiry, production rates and the mix
of new orders. There were a number of events in 2013 that makes it an unusual year in the
evolution of the backlog including the amalgamation with NABI adding 551EU and 608EU of
firm and option backlog and the cancellation of the CTA order for 240EU of firm and
1560EU of options.
25
162
Unit Backlog Evolution (EU)

Backlog Beginning of Period
Firm
Options
New Orders
New Options
Exercised Options
Deliveries
Firm Order Cancellations
Options Cancelled/Expired
Backlog End of Period
Firm
Option
New Option To New Firm Order Ratio
Option Exercise as % of Opening Options
Option Expiry % of Opening Options
Unit Book : Bill Ratio
2010
2011
2012 2013E 2014E 2015E
2,082
6,908
1,013
914
825
2,023
(182)
1,897
6,815
182
477
1,208
1,811
(463)
1,476 1,672
5,621 4,653
882 2,149
738 4,137
970
655
1,656 2,134
(240)
(736) (2,647)
2,653
6,097
1,783
2,265
889
2,429
(244)
2,896
7,229
1,970
1,970
981
2,682
(288)
1,897
6,815
1,476
5,621
1,672
4,653
2,653
6,097
2,896
7,229
3,165
7,930
0.9x
11.9%
2.6%
0.9x
2.6x
17.7%
6.7%
0.8x
0.8x
17.3%
10.8%
1.1x
1.9x
14.1%
47.1%
1.3x
1.3x
14.6%
5.2%
1.1x
1.0x
13.6%
4.7%
1.1x
Figure 21. Unit Backlog Evolution (EU)

We expect New Flyers aftermarket business should show strong y/y growth in 2014 driven
by acquisitions and the Chicago rebuild contract as well as incremental organic growth. We
forecast aftermarket revenues will grow approximately 26% and 3% in 2014 and 2015,
respectively. We are expecting margins in the aftermarket segment will show small
improvements, mainly due to small integration gains with EBITDA margins of 14.6%, 14.9%
and 15.3% respectively in 2013, 2014 and 2015. A summary of our forecasts are contained in
Figure 22.
Forecast Summary ($000s, except per share)
2014E
2015E
Revenues
Bus Manufacturing
Growth
Aftermarket
Growth
Total
Growth
Aftermarket Revenues As % of Total Revenues
2012
2013E
753,865
941,110 1,092,632
(7.0%)
24.8%
16.1%
119,050
211,426
267,049
2.6%
77.6%
26.3%
872,915 1,152,536 1,359,681
(5.8%)
32.0%
18.0%
13.6%
18.3%
19.6%
1,212,470
11.0%
273,912
2.6%
1,486,382
9.3%
18.4%
Adjusted EBITDA
Margin
Growth
61,392
7.0%
(23.3%)
84,349
7.3%
37.4%
97,234
7.2%
15.3%
117,664
7.9%
21.0%
FD EPS per share

Growth
$0.31
(33.1%)
$0.51
61.4%
$0.62
22.2%
$0.86
38.8%
Free Cash Flow (C$)

per share
Growth
19,777
$0.45
(44.1%)
42,775
$0.83
85.6%
62,368
$1.12
35.9%
78,142
$1.41
25.3%
Actual Cash Payment Per Share / Unit

Payout Ratio
$0.75
167.3%
$0.585
70.7%
$0.585
52.0%
$0.585
41.5%
Figure 22. Forecast Summary ($000)

26
163
Valuation and Recommendation

In estimating fair value for New Flyer IDS units, we take into consideration a number of
factors in addition to our earnings estimates:
New Flyer maintains a dominant presence in the heavy-duty transit industry with leading
market share and a strong product offering. The company has continued to invest in new
technologies and has been among the first of all manufacturers to offer new ideas in bus
design and propulsion systems to Transit Authorities. We currently include no value for
the midi-bus platform due to a lack of substantial backlog, although we recognize this is
conservative on our part, and likely will offer upside to current estimates.
The company has an extensive backlog of orders, which form the basis for future
production, which offers significant transparency into anticipated production rates and
associated revenues and provides the stability to support distributions.
We expect macro trends driving the use of public transit, including an increasing focus on
environmental impacts, increasing rates of urbanization and substitution effects versus
private automobiles, particularly within heavily urbanized areas, to continue. Ridership
on public transit has continued to show steady growth rates and increasing government
funding seeking to reduce fuel consumption and greenhouse gas emissions are expected
to provide additional catalysts.
The investment by a strategic investor in the company and the recent acquisitions of
Orions aftermarket business and NABI offer additional cost and strategic synergies that
are all in an early stage of development. In addition, we believe Marcopolos
involvement with New Flyer raises the possibility of the acquisition of the company in
the future.
While taking these factors into consideration, we also look to comparable multiples including
the companys recent trading history on both a price to earnings and enterprise value to
EBITDA approach. Since the conversion to a more traditional common share structure,
valuation multiples have been more comparable to other corporations and more useful as a
basis for analysis and in our opinion made an investment in New Flyer a less complex
investment decision. In particular, the companys price earnings multiple now is more useful
as normalized earnings per share are relevant as a metric as they no longer reflect the tax
shield created by the IDS structure.
New Flyer Consensus Fwd. EV/EBITDA Valuation
11.0x
NTM EV/EBITDA Multiple
10.5x
10.0x
9.5x
9.0x
8.6x
LT Median: 8.6x
8.5x
8.0x
7.5x
7.0x
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Figure 23. New Flyer Consensus Fwd. EV/EBITDA Valuation

Source: Factset, AltaCorp Capital Inc.
27
164
Since conversion from the IDS structure, New Flyer shares have tended to trade at a median
forward valuation of 8.6x on an EV/EBITDA basis and 12.1x on a price to forward earnings
basis. The companys recent Q3/13 reported results and guidance resulted in a downward bias
on consensus earnings for 2014, which has spiked near term valuation multiples, although we
expect the impact to be transitory with valuation multiples returning to more normal levels
reflecting an improving market dynamic and earnings growth with most impacts expected to
occur in H1/14.
New Flyer Consensus Fwd. Price to Earnings Valuation
20.0x
18.0x
16.1x
NTM P/E multiple
16.0x
14.0x
LT Median: 12.1x
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Figure 24. New Flyer Consensus Fwd. Price to Earnings Valuation

Source: Factset, AltaCorp Capital Inc.
Current comparable multiples (see Appendix 2) for the peer group based on estimates for
2014 stand at a mean of 13.8x earnings and 7.9x EBITDA. Taking historical and comparable
multiples into account we believe a 7.0x multiple of forward EBITDA and 14.0x multiple of
forward earnings are appropriate reflecting an assessment that New Flyer shares should trade
along lines typically seen by peers. We also take into account the influence of exchange rates
between the companys trading currency and its fundamental currency, where we expect the
C$ / US$ exchange rate to remain at the US$1.08 per C$ over 2014.
We believe a robust order pipeline, improving fundamentals, the presence of a strategic
investor and strong growth opportunities should result in further share price appreciation, all
while offering a sustainable 5.6% cash yield. As such, we are initiating coverage of New
Flyer Industries Inc. with an Outperform rating and a 12-month target price of C$13.00. Our
target price is based on a blend of a 14.0x earnings and 7.0x EBITDA multiple of our 2015
earnings, reflecting our 12-month forward valuation period.
28
165
Risks
Order Variability: Industry-wide bus orders are not consistent from year to year, resulting in
potential cash flow variability for New Flyer. The availability of government funding for
transit needs is a key driver of order volume and may fluctuate depending on tax revenue and
budget priorities.
Reliance on Government Funding & Legislation: The majority of the companys products are
funded by various levels of municipal, state, provincial and federal governments. Changes in
legislation related to budgets, procurement practices, material content, foreign ownership,
safety and operating regulations and requirements for operation in specified jurisdictions,
among other criteria, may expose the company to additional costs or operational
disadvantages or benefit competitors to the companys detriment.
Raw Material and Component Costs: Raw materials and components account for the majority
of bus manufacturing costs, representing approximately 71% in 2012. This includes raw
materials such as carbon and stainless steel, aluminum, copper, resins, and oil-based products
that may experience significant price fluctuations.
Product Warranty and Product Liability Claims: New Flyer is subject to product warranty
claims as an ordinary part of its business. The company typically provides a 12-year warranty
on its bus structure (sometimes up to 18 years) and one- to five-year warranties on certain
other major bus components. Excessive warranty claims in any period could negatively
impact results. In addition, any negative publicity as a result of excessive warranty claims
could be damaging to New Flyers reputation. New Flyer may be subject to liability claims in
relation to the operation of one or more of the vehicles sold to various Transit Authorities in
the event of property damage or injury during their operation.
Labor Agreements: A majority of New Flyers employees are represented by unions through
four collective labor agreements. Any labor disruption, such as that which occurred in 2006 at
the Winnipeg facility, could result in production delays and increased costs.
Foreign Exchange Rates: New Flyer is exposed to changes in the C$/US$ rate, through
revenue, operating costs, and financial obligations that are a mix of U.S. dollar and Canadian
dollar flows. Depending on the revenue split between Canadian dollars and U.S. dollars,
which can vary materially from period to period, the companys net currency exposure will
fluctuate. New Flyer actively hedges its expected currency exposure as firm orders are
planned into production. Changes in the C$/US$ exchange rate from year to year may impact
operating cash flow.
29
166
Appendix 1: Officers & Directors Management Bios

Name
Office/Position Held
Background
Paul Soubry
President and CEO
Prior to joining New Flyer in January 2009, Mr. Soubry held various positions at StandardAero. He was named
President in 2001, COO in 2006 and CEO in 2007. Mr. Soubry holds a B.Comm from the University of
Manitoba and completed executive development program at Harvard Business School. He received the
Canada's Top 40 Under 40 award in 2003. Mr. Soubry is also a Director of the corporation.
Glen Asham
Chief Financial Officer and Director
Glen joined New Flyer in 1992 as the Corporate Controller. Previously, he worked with Deloitte & Touche for
eight years, providing client services in accounting, auditing, taxation and management consulting. Glen is a
Chartered Accountant with a B.Comm from the University of Manitoba.
Wayne Joseph
Executive VP of Operations
Wayne joined New Flyer in July 2008 , responsible for providing overall leadership and direction for the
operations. Prior to New Flyer, he held various executive level positions at North American Bus Industries,
Blue Bird Body Company and BAE Systems. Wayne holds a B.BA from Ashland University in Ohio.
Paul Smith
Executive VP of Sales & Marketing
David White
Executive VP of Supply Management
Ian Smart
Executive VP of After Market
Colin Pewarchuk
Chris Stoddart
Executive VP, General Counsel and

Corporate Secretary, and Director
VP of Engineering Services
Paul joined New Flyer in 1988 and appointed Executive VP of Sales Marketing in 2000. He brings over 15
years of design experience in mechanical technology.
David began with New Flyer in 1998 as a Corporate Controller and was appointed Executive VP position in
2006. He is a Chartered Accountant with a B.Comm from the University of Manitoba
Ian joined New Flyer in 2011. He is responsible for After Market, which includes Parts, New Flyer Connect,
Customer Training and Publications. Ian holds a Bachelor of Science in Industrial Engineering.
Colin Pewarchuk was a lawyer with Aikins, MacAulay & Thorvaldson LLP prior to joining New Flyer in 2006. He
holds a Bachelor of Laws and B.Comm Degree from the University of Manitoba.
Chris joined New Flyer in 1997. He bought over nine years of automotive experience at General Motors and
nine years in freight railcars at National Steel Car. He holds a B.Eng Degree from Kettering University in
Michigan and is a Professional Engineer.
Kevin Wood
VP of Manufacturing
Kevin Wood joined New Flyer in January 2009. He previously held various senior management positions within
the transportation industry. He holds a B.A. degree from Ashland University in Ohio and has a CPIM
designation from the Association for Operations Management.
Margaret Lewis
VP of Quality Assurance
Margaret Lewis joined New Flyer in October 2009. Prior to New Flyer, she spent 15 years with Lear
Corporation in Michigan. She holds a B.S. degree from the University of Akron in Ohio and an MBA from
Michigan State University.
Janice Harper
VP, Human Resources
Janice Harper joined New Flyer in 1998. Prior to New Flyer, Janice spent ten years in recruitment/selection,
disability management and industrial relations for Westfair Foods Ltd. in the Manitoba and NW Ontario Region.
Janice holds a Diploma in Creative Communications from Red River Community College and a Certificate in
Human Resources Management from the University of Winnipeg.
The Honorable Brian V. Tobin P.C., ICD.D
Chairman of the Board
Mr. Tobin is Chairman of the Board of New Flyer. Previously, he served as the Premier of Newfoundland and
Labrador from 1996 to 2000. Currently Mr. Tobin is Vice-Chair of BMO Capital Markets. Most recently, Mr.
Tobin has been a senior business advisor with Dentons Canada LLP (formerly Fraser Milner Casgrain LLP) in
Toronto. He has also been a strategic advisor to several Canadian corporations and served on a number of
public company boards. He was Executive Chairman and CEO of Consolidated Thompson Iron Mines Ltd. until
its sale to Cliffs Natural Resources. He also serves as Director of AECON Group Inc. Mr. Tobin is a member of
the Institute of Corporate Directors and a graduate of the Directors Education Program.
V. James Sardo
Director
Mr. Sardo has served on the board of Currency Exchange International Corporation and has been a director of
Capstone Infrastructure Corporation since 2009. Mr. Sardo is a member of the Institute of Corporate Directors
and a graduate of the Directors Education Program.
Wayne M.E. McLeod
Director
Mr. McLeod serves as a member of the board of directors of Morguard Investments Inc. and is a trustee of
Richards Packaging Income Fund. He is also a Fellow of the Institute of Chartered Accountants of Ontario. He
received his Masters of Business Administration from Harvard University in 1965. Mr. McLeod retired in 1999
after 20 years with CCL Industries Inc., where he served as President, CEO and Chairman of the board of
directors, among other positions.
Larry Edwards
Director
Mr. Edwards serves as a director and Chairman of the board of Victory Energy Operations, LLC. Mr. Edwards
earned a B.S. in Industrial Engineering and Management from Oklahoma State University and an M.B.A. with
honors from Oklahoma City University. Mr. Edwards is a member of the Institute of Corporate Directors and a
graduate of the Directors Education Program.
John Marinucci, C.A., ICD.D, H.R.C.C.C
Director
Mr. Marinucci joined New Flyer as President and CEO in 2002 and retired as an executive officer of the
Company at the beginning of 2009. Mr. Marinucci currently serves as a director of Intelgenx Corporation and is
a governor of Mohawk College in Hamilton, Ontario. Mr. Marinucci is a Chartered Accountant and holds an
Honours Bachelor of Commerce degree from McMaster University. Mr. Marinucci is a member of the Institute
of Corporate Directors and a graduate of the Directors Education Program.
Patricia Jacobsen
Director
Ms. Jacobsen has been a corporate director since she stepped down in 2008 as the CEO of the Greater
Vancouver Transportation Authority (TransLink). A graduate of the University of Manitoba, Ms. Jacobsen held
several senior positions with the Ontario Provincial Government, including Deputy Minister of Transportation.
Following her public service career, Ms. Jacobsen held senior executive positions in the insurance industry
with Manulife Financial and Liberty Mutual in Toronto and was the CEO of the Workers Compensation Board
of Manitoba. Ms. Jacobsen is a member of the Institute of Corporate Directors and a graduate of the Directors
Education Program.
Adam Gray
Director
Mr. Gray is a managing partner of Coliseum Capital Management, a private firm which he co-founded in
December 2005. Mr. Gray holds both a BSE in Finance from the Wharton School of Business and a BS in
Mechanical Engineering from the School of Engineering & Applied Science at the University of Pennsylvania.
William Millar
Director
Mr. Millar, is a well known expert in the fields of public transportation and transportation policy, who led the
American Public Transportation Association (APTA) serving as its President from 1996 to 2011. Mr. Millar
served 19 years at the Port Authority of Allegheny County, the principal transit operator serving Pittsburgh, PA.
As executive director from 1983-1996. Mr. Millar also serves on the governing boards of several organizations
including Reconnecting America and as a Senior Advisor for Rail and Transit at H.W. Lochner, Inc. Mr. Millar
has a BA from Northwestern University in geography and an MA from the University of Iowa in urban
transportation planning and policy analysis.
30
167
Appendix 2: Comparable Companies

Ticker
Company
TSX: ARF Armtec Infrastructure Inc
TSX: VIC Vicwest Inc
TSX: WJX Wajax Corporation
TSX: AFN Ag Growth International Inc.
TSX: SPB Superior Plus Corp.
GBX
OSK
Oshkosh Corporation
SPAR
Spartan Motors Inc.
WNC
THO
WGO
NAV
TSX: STB Student Transportation, Inc.
CUB
Cubic Corporation
Average
TSX: NFI
Price
1/06/14
$1.30
$12.62
$36.19
$43.65
$12.60
$31.84
$48.99
$6.70
$12.60
$54.85
$26.56
$38.12
$6.61
$50.81
$10.51
Market
Enterprise
31
366
222
316
606
831
550
701
1,590
2,484
894
1,247
4,232
4,454
229
214
863
1,187
2,923
2,628
736
686
3,094
6,703
540
832
1,361
1,256
583
743
Price / EPS
FY+1
FY+2
NM
6.0x
73.8x
12.5x
12.7x
11.6x
21.8x
14.8x
17.5x
13.1x
12.1x
10.7x
14.4x
11.6x
NM
28.2x
15.9x
12.2x
15.7x
13.4x
17.1x
14.9x
NM
13.3x
NM
NM
18.3x
15.6x
21.9x
13.7x
EV/EBITDA
FY+1 FY+2
8.6x 7.1x
13.9x 7.3x
8.8x 8.2x
11.6x 9.5x
9.0x 8.3x
6.3x 5.7x
7.2x 6.3x
27.7x 9.2x
7.6x 6.5x
8.9x 7.7x
10.3x 8.3x
14.3x 6.9x
9.5x 9.8x
9.8x 8.6x
11.0x 7.8x
22.9x
9.8x
15.9x
7.7x

Margin
Yield
EBITDA
8.1%
0.0%
9.0x
4.5%
4.7%
5.0x
6.1%
6.6%
2.6x
15.4%
5.5%
3.0x
7.2%
4.9%
3.4x
8.2%
0.0%
2.2x
8.3%
1.2%
0.3x
0.8%
1.5%
nmf
9.2%
0.0%
2.2x
7.8%
3.5%
nmf
6.6%
0.0%
nmf
-3.7%
0.0%
nmf
14.9%
8.5%
4.3x
8.8%
0.5%
nmf
7.3%
2.6%
3.6x
6.6%
5.6%
3.0x
Return On
Capital
5.1%
4.8%
11.0%
7.4%
6.8%
7.1%
11.0%
(1.8%)
10.4%
16.5%
19.3%
(28.3%)
2.6%
7.9%
5.7%
Total Debt
to Capital
107.3%
60.6%
41.8%
43.2%
75.2%
48.0%
31.2%
2.9%
61.3%
0.0%
0.0%
343.6%
52.8%
12.7%
62.9%
4.3%
39.4%
31
168
Appendix 3: Financial Models

Consolidated Statement of Income
In US$000's, For Periods Ending December 31
2010
2011
2012
$878,082
105,676
983,758
841,682
46,986
74,301
24,058
95,090
(2,028)
97,118
97,118
100,105
24,058
$810,417
116,006
926,423
787,210
41,525
54,897
23,475
97,688
(184)
97,872
17,785
17,785
80,087
79,031
24,243
$753,865
119,050
872,915
774,069
43,091
41,248
19,517
55,755
(2,812)
58,567
(2,825)
(2,825)
61,392
61,377
24,326
73,060
73,629
34,241
45,782
Other
8,816
4,722
Unrealized FX Loss On Non-Current Monetary Items And Forward Foreign Exchange
16,893
Contracts (935)
Follow-On Offering Related Costs
(23)
35
1,153
22
-
1,403
Revenue
Bus Manufacturing
Aftermarket
Revenue
Sales, General Administration Costs And Other Operating Expenses
Bus Manufacturing
Aftermarket
EBITDA Excluding Realized FX Gain/Loss
Foreign Exchange Loss (gain)
EBITDA including realized FX gain/loss
Follow-On Offering Cost
Fair Market Value Adjustment To Deferred Revenue
Fair Market Value Adjustment To Accounts Payables And Accrued Liabilities
Fair Market Value Adjustment To Inventory
Fair Market Value Adjustment To Prepaid Expenses
Other (Embedded Derivative)
Adjustments To EBITDA
Adjusted EBITDA
Adjusted EBITDA (C$)
Amortization & Depreciation
Earnings from Operations
2013
2014
2015
$941,110 $1,092,632 $1,212,470

211,426
267,049
273,912
1,152,536 1,359,681 1,486,382
1,007,594 1,182,730 1,282,773
70,741
79,717
85,945
53,439
57,341
75,768
30,910
39,893
41,896
74,201
97,234
117,664
(122)
74,323
97,234
117,664
(10,026)
(10,026)
84,349
97,234
117,664
86,898
104,422
127,078
28,541
31,191
31,175
66,042
86,489
360
6,925
-
EBIT
47,352
68,654
25,913
45,422
66,042
86,489
Interest On Long-Term Debt

Fair Market Value Adjustment On Cross-Currency Interest Rate Swap
Other
Interest Expense
48,449
890
2,154
419
37,008
913
3,743
302
11,852
1,432
2,701
(835)
8,016
2,175
3,112
958
7,539
978
3,076
-
7,552
289
3,070
-
51,912
41,966
15,150
14,261
11,593
10,910
1,626
(6,186)
26,688
10,763
31,161
54,449
75,579
6,400
(16,460)
(10,060)
3,874
21,647
(14,156)
7,491
19,197
12,809
(11,804)
1,005
9,758
18,103
(9,734)
8,369
22,792
16,117
4,029
20,146
34,303
22,371
5,593
27,964
47,615
(116,780)
3,874
(18,624)
(131,530)
(99,225)
19,197
(26,081)
(1,990)
(108,099)
(111,347)
9,758
(33,075)
(2,107)
(136,771)
(130,281)
22,792
(29,762)
(137,251)
(137,251)
34,303
(30,222)
(133,170)
(133,170)
47,615
(30,045)
(115,600)
Distributions On Class B And Class C Common Shares

EBT
Current Income Tax

Future Income Tax
Income Tax Expense
Net Income
Deficit - Beginning Of Period
Net Earnings (Loss) For The Period
Dividends Declared
Other Comprehensive loss for the period
Deficit - End Of Period
Reported Net Earnings (Loss) Per Unit
Net Earnings (Loss) Per Unit Adjusted (Excl. Non-cash charges,
Unrealized FX gains/losses, Tax Normalized)
0.80
-
0.98
0.22
0.44
0.62
0.86
2.78
0.47
0.31
0.51
0.62
0.86
32
169
Balance Sheet
2010
2011
2012
2013
2014
2015
73,463
60,709
82,882
5,196
8
222,258
10,133
115,850
93,491
5,077
145
224,696
11,182
113,460
124,712
4,724
254,078
21,342
160,065
201,512
6,886
111
1,163
391,078
66,799
164,936
187,718
7,095
111
1,163
427,822
118,528
180,381
189,808
7,760
111
1,163
497,750
37,086
559,711
24,968
4,910
37,397
544,361
36,558
3,684
848,933
870,462
42,024
57,027
56,473
56,476
528,528 569,362 549,934 530,506
49,332
51,433
47,404
41,811
23,262
18,745
18,745
18,745
897,224 1,087,645 1,100,378 1,145,288
LIABILITIES AND UNITHOLDERS EQUITY

Current Liabilities
Bank Indebtedness
Income Taxes Payable
Deferred Revenue
Provision For Warranty Costs
Current Portion Of performance unit plan liability
Current Portion Of Obligations Under Capital Lease
Current Portion Of Long-Term Debt
Other
95,008
27,568
42,641
4,142
2,596
171,955
152,207
4,964
1,897
32,808
1,404
2,377
9,000
204,657
150,828
6,756
19,190
20,106
14
1,857
40,035
238,786
224,755
34,631
28,952
1,213
12,000
301,551
231,595
30,425
35,206
568
12,000
309,793
253,281
29,792
41,771
12,000
336,844

Obligations Under Capital Lease
Deferred Compensation Obligation
Future Income Tax Liability
Long-Term Debt
Other Liabilities, Class B & C Common Shares
Other
Total Liabilities
8,922
3,684
3,823
125,997
404,929
2,510
721,820
9,136
2,102
262
119,088
166,835
2,811
504,891
8,973
2,314
1,233
122,244
120,950
1,976
553,236
4,214
1,597
3,830
115,271
140,612
2,934
10,212
638,138
4,214
1,029
3,830
115,271
141,591
2,934
10,212
646,791
4,214
1,029
3,830
115,271
141,879
2,934
10,212
674,130
ASSETS
Current Assets
Cash
Accounts Receivable
Inventory
Prepaid Expenses And Other Assets
Embedded Derivative Instrument
Due From Related Party
Future Income Tax Assets + Derivatives
Other
Property, Plant & Equipment
Long-term receivable
Intangible Assets
Goodwill
Other Assets & Foreign Exchange Contracts
Unused Investment Tax Credits
Other
Total Assets
Unitholder's Equity
Share Capital
Surplus (Deficit)
Total Equity
226,338 476,918 476,918 589,208 589,208 589,208

(99,225) (111,347) (130,281) (137,251) (133,170) (115,600)
127,113 365,571 343,988 449,507 453,588 471,158
848,933 870,462 897,224 1,087,645 1,100,378 1,145,288
33
170
Consolidated Statement of Cash Flows

2010
Operating Activities
Net Earnings
3,874
8,193
15,865
Loss From Equity Accounted Investment
Loss (Gain) On Disposal Of PP&E
(23)
Future Income Taxes
(16,460)
Unrealized (Gain) Loss On Cross-Currency Interest Rate Swap
419
Unrealized Foreign Exchange (Gain) On Non-Current Monetary Items And Forward
16,893
Foreign Exchange Contracts
Foreign Exchange Loss (Gain) On Cash Held In Foreign Currency
(2,003)
890
Non-Cash Impact Of Embedded Derivative
22
Net Defined Benefit Expense
(2,357)
Other
8,684
Cash From Operating Activities Before Changes In Non-Cash Working Capital Items 33,997
Changes In Non-Cash Working Capital Items
36,713
70,710
(2,478)
Share Issuance
(479)
Proceeds (Repayment) of Long-Term Debt
11,565
(588)
Proceeds of issue of convertible debentures
Repayment Of Other Liabilities, Class B And C Common Shares
(11,565)
Due From Related Parties
383
Dividend Paid To IDS And Common Shares
(18,468)
(21,630)
Cash Provided From Consolidation Of New Flyer Holdings Inc
Proceeds From Disposition Of Property, Plant And Equipment
23
Acquisitons
(1,085)
Capital Expenditures
Maintenance
(3,352)
Growth
(3,902)
Acquisitions
Total Capital Expenditures
(7,254)
(8,316)
2,003
Increase In Cash
42,767
Cash - Beginning Of Period
30,696
Cash - End Of Period
73,463
2011
19,197
8,262
15,981
35
2,363
728
(935)
2012
2013
9,758
8,319
16,007
-
22,792
10,075
18,466
1,147
-
1,403
360
2014
2015
34,303
11,763
19,428
4,029
-
47,615
11,747
19,428
5,593
-
(2,074)
674
1,153
(15,808)
29,576
(63,151)
(33,575)
(2,150)
6,925
40,262
(24,003)
16,259
(689)
495
198
52,844
9,320
62,164
978
70,502
17,600
88,102
289
84,671
9,420
94,091
(2,732)
(4,600)
30,000
(1,288)
(15,439)
(24,594)
(18,653)
(2,418)
42,035
(3,789)
65,000
(62,449)
(34,031)
4,348
(1,937)
113,782
(2,051)
(9,391)
(29,308)
71,095
(1,213)
(30,222)
(31,435)
(568)
(30,045)
(30,613)
(103,643)
(174)
(10,798)
(10,972)
(10,972)
2,150
1,049
10,133
11,182
(2,480)
(5,881)
(8,361)
(112,004)
689
10,160
11,182
21,342
(2,233)
(8,977)
(11,210)
(11,210)
45,457
21,342
66,799
35
(631)
(2,015)
(5,670)
(7,685)
(8,281)
2,074
(63,330)
73,463
10,133
(2,337)
(9,413)
(11,750)
(11,750)
51,729
66,799
118,528
34
171

NFI
$10.51
Rating:
Outperform
If answer to #2 is yes, state name and the nature of the interest:
Does AltaCorp Capital and it affiliates collectively beneficially own more than 1% of any class of common equity
of the issuer?
Does AltaCorp Capital or the analyst have any actual material conflicts of interest with the issuer? If yes, explain:
10
issuer?
11
Has any director, officer or employee who prepared this research report received any compensation from the
12
Has AltaCorp Capital provided the issuer or its predecessor with non-investment banking securities-related
13
past 12 months?
14
Issuer
N
Rating System
Outperform
Ranking
Distribution
60%
% IB Clients
19%
Sector Perform
33%
1%
Underperform
1%
0%
Speculative
4%
2%
Restricted
0%
0%
Tender
0%
0%
Total
99%
22%

group average.
average.
return potential is high, but the risk of a significant loss
is material.

$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Aug 11
Sep 11
Oct 11
Nov 11
Dec 11
Jan 12
Feb 12
Mar 12
Apr 12
May 12
Jun 12
Jul 12
Aug 12
Sep 12
Oct 12
Nov 12
Dec 12
Jan 13
Feb 13
Mar 13
Apr 13
May 13
Jun 13
Jul 13
Aug 13
Sep 13
Oct 13
Nov 13
Dec 13

The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or
purchase of securities. While the accuracy or completeness of the information contained in this document cannot be guaranteed by
AltaCorp Capital Inc., it was obtained from sources believed to be reliable. AltaCorp Capital Inc. and/or its officers, directors and
employees may from time to time acquire, hold or sell positions in the securities mentioned herein as principal or agent.
Tel: 403 539 8600

Tel: 647 776 8230
This report has not been approved by AltaCorp Capital Inc. for the purposes of section 21 of the Financial Services and Markets Act 2000
as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied upon, by any other person.
AltaCorp Capital Inc. may receive or intends to seek compensation for investment banking services from all issuers under research
coverage within the next three months.
AltaCorp Capital (USA) Inc. has taken reasonable steps regarding the accuracy of key statements in this report and accepts responsibility
for the content in this research report.
U.S. Institutions interested in effecting transactions in any of the securities discussed in this report, must contact AltaCorp Capital (USA)
Inc. at 403-539-8600.
35
172
Direct
George FJ Gosbee
Chairman & CEO
403 539 8601

President
647 776 8250
ATB Financial
Dave Mowat
President & CEO
780 408 7181
dmowat@atb.com
Ian Wild
403 974 5127
iwild@atb.com
_________________________________________________________________________

E&P- Domestic
Joseph Lee, P. Eng., Associate
403 539 8606

403 539 8598
403 539 8621
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403 539 8615
dlever
jblee
drawson
cerana
jmccrea
kvandenberg
porourke
Oilfield Services
403 539 8620

403 539 8594
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bwoods
jsawatzky
mwestby
647 776 8246

647 776 8245
cmurray
gulybyshev
Agri-Industry
Jennifer Wood, Associate
647 776 8236

647 776 8254
jchu
jwood
All Sectors
Jennifer Fong, Research Assistant
403 539 8607
jfong
_________________________________________________________________________
Institutional Sales
Calgary
Kerk Hilton
403 539 8608
khilton
Toronto
Paul Sarachman, CFA, FCSI.
647 776 8250
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647 776 8242
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647 776 8233
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647 776 8237
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_________________________________________________________________________
Calgary
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403 539 8613
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Toronto
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647 776 8244
cpolan
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647 776 8235
jvarley
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647 776 8231
mcapobianco
________________________________________________________________________
Investment Banking
CALGARY
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TORONTO
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403 539 8601
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647 776 8243
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403 539 8618
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Oilfield Services
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403 539 8597
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Agri-Industry | Energy Infrastructure & Industrials

Bill Murray, CFA
647 776 8240
bmurray
All Sectors
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403 539 8628
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403 539 8614
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403 539 8595
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403 539 8604
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________________________________________________________________________

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403 539 8593
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173
Industrial
Products
(NFI TSX)
Stock Rating:
July 4, 2013
Toronto, Ontario
Bert Powell, CFA
BMO Nesbitt Burns Inc.
(416) 359-5301
bert.powell@bmo.com
Market Perform
Industry Rating: Outperform
Associate: Jason Vouriot, CFA

(416) 359-6193
jason.vouriot@bmo.com
Initiating Coverage With Market Perform

Rating and $12 Target Price
Price (3 Jul)
$11.14
52-Week High
$11.33
Target Price
$12.00
52-Week Low
$6.40
(FY Dec.)
2012A
2013E
2014E
Highlights
EPS
$0.23
$0.56
$0.79
20.1x
14.3x
$0.67
$0.83
$1.33
P/CFPS
13.6x
8.5x
$1,150
$1,340
New Flyer is the leading manufacturer of heavy-duty transit buses

in Canada and the U.S. and a leading provider of aftermarket parts
and product support. It has the largest market share in the U.S. and
Canada in terms of both annual deliveries (32% in 2012; ~45% pro
forma NABI) and a number of buses in service (30% in 2012; ~50%
pro forma NABI based on management estimates).
We are introducing adjusted EBITDA estimates of $82.6 million for
2013 and $103.5 million for 2014.
Our $12 target price is based on an 7.7x EV/EBITDA applied to our
2014E EBITDA adjusted using CAD/USD exchange rate of $0.95 and
implies a ~5% dividend yield.
New Flyer has undergone a number of structural changes in the past
12 months designed to improve the underlying fundamentals of the
business. The capital injection from Marcopolo S.A. has served to fund
the acquisition of NABI and Orions aftermarket business, which should
lead to further share gains and opportunities to extract synergies. Firm
orders have started to rebound and the company is well positioned to
increase manufacturing operations should demand reach levels that
would justify a production increase.
However, at this time, we believe the market is attributing a reasonable
value to the existing operations and we are hesitant to allocate much
in the way of value towards potential synergies from the completed
acquisitions or future growth options until there are more details
regarding their proposed financial impact. In the meantime, we would
advise investors to wait for a better entry point and are initiating coverage
of New Flyer Industries with a Market Perform rating.
P/E
CFPS
Rev. ($mm)
$873
EV ($mm)
$593
$810
$787
EBITDA ($mm)
$61.6
$82.6
$103.5
9.6x
9.8x
7.6x
EV/EBITDA
Dividend
$0.59
Yield
Book Value
$7.93
Price/Book
5.2%
1.3x
Shares O/S (mm)
55.5
Mkt. Cap ($mm)
$625
Float O/S (mm)
49.3
Float Cap ($mm)
$495
Notes: Share price, target & capitalization in C$, all others

US$
Major Shareholders: Marcopolo S.A. (19.9%), Mawer
(13.3%), Coliseum Capital (11.4%), Bissett (7.5%)
New Flyer Industries Inc (NFI)
Price: High,Low,Close
12
Earnings/Share
2.0
11
1.5
10
1.0
0.5
0.0
-0.5
-1.0
-1.5
Volume (mln)
NFI Relative to S&P/TSX Comp
200
200
150
150
100
100
50
Q4
Q1
Q2
Q3
2012
Q4
Q1
50
Q2
2013
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s)
under FINRA rules. For disclosure statements, including the Analysts Certification, please refer to pages 26 to 29.
174
175
Table of Contents
Investment Thesis........................................................................................................................................................... 2
New Flyer Continues to Consolidate the Industry....................................................................................................... 2
Backlog on the Mend.................................................................................................................................................. 3
Excess Capacity in the Marketplace Led to Pricing Pressure....................................................................................... 4
Line Entry Rate Is the Key to Profitability.................................................................................................................. 4
Attractive Yield Is Sustainable..................................................................................................................................... 5
Company Overview........................................................................................................................................................ 8
Industry Overview........................................................................................................................................................ 15
Ridership................................................................................................................................................................... 15
Rules of Origin (Buy America) Legislation................................................................................................................ 16
Public Transit Funding.............................................................................................................................................. 16
Competition.............................................................................................................................................................. 18
Introducing Estimates ................................................................................................................................................. 20
Valuation...................................................................................................................................................................... 20
Income Statement......................................................................................................................................................... 22
Balance Sheet................................................................................................................................................................ 23
Cash Flow Statement.................................................................................................................................................... 24
Risks ............................................................................................................................................................................ 25
176
Page 2
Investment Thesis
We are initiating coverage of New Flyer Industries with a Market Perform rating and a
$12 target price, which implies a total return of ~13% including the annual dividend of
$0.585 per share. New Flyer is the leading manufacturer of heavy-duty transit buses in
Canada and the U.S. and a leading provider of aftermarket parts and product support.
New Flyer has a strong reputation reflecting its broad product offering, extensive engineering resources, product reliability, and its aftermarket parts and support capabilities.
It has the largest market share in the U.S. and Canada in terms of both annual deliveries
(32% in 2012; ~45% pro forma the NABI acquisition and Orions discontinuation of
bus manufacturing operations) and number of buses in service (30% in 2012; ~50% pro
forma including NABI and Orion based on management estimates). New Flyers leading market share and existing relationships with large transit agencies provides extensive
opportunities for repeat business.
Other
4%
Chart 1: Market Share

of Deliveries in U.S. and
Canada 2012
Nova 18%
New Flyer 32%
Gillig
29%
NABI
10%
Orion, 7%
Source: BMO Capital Markets, Company documents
New Flyer Continues to Consolidate the Industry

In January 2013, Marcopolo S.A., one of the worlds largest bus builders based in Brazil,
announced a $116 million (11.1 million shares at $10.50) strategic investment in New Flyer
in exchange for a 19.99% stake in the company. The first tranche of 4.9 million shares
was issued in January with the remaining 6.2 million shares issued on June 21, 2013.
The investment established a long-term strategic relationship between the two firms and
provided New Flyer with necessary capital to complete the acquisition of Orions parts
and service business in March 2013 and North American Bus Industries (NABI) in June
2013. The two transactions add scale, an enhanced product offering and the opportunity
for a variety of potential synergies from combining the operations:
Orion adds key relationships with the New York transit agency (largest in North
America) and the Toronto transit agency (5th largest in North America).
177
Page 3
NABI benefits from lower cost non-unionized labour at its Anniston, Alabama
manufacturing facilities.
NABI has a well-established aftermarket business based in Delaware, Ohio that sources
parts from more than 200 suppliers.
Our forecasts are based on preliminary pro forma estimates for the combined firm but we
will refine them once we have greater visibility post Q2 results. The NABI transaction has
closed, but there remains post closing work on definitions around backlog and allocation
of purchase costs between non-amortizing goodwill and amortizing intangibles.
Backlog on the Mend

At the end of Q1/13, New Flyers total backlog was $3.3 billion (including $0.9 billion
in firm order backlog and $2.4 billion in options backlog) compared to the peak of $4.1
billion in total backlog at the end of 2008 but 25% above the low of $2.6 billion reported
in Q3/12. Firm order backlog has improved in each of the last four quarters and is currently at its highest level in terms of equivalent units (35 & 40 foot buses are treated as one
unit, 60 foot buses are treated as two units) since late 2010. Firm order backlog peaked in
Q1/08 at $1.3 billion, before declining steadily to $545 million in Q1/12. We note that we
do not have details of the backlog duration, which can range from 15 years. Assuming the
average firm order backlog duration is approximately 23 years we estimate that current
firm order backlog reflects between one-third and one-half of planned production.
Our best guess for the acquired NABI backlog assuming an average cost of $460,000 per
unit, is $273 million for the firm backlog and another $454 million in options for a total
backlog of $727 million. However, the company has yet to scrub the backlog following
the acquisition and will provide greater visibility in conjunction with its release of Q2/13
deliveries.
Chart 2: New Flyers
Backlog
10,000
9,000
8,000
(EUs)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
2007
2008
Firm Orders
2009
Option Orders
2010
Deferred Firm Order
2011
2012
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
0
2013
Deferred Option Order
Note: Deferred firm and option orders related to Chicago contract that is not expected to materialize
Source: BMO Capital Markets, Company reports
178
Page 4
Excess Capacity in the Marketplace Led to Pricing Pressure

We believe the industry will likely remain under pressure in the near term as excess capacity relative to the level of bus deliveries has led to an approximate 10-15% decline in
price. Industry competitor Orion, which had a 7% market share in 2012, discontinued
bus manufacturing operations in early 2013. Orions exit should alleviate some of the
competitive pressure, but better demand is needed before we see any meaningful pricing power. We do expect orders to continue improving as the cycle rebounds and transit
agencies advance delayed replacements and expansions. Other factors expected to drive
fleet growth include increasing traffic congestion, rising fuel costs, and a growing public
sentiment towards environmental concerns, which is fuelling investment in new propulsion
technologies (hybrid, CNG and all electric).
Line Entry Rate Is the Key to Profitability

Despite the high degree of customization offered by New Flyer, pricing power is limited.
Accordingly, the biggest driver of profitability is higher asset turnover exhibited in the line
entry rate. Most of the bus costs are variable, but engineering and fixed costs are absorbed
at a higher rate as utilization increases. As shown below, New Flyer went through a period
of rapid expansion, roughly doubling the build rate between 2006 and 2009, but was forced
to pull back as orders had already started to decline in 2008 and remained soft for nearly
four years. We believe the current line entry rate of 36 buses per week (18 per week from
both Winnipeg and St. Cloud operations) has positioned the firm on more solid footing.
The 36 buses per week or ~1,800 per year build rate is closely aligned with the annual
deliveries reported in recent years and has allowed the firm to in-source a variety of parts
as well as make other structural improvements to the manufacturing operations. We assume the acquired NABI operations will add an additional 12 equivalent units per week
or roughly 600 units per annum at current production levels, bringing the total deliveries
to approximately 2,100 units in 2013 and 2,400 units in 2014.
55
16.0%
Forecast
50
14.0%
45
12.0%
40
10.0%
35
8.0%
30
6.0%
25
4.0%
20
2.0%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2E
Q3E
Q4E
Q1E
Q2E
Q3E
Q4E
Chart 3: New Flyers

Line Entry Rate vs. Bus
Manufacturing EBITDA
Margin
2006
2007
2008
2009
2010
Line Entry Rate
2011
2012
2013E
2014E
EBITDA Margin
179
Page 5
Attractive Yield Is Sustainable

New Flyer offers an attractive yield of 5.3% based on its annual distribution of $0.585
per share. The dividend exceeded the reported free cash flow in both 2011 and 2012 but is
forecasted to represent ~66% of free cash flow in 2013 and ~50% in 2014. At these levels,
and given the relatively stable cash flow profile of the business, we believe the dividend
is sustainable and would expect the free cash flow to improve along with a rebound in
deliveries.
What we are looking for in order to be more constructive on the stock:
Greater Certainty Around MiDi Bus Initiative In 2012, the company launched a 50/50
joint venture with Alexander Dennis Limited, the U.K.s largest bus and coach builder
and the world leader in MiDi buses. The strategic rationale was to bring a smaller medium duty bus targeted at both public and private applications to the North American
market. New Flyer is currently manufacturing prototypes with production expected to
commence by the end of 2013. While interesting and likely to generate a positive return at
some point, at this time it is difficult to substantiate what the financial impact will be. The
North American MiDi bus market is believed to represent ~1,000 buses per annum at a
cost of ~$300,000 per bus, to which we assume an expected EBITDA margin comparable
to existing bus manufacturing operations (adjusted for the 50/50 JV). However, due to
the development costs, lack of orders and the timing of production starting at the end
of 2013, we expect the incremental profit to be immaterial within our forecast period of
20132014. To put this in context, our 2014 EBITDA forecast is $103.5 million.
Table 1: Potential EBITDA Contribution From Sale of MiDi Buses (in US$ millions)
EBITDA
Margin
(NFI's share of
50/50 JV)
1.8
0.5%
1.5%
2.5%
3.5%
4.5%
50
$0.1
$0.2
$0.4
$0.5
$0.7
Number of MiDi Buses Delivered

100
200
$0.2
$0.3
$0.5
$0.9
$0.8
$1.5
$1.1
$2.1
$1.4
$2.7
300
$0.5
$1.4
$2.3
$3.2
$4.1
500
$0.8
$2.3
$3.8
$5.3
$6.8
Source: BMO Capital Markets estimates, Company reports
Renewed Growth in Higher Margin Aftermarket Parts and Support Business New Flyers
leading share of bus deliveries and fleet in service provides ongoing demand for its higher
margin aftermarket parts business. The EBITDA margin in this business was 16.5% in
2012 compared to 5.5% in Bus Manufacturing. Aftermarket parts represented approximately 14% of 2012 revenue and 32% of EBITDA. Aftermarket revenue has exhibited a
compound annual growth rate of 12.9% since 2000 but growth has slowed since 2009 as
transit agencies faced shrinking operating budgets and became increasingly focused on
cost reduction, which put pressure on part pricing. New Flyer has started offering new
services such as on-site parts and support solutions in addition to inventory management
services. The addition of Orion and NABIs aftermarket businesses combined with the
Chicago Transit Agency (CTA) retrofit contract announced in early 2013 are expected
to more than double the size of New Flyers parts and service operations. There is also
potential for the combined operations to deliver efficiency gains and improve the companys offering based on the enlarged active fleet. Signs of renewed organic growth in the
aftermarket business and/or higher pricing would be viewed as positive catalysts.
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Chart 4: Revenue From

Aftermarket Segment
($ in millions)
$300
$250
$200
$150
$100
$50
$0
2000
2001
2002
2003
2004
New Flyer
2005
2006
2007
CTA retrofit contract
2008
Orion
2009
NABI
2010
2011
2012
Pro
forma
Further Productivity Improvement Opportunities If Orders Rebound Sufficiently New

Flyer launched an Operational Excellence initiative in 2008 with the intention of reducing
manufacturing costs, enhancing quality and improving safety. To date, the company has
refined and standardized the companys manufacturing cells, is progressively in-sourcing
a greater number of parts to improve production of customized parts, eliminated the
central inventory warehouses and implemented point-of-use supply of materials to the
production line. We believe there are further productivity improvement opportunities to
be capitalized if the firm order backlog improves and the line entry rate is boosted to meet
the increased demand. Roughly 90% of the costs are variable, but we estimate that the
company can extract further productivity improvements from increased capacity utilization, which currently stands at ~70% for the New Flyer manufacturing operations.
More Robust U.S. Public Transit Funding and Improving Demand Demand for heavy-duty
transit buses in both the U.S. and Canada is largely dependent on funding programs from
various levels of government. The U.S. federal government has a well-established funding
program for transit buses, but the Federal Transit Association (FTA) requires that 20% of
capital costs be funded by the state or local government. The outlook for many U.S. states
and municipalities fiscal position has been improving recently but remains challenged.
New Flyers customers typically place their bus orders a year in advance of delivery.
Since federal funding is allocated to the customers when the orders are placed, cancellations are rare and many purchase order contracts include options to purchase additional
buses in 3-5 years time. The exercise of options has historically represented ~60% of
New Flyers annual bus deliveries. Federal funding for the options are also allocated to
the customer at the time of the original contract. The funding for these options can be
transferred to other transit authorities in the U.S. However, 1,560 options are likely to
expire in late 2013 related to a Chicago transit authority contract and a total of 2,767
options (49%) of the Q1/13 option backlog are expected to expire in 2013.
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More Balanced Supply/Demand Equation as Buying Cycle Rebounds With the slowdown
in bus deliveries in recent years and the proliferation of new models from competitors,
a glut of excess supply has plagued the industry and led to an estimated 10-15% decline
in price. Management has highlighted that competition for orders in 2012 remained at
its most intense in several years as firms bid aggressively to maintain operating rates.
Orions (previously owned by Daimler bus) decision to exit bus manufacturing will likely
alleviate some pressure but we would become more constructive if/when manufacturers
are able to absorb the excess capacity in the marketplace and potentially begin extracting
some pricing power.
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Company Overview
New Flyer is the leading manufacturer of heavy-duty transit buses and provider of aftermarket parts and service in the U.S. and Canada. The company is headquartered in
Winnipeg, Manitoba, and operates manufacturing and distribution facilities in both the
U.S. and Canada. The companys bus manufacturing segment represented approximately
86% of its revenue and 68% of its adjusted EBITDA in the trailing 12 months ended
Q1/13, while its aftermarket parts distribution business represented approximately 14%
of its revenue and 32% of its adjusted EBITDA. Approximately 81% of the companys
trailing 12 months revenue was earned in the U.S., while the remainder was generated
in Canada.
On a pro forma basis, including the acquisition of NABI and the Orion parts and service
business, we estimate the bus manufacturing segment will represent 81% of revenue and
40% of adjusted EBITDA. The proportion of U.S. sales is expected to grow to approximately 88%.
Chart 5: Revenue and

EBITDA Breakdown by
Segment and Geography
Canada Aftermarket, 4.5%

Canada Bus, 14.3%
U.S. Aftermarket, 9.5%
32%
68%
U.S. Bus, 71.7%

Legend:
Outer circle refers to revenues;
inner circle EBITDA
New Flyer has the most extensive product portfolio in the transit bus industry and now
offers a broad range of manufactured buses ranging from 30 to 60 feet in length with
seating capacity for up to 65 passengers and a variety of propulsion system options. Following the acquisition of North American Bus Industries (NABI), the company added
to its product portfolio with increased exposure to Bus Rapid Transit (BRT) and the
incorporation of NABIs low-floor design (LFW).
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Type
Table 2: New Flyers

Manufactured Bus Models
and Specifications
Length
Propulsion System(s)
Xcelsior
(Heavy-duty transit)
35', 40', 60'
Diesel, Diesel-electric hybrid,

Compressed natural gas
(CNG), Liquid natural gas
(LNG), electric trolley (40'
and 60') and hydrogen fuel
cell hybrid (40')
MiDi
(Medium-duty transit)
30', 35'
Diesel
LFW
31', 35', 40'
Diesel, Diesel-electric hybrid

and Compressed natural gas
(CNG)
Bus rapid transit

(BRT)
(High capacity)
35', 40', 60'
Diesel, Diesel-electric hybrid

and Compressed natural gas
(CNG)
Source: Company reports, Company documents
In 2012, 43% of bus manufacturing revenue came from compressed natural gas (CNG)
buses, 34% from diesel buses and the remaining 23% from hybrid buses.
Chart 6: 2012 Bus Manufacturing Revenue by Propulsion

System and Length
Chart 7: 2012 Bus Manufacturing Revenue by Propulsion

System and Length
60 Foot
26%
Diesel
34%
CNG
43%
35/40 Foot
74%
Hybrid
23%
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New Flyers product breadth and engineering capabilities allow it to provide a high degree of customization and opportunities to bid on almost any contract in the U.S. and
Canada. Manufacturing facilities are located in Winnipeg, Manitoba, and Crookston
and St. Cloud, Minnesota. The Crookston facility, located in northwest Minnesota, is
175 miles south of Winnipeg and lies approximately halfway between the Winnipeg and
St. Cloud facilities. The St. Cloud facility is located near Minneapolis and is 400 miles
south of Winnipeg.
Efficient supply chain management is critical to the manufacturing process as the company
must meet federal constraints related to foreign content and ensure all components are
available according to scheduled assembly times. The company builds each bus according
to contracted specifications and does not maintain an inventory of completed buses. The
manufacturing process for a typical bus takes approximately five weeks, although this can
vary based on production rates and specifications.
Table 3: New Flyers Facilities

Location
Type
Winnipeg, Manitoba
Winnipeg, Manitoba
Manufacturing facility
Distribution center
Winnipeg, Manitoba
Development facility
St. Cloud, Minnesota
Crookston, Minnesota
Erlanger, Kentucky
Fresno, California
Brampton, Ontario
Customer acceptance
Distribution center
Distribution center
Distribution center
Arnprior, Ontario
Elkhart, Indiana
Service center
TCB's facilities
Function
Administration, subassembly, structure weld,
shell assembly and paint
suppport services
Aftermarket parts
New product development
Structure weld, shell
assembly, paint, final
assembly and customer
inspection/acceptance
Final assembly
Customer
inspection/acceptance
Parts distribution center
Warranty support and
parts distribution
Parts fabrication
Approximate Size
(Sq. ft.)
Ownership
Lease
Expiration
Owned
Leased
n/a
2013
Leased
2013
Leased
2024
Owned
n/a
27,000
43,000
32,000
32,000
Owned
Leased
Leased
Leased
n/a
2013
2014
2014
2010 26,000
2010 24,000
Leased
Leased
2015
2013
Established
1973
(expanded 1998) 364,000
1998 52,000
1992 12,000
1999 338,000
1996
(expanded 1998) 89,000
1998
2008
2009
2011
The Winnipeg manufacturing facility ships partially completed shells via flatbed truck to
either Crookston or St. Cloud for final assembly in order to comply with Buy America
legislation. The Crookston facility is a final assembly facility that completes bus shells
delivered from Winnipeg or St. Cloud and tests the completed vehicles. The St. Cloud
facility is the companys newest and is capable of manufacturing a complete bus, from the
initial frame welding process through to final assembly and testing. Specialized ventilation
equipment was installed in the St. Cloud facility in 2011 to accommodate operational
flexibility and to address the increasing demand for CNG-powered buses.
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Figure 1: Bus
Manufacturing Flow Chart
Source: Company documents
The NABI acquisition increases New Flyers manufacturing capacity with two facilities
located in Anniston, Alabama. The NABI operations include all stages of manufacturing
from the initial frame welding through to final assembly and testing.
New Flyer exhibits high customer concentration, with its top 10 customers typically accounting for between 50% and 75% of total revenue in any given year. However, municipalities and transit agencies tend to place large orders every few years rather than smaller
orders each year, leading to an evolving list of key customers. New Flyer has business
relationships with 270 transit authorities in the U.S. and Canada, which combined operated
approximately 75% of the total heavy-duty transit buses in North America in 2012. Also,
20 of the 25 largest transit authorities in the U.S. and Canada operate New Flyer buses.
Taking into consideration the customer buying pattern, New Flyer generates a significant
amount of repeat business. The average tenure of the companys relationships with its
10 largest customers over the last five years is approximately 16 years. Over the past five
years, 91% of its annual bus manufacturing revenue was generated from repeat customers
that had purchased buses within the prior five-year periods.
Chart 8: Largest Transit

Authorities in the U.S. and
Canada
Source: Company documents
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Page 12

The company currently has a production capacity of roughly 2,500 equivalent units (EU)
per year. An equivalent unit is defined as a standard 40-foot diesel bus (35 & 40 foot buses
are treated as one unit, 60 foot buses are treated as two units). In 2012, 1,692 equivalent
units were produced, translating into 68% of capacity. New Flyer generally runs one to
two shifts per day, five days a week at each of its three facilities. We estimate that 2013
deliveries will include roughly 1,800 equivalent units from New Flyer manufacturing operations, which implies approximately 30% excess capacity and a healthy margin for the
company to increase production with limited capital expenditure as orders and backlog
improve.
Approximately 90% of the total costs in the bus manufacturing operations are variable
(based on 2012). However, there remains material leverage to the bottom line given the
relatively low margin exhibited in the bus manufacturing operations.
Chart 9: Cost Structure for

Bus Manufacturing
Labour
9%
Warranty
2%
Other Direct 5%
Variable
Overhead
3%
Fixed Overhead
6%
Materials
71%
Operating
Expenses
4%
New Flyer sells aftermarket parts and services to customers for buses manufactured
by New Flyer or its competitors. The aftermarket business offers an interesting growth
platform as there is typically $2.50-3.50 spent on parts and service for every $1 spent on
new buses. Assuming parts account for roughly 50% of that spend, New Flyer has lots of
room to grow relative to its current position of <$0.25 vs. $1.25-1.75 target.
While the cost of aftermarket support is often built into the purchase price of the bus,
aftermarket parts are sold separately. The company sells a variety of parts including its
own OEM parts; OEM parts from other manufacturers; Kinetik brand parts, which
are a New Flyer generic alternative; Xtended Life products, which are a premium
product option and other no-name parts. Based on the margin earned on the different
lines of parts, mix plays an important role in determining the overall margin earned in
the division. Competitive pressure will also weigh on results as New Flyer competes with
a large number other OEMs, independent parts suppliers and truck part suppliers. For
example, if New Flyer is providing OEM parts from other manufacturers such as the
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Page 13
engine supplier Cummins, margins will be low vs. a New Flyer OEM part made in-house
where margins will be quite high.
Table 4: Margin Profile of

Various Aftermarket Parts
Margin Profile
Best Margin
Aftermarket Parts
New Flyer OEM
Kinetik (New Flyer Generic)
Xtended Life
Other OEM
No name parts
Better Margin
Low Margin
Source: BMO Capital Markets
Given the companys leading share of heavy-duty transit buses in service, there remains
significant potential to grow the higher margin aftermarket business. The recent acquisition of the Orion parts and services business (formerly owned by Daimler buses) will add
approximately $50 million in aftermarket revenue while NABI is expected to add roughly
$60 million per annum. These two acquisitions fit with the companys ongoing strategy
to expand its share of that market and extend New Flyers offering.
New Flyer was also awarded its first ever transit bus mid-life overhaul program with the
Chicago Transit Authority (CTA) on February 4, 2013. The mid-life program is for CTAs
fleet of 1,029 New Flyer buses that have been in service for up to seven years and have more
than 275,000 miles each. New Flyer will supply spare parts and labour for the mid-life
overhaul program estimated at approximately $50 million over the next 24 months for 400
buses. The company will also provide ~$25 million in spare parts and labour to another
supplier who was awarded the second mid-life contract by CTA for another 629 buses.
The company faced significant margin pressure in 2012 due to contraction in the overall
market that led to competitive pricing but remained the market leader and saw its share
grow to 18%. Combining New Flyers existing aftermarket business with Orion and NABI,
the implied pro forma market share will be 34%.
Chart 10: Market Share of

Aftermarket Parts Business
Other , 25%
New Flyer,
18%
NABI, 9%
Truck , 5%
Orion, 7%
Nova, 6%
Muncie, 6%
Locals, 7%
Gillig, 9%
Eng Dealers,
8%
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New Flyer has four parts distribution centers (PDC) that are strategically located to provide rapid delivery to its U.S. and Canadian customers. In Canada, a PDC in Winnipeg,
Manitoba distributes parts to Western Canada while the PDC in Brampton serves Eastern
Canada. In the U.S., a PDC in Erlanger, Kentucky is responsible for eastern U.S. and a
PDC in Fresno, California serves western U.S. Warranty and service support for buses
operated in Southern Ontario and North-eastern U.S. is carried out of a service center
in Arnprior, Ontario.
The addition of NABIs aftermarket business in Delaware, Ohio will likely lead to some
consolidation amongst New Flyers parts distribution facilities. In addition, NABIs service
centre in Jurupa Valley, California fits with New Flyers strategy of opening a second service
center in the Los Angeles, California region that was expected near the end of 2013.
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Industry Overview
We characterize the heavy-duty transit bus industry in Canada and the U.S. as mature
and we believe the long-term demand growth will be modest, driven primarily by fleet
replacement. Last year, an estimated 65% of vehicles purchased within Canada were for
replacement purposes versus 77% in the U.S. The remainder of growth will come from
some route expansion and as feeders into new strategies such as light rail transit (LRT)
and high speed rail.
From 19982012, transit agencies in Canada and the U.S. purchased an average of 5,250
buses per year.
6,500
6,236
6,032
6,000
5,500
5,816
5,347
5,388
5,212
5,065
5,933
5,284
5,154 5,109
5,009
5,000
4,723
4,500
4,333
4,047
4,000
3,500
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
3,000
19
98
Chart 11: Annual Heavy

Duty Bus Deliveries in
Canada and the U.S.
(in equivalent units)
Ridership
Data from the American Public Transit Association (APTA) and the Canadian Urban
Transit Association (CUTA) suggest that the number of yearly bus passenger trips grew
steadily between 1996 and 2006 but softened in conjunction with the slowdown in economic activity and employment. Recent data suggests increasing bus ridership levels in
both Canada (1.2% increase in 2012) and the U.S., which bodes well for future orders
after two years of lower deliveries.
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6,000,000
5,800,000
5,600,000
5,400,000
5,200,000
5,000,000
4,800,000
19
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
12
Chart 12: Annual U.S.

Transit Bus Passenger
Trips (in millions)
Bus Trips (000s)
Average Bus Trips
Source: BMO Capital Markets, APTA
Rules of Origin (Buy America) Legislation

First introduced in 1984 and modified in 1998, Buy America regulations require that (1)
final bus assembly/manufacture must occur within the U.S., and (2) the bus must contain
a minimum 60% U.S. content by cost. Once these conditions are satisfied, the buses are
then eligible for U.S. federal funding. New Flyer is fully compliant with Buy America
legislation and has never failed a compliance audit.
Public Transit Funding

In both Canada and the U.S., public transit is supported by a combination of federal,
state/provincial and local government funding, as well as fare collections and other sources
such as advertising and parking revenue. Capital funding includes expenditures related
to the purchase, renovation and replacement of infrastructure. Operating funds provide
for expenses such as salaries, wages, benefits, maintenance and fuel.
In the U.S., the majority of capital funding for public transit is provided by the federal
government. The Federal Transit Administration will provide up to 80% of the cost of a
bus as long as it meets the following requirements:
1. the purchase replaces a vehicle that has been in operation for at least 12 years or
500,000 miles of service, or is a new vehicle that supports fleet growth based on
population and ridership trends;
2. satisfies the requirements of the Buy America legislation; and
3. remaining 20% of the purchase price must be funded by the local transit authority
or municipality.
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Federal funding for public transit in the U.S. is provided by legislation that covers all
modes of surface transportation. On July 6, 2012, a new two-year transportation authorization was signed into law, entitled Moving Ahead for Progress in the 21st Century
(MAP-21). The new legislation authorizes $10.6 billion in 2013 and $10.7 billion in 2014
for public transportation.
Operating funds for many U.S. transit agencies were severely impacted by the recession
and have led to cuts in service, idling buses, increasing fares, laying off employees and the
deferral of bus replacements. State and local budgets remain challenged but overall state
tax revenues have recovered to pre-recession levels, which should alleviate some of the
pressure on local funding (state, county, and municipal taxes comprise the main source
of the local funding required for agencies to qualify for the FTA capital grants).
$12
$10
FTA Transit Funding

(in billions)
$8
$6
$4
$2
$0
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Chart 13: U.S. FTA Transit

Funding
ISTEA
TEA 21
SAFETEA-LU
SAFETEA-LU Extension
MAP-21
Source: U.S. Federal Filings, BMO Capital Markets
In Canada, there is no central source of funding for bus procurements. Funding for bus
purchases comes from a mix of provincial funding, municipal funding, fare revenue,
various federal programs, and other smaller sources with varying approaches in different
provinces and cities. The Canadian federal government announced in the 2008 budget
that the federal Gas Tax Fund would become permanent. This fund provides approximately C$2.0 billion per year from 2009 through 2014 to help municipalities improve
their infrastructure.
The Canadian Urban Transportation Association has reported a decrease in average fleet
age from 10.5 years in 2005 to 6.6 years in 2011. For the same period, APTA reports that
the average fleet age in the U.S. has increased slightly from 7.5 years to 8.0 years.
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Table 5: Average Age of

the U.S. and Canadian
Transit Bus Fleet (in years)
Year
2005
2006
2007
2008
2009
2010
2011
U.S.
7.5
7.5
7.5
7.5
7.5
8.0
8.0
Canada
10.5
9.6
8.7
7.6
7.5
6.6
6.6
Source: BMO Capital Markets,

APTA, CUTA, Company reports
Competition
Up until the start of 2013 there were five main competitors in the heavy-duty transit bus
industry: New Flyer, Gillig, Nova, North American Bus Industries (NABI), and Orion.
In 2012, New Flyers sales accounted for approximately 32% of the U.S. and Canadian
markets, with Gillig, the next closest competitor at 29%. Orion has since ceased its bus
manufacturing operations and New Flyer acquired NABI on June 21, 2013. On a pro
forma basis, New Flyer will account for 42% of bus deliveries, or depending on how many
Orion customers make the transition to New Flyer, potentially 45-50% market share.
Chart 14: Market Share of

Bus Deliveries in the U.S.
and Canada 2012
Other
4%
Nova 18%
New Flyer 32%
Gillig
29%
Orion, 7%
NABI
10%
Gillig Corporation
The company was founded in 1890 in San Francisco, California by the Gillig family. Gillig
is the second-largest producer of transit buses in North America. Gillig produces buses
with diesel and diesel-electric hybrid propulsion systems. Gillig Corporation is privatively
held, currently by the Henry Crown and Company, which purchased Gillig in 2008.
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Page 19
Nova Bus
Nova Bus began as a division of General Motors, which sold its bus operations in 1987.
The company is now part of the Volvo Bus Corporation. Nova is headquartered in SaintEustache, Quebec and operates three plants (two in Canada and one in the U.S.). Nova
is primarily focused on the Canadian market; however, the company opened a plant in
Plattsburgh, New York in order to sell into the U.S. market. Nova produces buses with
clean diesel and hybrid propulsion systems.
NABI
North American Bus Industries (NABI) was formed in 1976 as part of a strategic alliance
between Crown Coach and Hungarian bus manufacturer, Ikarus. NABI is headquartered
in Anniston, Alabama. NABI is owned by Cerberus Capital Management, which purchased the company in 2006. Also in 2006, Cerberus purchased Optima Bus Corporation and Blue Bird Corporation which specialize in small transit buses and school buses,
respectively. NABI produces buses with clean diesel, hybrid, CNG and LNG propulsion
systems. NABI was acquired by New Flyer on June 21, 2013.
Orion Bus Industries
Orion was founded in 1975 by the Ontario government and is headquartered in Mississauga, Ontario. The company was privatized in 1993 and was acquired by DaimlerChrysler
(now Daimler AG) in 2000. All production begins in the companys Mississauga facility
where the chassis/body structure is assembled. The frame is then shipped to its New York
facility where the major components (engine, transmission, seats, etc.) are installed. Orion
produces buses with diesel, biodiesel, hybrid and CNG propulsion systems. Orion has
ceased to operate as of early 2013.
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Introducing Estimates
We are introducing the following forecasts for 2013 and 2014 based on pro forma estimates
related to the Orion and NABI acquisitions and our belief that bus deliveries will remain
relatively constant despite the improving order flow. We are not factoring in any impact
from the proposed MiDi bus initiative and are assuming modest margin expansion in the
bus manufacturing operations as excess capacity in the market is expected to limit any
potential pricing power.
Table 6: Estimates Relative

to Mean Expectations
BMO Estimates
(US$ millions, except per share data)
Revenue
Cost of Sales
Gross Profit
% of Revenue
SG&A
EBITDA
% of Revenue
Depreciation and Amortization
EBIT
% of Revenue
Net Interest Expense
EBT
% of Revenue
Income Tax Expense
Tax Rate
Net Income
% of Revenue
EPS - Diluted
Mean Estimates
2013
1,150
1,040
110
10%
60
83
7.2%
30
50
4.3%
12
38
3.3%
7
17%
31
2.7%
2014
1,340
1,203
136
10%
67
103
7.7%
34
69
5.2%
10
59
4.4%
14
23%
46
3.4%
2013
1,143
2014
1,423
82
7.2%
34
48
4.2%
10
38
3.3%
8
22%
30
2.6%
112
7.9%
42
70
4.9%
3
67
4.7%
18
27%
49
3.4%
0.56
$0.79
$0.56
$0.98
Source: BMO Capital Markets estimates, Bloomberg
Valuation
Our $12 target price is based on an EV/EBITDA of 7.7x applied to our 2014E EBITDA
forecast adjusted using CAD/USD exchange rate of $0.95 and implies a dividend yield
of ~5% based on the annual $0.585 distribution. The limited track record post conversion from an Interest Deposit Security (IDS) combined with the weak EBITDA margins
reported in 2012 make the determination of an appropriate valuation multiple less clear.
However, we believe that based on its growth prospects, stable cash flow generation and
declining payout ratio that New Flyer will benefit from multiple expansion.
Excluding some unusual tax payments recognized in H2/11 New Flyer has exhibited
consistent free cash flow since converting to a corporation. Our forecasts incorporate
a steady progression in free cash flow resulting from the Orion aftermarket and NABI
acquisitions. Assuming our forecasts are correct, we anticipate free cash flow per share
of $0.25-0.30 per quarter on a go forward basis. Our $12 target price implies a free cash
flow yield of roughly 10% using our 2014E free cash flow per share estimate of $1.22. We
195
Page 21
would become more constructive once we have greater confidence in the potential free
cash flow of the enlarged business.
Chart 15: New Flyers

Historical Forward
EV/EBITDA Valuation
7.5x
7.0x
6.5x
6.0x
5.5x
5.0x
4.5x
O
ct
N 11
ov
D 11
ec
-1
Ja 1
nFe 12
bM 12
ar
-1
Ap 2
r-1
M 2
ay
Ju 12
n1
Ju 2
l-1
Au 2
gSe 12
p1
O 2
ct
N 12
ov
D 12
ec
-1
Ja 2
nFe 13
bM 13
ar
-1
Ap 3
r-1
M 3
ay
-1
Ju 3
n13
4.0x
Fwd EV/EBITDA
Average EV/EBITDA
Source: BMO Capital Markets estimates, Thomson One
Chart 16: New Flyers

Free Cash Flow
Generation (in US$ 000s)
$20,000
Forecast
$15,000
$10,000
$5,000
$-
$(5,000)
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
Q4
Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E
2012
2013
2014
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Page 22
Income Statement
Table 7: Income Statement
2012
In millions of US$
Bus Manufacturing
y/y%
Aftermarket Operations
y/y%
Revenues
y/y%
Cost of Sales
% of revenues
Gross profit
% of revenues
Sales, general and admin. expenses
% of revenues
Foreign exchange losses (gains)
% of net revenues
EBITDA
% of revenues
Depreciation of property and equipment
% of revenues
Amortization of intangible assets
% of revenues
Other income
EBIT
% of revenues
Net interest expense
% of revenues
EBT
% of revenues
Income taxes
Tax rate as % of EBT
Net income
% of revenues
Reported EPS (basic)
Reported EPS (fully diluted)
WA Fully diluted Shares O/S (millions)
Adjusted EBITDA
% of revenues
2010
2011
Q1
Q2
878.1
-11.5%
105.7
12.0%
983.8
-10.6%
865.3
88.0%
118.5
12.0%
47.0
4.8%
(1.7)
-0.2%
97.3
9.9%
8.2
0.8%
15.9
1.6%
14.9
58.3
5.9%
51.9
5.3%
6.4
0.7%
(6.3)
-98%
12.7
1.3%
$0.50
$0.50
810.4
-7.7%
116.0
14.3%
926.4
-5.8%
811.5
87.6%
115.0
12.4%
41.5
4.5%
(0.2)
0.0%
97.9
10.6%
8.3
0.9%
16.0
1.7%
5.0
68.7
7.4%
42.0
4.5%
26.7
2.9%
10.7
40%
15.9
1.7%
$0.81
$0.81
196.2
4.7%
31.4
16.0%
227.6
6.2%
208.6
91.7%
19.0
8.3%
11.6
5.1%
0.2
0.1%
13.3
5.8%
2.0
0.9%
4.0
1.8%
2.4
4.9
2.2%
3.7
1.6%
1.2
0.5%
0.8
64%
0.4
0.2%
$0.01
$0.01
49.6
46.9
97.3
9.9%
80.1
8.6%
2012
Q1
2013E
Q2E
Q3E
Q4E
2013E
2014E
180.9
-20.5%
28.9
16.0%
209.9
-18.3%
190.2
90.6%
19.7
9.4%
11.5
5.5%
(0.4)
-0.2%
14.8
7.1%
2.3
1.1%
4.0
1.9%
0.3
8.2
3.9%
3.3
1.6%
4.9
2.3%
0.5
10%
4.4
2.1%
$0.10
$0.11
753.9
-7.0%
119.1
15.8%
872.9
-5.8%
798.4
91.5%
74.5
8.5%
43.1
4.9%
(2.8)
-0.3%
58.6
6.7%
8.3
1.0%
16.0
1.8%
8.3
25.9
3.0%
15.2
1.7%
10.8
1.2%
1.0
9%
9.8
1.1%
$0.22
$0.23
210.0
7.0%
37.3
17.8%
247.4
8.7%
226.2
91.4%
21.2
8.6%
14.9
6.0%
(0.3)
-0.1%
12.8
5.2%
2.0
0.8%
4.3
1.7%
0.2
6.3
2.5%
3.1
1.3%
3.1
1.3%
(0.4)
-12%
3.5
1.4%
$0.07
$0.08
213.2
8.0%
50.0
23.5%
263.2
16.0%
237.4
90.2%
25.8
9.8%
13.2
5.0%
0.0
0.0%
19.2
7.3%
2.1
0.8%
4.5
1.7%
0.0
12.7
4.8%
3.2
1.2%
9.5
3.6%
1.6
17%
7.8
3.0%
$0.16
$0.15
250.6
39.7%
65.0
25.9%
315.6
51.4%
284.6
90.2%
31.0
9.8%
15.8
5.0%
0.0
0.0%
23.8
7.5%
4.1
1.3%
4.5
1.4%
0.0
15.2
4.8%
2.8
0.9%
12.4
3.9%
2.6
21%
9.8
3.1%
$0.18
$0.17
259.2
43.3%
65.0
25.1%
324.2
54.5%
292.3
90.2%
31.9
9.8%
16.2
5.0%
0.0
0.0%
24.3
7.5%
4.1
1.3%
4.5
1.4%
0.0
15.7
4.8%
2.8
0.9%
12.9
4.0%
2.7
21%
10.1
3.1%
$0.18
$0.18
933.0
23.8%
217.3
23.3%
1,150.3
31.8%
1,040.5
90.5%
109.9
9.5%
60.1
5.2%
(0.3)
0.0%
80.1
7.0%
12.2
1.1%
17.8
1.5%
0.2
49.8
4.3%
12.0
1.0%
37.8
3.3%
6.6
17%
31.3
2.7%
$0.60
$0.56
1,075.9
15.3%
264.0
24.5%
1,339.9
16.5%
1,203.4
89.8%
136.4
10.2%
67.0
5.0%
0.0
0.0%
103.5
7.7%
16.0
1.2%
18.0
1.3%
0.0
69.5
5.2%
10.1
0.8%
59.3
4.4%
13.6
23%
45.7
3.4%
$0.82
$0.79
53.2
52.3
52.3
55.8
55.9
61.6
61.6
61.6
61.6
14.1
6.8%
15.2
7.2%
61.6
7.1%
15.4
6.2%
19.2
7.3%
23.8
7.5%
24.3
7.5%
82.6
7.2%
103.5
7.7%
Q3
Q4
197.4
1.4%
29.6
15.0%
227.0
0.5%
208.3
91.8%
18.7
8.2%
9.9
4.4%
(1.8)
-0.8%
16.6
7.3%
1.9
0.8%
4.0
1.8%
4.8
5.8
2.6%
4.2
1.9%
1.6
0.7%
(1.8)
-110%
3.4
1.5%
$0.08
$0.07
179.3
-10.7%
29.1
16.2%
208.4
-9.1%
191.3
91.8%
17.1
8.2%
10.1
4.9%
(0.8)
-0.4%
13.9
6.7%
2.1
1.0%
4.0
1.9%
0.9
6.9
3.3%
3.9
1.9%
3.0
1.5%
1.5
50%
1.5
0.7%
$0.03
$0.04
44.4
54.9
15.9
7.0%
16.4
7.2%
Source: BMO Capital Markets estimates, Thomson One
197
Page 23
Balance Sheet
Table 8: Balance Sheet
In millions of US$
ASSETS
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Future income tax assets
2010
2011
2012
2013E
2014E
73
59
83
5
2
222
10
116
93
5
0
225
11
113
125
5
0
254
18
143
135
6
1
301
10
146
137
6
1
299
Fixed assets
Intangible assets
Goodwill
Other
Total Assets
37
560
0
25
5
849
37
544
0
37
27
870
42
529
0
49
23
897
81
524
40
51
22
1,019
79
506
40
51
22
997
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities
Deferred revenue
Provision for warranty costs
Current portion of long-term debt
Current portion of capital leases
Other
95
28
43
4
3
0
172
152
2
33
9
2
6
205
151
19
20
40
2
7
239
193
13
20
49
1
0
275
196
13
20
49
1
0
279
Future income taxes

Other
Long-term debt:
Credit facility
Convertible Debentures
Subordinated notes
Total long term debt
126
19
119
14
122
14
115
12
109
9
89
0
43
132
109
0
27
136
121
57
0
178
101
57
0
158
71
57
0
128
IDS subordinated notes

Total Liabilities
273
722
31
505
0
553
0
560
0
525
SHAREHOLDERS' EQUITY
Share capital
Contributed surplus
Equity Component of Convertible Debentures
Retained earnings
Total Shareholders' Equity
Total Liabilities & Shareholders' Equity
226
0
0
(99)
127
849
477
0
0
(111)
366
870
477
(6)
4
(130)
344
897
592
(6)
4
(131)
459
1,019
592
(6)
4
(117)
472
997
198
Page 24
Cash Flow Statement

Table 9: Cash Flow
Statement
In millions of US$
Operating activities
Net income
Amortization of PP&E
Amortization of Intangible Assets
Deferred income taxes
Income Tax Expense
Finance Costs
Foreign exchange (gain) loss on cash
Fair value adjustment to other liabilities
Defined benefit expense
Defined benefit funding
Other
Interest Paid
Income Taxes Paid
Cash flow
Net change in non-cash working capital
Operating cash flow
Financing activities
Issue of common shares
Issue (repayment) of subordinated notes
Issue (repayment) of separate subordinated notes
Issue (repayment) of term credit facility
Issue (repayment) of convertible debentures
Issue (repayment) of capital lease
Repurchase of Class C shares
Dividends - Class A shares
Other
Financing cash flow
Investing activities
Acquisition of property, plant and equipment
Business acquisitions
Other
Investing cash flow
Effect of foreign exchange rate on cash
Increase (decrease) in cash
Cash (bank indebtedness) beginning of year
Drawdown on credit facility
Cash (bank indebtedness) end of year
2010
2011
2012
2013E
2014E
2
8
16
0
(6)
52
(2)
0
1
(4)
23
(50)
(11)
29
42
71
16
8
16
0
11
42
(2)
1
2
(5)
(17)
(43)
(5)
24
(62)
(38)
10
8
16
0
1
15
(2)
1
4
(7)
7
(17)
(7)
30
(24)
6
31
12
18
(5)
(0)
3
(1)
0
1
(2)
1
(3)
(10)
46
12
58
46
16
18
(6)
0
0
0
0
0
0
0
0
0
74
(2)
71
(0)
12
0
0
0
(2)
(12)
(18)
(1)
(22)
(5)
(15)
0
30
0
(3)
0
(25)
(1)
(19)
0
0
(62)
42
65
(2)
0
(34)
(4)
4
116
0
0
(11)
0
(3)
0
(31)
(1)
70
0
0
0
(30)
0
(3)
0
(32)
0
(65)
(7)
(1)
0
(8)
2
43
31
73
0
73
(8)
0
(1)
(8)
2
(63)
73
10
0
10
(11)
0
(0)
(11)
2
1
10
11
0
11
(51)
(72)
0
(122)
1
6
11
18
0
18
(14)
0
0
(14)
0
(8)
18
10
0
10
199
Page 25
Risks
In addition to the general risks inherent in operating a bus manufacturing company,
including economic conditions, environmental and regulatory risk, interest rate risk, and
competition, we note the following risks for New Flyer:
Price Volatility of Raw Materials The primary materials used by New Flyer in its bus
manufacturing business include carbon and stainless steel, aluminum, copper, resins, and
oil-based products, which combine to represent a large percentage of the bus production
costs (Materials make up ~75% of manufacturing costs). While the company fixes the cost
of certain raw materials for one year with its suppliers, a rise in raw material costs presents
a risk to the company if the price increases cannot be passed onto the customers.
Customer Reliance on Government Funding The U.S. Federal Transportation Administration provides 80% of the funding for new heavy-duty transit bus manufacturing in the
US. The loss of funding by the customer may lead to adverse impacts on existing sales.
Warranty Costs Can Be Potentially Material The Company provides a 12-year warranty
on buses (and 18-years on some buses) and one to five years of warranty on other bus
components. These costs can be potentially materially greater than the amount outlined
in bus contracts. Two particular areas that can increase warranty costs are the new engines that have been redesigned to meet stricter emission requirements and bus engine
compartment fires.
Customer Contract Termination a Possibility Since New Flyer does not typically enter
into long-term supply contracts, customers have the right to terminate relationships with
the company once the current contract is completed. In addition, customers have the
right to purchase less volume or to renegotiate a lower price. Any of the above scenarios,
particularly the termination of a business relationship, may have adverse effects on the
companys sales.
Collective Bargaining Approximately 70% of New Flyers employees are subject to collective bargaining agreements. A strike or other disruptions by its unionized employees
may adversely affect the company.
200
Page 26

Target Price
Share Price
Quarterly Price
11
80
11
80
70
70
10
10
60
60
50
50
40
40
30
30
20
20
10
1) Mkt
0
NFI Relative to S&P/TSX Comp.
NFI Relative to Machinery
180
180
160
160
140
140
120
120
100
100
80
200
200
150
100
100
50
50
1.0
8)
7) NR
R 10
150
80
Revenue / Share
Price / Revenue
6)RNR
4) NR 5)

200
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
300
2)
3) R
Mkt
2011
2012
2013
NFI Relative to S&P/TSX Comp. Y/Y (%)

NFI Relative to Machinery Y/Y (%)
100
100
0.5
100
-100
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2011
2012
2013
-100
400
200
0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE
(Dec.)
EPS
$
2011
0.98
Range*:
Current*
1.15
P/E
Hi - Lo
DPS
$
7.9
5.3
0.86
7.9
5.3
9.6
Yield%
Hi - Lo
16.5 11.2
Payout
%
88
BV
$
ND
16.5 11.2
0.59
5.3
P/B
Hi - Lo
ROE
%
>15 >15
>15 >15
51
* Current EPS is the 4 Quarter Trailing to Q2/2012.

* Valuation metrics are based on high and low for the fiscal year.
* Range indicates the valuation range for the period presented above.
ND
NFI - Rating as of 29-Sep-11 = Mkt
ND
na
1
2
3
4
5
6
7
8
Date
29-Sep-11
15-May-12
5-Jun-12
29-Oct-12
24-Jan-13
20-Feb-13
21-Jun-13
28-Jun-13
Rating Change
NR to Mkt
Mkt to R
R to Mkt
Mkt to NR
NR to R
R to NR
NR to R
R to NR
Share Price
$6.10
$7.13
$6.59
$7.75
$10.00
$9.94
$10.30
$11.02
Last Price ( July 2, 2013): $11.27

Sources: IHS Global Insight, Thomson Reuters, BMO Capital Markets.
201
Page 27
IMPORTANT DISCLOSURES
Analysts Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities
or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets
and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings
estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA.
These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule
2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by
a research analyst account.
Company Specific Disclosures
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within
the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking
services within the past 12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within
the past 12 months: Investment Banking Services & Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in
an advisory capacity to, this issuer: Brian Tobin (Member of Board of Directors)
For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/
Company_Disclosure_Public.aspx.
Methodology and Risks to Price Target/Valuation
Methodology: Our $12 target price is based on an 7.7x EV/EBITDA applied to our 2014E EBITDA adjusted using CAD/USD exchange
rate of $0.95 and implies a ~5% dividend yield.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial
and municipal budgets remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include:
price volatility of raw materials, warranty costs could be material, labour disruptions from its predominantly unionized workforce and
customer contract issues (early termination, deferral, non-renewal).
Distribution of Ratings (March 31, 2013)
Rating
Category
BMO Rating
BMOCM US
Universe*
BMOCM US IB
Clients**
BMOCM US IB
Clients***
BMOCM
Universe****
BMOCM IB
Clients*****
Starmine
Universe
Buy
Outperform
37.3%
16.5%
53.8%
38.2%
51.3%
53.2%
Hold
Market Perform
58.0%
8.8%
44.6%
56.8%
47.7%
41.1%
Sell
Underperform
4.7%
3.7%
1.5%
4.9%
1.0%
5.7%
202
Page 28
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for
Investment Banking services as percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for
Investment Banking services as percentage of Investment Banking clients.
****
Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment
Banking services as percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013)
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis;
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis;
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis;
(S) = Speculative investment;
NR = No rating at this time; and
R = Restricted Dissemination of research is currently restricted.
BMO Capital Markets seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN
Small Cap, US Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Rating System (January 4, 2010 April 4, 2013)
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/
Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036
or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
Dissemination of Research
Our research publications are available via our web site http://bmocm.com/research. Institutional clients may also receive our research
via FIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research
is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination
may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information.
Conflict Statement
A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy
for managing conflicts of interest in connection with investment research which is available at http://researchglobal.bmocapitalmarkets.
com/Public/Conflict_Statement_Public.aspx.
General Disclaimer
BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank
of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp.
in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal
or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers
covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets
as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents
have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and
complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no
responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of,
or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected
in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of
individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This
material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital
Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO
Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein,
related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital
203
Page 29
Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or
sell securities of issuers discussed herein.
Additional Matters
To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents
and accepts responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions
in any of the securities included in this report should do so through BMO Nesbitt Burns Inc.
The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This
research is not prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and
subject to the regulations of the Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm
providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 5% or more
of the equity of the issuer. Canadian regulations require that a firm providing research disclose its ownership interest in the issuer
that is the subject of the research if it and its affiliates own 1% or more of the equity of the issuer that is the subject of the research.
Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the subject issuer if such ownership exceeds 5% of the equity of the issuer.
To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report
to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal.
Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/
or BMO Nesbitt Burns Securities Ltd.
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by
the Financial Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I)
persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d)
of the Order (all such persons together referred to as relevant persons). The contents hereof are not intended for the use of and may
not be issued or passed on to, retail clients.
R39290
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and
corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and
commercial banking clients are served by BMO Harris Bank N.A., (Member FDIC). Investment and corporate banking services are provided in Canada and the US
through BMO Capital Markets.
BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A,
(Member FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp.
(Member SIPC), BMO Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt
Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Capital Markets Limited in Europe, Asia and Australia and
BMO Advisors Private Limited in India.
Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is a trademark of Bank of
Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.
Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.
TM Trademark Bank of Montreal
COPYRIGHT 2013 BMO CAPITAL MARKETS CORP.
A member of BMO
April 3, 2013
Financial Group
204

(NFI-TSX)
July 4, 2013
Research Comment
Toronto, Ontario
Stock Rating:
Market Perform
Industry Rating: Outperform
Bert Powell, CFA
Initiating Coverage With Market Perform Rating and

$12 Target Price
Price (3-Jul)
Target Price
BMO Nesbitt Burns Inc.

(416) 359-5301
bert.powell@bmo.com
Assoc: Jason Vouriot, CFA
$11.14
$12.00
52-Week High
52-Week Low
$11.33
$6.40

Price: High,Low,Close
Earnings/Share
The Company
New Flyer is the leading manufacturer of heavy-duty transit buses in Canada
and the U.S. and a leading provider of aftermarket parts and product support. It
has the largest market share in the U.S. and Canada in terms of both annual
deliveries (32% in 2012; ~45% pro forma NABI) and a number of buses in
service (30% in 2012; ~50% pro forma NABI based on management estimates).
1.0
10
0.5
0.0
-0.5
-1.0
Volume (mln)
Forecasts
We are introducing adjusted EBITDA estimates of $82.6 million for 2013 and
$103.5 million for 2014.
Valuation
Our $12 target price is based on a 7.7x EV/EBITDA applied to our 2014E
EBITDA, adjusted using CAD/USD exchange rate of $0.95, and implies a ~5%
dividend yield.
Recommendation
New Flyer has undergone a number of structural changes in the past 12 months
designed to improve the underlying fundamentals of the business. The capital
injection from Marcopolo S.A. has served to fund the acquisition of NABI and
Orions aftermarket business, which should lead to further share gains and
opportunities to extract synergies. Firm orders have started to rebound and the
company is well positioned to increase manufacturing operations should
demand reach levels that would justify a production increase. However, at this
time, we believe the market is attributing a reasonable value to the existing
operations and we are hesitant to allocate much in the way of value towards
potential synergies from the completed acquisitions or future growth options
until there are more details regarding their proposed financial impact. In the
meantime, we would advise investors to wait for a better entry point. For further
information please see our full report (link).
1.5
0
NFI Relative to S&P/TSX Comp
200
200
100
0
100
Q4
Q1
Q2
Q3
Q4
Q1
2012
Q2
2013
Last Data Point: July 2, 2013
(FY-Dec.)
EPS
P/E
2011A
$0.81
2012A
$0.23
2013E
$0.56
19.9x
2014E
$0.79
14.1x
CFPS
P/CFPS
$0.50
$0.67
$0.83
13.4x
$1.33
8.4x
Rev. ($mm)
EV ($mm)
EBITDA ($mm)
EV/EBITDA
$926
$428
$80.1
5.3x
$873
$593
$61.6
9.6x
$1,150
$810
$82.6
9.8x
$1,340
$787
$103.5
7.6x
Quarterly EPS
2011A
2012A
2013E
Q1
-$0.13
$0.01
$0.08a
Q2
-$0.15
$0.07
$0.15
Q3
$0.57
$0.04
$0.17
Q4
$0.35
$0.11
$0.18
Dividend
Book Value
Shares O/S (mm)
Float O/S (mm)
Wkly Vol (000s)
Net Debt ($mm)
$0.59
$7.93
55.5
43.9
272
$224
Yield
Price/Book
Mkt. Cap (mm)
Float Cap (mm)
Wkly $ Vol (mm)
Next Rep. Date
5.3%
1.3x
$618
$489
$2.5
August (E)
Notes: Share price, target & capitalization in C$, all others US$
Major Shareholders: Marcopolo S.A. (19.9%), Mawer (13.3%),
Coliseum Capital (11.4%), Bissett (7.5%)
First Call Mean Estimates: Not Available
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under
FINRA rules. For disclosure statements, including the Analyst's Certification, please refer to pages 2 to 5.
205
BMO Capital Markets

Target Price
Share Price
Quarterly Price
11
11
10
10
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
1) Mkt
2)
3) R
Mkt
6)RNR
4) NR 5)
8)
7) NR
R 10
0
180
180
160
160
140
140
120
120
100
100
80
80
Revenue / Share
Price / Revenue
200
150
150
100
100
50
50
1.0
200

200
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
300
2011
2012
2013
NFI Relative to S&P/TSX Comp. Y/Y (%)

NFI Relative to Machinery Y/Y (%)
100
100
0.5
100
-100
2011
0.0
EPS (4 Qtr Trailing)
Price / Earnings
2012
2013
-100
400
200
0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
FYE
(Dec.)
EPS
$
2011
0.98
Range*:
Current*
1.15
P/E
Hi - Lo
DPS
$
Yield%
Hi - Lo
7.9
5.3
0.86
16.5 11.2
7.9
5.3
9.6
Payout
%
88
BV
$
P/B
Hi - Lo
ND
>15 >15
16.5 11.2
0.59
5.3
ROE
%
>15 >15
51
* Current EPS is the 4 Quarter Trailing to Q2/2012.

* Valuation metrics are based on high and low for the fiscal year.
* Range indicates the valuation range for the period presented above.
ND
ND
na
NFI - Rating as of 29-Sep-11 = Mkt
1
2
3
4
5
6
7
8
Date
29-Sep-11
15-May-12
5-Jun-12
29-Oct-12
24-Jan-13
20-Feb-13
21-Jun-13
28-Jun-13
Rating Change
NR to Mkt
Mkt to R
R to Mkt
Mkt to NR
NR to R
R to NR
NR to R
R to NR
Share Price
$6.10
$7.13
$6.59
$7.75
$10.00
$9.94
$10.30
$11.02
Last Price ( July 2, 2013): $11.27

Sources: IHS Global Insight, Thomson Reuters, BMO Capital Markets.
Page 2 July 4, 2013
206
BMO Capital Markets
IMPORTANT DISCLOSURES
Analyst's Certification
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analysts
may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472
restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosure
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within the past 12
months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the
past 12 months.
Disclosure 6: This issuer is a client (or was a client) of BMO NB, BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months:
Investment Banking Services & Non-Securities Related Services.
Disclosure 13: A partner, director, officer, employee or agent of BMO Capital Markets is an officer, director, employee of, or serves in an advisory
capacity to, this issuer: Brian Tobin (Member of Board of Directors)
Methodology and Risks to Price Target/Valuation
Methodology: Our $12 target price is based on an EV/EBITDA multiple of 7.7x our 2014E EBITDA forecast, adjusted using a CAD/USD exchange
rate of $0.95, and implies a dividend yield of ~5%.
Risks: A significant portion of new transit bus purchases are funded from government sources. As long as federal, state/provincial and municipal
budgets remain under pressure, funding for new bus purchases could be reduced or eliminated. Other risks include: price volatility of raw materials,
warranty costs could be material, labour disruptions from its predominantly unionized workforce and customer contract issues (early termination,
deferral, non-renewal).
Distribution of Ratings (March 31, 2013)
Rating
BMOCM US
BMOCM US
BMOCM US
BMOCM
BMOCM
Starmine
Category
BMO Rating
Universe*
IB Clients**
IB Clients***
Universe****
IB Clients*****
Universe
Buy
Outperform
37.3%
16.5%
53.8%
38.2%
51.3%
53.2%
Hold
Market Perform
58.0%
8.8%
44.6%
56.8%
47.7%
41.1%
Sell
Underperform
4.7%
3.7%
1.5%
4.9%
1.0%
5.7%
*
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
**
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as
percentage within ratings category.
***
Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as
percentage of Investment Banking clients.
Rating and Sector Key (as of April 5, 2013):
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis
Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis on a total return basis
(S) = speculative investment;
NR = No rating at this time;
R = Restricted Dissemination of research is currently restricted.
Page 3 July 4, 2013
207
BMO Capital Markets
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Ratings System (January 4, 2010April 5, 2013):
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For
Other
Important
Disclosures
on
the
stocks
discussed
in
this
report,
please
go
to
http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3
Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
Our research publications are available via our web site http://www.bmocm.com/research/. Institutional clients may also receive our research via
FIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely
available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular
mail. Please contact your investment advisor or institutional salesperson for more information.
Conflict Statement
A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing
conflicts
of
interest
in
connection
with
investment
research
which
is
available
at
http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx.
General Disclaimer
BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its
subsidiaries BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc.,
BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending
arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections
contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets
endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions
that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no
responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this
report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this
report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as
advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the
solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned
in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the
securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO
Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell
securities of issuers discussed herein.
Additional Matters
To Canadian Residents: BMO Nesbitt Burns Inc., affiliate of BMO Capital Markets Corp., furnishes this report to Canadian residents and accepts
responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities
included in this report should do so through BMO Nesbitt Burns Inc.
The following applies if this research was prepared in whole or in part by Andrew Breichmanas, Tony Robson, or Edward Sterck: This research is not
prepared subject to Canadian disclosure requirements. This research is prepared by BMO Capital Markets Limited and subject to the regulations of the
Financial Conduct Authority (FCA) in the United Kingdom. FCA regulations require that a firm providing research disclose its ownership interest in
the issuer that is the subject of the research if it and its affiliates own 5% or more of the equity of the issuer. Canadian regulations require that a firm
providing research disclose its ownership interest in the issuer that is the subject of the research if it and its affiliates own 1% or more of the equity of
the issuer that is the subject of the research. Therefore BMO Capital Markets Limited will only disclose its and its affiliates ownership interest in the
subject issuer if such ownership exceeds 5% of the equity of the issuer.
To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents
and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect
transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd.
To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial
Conduct Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional
experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant
persons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.
Page 4 July 4, 2013
208
BMO Capital Markets
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and
corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and
commercial banking clients are served by BMO Harris Bank N.A., (Member FDIC). Investment and corporate banking services are provided in Canada and the US
through BMO Capital Markets.
BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A (Member
FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC), BMO
Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian
Investor Protection Fund) in Canada, Europe and Asia, BMO Capital Markets Limited in Europe, Asia and Australia and BMO Advisors Private Limited in India.
Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is a trademark of Bank of Montreal,
used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.
Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.
TM Trademark Bank of Montreal
COPYRIGHT 2013 BMO CAPITAL MARKETS CORP

A member of BMO
Financial Group
Page 5 July 4, 2013
209

Initiating Coverage
December 13, 2012
Capital Equipment
Stock Rating:
Sector Performer
Executive Summary: Getting Paid To Wait

Sector Weighting:
Market Weight
12-18 mo. Price Target
NFI-TSX (12/13/12)
Key Indices:
C$8.50
C$8.34
As of December 13 we are initiating coverage of New Flyer with a SP rating

and C$8.50 PT, applying a 7.5x EV/EBITDA multiple to our 2014 estimate to
derive our valuation and reflecting the improving fundamentals for bus
demand. Total return to price target of 9% is in line with an SP rating.
Fundamentals for bus demand are improving given rising U.S.

state/municipal tax revenue, growing bus ridership numbers (reflecting the
cost advantage of taking bus transit versus driving and modestly declining
unemployment rate), and public transit being a greener option.
We do not expect a material uptick in N. American bus deliveries until at

least 2014 given the lag in translating improving fundamentals into orders
and U.S. transit authorities typically working on a ~15-year replacement
cycle (even though federal funding is based on a 12-year cycle).
While New Flyer is guiding towards a 2013 production line rate of ~36
EUs/week (flat from Q4/12 levels), we view its $0.585/share annual
dividend as safe (forecasting 2013 and 2014 payout ratio of 68% and 58%,
respectively). Investors are being paid to wait until orders pick up.
Toronto
3-5-Yr. EPS Gr. Rate (E)

52-week Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Book Value
2012 ROE (E)
LT Debt
Preferred
Common Equity
Convertible Available
NM
C$5.20-C$8.47
44.4M
44.4M Shrs
38,000
$376.3M
C$0.59 / 7.4%
December
$7.78 per Shr
5.0%
$194.9M
Nil
$345.6M
Yes
EBITDA ($ mlns.)
Prev
2012
2013
2014
EV/EBITDA
2012
2013
2014
Current
$62. 9E
$68. 4E
$76. 6E
8.9x
8.2x
7.3x
Stock Price Performance
Source: Reuters
Company Description
New Fly er Industries Inc. is the largest North American
manufacturer of heavy -duty transit buses supply ing
transit authorities in Canada and the U.S.
www.newflyer.com
Kevin Chiang, CFA

1 (416) 594-7198
Kevin.Chiang@cibc.ca
Find CIBC research on Bloomberg, Reuters, firstcall.com

and ResearchCentral. cibcwm.com
All figures in US dollars, unless otherwise stated.(C$0.984:US$1)
12-120291 2012
CIBC World Markets does and seeks to do business with companies covered in
its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their
investment decision.
See "Important Disclosures" section at the end of this report for important
required disclosures, including potential conflicts of interest.
See "Price Target Calculation" and "Key Risks to Price Target" sections at the
end of this report, where applicable.
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
210
Executive Summa ry: Get ting Paid To Wait - Dece mbe r 13, 2012
Sector Performer
NFI-TSX
12/13/12
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Consensus estimates except New Flyer
High-Yielding Industrials
Commercial Vehicle & Parts
Manufacturers
P/E Multiples
Manufacturers
Key Financial Metrics
2011A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Bus Manufacturing Revenues
Aftermarket Revenues
Revenues - Consolidated
Cost of Sales
Gross Profit
EBITDA
EBIT
EBT
Net Income
FD EPS, (Ex. Unusuals)
Balance Sheet
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
C$8.34
C$8.50
Kevin Chiang, (416-594-7198) Kevin.Chiang@cibc.ca
Market Weight
2012E
2013E
2014E
8.9x
8.3x
8.5x
8.2x
7.0x
7.4x
7.3x
6.3x
6.2x
2012E
2013E
2014E
23.9x
14.8x
12.8x
12.3x
11.1x
10.9x
9.7x
10.0x
8.4x
2012E
2013E
2014E
8.3%
1.1x
48.1%
32.5%
2011A
7.0%
1.1x
57.1%
36.4%
2012E
7.3%
1.2x
56.9%
36.3%
2013E
7.6%
1.2x
55.7%
35.8%
2014E
$810.4
$116.0
$926.4
$807.7
$118.7
$77.2
$68.7
$26.7
$19.2
$0.15
Q3/12A
$773.8
$117.7
$891.6
$792.4
$99.2
$62.9
$29.5
$12.8
$14.2
$0.35
$814.7
$123.6
$938.3
$832.6
$105.7
$68.4
$44.1
$30.0
$30.0
$0.68
$872.5
$129.8
$1,032.3
$914.7
$117.6
$76.6
$52.1
$38.1
$38.1
$0.86
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S., with approximately one-third of the market.
Investment Thesis
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a greener option.
We do not expect a material uptick in N. American bus deliveries until at least 2014 given the lag in
translating improving fundamentals into orders and U.S. transit authorities typically working on a ~15year replacement cycle (even though federal funding is based on a 12-year cycle).
While New Flyer is guiding towards a 2013 production line rate of ~36 EUs/week (flat from Q4/12
levels), we view its $0.585/share annual dividend as safe (forecasting 2013 and 2014 payout ratio of
68% and 58%, respectively). Investors are being paid to wait until orders pick up.
2011 Revenue by Operating Segment

Aftermarket
Operations
13%
205
854
191
508
346
United States
77%
Revenue from Bus Manufacturing Operations
Revenue from Aftermarket Operations
1000
2000
800
1500
600
1000
400
500
200
0
0
2010
Deliveries (EU's)
2011
140
120
100
$ Millions
2500
2008
2009
Revenue ($ Millions)
Canada
23%
Bus Operations
87%
1200
2007
2011 Revenue by Geography
108.2
106
116.4
2009
2010
2011
96
82.7
80
60
40
20
0
2007
2008
Source: Company reports and CIB C World Markets I nc.
211
Please see our full initiation-of-coverage report, published December 13, 2012,
for further details.
Executive Summary
As of December 13, we initiate coverage of New Flyer Industries Inc. (NFITSX)
with a Sector Performer rating and an C$8.50 price target. We are applying a
7.5x EV/EBITDA multiple to our 2014 estimate to derive our valuation, which is
at the upper end of New Flyers historical trading range and reflects the
improving fundamentals for bus demand and New Flyers move towards a more
diverse revenue stream (i.e., increased aftermarkets revenue and its Alexander
Dennis joint venture). Including the companys $0.585/share annual dividend,
this infers a total return to price target of 9%, in line with the criteria for a
Sector Performer rating. Below, we highlight our key investment themes for New
Flyer.
1. Fundamentals For Bus Demand Are Improving: Not surprisingly, over
the past few years, bus demand has been relatively soft as U.S. state and
municipal finances were negatively impacted by the recent recession. That
said, fundamentals are improving as state tax revenues have begun to
steadily increase while bus ridership has posted six quarters of consecutive
growth. The latter reflects the decline in the U.S. unemployment rate (with
the CIBC Economics team forecasting this will continue to trend modestly
down over the next two years) and elevated fuel prices. It is estimated that
individuals switching from car to bus travel will save over $10,000 annually,
a not-so-insignificant sum. So with the underlying fundamentals for bus
demand improving, we expect an acceleration of replacement demand by
transit authorities (TAs). New Flyers five-year pipeline is sitting at 17,730
EUs, 56% above last years levels.
Exhibit 1. Order Pipeline
EUs
Pipeline / Bid Universe

20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Expected Future Industry

Procurement Over 5 Years
Bids Submitted
Bids in Process
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Source: Company reports.
212
2. We Are Still Likely 12 To 24 Months From A Material Improvement
In Bus Demand: The million-dollar question is if fundamentals for bus

demand have significantly improve d, why have bus deliveries remained
flattish? First, it reflects the timing lag between when improving
fundamentals translate into increased orders, which is why New Flyer is
guiding to a flat production line entry rate in 2013. With a typical one - to
two-year time frame, this suggests any material improvement in New
Flyers delivery output is likely a 2014 story at the earliest. Second, while
bus deliveries in the U.S. spiked in 19992001, most transit authorities
retire their fleet after 15+ years, despite federal funding that allows for
replacement after 12 years. Again, this suggests that it is likely at least a
year before these buses purchased at the turn of the millennium will need
to be replaced.
3. Increasing Exposure To Higher-margin Service Opportunities: New
Flyer has a 17% market share in aftermarket parts (up from 15% in 2010),
selling parts for New Flyer and competitor buses. New Flyer is seeking to
grow its traditional aftermarket services, which include parts, field support,
warranty and product training, and to build up its life cycle product support
strategy, including vendor-managed parts inventory services, fleet
management, maintenance programs, and product reliability services. We
view this as a natural extension of New Flyers operations given its large
installed base of buses in North America and a trend towards transit
authorities outsourcing maintenance work. Finally, aftermarket margins are
~3x higher than new bus sales and provide a potentially steadier earning
stream.
4. Getting Paid To Wait: New Flyers annual dividend is $0.585/share and
reflects a yield of 7.4%. While we believe New Flyers earnings growth will
be modest over our forecast period, we view its dividend as safe and
forecast a payout ratio of 68% and 58% in 2013 and 2014, respectively. So
while bus orders may not pick up until 2014, investors are being paid to
wait.
Exhibit 2. Payout Ratio

FCFPS
Annual Div idend
Pay out Ratio
2012E
$0.68
$0.585
86.6%
2013E
$0.85
$0.585
68.5%
2014E
$1.00
$0.585
58.3%
Note: F CF = CFO Capex Repayment under capital lease.

213
Price Target Calculation

We derive our C$8.50 price target by applying a 7.5x EV/EBITDA multiple to our
2014 EBITDA estimate of $76.6 million. Our target multiple is at the top end of
New Flyers historical trading range given the longer-term positive impact of
heavy-duty bus demand.
Key Risks To Price Target

Competition: New Flyers market share increased slightly in 2011 to 35%.
However, several established players, including Daimler (DAIGNDE), Gillig, and
Volvo Bus Corporation (VOLVBST), are continually battling New Flyer for
market share. Recently, several international firms entered the North American
bus market; however, the 60% content Buy American rules should limit the
potential impact from international competitors.
Government Budget And Funding Concerns: With the potential for greater
U.S. state budget cuts and with Canadian infrastructure stimulus having ceased
at the end of 2010, New Flyer management has highlighted some concerns
pertaining to the funding available to TAs throughout North America. An inability
of TAs to purchase buses could have a negative impact on future sales.
Labor Agreements: New Flyer has four collective labor agreements with two
different unions (CAW and CWA). The company experienced a major labor
disruption at its Winnipeg facility in 2006. There is always a risk that such an
event can occur again in the future, resulting in production delays and increased
costs.
Foreign Exchange Rates: New Flyer is exposed to changes in the C$/US$ rate,
in terms of revenue, operating costs, and financial obligations. New Flyer
engages in hedging practices to protect itself from changes in the value of the
C$/US$ exchange rate and by adjusting prices of its products by attempting to
anticipate, as closely as possible, the number of orders for the year (TAs
generally order buses one year in advance).
Raw Material And Component Costs: Raw materials and components
represent a majority of the costs in the manufacturing of buses. Nearly 92% of
New Flyers costs are variable. Additional costs are generally passed onto
customers through price adjustments. However, significant increases, or
fluctuations, in copper, resins or oil prices could affect margins.
214
Our EBITDA ($mln) estimates are shown below:
2012 Current
2013 Current
2014 Current
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
$16.7A
---
$16.4A
---
$14.1A
---
$15.7E
---
$62.9E
$68.4E
$76.6E
215
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions exp ressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
Department. Research analysts do not receive compensation based upon revenues from specific investment banking
transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household from
executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this repo rt,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
Important Disclosure Footnotes for New Flyer Industries Inc. (NFI)

2a
2c
New Flyer Industries Inc. is a client for which a CIBC World Markets company has performed investment
banking services in the past 12 months.
CIBC World Markets Inc. has managed or co -managed a public offering of securities for New Flyer Industries
Inc. in the past 12 months.
2e
CIBC World Markets Inc. has received compensation for investment banking services from New Flyer
Industries Inc. in the past 12 months.
2g
CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services
from New Flyer Industries Inc. in the next 3 months.
216
Companies Mentioned in this Report that Are Not Covered by CIBC World Markets Inc.:
Stock Prices as of 12/13/2012:
Daimler AG (DAIGN-DE, 39.82, Not Rated)
Volvo AB (VOLVB-ST, [SEK]91.85, Not Rated)
217
CIBC World Markets Inc. Price Chart
No rating history data found for New Flyer Industries Inc.
218
CIBC World Markets Inc. Stock Rating System

Abbreviation
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
CIBC World Markets does not maintain an investment recommendation on the stock.
Restricted
CIBC World Markets is restricted*** from rating the stock.
Stock Ratings
Sector Weightings**
O
Overweight
Sector is expected to outperform the broader market averages.
Market Weight
Sector is expected to equal the performance of the broader market averages.
Underweight
Sector is expected to underperform the broader market averages.
NA
None
Sector rating is not applicable.
**Broader market averages refer to the S&P 500 in the U.S. and the S&P/TSX Composite in Canada.
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidi ty issues.
***Restricted due to a potential conflict of interest.
Ratings Distribution*: CIBC World Markets Inc. Coverage Universe

(as of 13 Dec 2012)
Count
Percent
Inv. Banking Relationships
Count
Percent
Sector Outperformer (Buy)
146
39.7%
Sector Performer (Hold/Neutral)
174
47.3%
144
98.6%
171
Sector Underperformer (Sell)
29
7.9%
27
98.3%
93.1%
Restricted
18
4.9%
Restricted
18
100.0%
Count
Percent
Ratings Distribution: Capital Equipment Coverage Universe

(as of 13 Dec 2012)
Count
Percent
0.0%

Restricted

0.0%
50.0%
100.0%
50.0%
100.0%
0.0%
Restricted
0.0%
Capital Equipment Sector includes the following tickers: ATA, NFI.

*Although the investment recommendations within the three -tiered, relative stock rating system utilized by CIBC World Markets Inc.
do not correlate to buy, hold and sell recommendations, for the purposes of complying with NYSE and NASD rules, CIBC World
Markets Inc. has assigned buy ratings to securities rated Sector Outperformer, hold ratings to securities rated Sector Performer, and
sell ratings to securities rated Sector Underperformer without taking into consideration the analyst's sector weighting.
Important disclosures required by IIROC Rule 3400, including potential conflicts of interest information, our system for
rating investment opportunities and our dissemination policy can be obtained by visiting CIBC World Markets on the web
at http://researchcentral.cibcwm.com under 'Quick Links' or by writing to CIBC World Markets Inc., Brookfield Place, 161
Bay Street, 4th Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request.
10
219
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Legal Disclaimer (Continued)

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221

Initiating Coverage
December 13, 2012
Capital Equipment
Stock Rating:
Sector Performer
Getting Paid To Wait

Sector Weighting:
Market Weight
NFI-TSX (12/13/12)
Key Indices:
C$8.50
C$8.34
As of December 13 we are initiating coverage of New Flyer with a SP rating

and C$8.50 PT, applying a 7.5x EV/EBITDA multiple to our 2014 estimate to
derive our valuation and reflecting the improving fundamentals for bus
demand. Total return to price target of 9% is in line with an SP rating.
Fundamentals for bus demand are improving given rising U.S.

state/municipal tax revenue, growing bus ridership numbers (reflecting the
cost advantage of taking bus transit versus driving and modestly declining
unemployment rate), and public transit being a greener option.
We do not expect a material uptick in N. American bus deliveries until at

least 2014 given the lag in translating improving funda mentals into orders
and U.S. transit authorities typically working on a ~15-year replacement
cycle (even though federal funding is based on a 12-year cycle).
While New Flyer is guiding towards a 2013 production line rate of ~36
EUs/week (flat from Q4/12 levels), we view its $0.585/share annual
dividend as safe (forecasting 2013 and 2014 payout ratio of 68% and 58%,
respectively). Investors are being paid to wait until orders pick up.
Toronto

52-week Range
Shares Outstanding
Float
Dividend/Div Yield
Fiscal Year Ends
Book Value
2012 ROE (E)
LT Debt
Preferred
Common Equity
NM
C$5.20-C$8.47
44.4M
44.4M Shrs
38,000
$376.3M
C$0.59 / 7.4%
December
$7.78 per Shr
5.0%
$194.9M
Nil
$345.6M
Yes
EBITDA ($ mlns.)
Prev
2012
2013
2014
EV/EBITDA
2012
2013
2014
Current
$62. 9E
$68. 4E
$76. 6E
8.9x
8.2x
7.3x
Source: Reuters
Company Description
New Fly er Industries Inc. is the largest North American
manufacturer of heavy -duty transit buses supply ing
www.newflyer.com
Kevin Chiang, CFA

1 (416) 594-7198
Kevin.Chiang@cibc.ca

and ResearchCentral. cibcwm.com
12-120236 2012
222
Get ting Paid To Wait - Decembe r 13, 2012
Sector Performer
NFI-TSX
12/13/12
12- To 18- Month Price Target:
Capital Equipment
Sector Weighting:
All figures in US$ millions, except per share data.
EV/EBITDA Multiples
Manufacturers
P/E Multiples
Manufacturers
Key Financial Metrics
2011A
EBITDA Margin
Current Ratio
Debt/Equity
Debt/Total Capital
Income Statement
Bus Manufacturing Revenues
Aftermarket Revenues
Revenues - Consolidated
Cost of Sales
Gross Profit
EBITDA
EBIT
EBT
Net Income
Balance Sheet
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Shareholders' Equity
C$8.34
C$8.50
Kevin Chiang, (416-594-7198) Kevin.Chiang@cibc.ca
Market Weight
2012E
2013E
2014E
9.0x
8.3x
8.5x
8.2x
7.0x
7.4x
7.3x
6.3x
6.2x
2012E
2013E
2014E
23.9x
14.8x
12.8x
12.3x
11.1x
10.9x
9.7x
10.0x
8.4x
2012E
2013E
2014E
8.3%
1.1x
48.1%
32.5%
2011A
7.0%
1.1x
57.1%
36.4%
2012E
7.3%
1.2x
56.9%
36.3%
2013E
7.6%
1.2x
55.7%
35.8%
2014E
$810.4
$116.0
$926.4
$807.7
$118.7
$77.2
$68.7
$26.7
$19.2
$0.15
Q3/12A
$773.8
$117.7
$891.6
$792.4
$99.2
$62.9
$29.5
$12.8
$14.2
$0.35
$814.7
$123.6
$938.3
$832.6
$105.7
$68.4
$44.1
$30.0
$30.0
$0.68
$872.5
$129.8
$1,032.3
$914.7
$117.6
$76.6
$52.1
$38.1
$38.1
$0.86
Company Profile
New Flyer Industries Inc. is the largest North American manufacturer of heavy-duty transit buses
supplying transit authorities in Canada and the U.S., with approximately one-third of the market.
Investment Thesis
Fundamentals for bus demand are improving due to rising U.S. state/municipal tax revenue, growing
bus ridership numbers (reflecting the cost advantage of taking bus transit versus driving and modestly
declining unemployment rate), and public transit being a greener option.
We do not expect a material uptick in N. American bus deliveries until at least 2014 given the lag in
translating improving fundamentals into orders and U.S. transit authorities typically working on a ~15year replacement cycle (even though federal funding is based on a 12-year cycle).
While New Flyer is guiding towards a 2013 production line rate of ~36 EUs/week (flat from Q4/12
levels), we view its $0.585/share annual dividend as safe (forecasting 2013 and 2014 payout ratio of
68% and 58%, respectively). Investors are being paid to wait until orders pick up.

Aftermarket
Operations
13%
205
854
191
508
346
United States
77%
1000
2000
800
1500
600
1000
400
500
200
0
0
2010
Deliveries (EU's)
2011
140
120
100
$ Millions
2500
2008
2009
Canada
23%
Bus Operations
87%
1200
2007
108.2
106
116.4
2009
2010
2011
96
82.7
80
60
40
20
0
2007
2008
223
Table of Contents
Executive Summary ...................................................................................... 4
Company Profile ............................................................................................ 6
Government Funding Focus On State And Local Tax Revenue...................... 6
Fundamentals Appear To Support Bus Demand.............................................. 9
Economic Reasons To Take The Bus Modestly Rising Employment
And Elevated Fuel Prices ....................................................................... 9
Buses A Cheaper Option For Transit Authorities .........................................11
Congestion And Environmental Benefits Bode Well For
Future Demand For Public Transportation .............................................11
Replacement Demand ..................................................................................12
Why Are U.S. Municipalities Still Not Buying Buses? ......................................14
Diversifying To Medium-duty Buses With Recent Joint Venture ......................19
Increasing Exposure To Parts & Service ........................................................20
Going LEAN ..................................................................................................21
Valuation......................................................................................................22
EV To Forward EBITDA ..............................................................................23
Price To Forward Earnings .........................................................................23
Price To Forward Cash Flow .......................................................................24
Financials .....................................................................................................25
Income Statement.....................................................................................25
Balance Sheet ...........................................................................................26
Cash Flow Statement.................................................................................30
Price Target Calculation And Key Risks To Price Target..................................31
Price Target Calculation .............................................................................31
Key Risks To Price Target ..........................................................................31
Appendix 1. Operations ................................................................................32
Bus Manufacturing Operations ...................................................................32
Aftermarket Operations .............................................................................34
Sales, Orders, And Manufacturing ..............................................................35
Appendix 2. Customers And Competitors ......................................................37
Customers.................................................................................................37
Competitors ..............................................................................................38
Appendix 3. Management & Board Of Directors .............................................40
224
Executive Summary
As of December 13, we initiate coverage of New Flyer Industries Inc. (NFITSX)
with a Sector Performer rating and C$8.50 price target. We are applying a 7.5x
EV/EBITDA multiple to our 2014 estimate to derive our valuation, which is at the
upper end of New Flyers historical trading range and reflects the improving
fundamentals for bus demand and New Flyers move towards a more diverse
revenue stream (i.e., increased aftermarkets revenue and its Alexander Dennis
joint venture). Including the companys $0.585/share annual dividend, this
infers a total return to price target of 9%, in line with the criteria for a Sector
Performer rating. Below, we highlight our key investment themes for New Flyer.
1. Fundamentals For Bus Demand Are Improving: Not surprisingly, over
the past few years, bus demand has been relatively soft as U.S. state and
municipal finances were negatively impacted by the recent recession. That
said, fundamentals are improving as state tax revenues have begun to
steadily increase while bus ridership has posted six quarters of consecutive
growth. The latter reflects the decline in the U.S. unemployment rate (with
the CIBC Economics team forecasting this will continue to trend modestly
down over the next two years) and elevated fuel prices. It is estimated that
individuals switching from car to bus travel will sa ve over $10,000 annually,
a not-so-insignificant sum. So with the underlying fundamentals for bus
demand improving, we expect an acceleration of replacement demand by
transit authorities. New Flyers five -year pipeline is sitting at 17,730 EUs,
56% above last years levels.
EUs

20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

Bids Submitted
Bids in Process
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
2. We Are Still Likely 12 To 24 Months From A Material Improvement In

Bus Demand: The million-dollar question is if fundamentals for bus
demand have significantly improved, why have bus deliveries remained
flattish? First, it reflects the timing lag between when improving
fundamentals translate into increased orders, which is why New Flyer is
guiding to a flat production line entry rate in 2013. With a typical one- to
two-year time frame, this suggests any material improvement in New Flyers
delivery output is likely a 2014 story at the earliest. Second, while bus
deliveries in the U.S. spiked in 19992001, most transit authorities retire
their fleet after 15+ years, despite federal funding that allows for
replacement after 12 years. Again, this suggests that it is likely at least a
year before these buses purchased at the turn of the millennium will need to
be replaced.
225
3. Increasing Exposure To Higher-margin Service Opportunities: New

Flyer has a 17% market share in aftermarket parts (up from 15% in 2010),
selling parts for New Flyer and competitor buses. New Flyer is seeking to
grow its traditional aftermarket services, which include parts, field support,
warranty and product training, and to build up its life cycle product support
strategy, including vendor-managed parts inventory services, fleet
management, maintenance programs, and product reliability services. We
view this as a natural extension of New Flyers operations given its large
installed base of buses in North America and a trend towards transit
authorities outsourcing maintenance work. Finally, aftermarket margins are
~3x higher than new bus sales and provide a potentially steadier earning
stream.
4. Getting Paid To Wait: New Flyers annual dividend is $0.585/share and
reflects a yield of 7.4%. While we believe New Flyers earnings growth will
be modest over our forecast period, we view its dividend as safe and
forecast a payout ratio of 68% and 58% in 2013 and 2014, respectively. So
while bus orders may not pick up until 2014, investors are being paid to
wait.

FCFPS
Annual Div idend
Pay out Ratio
2012E
$0.68
$0.585
86.6%
2013E
$0.85
$0.585
68.5%
2014E
$1.00
$0.585
58.3%
Note: F CF = CFO Capex Repayment under capital lease.

226
Company Profile
New Flyer is North Americas largest manufacturer of heavy-duty transit buses
and a leading provider of aftermarket parts and services. New Flyer has a ~35%
market share in bus manufacturing in Canada and the U.S., making buses
ranging from 35 to 60 feet in length and propulsion systems , including diesel,
diesel-electric hybrid, natural gas (CNG and LNG) and electric trolleys.
Exhibit 3. Transit Bus Market Share
Active Buses by Manufacturer
2011 Heavy-Duty Transit Bus Market Share
NOVA
16%
Other
1%
New Flyer
35%
Orion
9%
NABI
9%
Gillig
30%
OEMs no
longer in
business
9%
NOVA
7%
NABI
9%
Other
12%
Orion
14%
New Flyer
30%
Gillig
19%
Government Funding Focus On

State And Local Tax Revenue
The main buyers of heavy-duty transit buses are municipal and other local
authorities. While there is excess funding capacity at the U.S. federal level for
large-scale transit fleet replacement, the local authority is required to match the
federal contribution, and this has proven problematic given a decrease in local
tax revenues. State and local tax revenues (TTM basis) in the U.S. peaked in
2008, fell 8% in 2009 and bottomed in Q1/2010. While still 5% below 2008
levels, TTM revenue growth has been positive for seven consecutive quarters,
and is approaching levels that we believe could act as a catalyst in local
authorities engaging the federal funding programs to start making purchases,
particularly for fleet replacement that has been delayed since 2009.
227
Exhibit 4. U.S. State And Local Taxes

State And Local Tax Revenues (TTM)
325,000
65,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
275,000
225,000
175,000
General Sales Tax
Individual Income Tax
Q2-2012
Q2-2011
Q2-2010
Q2-2009
Q2-2008
Q2-2007
Q2-2006
Q2-2005
Q2-2004
Q2-2003
Q2-2002
Q2-2001
Q2-2000
Q2-1999
Q2-1998
Q2-1997
Q2-1996
Q2-1995
Q2-1994
Q2-1993
125,000
Corporate Income Tax (Right Axis)
Source: U.S. Census Bureau.
Looking at the specifics of U.S. federal funding programs, the MAP-21 federal
transportation bill, a two-year extension following the previous SAFETEA-LU bill,
was passed. The new bill allocates $422 million to bus spending (on new buses,
replacements, or rehabilitations or on bus facilities) in F2013 and $428 million in
F2014. The federal share is 80% with a 20% local match component required;
the criteria for funding is based on a 12-year or 500,000 mile bus life for
replacement, or supporting population and ridership trends to validate new bus
fleet growth; and Buy America provisions apply. While this appears to be a
large cut from the F2012 allocation of $984 million, additional funds are now
eligible to be transferred by the state to the federal level under urban and rural
grant programs. These rural and urban grants (which cover more than just bus
capital spending) are up 30% to $600 million and up 7% to $4.4 billion,
respectively. For overall transit capital funding in the U.S., federal funding is by
far the largest government source at 42% of the total, with state and local
sources providing ~13% each and directly generated funds (i.e., fare revenues,
donations, etc.) making a 31% contribution.
Exhibit 5. U.S. Transit Funding
U.S. Transit Capital Funding

Local, 13%
Directly Generated
Funds, 31%
State, 14%
Federal, 42%
Source: APTA.
228
In Canada, transit funding is shared among the municipal, provincial, and

federal levels. As the majority of funding comes from the provinces, government
funding is less centralized and more varied than the federal funding structure in
the U.S. As we show in Exhibit 6, while municipal transit spending has ranged
from C$300 million to C$900 million since 2001, provincial and federal spending
have increased from nearly nothing in 2001 to ~C$2.4 billion and ~C$800
million, respectively, in 2010, comprising more than C$3 billion of the total
C$4 billion spent on transit that year.
Exhibit 6. Sources Of Transit Investment (C$ mlns.)

Public Transit Investment By Source - Canada
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Federal
Other
Provincial
Municipal
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: CUTA.
There are various federal programs that support transit investment. The Building
Canada Fund (BCF) and Canada Strategic Infrastructure Fund (CSIF) are
infrastructure building programs with C$13 billion in combined funding capacity,
while the Gas Tax Fund allocates another C$2 billion annually to municipal
infrastructure. In addition, the FLOW initiative sets aside C$1 billion in federal
funds for GTA transit initiatives, including C$263 million for bus projects. Bus
spending in Canada is generally well funded. In a 2010 survey of Canadian
transit authorities, the Canadian Urban Transit Association (CUTA) reported that
Canadian transit authorities identified C$4.3 billion in funding needed to replace
old buses and buy new buses for growth. With C$3.7 billion, or 85%, of that
planned spending fully funded back in 2010, transit authorities are in a relatively
strong position to execute their planned projects. In comparison, planned
spending on other types of transit was only 67% funded.
Exhibit 7. Transit Spending Funding Status By Type (C$ mlns.)

5-Year Transit Spending By Funding Status ($ Millions)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
$647
$17,554
Unfunded
$3,682
Funded
$35,907
Transit Spending (Excluding Buses)
Bus Spending
229
Fundamentals Appear To Support

Bus Demand
North American transit ridership is at historically high levels , according to the
American Public Transportation Associate (APTA), hitting a 50-year peak in
2008, taking a hit during the recession, and beginning a recovery in 2011,
posting six consecutive quarters of positive Y/Y growth.
Exhibit 8. Transit Ridership

Transit Ridership Y/Y
U.S. Bus
U.S. All Modes
Q2/12
Q1/12
Q4/11
Q3/11
Q2/11
Q1/11
Q4/10
Q3/10
Q2/10
Q1/10
Q4/09
Q3/09
Q2/09
Q1/09
8%
6%
4%
2%
0%
(2%)
(4%)
(6%)
(8%)
(10%)
Canada All Modes
Source: APTA.
Economic Reasons To Take The Bus

Modestly Rising Employment And Elevated
Fuel Prices
Two key drivers behind bus ridership are employment and gasoline prices.
Comparing monthly ridership data in the National Transit Database (NTD) with
gasoline pump prices yields a strong correlation of 0.75. Comparing ridership to
non-farm payroll employment, we reach a 0.27 correlation.
Exhibit 9. Comparison Of Transit Ridership, Gas Prices, And Employment

In The U.S.
Ridership, Gas Prices, and Employment - U.S.
116
114
112
110
108
106
104
102
100
98
$5.00
$4.00
$3.00
$2.00
$1.00
Pump Price (US$/Gallon, R Axis)
Ridership
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
$0.00
Employment (Non-Farm)
Note: January 2003 = 100

Source: Company reports, National Transit Database and CIBC World Markets Inc.
230
The unemployment rate in Canada is currently 7.4%, down 130 basis points
(bps) from peak levels, while hiring has been particularly strong, with 88,200
new jobs created since July. In the U.S., the unemployment rate dipped below
8% for the first time in almost four years in September, moving in the right
direction. New Flyer estimates that ~60% of city bus trips are employment
related. The CIBC Economics team is forecasting slow but steady employment
gains of 1%2% at an annual rate through 2013.
Exhibit 10. Transit Usage By Trip Purpose (Left) And Employment Forecast (Right)
Trip Purpose
18,000
145,000
CIBC Economics
Other, 6%
17,800
M edical, 3%
144,000
Forecast
143,000
17,600
Sho pping/
Dining, 9%
Wo rk, 59%
142,000
Canada
17,400
141,000
US
Jan.12
Feb.12
Mar.12
Apr.12
May.12
Jun.12
140,000
Scho o l, 11%
Jul.13
Aug.13
Sep.13
Oct.13
Nov.13
Dec.13
17,200
So cial, 7%
Jul.12
Aug.12
Sep.12
Oct.12
Nov.12
Dec.12
Jan.13
Feb.13
Mar.13
Apr.13
May.13
Jun.13
P erso nal
B usiness,
5%
Canada and U.S. Employment ('000s)
Source: APTA, Company reports and CIB C World Markets Inc.
The price of gasoline is another driver of ridership. We remain in an elevated

fuel price environment, with gasoline pump prices between $3/gallon$4/gallon
since February 2011, compared to an average of less than $2/gallon through the
first seven years of the last decade. While fuel prices are off from peak levels,
they remain at historically high levels nonethe less.
Exhibit 11. Gasoline Price
Aug-12
Aug-11
Aug-10
Aug-09
Aug-08
Aug-07
Aug-06
Aug-05
Aug-04
Aug-03
Aug-02
Aug-01
Aug-00
Aug-99
Aug-98
US$ per Gallon
U.S. Conventional Retail Gasoline Price
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
In an environment of high gas prices and an uncertain economic outlook, drivers

are more likely to switch to transit given the cost savings. In a comparison of
car and bus passenger-miles through the last recession in the U.S., bus travel
has remained flat over the downturn while car travel is down 15%. The APTA
estimates that public transit saves a commuter on average $826 per month or
$9,917 per year.
10
231
Exhibit 12. Annual Savings By Switching To Transit (Left) And Recession- time Car Versus Bus Travel (Right)
Savings
U.S. Passenger-Miles (Indexed, 2007 = 100)
City
Monthly
Annual
New York
$1,212
$14,547
Boston
$1,108
$13,301
105
San Francisco
$1,082
$12,982
100
Chicago
$991
$11,890
95
Philadelphia
$982
$11,780
90
Seattle
$981
$11,769
85
Honolulu
$943
$11,315
Los Angeles
$911
$10,936
80
Minneapolis
$885
$10,618
110
Passenger Car
Motor bus
2007
2008
2009
2010
Source: APTA, U. S. Bureau of Transportation Statistics (BTS)
Buses A Cheaper Option For Transit

Authorities
In addition to being cheaper from a customer standpoint, bus operating costs for
transit authorities are significantly cheaper than those for light rail
(streetcar/tram) or heavy rail (subway/metro) per vehicle revenue hour. As
fares typically cover only 20% to 40% of operating costs for bus and rail transit
systems, the lower cost structure makes investing in buses a cheaper option for
transit authorities versus other modes of transit.
Exhibit 13. Operating Costs By Transit Mode
Operating Cost Per Vehicle Revenue Hour
$600
$500
$400
$300
$480
$200
$100
$120
$199
$245
$0
Fixed-Route Bus
Heavy Rail
Light Rail
Commuter Rail
Source: APTA
Congestion And Environmental Benefits Bode

Well For Future Demand For Public
Transportation
Longer-term fundamental supports of bus demand include urbanization coupled
with the trend towards transit-oriented development and green initiatives. As
cities become more congested, demand for bus transit increases. The UN
population division forecasts the urbanization rate in North America to trend
towards 90% in the long term, with urban populations growing at a 1% CAGR
over the next decade. While this growth pace is subdued, a growing urban
population increases the number of potential riders and increases congestion ,
rendering public transportation more attractive versus more individual modes of
transportation.
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232
Exhibit 14. United States Urbanization Trends
Urban
Rural
Source: United Nations Population Division.
In addition, there has been a focus towards transit-oriented development (TOD),

whereby cities support development along transit routes and encourage transit
usage, as well as green initiatives, with both government policy and prevailing
attitudes advocating emphasis on public transit over car usage in urban areas.
New Flyer has a broad offering of green population options , including electric
hybrid, electric trolley, and hydrogen fuel cell, while an all-electric prototype has
been delivered.
Exhibit 15. Green Benefits: Energy And Emission Benefits From Public
Transportation
Gross Reduction Of Switching To Transit From Priv ate Vehic le

(Less Fuel Currently Used By Public Transit)
Sav ings To Priv ate Vehicle Driv ers From Reduced Congestion
Secondary Reduction Due To Reduced Travel Distance
Related To Public Transportation-related Location Decis ions
Total Savings Due To Public Transportation
Total Energy Savings

(Billions Of Gallons, CO2 Emission Reduction
Gasoline Equivalent)
(Million Metric Tons)
1.80
16.2
(1.38)
(12.3)
0.34
3.0
3.40
30.1
4.16
37.0
Source: APTA.
Replacement Demand
With the underlying fundamentals for bus demand in the U.S. improving, we
expect an acceleration of replacement demand from transit authorities. The
five-year period from 1999 to 2003 represented the historical peak for
heavy-duty transit bus deliveries in North America. Given the 12-year average
targeted life for these buses, we should be entering a significant replacement
demand cycle in the near to medium term. Industry orders in 2011 were flat Y/Y
and down 10%15% versus 2009 levels.
12
233
Exhibit 16. Installed Base (Left) And EU Deliveries (Right)
New Flyer tracks the potential five -year pipeline for new orders, which
encompasses forecasted orders, and active and pending bids and options. While
there is limited timing visibility in terms of turning the pipeline into firm orders,
the five-year pipeline of 17,730 EUs (33% of which are active, i.e., the bids and
options have been submitted or are in process) is a post-recession peak.
EUs

20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

Bids Submitted
Bids in Process
Q3/11
Q4/11
Q1/12
Q2/12
Q3/12
Source: Company reports and CIB C Wo rld Markets I nc.
We expect fleet replacement demand to come primarily from the bigger U.S.
market rather than from Canada. While in the U.S. the average bus age has
increased from 7.5 to 8.0 years since 2002, in Canada the average age has
decreased from 10.8 to 6.6 years.
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234
Exhibit 18. Average Bus Fleet Age

Fleet Age
12
10
Years
8
6
4
2
0
Canada
United States
2002
Current
Source: APTA, CUTE.
With New Flyers bid pipeline improving, there has also been a slowdown in the
decline in its backlog. The total backlog at the end of Q3/2012 was 6,206 EUs
and decreased by 0.3% Q/Q and now totals $2.64 billion. The decline in the
backlog appears to be slowing compared to the 19.4% Q/Q decrease from the
backlog at the end of Q3/2011. As well, the firm portion of the total backlog at
the end of Q3/2012 of 1,462 EUs increased 15.4% Q/Q.
Why Are U.S. Municipalities Still Not

Buying Buses?
While Canadian transit authorities are buying buses , as evidenced by the
average bus age falling from 10.8 to 6.6 years over the past decade, in the U.S.
(77% of New Flyers sales) there is still significant pent-up demand. The
question remains, if the fundamentals are there as we outline above, why is
there not yet large-scale buying?
Timing Lag: Despite the improving outlook for bus demand, New Flyer is
guiding towards a production line entry rate of ~36 EUs/week in 2013, flat from
Q4/2012 levels. The company has noted that there is typically a one - to
two-year lag before improving fundamentals translate into increased order
activity. This suggests that an improvement in New Flyers output is still likely a
year away. That said, the company can respond quickly to any uptick in activity.
While it used to take the company 29 weeks to convert an order, New Flyer can
now turn it around in 12 weeks if necessary.
Most Retirements Come Well After The 12-year Minimum: U.S. federal
funding for replacement purchases kicks in after the in-use bus is 12 years old.
In practice, however, only 13% of buses (excluding lemons) are retired at 12 to
13 years old, with most buses retired between ages 14 and 18 (three-quarters
of retirements occur at age 14 or later). The FTA has found that the 12-year
retirement age is not a significant constraint on municipality spending decisions,
meaning that if it lowered the minimum retirement age, buying patterns would
not meaningfully change.
14
235
Exhibit 19. Bus Retirements By Age
Source: FTA.
The 12-year federal minimu m is, by design, a point in time when the average
bus still has useful life left, as buying patterns prove. The average age of
retirement at the time when the FTA undertook its large-scale survey in 2007
was 15.1 years; in todays post-recession economy, we suspect that average
age has moved even higher. Similarly, the share of active vehicles more than
one year past the retirement minimum (19%) and three or more years past the
minimum (9%) are also likely higher today.
Exhibit 20. Heavy-duty Transit Buses Actual Retirement Age

Retirement Age (Years)
Share Of Active Vehicles That Are:
Minimum
Average
1+ Years Past Retirement Minimum
3+ Years Past Retirement Minimum
12.0
15.1
19%
9%
As most transit operators replace their transit vehicles between a condition -level
of 2.0 and 2.5 (as defined in Exhibit 21), it is reasonable to expect most
retirements in the 15- to 20-year range when budgets are tight.
15
236
Exhibit 21. Average Bus Conditions By Age (Smoothed)

Condition
Interpretation
Poor
Substandard
Adequate
Good
Ex cellent
Source: FTA.
Exhibit 22 illustrates that keeping a bus for 14 years minimizes the annual cost
of owning and operating the bus. The curve is downward sloping up to age 14 as
the capital cost of buying the bus is spread over mo re years, but as operating
and maintenance costs increase as the bus ages past 14 years old, these
incremental costs outstrip the benefit of spreading out the initial capital cost
over a longer period. That said, between the ages of 14 years and 18 years, the
increase in average annual costs is relatively modest on an annual basis, so
transit operators may choose a retirement age later than the minimum if capital
is constrained. Longer term, though, once operating costs begin to accelerate, it
makes economic sense to replace given the increased maintenance expenditures
are borne entirely by the municipality while new bus funding is shared with the
federal government.
16
237
Exhibit 22. Minimum Life Cycle Cost Profiles
Source: FTA.
Its All About Funding: While transit authorities have some flexibility in terms
of when to replace their fleets, they can delay replacement only about five years
before bus conditions approach sub-standard levels (Exhibit 22). As 19992001
was a peak bus delivery period of over 6,000 EUs delivered per year, we are
confident that we are somewhere within this five-year window today for fleet
replacement the question is when will U.S. transit authorities pull the trigger?
The FTA reports that limited capital funding is the primary reason (almost
unanimously echoed by all the transit authorities surveyed) behind delays in
actual vehicle retirements beyond plan.
Exhibit 23. Determinants Of Retirement Age

Primary Reason
Secondary Reasons
Limited Capital Funding
Serv ic e Reliability
Vehicle Condition
Vehicle Maintenance
Physical And Local Environmental Conditions
Procurement Process (Low Bid Or Negotiated)
Duty Cycle (Mainly Operating Speed)
So assuming transit authorities can push buses to 16+ years of age would
suggest pent-up demand in 20152017, if not earlier. Past 14 years of age,
transit bus operating and maintenance costs exceed the benefit of amortizing
capital costs over a longer period of time. We believe the confluence of aging
buses, improving tax receipts, and falling municipal debt levels and yields is
creating an environment in which we could begin to see large-scale bus capital
spending in the U.S.
17
238
So When Will Funding Kick In? As we discussed in the government funding

section above, bus capital spending in the U.S. comes 80% from the federal
level with a required 20% match component from municipalities . Municipal
funding is ultimately the issue at hand. State and local tax revenues bottomed
out post-recession in Q1/2010 and have trended positively since, but the effects
of the recession linger. In 2010 state and local government debt outstanding
peaked at $3.1 billion, 13% above 2006 levels. Since the n, while higher tax
receipts have helped reduce debt outstanding by 3% to $3.0 billion in Q2/2012,
debt remains 10% above 2006 levels.
Exhibit 24. State And Local Government Debt Levels

State and Local Governments - Credit Market Debt Oustanding
3,200
3,100
US$ Billions
3,066
2,999
3,000
2,900
2,800
2,868
2,888
2007
2008
3,007
2,989
2011
Q2/12
2,721
2,700
2,600
2,500
2,400
2006
2009
2010
That said, with over $60 billion flowing into municipal bonds over the past
14 months as investors hunt for yield, municipal bond yields have fallen, making
debt service more manageable for municipal authorities. The downward trend in
debt levels and debt service payments, as well as improving tax receipts, is
supportive of improving municipality finances.
Exhibit 25. Municipal Bond Prices And Yields

Barclays Muni Bond Index (Tracked By SPDR Nuveen Barclays Muni Bond ETF)
25
4.5%
24
4.0%
23
3.5%
22
Price (Left)
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
2.5%
Sep-08
20
Jun-08
3.0%
Mar-08
21
Yield (%, Right)
18
239
Diversifying To Medium-duty Buses

With Recent Joint Venture
In May 2012 New Flyer and British bus manufacturer Alexander Dennis
announced a joint venture to introduce a midi bus to North America. The midi
bus (medium-duty, low -floor) will be designed specifically for the North
American market, adapted from Alexander Dennis current models, which have
been delivered in the U.K., Hong Kong, New Zealand, and Australia. The new
product is aimed to appeal to transit customers that do not require a full-sized
heavy-duty bus with a 12-year useful life (midi buses are lighter and have a
10-year life with different operating economics) and, as such, will diversify New
Flyers revenue stream towards new customers. Like other New Flyer products,
the company will provide aftermarket support, including service, warranty,
training, and parts. Under the JV, New Flyer is responsible for sales,
manufacturing, and support, while Alexander Dennis will develop, design, and
engineer the product. With this JV, New Flyer will begin servicing the
medium-duty market, which has not been well served in North America.
Exhibit 26. Midi Bus
The joint venture allows New Flyer to diversify its product line while leveraging
its competitive advantages in North America (i.e., manufacturing capabilities and
distribution network). The companys goal is to stimulate market demand, with
the potential market size of midi buses estimated to be ~1,000 units per year.
The sales focus will be on offering a bus that is more right sized for smaller cities
that do not require heavy-duty buses, but historically had no option besides
buying a bus that exceeded needs. The midi bus will offer smaller municipalities
an option to buy a less expensive bus with lower life cycle costs. As illustrated in
Exhibit 27, in addition to having a lower purchase price, midi buses are also
lighter, translating into reduced fuel consumption.
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240
Exhibit 27. Heavy Duty Versus Midi Bus Comparison

Bus Comparison
Heavy Duty Bus
$400,000 to $500,000
35' to 40'
30,000 lb.
Price
Size
Weight
Midi Bus
$275,000 to $300,000
30' to 35'
20,000 lb.
New Flyer plans to launch this new product in H2/2013 and we believe that this
venture could have an impact on results starting in 2014. While the company
has provided little financial guidance regarding this venture, New Flyer and
Alexander Dennis will split the profits.
Exhibit 28. Alexander Dennis JV EBITDA Sensitivity Table

Alexander Dennis JV - EBITDA Sensitivity Table ($, '000)
NFI's EBITDA
Margin From JV
Market Share (Total Market Size For Midi Buses Is 1,000 Units)
288
5%
10%
15%
20%
1%
$144
$288
$431
$575
2%
$288
$575
$863
$1,150
3%
$431
$863
$1,294
$1,725
4%
$575
$1,150
$1,725
$2,300
5%
$719
$1,438
$2,156
$2,875
25%
30%
35%
40%
45%
50%
$719
$863
$1,006
$1,150
$1,294
$1,438
$1,438
$1,725
$2,013
$2,300
$2,588
$2,875
$2,156
$2,588
$3,019
$3,450
$3,881
$4,313
$2,875
$3,450
$4,025
$4,600
$5,175
$5,750
$3,594
$4,313
$5,031
$5,750
$6,469
$7,188
Increasing Exposure To Parts &

Service
New Flyer has a 17% market share in aftermarket parts (up from 15% in 2010),
selling parts for New Flyer and competitor buses. Over the past five years, New
Flyer has expanded its warehousing and distribution network to serve transit
authorities across North America in a timely manner, and now has four
distribution centers, serving Western Canada, Eastern Canada, the Southwest
U.S. and the Midwest U.S.
New Flyer is looking to grow its traditional aftermarket services, which include
parts, field support, warranty and product training, and to build up its life cycle
product support strategy, including vendor-managed parts inventory services,
fleet management, maintenance programs, and product reliability services.
Longer term, New Flyers goal is to offer a packaged product that includes selling
the bus and aftermarket support together, thereby creating a steadier customer
base and earnings stream.
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241
Exhibit 29. Aftermarket Market Share and Revenues

2011 Aftermarket Market Share
Revenue and EBITDA from Aftermarket Operations

New Flyer
17%
Others
37%
$ Millions
NABI
7%
Gillig
9%
Truck Parts
Distributors
5%
Engine/Transmiss
ion Dealers
6%
Locals (ex. flat

glass)
Orion
8%
Muncie
4%
7%
140.0
120.0
100.0
80.0
96.0
82.7
108.2
116.0
105.7
30.0%
25.0%
Rev enues
20.0%
15.0%
60.0
40.0
20.0
0.0
EBITDA
Margin
10.0%
5.0%
0.0%
2007
2008
2009
2010
2011
Going LEAN
Back in 2009, New Flyer rolled out its operational excellence initiative. The
company started with changes at the management level, creating a 90-member
leadership team to oversee the new corporate strategy, and adopting a Lean Six
Sigma approach to manufacturing and associated performance metrics and
employee training. The next initiative was facility improvements as New Flyer
standardized its manufacturing operations under 5-S Lean Manufacturing
principles, completed in 2010. Over the past two years, the company has
extended its application of Lean Manufacturing through a process called value
stream mapping, focused on identifying and eliminating waste. New Flyers most
recent initiatives are investing in machinery to increase insourcing, including
laser cutting machines and a small parts paint system; overhead cost reductions
as the company streamlines its footprint; and, reductions in materials cost
(~70% of operating costs) through a new purchasing system and strategic
sourcing. These projects have a target of less than two years cash payback.
The effort has yielded significant results, with work-in-process buses dropping
from $403 million in Q2/2009 to $187 million in Q2/2012 and inventory turnover
moving up from 3x to 5x. In New Flyers annual LEAN assessment measuring the
successful implementation of lean manufacturing, the company has posted
improving metrics every year. The company continues to improve the operating
efficiency at its plants, but the true benefit to the bottom line and expanding
margins will be a function of improving volumes.
Exhibit 30. Operating Improvements
Annual LEAN Assessment
Bus WIP
3.5
3.2
3.0
400
2.5
2.0
2.2
1.5
300
200
1.5
100
0.9
Q2/12
Q1/12
Q4/11
Q3/11
Q2/11
Q1/11
Q4/10
2012
Q3/10
2011
Q2/10
2010
Q1/10
2009
Q4/09
2008
Q3/09
0.0
Q2/09
0.5
2.5
Q1/09
1.0
500
21
242
Valuation
In Exhibit 31, we compare New Flyers valuation to its high-yielding industrial
and commercial vehicle manufacturing peers.
Exhibit 31. Comparable Table (Consensus Estimates; Calendar Year)

Company
Ticker
Symbol
NEW FLYER INDUSTRIES INC
NFI
High-yielding Industrials
AG GROWTH INTERNATIONAL INC
CANWEL BUILDING MATERIALS
CARGOJET INC
CONTRANS GROUP INC - CL A
ENERCARE INC
EXCHANGE IN COME CORP
STUDENT TRANSPORTATION INC
TRIM AC TRANSPORTATION LTD
VICWEST INC
WAJAX CORP
WATERFURNACE RENEWABLE ENER
High-yielding Industrials Average
Commercial Vehicle And Parts Manufacturers
ACCURIDE CORP
COMMERCIAL VEHICLE GROUP INC
DAIMLER AG-REGISTERED SHARES
OSHKOSH CORP
PACCAR INC
ROSENBAUER IN TERNATIONAL AG
SPARTAN MOTORS IN C
SUPREME IN DS INC-CLASS A
VOLVO AB-B SHS
Commercial Vehicle Manufacturers Average
Group Average
AFN
CWX
CJT
CSS
ECI
EIF
STB
TMA
VIC
WJX
WFI
ACW
CVGI
DAI
OSK
PCAR
ROS
SPAR
STS
VOLVB
Dividend
Yield 2012E
P/E
2013E
2014E
2012E
P/CF
2013E
2014E
2012E
EV/EBITDA
2013E 2014E
7.0% 18.1x
11.8x
NM
14.9x
7.0x
6.2x
9.7x
7.4x
Book
Value
Price/
Book
NM
8.24
1.0x
8.1%
11.2%
6.9%
4.0%
8.1%
6.3%
9.0%
5.3%
4.8%
8.2%
6.7%
7.1%
17.7x
15.8x
12.9x
12.4x
NM
19.1x
NM
10.8x
17.1x
9.9x
17.5x
14.8x
13.3x
10.2x
8.1x
10.8x
NM
13.8x
NM
9.3x
9.9x
10.2x
14.0x
11.1x
11.5x
NM
8.8x
11.2x
NM
12.8x
NM
8.2x
7.9x
9.2x
10.4x
10.0x
10.2x
10.4x
4.1x
11.9x
4.1x
8.8x
9.6x
NM
7.4x
7.9x
NM
8.3x
8.6x
6.9x
3.6x
10.6x
4.0x
7.6x
8.0x
NM
7.7x
15.1x
NM
8.0x
8.0x
NM
3.5x
13.2x
NM
5.8x
NM
NM
7.1x
9.8x
NM
7.9x
10.1x
10.6x
6.8x
6.7x
6.4x
7.9x
13.0x
4.4x
8.3x
7.0x
9.5x
8.3x
8.3x
7.8x
5.6x
6.4x
6.3x
6.7x
10.5x
4.0x
6.6x
7.1x
7.6x
7.0x
7.4x
NM
5.0x
6.6x
6.3x
6.5x
9.8x
3.5x
5.6x
6.5x
5.7x
6.3x
16.06
1.99
8.07
5.34
1.84
13.82
2.50
7.68
2.39
14.43
3.19
1.9x
1.2x
1.1x
1.9x
4.5x
1.9x
2.5x
0.7x
5.2x
2.7x
4.5x
2.6x
0.0%
0.0%
5.6%
0.0%
1.8%
2.7%
2.0%
0.0%
3.2%
1.7%
4.7%
NM
8.1x
8.5x
13.2x
14.4x
11.4x
29.1x
3.8x
13.7x
12.8x
13.8x
NM
10.8x
8.2x
10.9x
13.6x
9.0x
19.0x
4.1x
11.5x
10.9x
11.0x
7.1x
6.7x
7.2x
9.1x
12.3x
8.3x
11.5x
3.9x
9.3x
8.4x
9.1x
NM
NM
4.9x
9.5x
11.5x
5.8x
NM
NM
10.9x
8.5x
8.4x
NM
NM
4.6x
6.3x
9.8x
7.0x
NM
NM
6.5x
6.9x
7.6x
NM
NM
4.1x
NM
10.1x
7.3x
NM
NM
5.9x
6.8x
7.5x
7.1x
5.9x
9.2x
6.3x
10.6x
10.0x
10.2x
NM
9.2x
8.5x
8.4x
6.0x
6.0x
8.8x
5.4x
10.1x
7.9x
6.3x
NM
8.3x
7.4x
7.2x
3.7x
4.6x
7.8x
4.9x
9.2x
7.2x
4.6x
NM
7.2x
6.2x
6.2x
5.02
2.63
38.59
20.24
16.61
19.34
5.39
4.38
41.79
0.6x
3.2x
1.0x
1.4x
2.7x
2.3x
0.9x
0.8x
2.2x
1.7x
2.2x
22
243
EV To Forward EBITDA
On a EV to forward EBITDA basis, New Flyer is trading at 7.4x forward (2013)
EBITDA, versus its high-yield industrial comps at 7.0x and its commercial vehicle
and parts manufacturer comps at 7.4x. Historically, New Flyer has traded in a
range from 2x to 7.5x since 2006.
Exhibit 32. Forward Consensus EV/EBITDA

Forward Consensus EV/EBITDA
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
NFI
High Yield Industrials
Vehicle/Parts Makers
Price To Forward Earnings

On a price to forward earnings basis, New Flyer is trading at 11.8x forward EPS,
just above the high-yield industrials at 11.1x and the commercial vehicle and
parts manufacturers at 10.9x. Historically, New Flyer has traded in a range from
5x to 15x since 2007 (excluding extreme values).
Exhibit 33. Forward Consensus P/E

Forward Consensus P/E
17.5
15.0
12.5
10.0
NFI
7.5
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
5.0
23
244
Price To Forward Cash Flow

On a price to forward cash flow basis, New Flyer is trading at 7.0x forward cash
flow per share, compared to its high-yield industrial comps at 8.0x and the
commercial vehicle and parts manufacturers at 6.9x. Historically, New Flyer has
traded in a range from 4x to 9x since 2007 (excluding extreme values).
Exhibit 34. Forward Consensus P/CF

Forward Consensus P/CF
10.0
9.0
8.0
7.0
6.0
5.0
NFI
4.0
3.0
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
2.0
24
245
Financials
Income Statement
Earnings Forecast
While we expect 2012 revenue and EBITDA to be down Y/Y, reflecting lower
shipments and weaker margins, we are forecasting 2013 and 2014 revenue to
grow ~5% annually and EBITDA to grow ~9% annually. We expect earnings will
benefit from modest top-line growth and modestly improving operating
leverage.
Exhibit 35. New Flyers Guidance

Guidance
Production
EBITDA
Q4/12
36 EUs/Week
Q4/12 > Q3/12
2013
36 EUs/Week
N/A
Exhibit 36. Income Statement ($ 000)

Revenue
Cost Of Sales
Gross Profit
SGA
EBITDA
Amortization
FX Loss (Gain)
Operating Earnings
Unrealiz ed FX Loss On Non-current Monetary Items And Forw ard Foreign Exchange Contracts
Unusuals
EBIT
Interest On Long-term Debt
Accretion In Carrying Value Of Long-term Debt
Fair Market Value Adjustment On Cross-currency Interest Rate Swap
Interest Ex pense
EBT
Income Tax Expense
Net Income
2011A
$926,423
$807,740
$118,683
$41,525
$77,158
$24,243
($184)
$53,099
($935)
$35
($20,530)
$5,875
$68,654
$37,008
$913
$3,743
$302
$41,966
$26,688
$7,491
$19,197
Q1/12A
$227,644
$201,874
$25,770
$9,084
$16,686
$6,022
$186
$10,478
$959
$0
$2,468
$1,395
$5,656
$3,087
$118
$518
($52)
$3,671
$1,985
($742)
$2,727
Q2/12A
$226,980
$202,366
$24,614
$8,248
$16,366
$5,899
($1,848)
$12,315
($692)
$0
$7,159
$0
$5,848
$3,395
$128
$922
($217)
$4,228
$1,620
($1,984)
$3,604
Q3/12A
$208,421
$185,211
$23,210
$9,138
$14,072
$6,069
$880
$7,123
$0
$0
$183
$0
$6,940
$3,253
$359
$483
($179)
$3,916
$3,024
$1,338
$1,686
Q4/12E
$228,511
$202,939
$25,572
$9,826
$15,746
$6,047
$0
$9,699
$0
$0
$0
$0
$9,699
$3,116
$0
$400
$0
$3,516
$6,183
$0
$6,183
2012E
$891,556
$792,390
$99,166
$36,296
$62,870
$24,037
($782)
$39,615
$267
$0
$9,810
$0
$29,538
$12,851
$605
$2,323
($448)
$15,331
$12,812
($1,388)
$14,200
2013E
2014E
$938,305 $1,032,328
$832,579 $914,696
$105,726 $117,632
$37,279 $41,015
$68,447 $76,616
$24,341 $24,495
$0
$0
$44,105 $52,121
$0
$0
$0
$0
$0
$0
$0
$0
$44,105 $52,121
$12,463 $12,463
$0
$0
$1,600
$1,600
$0
$0
$14,063 $14,063
$30,043 $38,059
$0
$0
$30,043 $38,059
25
246
Balance Sheet
Common Share Conversion
The conversion from an IDS issuer to a common share structure in late 2011
allowed New Flyer to clean up its balance sheet. The company is most of the
way towards retiring all of its IDS debt, while in Q2/2012 it issued $65 million in
6.25% convertible notes and has $21 million under its new revolver.
Exhibit 37. Total Debt

Total Debt (US$ Mln)
450
400
350
Convertible Debenture
300
Revolver
250
Senior Term Loan
200
Bachelor Bonds
150
IDS Debt
100
50
0
2007
2008
2009
2010
2011
Q3/12
Covenants
New Flyer has three financial covenants under the terms of its credit facility,
based on an interest cover ratio, total leverage ratio, and senior leverage ratio.
As of Q3/2012 the company is in compliance with these covenants.
Exhibit 38. Financial Covenants

Q3/12
Q2/12
Lev erage Ratios
Total Leverage Ratio (Must Be Less Than 3.25)
2.23
1.84
Coverage Ratios (Fix ed Charge Ratio Covenant Replaced By Interest Coverage Ratio Cov enant In August 2012)
Interest Coverage Ratio (Must Be Greater Than 3.00)
3.75
n/a
Fix ed Charge Coverage Ratio (Must Be Greater Than 1.10)
n/a
1.63
Q4/11
2.15
n/a
1.26
Balance Sheet Ratios

As of Q3/2012 New Flyers long-term debt/total capital ratio was 36% versus the
comparable groups 46%. As mentioned above, New Flyers common share
conversion in 2011 resulted in significantly lower financial leverage compared to
2010, with the debt/total capitalization falling from the 70%80% level to the
low 30s.
New Flyer issued $65 million of 6.25% interest convertible debentures in
June 2012, maturing in June 2017. The debentures have a conversion price of
$10 and are redeemable after June 30, 2015.
26
247
Exhibit 39. Balance Sheet Ratios
NFI
High-yield Industrials
AFN
CWX
CJT
CSS
ECI
EIF
STB
TMA
VIC
WJX
WFIFF
Vehicle And Parts Makers
ACW
CVGI
DAI
OSK
PCAR
ROS
SPAR
STS
VOLVB
Interest Coverage
TTM
2011
2010
TTM
4.9x
2.3x
1.8x
1.1x
4.9x
3.4x
4.1x
9.8x
4.1x
6.2x
3.4x
10.4x
4.9x
25.9x
NM
4.3x
2.2x
4.5x
8.9x
3.9x
6.0x
3.1x
9.8x
4.1x
22.2x
NM
4.9x
7.4x
5.7x
8.4x
3.6x
5.9x
4.2x
5.1x
7.7x
15.6x
NM
2.0x
3.6x
7.6x
6.6x
11.8x
NA
NM
15.7x
16.0x
2.2x
3.2x
9.7x
6.6x
12.4x
13.7x
NM
3.1x
14.8x
1.1x
1.8x
22.8x
8.7x
6.1x
14.5x
NM
NM
10.7x
Current Ratio
2011
2010
Debt To Total Capitalization

TTM
2011
2010
Cash To TTM Revenue

TTM
2011
2010
1.1x
1.3x
36.5%
32.5%
76.4%
0.3%
1.1%
7.5%
3.6x
1.6x
1.1x
1.8x
0.2x
2.0x
1.4x
1.3x
1.8x
1.7x
5.2x
3.2x
2.5x
1.1x
2.4x
1.0x
1.8x
1.8x
1.3x
1.3x
1.6x
4.8x
2.9x
2.8x
1.1x
3.3x
2.0x
1.9x
0.9x
1.4x
2.0x
1.3x
4.0x
41.7%
31.9%
30.5%
42.5%
83.1%
42.1%
56.7%
63.9%
66.3%
36.6%
0.1%
41.5%
29.1%
35.7%
42.1%
82.7%
43.9%
67.0%
63.4%
66.9%
23.4%
0.2%
38.3%
21.6%
115.4%
35.6%
80.9%
38.0%
56.8%
76.6%
55.9%
30.8%
0.3%
0.0%
0.0%
0.0%
3.3%
1.6%
1.6%
0.2%
0.4%
2.1%
0.0%
9.5%
2.2%
0.0%
0.0%
6.0%
30.9%
2.4%
1.2%
0.1%
0.0%
0.4%
8.5%
13.3%
1.9%
0.4%
6.3%
25.3%
0.6%
0.6%
0.3%
2.2%
3.9%
5.2%
1.8x
3.1x
1.1x
1.6x
0.8x
NA
2.8x
2.4x
1.1x
1.9x
2.7x
1.1x
1.6x
0.7x
1.6x
3.0x
2.1x
1.1x
2.0x
2.2x
1.0x
1.4x
0.9x
1.7x
3.4x
1.4x
1.1x
57.7%
77.2%
67.3%
34.1%
56.7%
NA
2.7%
15.6%
61.5%
55.7%
95.1%
64.5%
38.5%
55.4%
36.6%
2.7%
22.4%
60.7%
50.3%
100.1%
63.8%
45.3%
49.6%
24.9%
2.8%
33.9%
62.9%
2.0%
10.9%
10.8%
6.6%
9.8%
NA
5.8%
1.2%
6.8%
6.1%
10.6%
9.0%
5.7%
12.9%
2.1%
7.4%
0.0%
9.8%
10.9%
7.1%
11.2%
4.4%
19.8%
1.8%
3.0%
0.5%
8.7%
Exhibit 40. Long-Term Debt

Term Credit Facility
Revolv ing Credit Facility (Rev olv er)
Final Maturity
2014
2014
Less: Current Portion Of Long-term Debt

Conv ertible Debenture (Face Value $65 Million)
2017
Net Book Value

$120,761
18,000
138,761
18,000
120,761
56,123
Update On Capital Structure

Currently a common share corporation, New Flyer was previously the last
income depository share (IDS) issuer in Canada. An IDS (or stapled security)
comprises a common share and high-yield bond traded together. To maintain a
similar tax status as a former income trust, New Flyer converted from an income
trust to this stapled security structure following the October 2006 Specified
Investment Flow -Through (SIFT) legislation. Each IDS consisted of one share
and $5.53 principle amount of 14% subordinated notes of NFI ULC. On
July 2011 the Minister of Finance announced the governments intention to
amend the SIFT rules interpretation regarding stapled units, and , shortly
thereafter, New Flyer converted to a corporation with a traditional common
share structure. The company has argued that the new structure reflects a
rebalance towards investment in growth and diversification, and there certainly
are benefits.
27
248
Under the new structure, New Flyer has implemented a cash dividend of $0.585
per share annually, representing a yield of ~7%. As part of the conversion, New
Flyer is retiring its IDS debt (including bachelor bonds, which is IDS debt
stripped from the equity component of the stapled unit) and has issued
$65 million of 6.25% convertible debt.
Exhibit 41. Long-term Debt History

Total Debt (US$ Mln)
450
400
350
Convertible Debenture
300
Revolver
250
Senior Term Loan
200
Bachelor Bonds
150
IDS Debt
100
50
0
2007
2008
2009
2010
2011
Q3/12
28
249
Exhibit 42. Balance S heet ($ 000)

2011A
Q1/12A
Q2/12A
Q3/12A
Q4/12E
2012E
2013E
2014E
$10,133
$115,850
$93,491
$5,077
$145
$224,696
$37,397
$342,193
$23,766
$36,558
$205,852
$645,766
$870,462
$7,509
$109,190
$92,552
$3,841
$1,303
$214,395
$39,182
$540,363
$22,889
$35,720
$4,461
$642,615
$857,010
$67,195
$108,690
$93,763
$3,737
$0
$273,385
$39,617
$536,499
$23,262
$49,066
$2,965
$651,409
$924,794
$3,065
$106,406
$91,666
$4,100
$118
$205,355
$41,063
$532,523
$23,262
$47,789
$3,713
$648,350
$853,705
$7,385
$103,420
$88,799
$3,973
$118
$203,695
$42,010
$528,529
$23,262
$47,789
$3,713
$645,303
$848,998
$7,385
$103,420
$88,799
$3,973
$118
$203,695
$42,010
$528,529
$23,262
$47,789
$3,713
$645,303
$848,998
$19,331
$108,843
$93,455
$4,182
$118
$225,929
$45,347
$512,851
$23,262
$47,789
$3,713
$632,962
$858,891
$37,672
$119,750
$102,820
$4,601
$118
$264,961
$48,065
$497,637
$23,262
$47,789
$3,713
$620,466
$885,427

Obligations Under Finance Leases
Performance Unit Plan Liability
Deferred Tax Liabilities
Long-term Debt
Convertible Debentures
Deriv ativ e Financial Instruments
Total Liabilities
$152,207
$1,897
$32,808
$2,377
$9,000
$4,964
$1,404
$204,657
$9,136
$2,102
$262
$119,088
$166,835
$0
$2,811
$504,891
$155,387
$1,234
$29,609
$2,387
$7,000
$0
$1,501
$197,118
$10,012
$1,490
$828
$119,877
$168,077
$0
$2,759
$500,161
$144,696
$1,591
$26,297
$2,099
$81,664
$0
$826
$257,173
$9,461
$1,405
$755
$128,302
$114,575
$55,949
$2,542
$570,162
$137,199
$6,485
$22,744
$1,895
$18,000
$4,334
$0
$190,657
$13,604
$1,492
$842
$122,274
$120,761
$56,123
$2,363
$508,116
$133,733
$4,458
$24,518
$1,895
$18,000
$4,334
$0
$186,938
$13,604
$1,492
$842
$122,274
$122,000
$56,123
$2,363
$505,636
$133,733
$4,458
$24,518
$1,895
$18,000
$4,334
$0
$186,938
$13,604
$1,492
$842
$122,274
$122,000
$56,123
$2,363
$505,636
$140,746
$4,692
$25,803
$1,895
$18,000
$4,334
$0
$195,470
$13,604
$1,492
$842
$122,274
$122,000
$56,123
$2,363
$514,168
$154,849
$5,162
$28,389
$1,895
$18,000
$4,334
$0
$212,629
$13,604
$1,492
$842
$122,274
$122,000
$56,123
$2,363
$531,327
Shareholders Equity
$365,571
$356,849
$354,632
$345,589
$343,362
$343,362
$344,723
$354,100
ASSETS
Current Assets
Cash
Accounts Receiv able
Inv entory
Prepaid Ex penses And Other Assets
Other
Property , Plant & Equipment
Intangible Assets
Unused Investm ent Tax Credits
Other
Total Assets
Liabilities
Current Liabilities
Deferred Revenue
Prov is ion For Warranty Costs
Current Portion Of Obligations Under Finance
Current Portion Of Long-term Debt
Deferred Tax Liabilities
Other
29
250
Cash Flow Statement

Dividend: We view New Flyers monthly dividend of $0.585/share as safe. By
comparison in its last full year as an IDS issuer (2010) the company distributed
$1.17 per IDS.

FCFPS
Annual Div idend
Pay out Ratio
2012E
$0.68
$0.585
86.6%
2013E
$0.85
$0.585
68.5%
2014E
$1.00
$0.585
58.3%
Capital Expenditure: We are forecasting annual capital expenditure of

~$12 million annually.
Share Buyback: New Flyer does not have a share buyback in place and we do
not anticipate the company will look to initiate one.
Exhibit 44. Cash Flow Statement ($ 000)

2011A
Cash Flow From Operations
Net Earnings
Other
Cash From Operating Activ ities Before Changes In Non-cash Working Capital Items
Changes In Non-cash Working Capital Items
Proceeds From Issue Of Long-term Debt
Common Div idend Paid
Acquis ition Of Property , Plant And Equipment
Acquis ition Of Intangibles
Proceeds From Disposition Of Property , Plant And Equipment

Increase In Cash
Cash Beginning Of Period
Cash End Of Period
$19,197
$8,262
$15,981
$28,779
$72,219
($62,136)
$10,083
Q1/12A
Q2/12A
$2,727
$3,604
$2,024
$1,901
$3,998
$3,998
$6,519
$6,396
$15,268 $15,899
$6,093 ($16,179)
$21,361
($280)
($2,732)
($645)
($4,600)
$0
$14,561 ($2,000)
($1,288)
$0
($24,594) ($9,489)
($18,653) ($12,134)
Q3/12A
Q4/12E
2012E
2013E
2014E
$1,686 $6,183
$2,059 $2,053
$4,010 $3,994
$2,992
$0
$10,747 $12,230
($1,913) $2,260
$8,834 $14,490
$14,200
$8,037
$16,000
$15,907
$54,144
($9,739)
$44,405
$30,043
$8,663
$15,678
$0
$54,384
($1,756)
$52,628
$38,059
$9,282
$15,213
$0
$62,554
($3,531)
$59,023
($629)
($582)
($680) ($2,536) ($2,720) ($2,720)
$0
$0
$0
$0
$0
$0
$84,000 ($59,449)
$0 $22,551
$0
$0
($3,789)
$0
$0 ($3,789)
$0
$0
($9,520) ($8,473) ($6,490) ($33,972) ($25,962) ($25,962)
$70,062 ($68,504) ($7,170) ($17,746) ($28,682) ($28,682)
($7,685)
($631)
$35
($8,281)
($3,660)
$0
$0
($3,660)
($2,057)
($134)
$0
($2,191)
($3,160) ($3,000) ($11,877) ($12,000) ($12,000)

($29)
$0
($163)
$0
$0
$0
$0
$0
$0
$0
($3,189) ($3,000) ($12,040) ($12,000) ($12,000)
$2,074
($63,330)
$73,463
$10,133
$209
($2,624)
$10,133
$7,509
($112)
$2,086
$59,686 ($64,130)
$7,509 $67,195
$67,195
$3,065
$0
$4,320
$3,065
$7,385
$2,183
($2,748)
$10,133
$7,385
$0
$11,947
$7,385
$19,331
$0
$18,341
$19,331
$37,672
30
251
Price Target Calculation And Key

Risks To Price Target
We derive our C$8.50 price target by applying a 7.5x EV/EBITDA multiple to our
2014 EBITDA estimate of $76.6 million. Our target multiple is at the top end of
New Flyers historical trading range given the longer-term positive impact of
heavy-duty bus demand.

Competition: New Flyers market share increased slightly in 2011 to 35%.
However, several established players, including Daimler (DAIGNDE), Gillig, and
Volvo Bus Corporation (VOLVBST), are continually battling New Flyer for
market share. Recently, several international firms entered the North American
bus market; however, the 60% content Buy American rules should limit the
potential impact from international competitors.
U.S. state budget cuts and with Canadian infrastructure stimulus having ceased
at the end of 2010, New Flyer management has highlighted some concerns
pertaining to the funding available to TAs throughout North America. An inability
of TAs to purchase buses could have a negative impact on future sales.
Labor Agreements: New Flyer has four collective labor agreements with two
different unions (CAW and CWA). The company experienced a major labor
disruption at its Winnipeg facility in 2006. There is always a risk that such an
event can occur again in the future, resulting in production delays and increased
costs.
in terms of revenue, operating costs, and financial obligations. New Flyer
engages in hedging practices to protect itself from changes in the value of the
C$/US$ exchange rate and by adjusting prices of its products by attempting to
anticipate, as closely as possible, the number of orders for the year (TAs
generally order buses one year in advance).
New Flyers costs are variable costs. Additional costs are generally passed onto
fluctuations, in copper, resins or oil prices could affect margins.
31
252
Appendix 1. Operations
New Flyer has two segments, bus manufacturing and aftermarket operations.
Exhibit 45. 2011 Revenues By Segment And Geography

Aftermarket
Bus Operations
Operations
United States
87%
13%
77%
Canada
23%
Bus Manufacturing Operations

New Flyers bus manufacturing operations comprise 87% of consolidated
revenues. The company is North Americas largest manufacturer of heavy-duty
transit buses, which are used for intra -city urban public transportation systems.
Exhibit 46. Revenue From Bus Manufacturing Operations

1200
2500
1000
2000
800
1500
600
1000
400
500
200
0
0
2007
2008
2009
2010
Deliveries (EU's)
2011
New Flyer manufactures a wide range of bus models, including conventional

transit buses; electric trolleys; hydrogen fuel cell buses; and , bus rapid transit
(BRT) vehicles, which are an alternative or comple ment to light rail. The
company had a 35% market share in heavy-duty transit bus sales in 2011 and
its buses account for ~30% of the current North American fleet. New Flyer has
four manufacturing facilities, in Winnipeg, MB; St. Cloud, MN; Crookston, MN;
and, Eikhart, IN, which is TCB Industries facility.
32
253
Exhibit 47. Bus Models

Model
Lengths (Feet)
Propulsion System(s)
Transit
35, 40, 60
Clean Diesel, Natural Gas (CNG, LNG), Diesel-Electric Hy brid
BRT
35, 40, 60
Clean Diesel, Diesel-Electric Hybrid
Trolley
40 and 60
Electric
Fuel Cell
40
Hy drogen Fuel Cell Hy brid
Each customer contract is customized to individua l specifications based on local

conditions and preferences. Approximately 87% of New Flyers buses are either
powered by diesel or diesel-electric hybrid, with most of the remainder being
compressed natural gas (CNG) propulsion. Two-thirds of New Flyers bus
manufacturing revenues come from 35 and 40 models, with one -third from
articulated buses (60 in length).
Exhibit 48. Bus Manufacturing Revenues By Propulsion Type And Bus Length
Bus Manufacturing Revenue by Propulsion Type
Hy brid buses
Diesel Buses
43%
44%
Bus Manufacturing Revenue by Bus Length
Articulated buses
35' and 40'
(60')
Buses
33%
67%
CNG Buses
13%
In 2008 New Flyer introduced the Xcelsior bus, its next-generation heavy-duty
transit bus, which is lighter, has better fuel economy, has upgraded styling, and
sports other mechanical improvements versus the standard bus designs outlined
above. The first Xcelsior buses were delivered in H1/2010 and 572 buses were
delivered to 24 customers in 2011. New Flyer continues to broaden the choices
customers have under the Xcelsior line, introducing a prototype for an
all-electric 40-foot Xcelsior transit bus in June and plans to migrate all
heavy-duty bus offerings onto the Xcelsior platform.
33
254
Get ting Pai d To Wait - Decembe r 13, 2012
Exhibit 49. Xcelsior Bus
New Flyer provides parts and support for both its own products and products
manufactured by competitors. It markets parts under its Kinetik brand. While
aftermarket support is typically included in a bus purchase contract, parts are
sold separately, and New Flyer has a 17% market share in parts. The company
has four parts distribution centers, one each for Western Canada, Eastern
Canada, the Midwest U.S. and the Southwestern U.S.
Exhibit 50. Parts Distribution And Service Centers

Location
Service Centre
Arnprior Servic e Centre
Parts Distribution Centers (PDC)
Western PDC
Eastern PDC
Midwest PDC
Southwestern PDC
Arnprior, ON Canada
Winnipeg, MB Canada
Brampton, ON Canada
Erlanger, KY USA
Fresno, CA USA
34
255
Exhibit 51. Revenue From Aftermarket Operations

140.0
120.0
$ Millions
100.0
82.7
96.0
108.2
106.0
116.4
2009
2010
2011
80.0
60.0
40.0
20.0
0.0
2007
2008
New Flyers publications team makes parts, maintenance and operational

documentation. The customer service team provides customers with product
acceptance, field support, field engineering, and warrant management. While
operator and maintenance training is provided to New Flyers customers as part
of their bus purchase contracts, the New Flyer Institute also offers its services
separately as an aftermarket service.
Sales, Orders, And Manufacturing

New Flyer has an internal sales force covering the U.S. and Canada. The sales
and pre-production process is outlined in Exhibit 52.
Exhibit 52. Sales and Pre-Production Process

Customer Identification And
Solicitation Of Bids
Approv ed Equal Process
Bid Stage And Contract Award
Pre-production
- Identify munic ipalities looking to upgrade their bus fleets (i. e., nearly 12 years old)
- Ongoing dialogue w ith ex is ting customers that have potential to order new buses
- Help U.S. transit agencies transfer federal funding among each other
New Fly er (and competing manufacturers) negotiate w ith the customer adjustments to
the specifications and commercial terms of the contract's requirements
New Fly er submits a bid, either an IFB or an RFP (4/5 bid processes are RFPs)
- IFB (low bid): contract awarded to low est pric ed that meets bid specifications
- RFP (request for proposal): bids are negotiated based on all relevant criteria (e.g.,
financial capability , service, quality , reliability , maintenance, etc.), not pric e alone
- Once a bid is awarded, there is a ~1 month lag to confirm funding, legal check, etc.
7-8 months prior to production, New Flyer and customer begin to confirm mutual
understanding of expectations, logged in a master resolution list (MRL) to ensure
adherence. Sale culminates w ith final inspection and acceptance by customer.
Starting at the time of the bid, New Flyer begins managing the supply chain for
a project, and the actual manufacture of the bus from frame welding to final
assembly takes five weeks. New Flyer has manufacturing facilities across North
America with various functions (Exhibit 53).
35
256
Exhibit 53. New Flyer Facilities

Location
Winnipeg, Manitoba
Manufacturing Facility
Distribution Center
Development Facility
Customer Acceptance
Erlanger, Kentucky
Distribution Center
Fresno, California
Distribution Center
Brampton, Ontario
Distribution Center
Arnprior, Ontario
Serv ic e Center
Elkhart, Indiana
TCBs facilities
Function
Adminis tration, sub-assembly , structure weld, shell assembly and paint support servic es
Aftermarket parts
New product dev elopment
Structure weld, shell assembly , paint, final assembly and customer inspection/acceptance
Final assembly
Customer inspection/acceptance
Parts dis tribution center
Warranty support and parts distribution
Parts fabric ation
The cost structure of bus manufacturing was 71% materials in 2011, and ~90%
of the total cost structure is variable.
Exhibit 54. Cost Structure
Cost Structure: 2011 Bus Manufacturing Operations

Fix ed Ov erhead, 6%
Operating Ex penses,
4%
Variable Ov erhead,
3%
Other Direct Costs,
5%
Warranty , 2%
Materials, 71%
Labour, 9%
36
257
Appendix 2. Customers And

Competitors
Customers
New Flyer has relationships with 20 of No rth Americas largest 25 transit
authorities and 251 authorities in total. Customer relationships tend to be long
term (average for key relationships is 14 years) and ~90% of customers are
repeat sales.
Exhibit 55. Customers: Presence Among Largest Transit Authorities

New Flyer's Presence Among The 25 Largest Transit Agencies in the United States
and Canada
6,000
5,000
Buses
4,000
3,000
2,000
1,000
San Fran
Dallas
Miami
Portland
Minneapolis
Calgary
Victoria
Edmonton
Orange Cty
Boston
Ottawa
Denver
Other OEMs
Phoenix
Houston
Philadelphia
Chicago
Washington
PACE
Montreal
Seattle
Vancouver
Toronto
L.A.
Newark
NYCTA
New Flyer
New Flyer has one-third of the heavy-duty transit bus manufacturing market and
a 17% market share in aftermarket products and services.
Exhibit 56. Bus Manufacturing Market Share
Active Buses by Manufacturer
2011 Heavy-Duty Transit Bus Market Share
NOVA
16%
Other
1%
New Flyer
35%
Orion
9%
NABI
9%
Gillig
30%
OEMs no
longer in
business
9%
NOVA
7%
NABI
9%
Other
12%
Orion
14%
New Flyer
30%
Gillig
19%
37
258
Exhibit 57. Aftermarket Market Share

2011 Aftermarket Market Share
New Flyer
17%
Others
37%
NA B I
7%
Gillig
9%
Truck P arts
Distributo rs
5%
Engine/Transmissio n
Dealers
6%
M uncie
7%
Lo cals (ex. flat glass)

8%
Orio n
4%
Competitors
Orion, a Daimler AG subsidiary and a major New Flyer competitor (9% of North
American bus sales in 2011), was shut down in April. We highlight New Flyers
other major competitors below.
Gillig Corporation
Gillig, founded in 1890 in San Francisco, is a privately owned heavy-duty bus
producer. Its product lines include a low floor, hybrid, BRT, and trolley. Gillig is
the second-largest producer of transit buses in North America, manufacturing
between 1,200 and 1,300 buses per year for numerous customers.
North American Bus Industries (NABI)

North American Bus Industries was originally founded in 1976 and after various
mergers and alliances became a single distinct brand in 2006 when NABI,
Optima Bus and Blue Bird Corporation merged. The companys focus is design
and propulsion systems ranging from clean diesel, hybrid, CNG and LNG. NABI
serves the North American market and provides a complete line of standard and
low floor, heavy-duty transit buses. NABI is owned by American private equity
firm Cerberus.
Nova Bus
Nova Bus, a subsidiary of Volvo, was established in 1993. Nova Bus has
production facilities located in Quebec and Plattsburg, NY. The company
manufactures four different buses: the Nova LFS and LFS HEV (both 40 feet in
length) and the LFS arctic and LFX (both 62 feet in length).
DesignLine International
DesignLine, originally founded in 1985, is based in New Zealand and recently
entered the North American bus industry. It is currently supplying the Baltimore
and NYC TAs with hybrid vehicles. The companys hybrid design utilizes a 30kW,
multi-fuel turbine manufactured by Capstone Turbine Corp. (CPSTOTC).
38
259
Foton America Bus Co., Inc.

Foton America Bus Company, established in 2008, is a subsidiary of OEM Beiqi
Foton Motor Company. The company caters primarily to Asian, African, and
European markets but has recently entered the North American market. The
company recently signed a distribution agreement with Macnab Transit Sales
Corporation.
39
260
Appendix 3. Management & Board

Of Directors
Exhibit 58. Management Team
Management Team
Officer
Description
Shares Held
Paul Soubry, President and CEO
Held v arious positions at StandardAero, named President in 2001, COO in 2006 and CEO in 2007. B.Comm from the
Univ ersity of Manitoba, ex ecutiv e development at Harvard Business School, Canada's Top 40 Under 40 aw ard
recipient.
122,300
Glenn Asham, Chief Financial Officer
Worked with Deloitte & Touche for eight years, providing client services in accounting, auditing, tax ation and
management consulting. Chartered Accountant w ith a B.Comm from the Univ ersity of Manitoba.
211,000
Wayne Joseph, Executiv e Vic e President,

Operations
Held ex ecutiv e-level positions at North American Bus Industries, Blue Bird Body Company and BAE Systems. B.BA
from Ashland Univ ersity in Ohio.
Hans Peper, Executiv e Vice President, Customer

Serv ic es
Held a variety of senior management positions w ithin the European farm equipment industry . Joined New Fly er in
1989, developed the aftermarket and public ations organizations. Masters of Agric ultural Engineering.
Paul Smith, Executiv e Vice President, Sales and

Marketing
Ov er 15 years of design experience in mechanic al technology, has been at New Fly er for 21 years.
7,250
94,238
275,913
Exhibit 59. Board Of Directors

Board of Directors
Director
Description
Hon. Brian Tobin (Chairman)

V. James Sardo
Wayne M.E. McLeod
Larry Edwards
Patricia Jacobsen
John Marinucci
Adam Gray
William Millar
Paul Soubry
Senior Business Adv is or, Fraser Milner Casgrain LLP, Toronto, Ontario
Corporate Director, Toronto, Ontario
Corporate Director, Toronto, Ontario
Corporate Director, Tuls a, Oklahoma
Corporate Director, Vancouver, British Columbia
Corporate Director, Oakville, Ontario
Managing Partner, Colis eum Capital Management, LLC, Greenwich, Connectic ut
Corporate Director, Stevensv ille, Mary land
President and Chief Executiv e Officer of New Fly er, Winnipeg, Manitoba
Shares Held
49,700
30,000
16,000
103.946
11.541
293,035
0
0
122,300
Source: Company reports and CIB C World Markets I nc
40
261
2012 Current
2013 Current
2014 Current
41
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
$16.7A
---
$16.4A
---
$14.1A
---
$15.7E
---
$62.9E
$68.4E
$76.6E
262
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
Department. Research analysts do not re ceive compensation based upon revenues from specific investment banking
In addition to 1% ownership positions in covered companies tha t are required to be specifically disclosed in this report,
Important Disclosure Footnotes for New Flyer Industries Inc. (NFI)

2a
2c
CIBC World Markets Inc. has managed or co -managed a public offering of securities for New Flyer Industries
2e
2g
42
263
Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered
by CIBC World Markets Inc.:
Ag Growth International Inc. (2g, 7) (AFN-TSX, C$30.73, Sector Performer)
Contrans Group Inc. (2g, 12) (CSS-TSX, C$9.58, Sector Outperformer)
Exchange Income Corporation (2a, 2c, 2e, 2g) (EIF-TSX, C$26.44, Sector Performer)
Vicwest Inc. (2g, 7) (VIC-TSX, C$12.35, Sector Outperformer)
Accuride Corporation (ACW -NYSE, $3.09, Not Rated)
Canwel Building Materials Ltd. (CWX-TSX, C$2.50, Not Rated)
Capstone Turbine Corp. (CPST-OTC, $0.95, Not Rated)
Cargojet Inc. (CJT-TSX, C$8.73, Not Rated)
Commercial Vehicle Group Inc. (CVGI-NASDAQ, $8.21, Not Rated)
Daimler AG (DAIGN-DE, 39.82, Not Rated)
EnerCare Inc. (ECI-TSX, C$8.39, Not Rated)
Oshkosh Truck Corp (OSK-NYSE, $28.48, Not Rated)
PACCAR (PCAR-NASDAQ, $44.38, Not Rated)
Rosenbauer International (RBAV-BE, 44.90, Not Rated)
Spartan Motors Inc. (SPAR-NASDAQ, $4.86, Not Rated)
Student Transportation of America (STB-TSX, C$6.20, Not Rated)
Supreme Industries Inc. (STS-AMEX, $3.40, Not Rated)
Trimac Transportation Ltd. (TMA-TSX, C$5.38, Not Rated)
Volvo AB (VOLVB-ST, [SEK]91.85, Not Rated)
Wajax Corporation (WJX-TSX, C$39.75, Not Rated)
WaterFurnace Renewable Energy Inc. (WFI-TSX, C$14.00, Not Rated)
Important disclosure footnotes that correspond to the footnotes in this table may be found in the "Key to
Important Disclosure Footnotes" section of this report.
43
264
Key to Important Disclosure Footnotes:

1
2a
2b
2c
2d
2e
2f
2g
3a
3b
CIBC World Markets Corp. makes a market in the securities of this company.
This company is a client for which a CIBC World Markets company has performed investment banking services
in the past 12 months.
CIBC World Markets Corp. has managed or co -managed a public offering of securities for this company in the
past 12 months.
CIBC World Markets Inc. has managed or co -managed a public offering of securities for this company in the
past 12 months.
CIBC World Markets Corp. has received compensation for investment banking services from this company in
the past 12 months.
CIBC World Markets Inc. has received compensation for investment banking services from this company in the
past 12 months.
CIBC World Markets Corp. expects to receive or intends to seek compensation for investment banking services
from this company in the next 3 months.
This company is a client for which a CIBC World Markets company has performed non-investment banking,
securities-related services in the past 12 months.
CIBC World Markets Corp. has received compensation for non-investment banking, securities-related services
from this company in the past 12 months.
3c
CIBC World Markets Inc. has received compensation for non-investment banking, securities-related services
4a
non-securities-related services in the past 12 months.
CIBC World Markets Corp. has received compensation for non-investment banking, non-securities-related
services from this company in the past 12 months.
4b
4c
CIBC World Markets Inc. has received compensation for non-investment banking, non-securities-related
5a
The CIBC World Markets Corp. analyst(s) who covers this company also has a long position in its common
equity securities.
A member of the household of a CIBC World Markets Corp. research analyst who covers this company has a
long position in the common equity securities of this company.
5b
6a
The CIBC World Markets Inc. fundamental analyst(s) who covers this company also has a long position in its
common equity securities.
6b
A member of the household of a CIBC World Markets Inc. fundamental research analyst who covers this
company has a long position in the common equity securities of this company.
CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1%
or more of a class of equity securities issued by this company.
An executive of CIBC World Markets Inc. or any analyst involved in the preparation o f this research report has
provided services to this company for remuneration in the past 12 months.
A senior executive member or director of Canadian Imperial Bank of Commerce ("CIBC"), the parent company
to CIBC World Markets Inc. and CIBC World Marke ts Corp., or a member of his/her household is an officer,
director or advisory board member of this company or one of its subsidiaries.
7
8
9
10
Canadian Imperial Bank of Commerce ("CIBC"), the parent company to CIBC World Markets Inc. and CIBC
World Markets Corp., has a significant credit relationship with this company.
11
12
The equity securities of this company are restricted voting shares.

The equity securities of this company are subordinate voting shares.
13
The equity securities of this company are non-voting shares.
14
The equity securities of this company are limited voting shares.
44
265
45
266

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
SU
NR
Not Rated
Restricted
Stock Ratings
Sector Weightings**
O
Overweight
Market Weight
Underweight
NA
None
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.

(as of 13 Dec 2012)
Count
Percent
Count
Percent
146
39.7%
174
47.3%
144
98.6%
171
29
7.9%
27
98.3%
93.1%
Restricted
18
4.9%
Restricted
18
100.0%
Count
Percent

(as of 13 Dec 2012)
Count
Percent
0.0%

Restricted

0.0%
50.0%
100.0%
50.0%
100.0%
0.0%
Restricted
0.0%
Capital Equipment Sector includes the following tickers: ATA, NFI.

*Although the investment recommendations within the three -tiered, relative stock rating system utilized by CIBC World Markets Inc.
46
267
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268
Legal Disclaimer (Continued)

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48
269

Initiating Coverage
August 30, 2010
Capital Equipment
Stock Rating:
Sector Outperformer
Still Time To Get On This Bus

Sector Weighting:
Market Weight
NFI.UN-TSX (8/26/10)
Key Indices:
C$12.50
C$10.99
As of 8/30, we are initiating coverage of New Flyer with a Sector

Outperformer rating and a 12- to 18-month price target of C$12.50. New
Flyer is an attractive cash flow story (FCF yield of 13.5% on 2010E), with
some potential upside through improvements in operating efficiencies.
Over the next two years, we are concerned that fiscal spending cuts could
potentially impact funding for U.S. and Canadian municipal transit
authorities; however, we believe this risk is already reflected in the share
price.
An upcoming replacement cycle, environmental concerns and increased

urbanization suggest public transit ridership should eventually rebound.
Over the past two years, the public transit market has taken market share
from the light vehicle market; we expect this trend to continue.
Our C$12.50 price target is based on a 11.3% target free cash flow yield on
2011 and reflects a target dividend yield of 9.4%. Our valuation also
reflects 6.3x 2010E EBITDA and 6.7x 2011E EBITDA. The company's
historical average EV/EBITDA multiple is 6.1x.
Toronto

52-week Range
Shares Outstanding
Float
Dividend/Div Yield
Fiscal Year Ends
Book Value
2010 ROE (E)
Net Debt
Preferred
Common Equity
NM
C$7.99-C$11.76
49.5M
47.1M Shrs
126,680
$513.5M
C$1.17 / 10.5%
December
$2.50 per Shr
NM
$379.7M
Nil
$123.5M
No
EBITDA ($ mlns.)
Prev
2009
2010
2011
EV/EBITDA
2009
2010
2011
Current
$102.7A
$103.4E
$95.9E
5.8x
5.8x
6.2x
Distributable Income Per Unit

2009
2010
2011
P/DI
2009
2010
2011
$1.52A
$1.47E
$1.38E
6.8x
7.1x
7.5x
Source: Reuters
Company Description
New Flyer Industries Inc. is the largest North American
manufacturer of heavy-duty transit buses supplying
www.newflyer.com
Michael Willemse, CFA

1 (416) 594-7285
David Galison
1 (416) 956-3548
Michael.Willemse@cibc.ca
David.Galison@cibc.ca

and ResearchCentral.cibcwm.com
10-104460 2010
270
Still Time To Get On This Bus - August 30, 2010
New Flyer Industries (NFI.UN-TSX)
Sector Outperformer
Current Price: $11.17

12- To 18-Month Price Target: $12.5
416-594-7285
michael.willemse@cibc.ca
David Galison, MBA
416-956-3548
david.galison@cibc.ca
All Figures in USD$ (000), except per share data

Key Multiples
2010E P/E
2010E
EBITDA
2011E P/E
2011E
EBITDA
New Flyer
Industrial Trusts
nmf
5.8x
nmf
6.2x
13.9x
7.8x
10.8x
6.6x
Corporates
13.6x
7.5x
12.1x
6.3x
Historical Price To Forward Earnings
11.3x
Historical EV/TTM EBITDA
6.1x
Operating Performance
2008A
2009A
2010E
2011E
Return on Equity
59.4%
-30.2%
25.6%
11.7%
Return on Capital Employed
9.4%
10.3%
10.9%
10.1%
EBITDA Margin
9.8%
8.6%
2.2%
9.1%
EBIT Margin
15.0%
2.3%
0.5%
6.8%
EBT Margin
9.9%
-1.3%
3.9%
2.0%
Net Margin
9.1%
-2.8%
3.0%
1.3%
Quality of Earnings
1
Cash Realization Ratio
2008A
2009A
2010E
2011E
0.9x
-2.6x
2.5x
5.3x
6.0x
6.3x
6.3x
6.7x
P/FCF
FCF Yield (inc. W/C chgs)
16.5%
16.0%
15.8%
14.9%
Effective Tax Rate
8.3%
116.4%
23.9%
34.0%
Interest Coverage
3.6x
0.8x
2.0x
1.5x
Investment Thesis
New Flyer was founded in 1930 in Winnipeg, Manitoba, with its primary focus being
motor coaches and school buses. In 1971, the company began to focus on
manufacturing transit buses exclusively. In 1986, the company was acquired by a Dutch
bus manufacturer Den Oudsten BV, which introduced low floor buses in 1988. New
Flyer has facilities located in Winnipeg, Manitoba, St. Cloud, Minnesota, Crookston,
Minnesota, Earlanger. The U.S. facilities allow New Flyer to comply with Buy America
legislation and funding rules.
New Flyer is a leading manufacturer of heavy-duty transit buses to transit authorities
throughout the U.S. and Canada with a market share of 35%-40%. The company also
provides aftermarket parts and service support. New Flyer primarily manufactures
heavy-duty buses of between 30 feet and 60 feet with seating capacity for up to 65
passengers. New Flyers product offerings are among the broadest and most advanced
in the industry.
Ridership Stats
US Bus Transit Passengers (mlns)
New Flyer Shipments
- Orders (1H/10 vs. 1H/09)
Q1/10
Q1/09
y/y
1,297
1,351
-4.0%
453
593
-23.6%
860
1,068
-19.5%
2010E
2011E
Industry Shipment Ests
5,500
5,500
0.0%
New Flyer Shipment Ests

Valuation & Outlook
2,068
2,052
-0.8%
2011E
Income Statement
2008A
2009A
2010E
2011E
Sales
$961.3
$1,099.9
$1,065.9
$1,050.7
Current Price:
$10.99 Rating:
Gross Profit
$140.5
$146.8
$150.8
$143.2
Price Target:
$12.50
EBITDA
$94.6
$102.7
$103.4
$95.9
12-18 Mo Return:
EBIT
$144.4
$35.8
$94.5
$71.9
Price Target Represents:
2009A
2010E
EBT
$95.6
($14.0)
$41.4
$21.2
P/E:
nmf
nmf
nmf
P/CF
7.5x
7.5x
7.9x
$619
Minority Interest
SO
22.4%
Net Income
$87.6
($30.4)
$31.5
$14.0
Enterprise Value:
$592
$619
$0.29
$0.42
$0.36
$0.28
EV/EBITDA:
6.0x
6.3x
6.7x
47.3
47.3
49.5
49.5
EV/Sales:
0.5x
0.6x
0.6x
Units Outstanding
P/BV:
FCF Yield:
Cash Flow
2008A
2009A
2010E
2011E
Operating cash flow
$79.2
$77.5
$79.5
$74.6
Capex
($6.8)
($5.5)
($6.7)
($6.4)
Changes in working capital

2
Free Cash Flow
$6.5
$15.1
($23.1)
$0.7
$86.0
$83.0
$86.2
$81.0
FCF per Share
$1.82
$1.75
$1.74
$1.64
Balance Sheet
2008A
2009A
2010E
$1,000.0
10.0%
$400.0
4.0%
$200.0
2.0%
$30.7
$25.8
$43.0
$391.7
$3,925.2
Equity
$147.6
$100.7
$123.2
$119.5
Net debt (Cash)
$314.9
$353.8
$365.9
$349.5
Net debt per share
$0.01
$0.01
$0.01
$0.01
Calculated as CFO less Capex
12.0%
6.0%
$384.5
Calculated as CFO divided by Net Income
$1,200.0
$600.0
$30.7
Chart: Sales, EBITDA & EBITDA margin
2011E
$345.6
5.2x
11.3%
8.0%
Total debt
Book Value Per Unit (FD)
5.0x
11.9%
$800.0
Cash
Net debt/EBITDA
5.9x
12.0%
3.3x
3.4x
3.5x
3.6x
$3.12
$2.13
$2.49
$2.42
0.0%
$0.0
F2006
F2007
Sales
F2008
F2009
EBITDA
F2010E
F2011E
EBITDA Margin
Source: WardsAuto, Bloomberg, Company reports and CIBC World Markets Inc.
271
Investment Summary
As of August 30, we are initiating coverage of New Flyer Industries Inc. with a
Sector Outperformer rating and a 12- to 18-month price target of C$12.50. New
Flyer is an attractive cash flow story, with the shares currently reflecting a free
cash flow yield of approximately 13.5% on our 2010 estimates. Over the next
two years, we are concerned that potential funding from U.S. and Canadian
municipal transit authorities (TAs) may be negatively impacted by fiscal
spending cuts; however, we believe this risk is already reflected in the share
price. Ridership in the U.S. has also suffered from the weak U.S. economy.
Regardless, environmental concerns, increased urbanization and replacement
demand should ultimately support the case for increased public transit. We also
believe the significant decline in the U.S. auto sector could eventually signal a
shift towards greater use of public transit in the U.S.
Ultimately, a decline in public spending would likely be temporary with the
market eventually rebounding as bus fleets age and replacement demand drives
spending for new fleets. We believe there may be a spike in bus purchases in
the 2011-2014 timeframe as a jump in bus purchases from 1999-2001 should
be approaching replacement. Management has acknowledged the potential for
this upcoming surge in replacement demand (the potential backlog for the
industry continues to improve), however, state public funding constraints could
limit the potential upside from this cycle upturn.
The free cash flow yield on our

conservative 2011 estimate is
approximately 11.3%. New Flyers
2010 payout ratio is approximately
79.5%, which is reflected in the
companys attractive dividend yield
currently at 10.6%.
We believe there may be a spike in

bus purchases in the 2011-2014 time
frame as a jump in bus purchases
made from 1999-2001 should be
approaching replacement.
The free cash flow yield on our conservative 2011 estimate is approximately
11.5%. New Flyer distributes most of the companys free cash flow in dividends
(the companys 2010 payout ratio is approximately 80%), which is reflected in
the companys attractive dividend yield currently at 10.6%.
New Flyer should also continue to hold its position as the market leader in the
North American heavy-duty transit industry, with its leading technology and
broad product offering. Longer term, the cash flow generating power of the
company should be positively impacted by improved operating efficiencies
(generated from the companys operating excellence program), new product
introductions and continued growth of the aftermarket operations. These areas
will be a major focus for new President and CEO Mr. Paul Soubry, who was
appointed in 2009. The aftermarket operations segment currently represents
approximately 10% of overall revenues; however, it is expected to grow (longer
term) as more TAs begin outsourcing the servicing of bus fleets.
In light of these factors, we believe New Flyer will continue to support a stable
dividend policy into 2011 and beyond. Our C$12.50 price target is based on an
11.3% target free cash flow yield on our 2011 estimate. Our valuation also
reflects a target dividend yield of 9.4%. Note that our 2011 estimate reflects
trough level earnings; the valuation on our 2010 and 2012 estimates is at
approximately 12%. Our valuation also reflects 6.3x 2010E EBITDA and 6.7x
2011E EBITDA. The companys historical average EV/EBITDA multiple is 6.1x.
Our valuation is in line with comparable industrial manufacturers. New Flyer
shares are registered as income deposit securities (IDS), which allow for a more
tax efficient structure relative to other industrials with traditional corporate
structures. New Flyers IDS units are not subject to the 2011 SIFT rule
implementation; the resulting scarcity of high yield equities for investors should
ultimately attract a premium to New Flyer.
Note that our estimates assume a C$/US$ exchange rate of C$1.05/US$1.00.
272
Company Profile
New Flyer is a leading manufacturer of heavy-duty transit buses for TAs
throughout the U.S. and Canada, holding the largest market share at
approximately 37% in 2009, down slightly from 41% in 2008. The decline in
market share in 2009 was primarily due to a deferral of a large contract with the
Chicago Transit Authority (CTA) (see further details below). The company also
provides aftermarket parts and service support. See further details related to
New Flyers competitors in Appendix A.
New Flyer is a leading manufacturer

of heavy-duty transit buses
throughout the U.S. and Canada,
holding the largest market share at
37% in 2009, down slightly from 41%
in 2008.
Exhibit 1. Market Share 2009

Nova
10%
Other
2%
NABI
10%
New Flyer
37%
Orion
17%
Gilig
24%
Source: Company reports and CIBC World Markets Inc.
Established in 1930 and headquartered in Winnipeg, Manitoba, New Flyer

primarily manufactures heavy-duty buses between 30 feet and 60 feet in length
with seating capacity for up to 65 passengers. Production facilities are located in
Winnipeg, Manitoba, as well as Crookston and St. Cloud, Minnesota (allowing
New Flyer to comply with Buy America legislation and funding rules). In the
U.S., bus manufacturers must ensure that final assembly and manufacturing
occurs in the U.S., with at least 60% of materials consisting of U.S. content. In
Canada, Ontario has similar regulations with a 25% Canadian content
requirement. New Flyers product offerings are among the broadest and most
advanced in the industry.
New Flyer mainly supplies buses to municipal TAs and other government-sponsored
operations. The company has relationships with 248 TAs, including, 20 of the 25
largest TAs in North America. Eighty-nine percent of New Flyer sales are typically
derived from repeat customers. The companys aftermarket parts and service
business currently represents 10% of overall revenues and has averaged growth of
17.1% over the past three years. Although this growth rate may subside in 2010
and 2011, we expect growth to pick up again in 2012 and beyond.
New Flyer was privately held until 2005, at which time the company went public.
New Flyer Industries Inc. was established in 2005 to acquire an interest in New
Flyer Holdings (NFL), the holding company established by the purchase of New
Flyer by private equity interests. The tradable securities of New Flyer include
IDS, which consist of one common share of New Flyer and C$5.53 face value of
14% subordinated notes. New Flyer owns all of the issued and outstanding Class
A shares. The IDS security trades as a unit on the TSX.
273
After the companys IPO and several subsequent issues, the private equity
sponsors are no longer shareholders.
As of June 30, New Flyer had 47.3 million units outstanding, which represent the
IDS of the company. The company recently announced a consolidation of its
Class B and C shares, which will result in units outstanding increasing to 49.5
million. New Flyer pays a distribution of both a dividend on the common shares
as well as interest on the subordinated notes, with the total annual distribution
currently set at $1.17 per unit. The distribution was last raised by $0.04 in
August 2007 and has since been maintained by the company. Management is
looking to maintain its distribution policy as long as it does not risk or violate
existing covenants. As evident from Exhibit 22, we do not anticipate the
company encountering covenant problems over the next few years.
Assessing Government Risks

The majority of New Flyer bus sales are to U.S. and Canadian municipal TAs.
Funding for these sales are provided by municipal, state, provincial and federal
governments (federal makes up the majority of funding in the U.S.).
Bus purchases in the U.S. are

primarily funded through the FTA,
which generates revenue from
gasoline taxes. Municipal and local
TAs receive 80% of the funding for
new bus purchases from the federal
government.
United States: Bus purchases in the U.S. are primarily funded through the
Federal Transit Administration (FTA), which generates revenue from gasoline
taxes. Municipal and local TAs receive 80% of the funding for new bus purchases
from the federal government for: 1) the replacement of buses that have
operated for 12 years or 500,000 miles; and 2) new buses to support fleet
growth based on population and ridership trends. Local TAs must contribute
20% towards the purchase to qualify for the grant and must comply with the
Buy America legislation.
Federal funding for public transit in the U.S. is provided under surface
transportation legislation covering highway, air, rail and marine transport. This
legislation is passed in six-year cycles. The most recent legislation for public
transit spending expired on September 30, 2009. U.S. funding for transit as a
whole was at a record high of $18 billion in 2009 ($10 billion in FTA funding and
$8.4 billion under the America Recovery and Reinvestment Act of 2009).
On July 29, the U.S. House of Representatives approved its F2011 transportation
appropriations bill, which includes an increase over F2010 funding levels
(http://www.govtrack.us/congress/bill.xpd?bill=h111-5850). The Senate has
proposed a budget that maintains transportation funding near F2010 levels;
however, the U.S. Senate is not expected to take up the issue until it returns from
its August recess. The bill provides $11.3 billion for FTA programs, an increase of
$575 million over F2010. $9.0 billion of this amount is provided for various public
transit and bus programs, an increase of $620 million over last year. The bill
includes $2.0 billion for the Capital Investments Program (New Starts).
Canada: Transit purchases in Canada have historically been funded by provincial
and municipal governments. However, since 2003, successive federal
governments have funded transit capital projects in order to address the perceived
infrastructure deficit in Canadian cities and the role transit can play to fight
climate change and reduce congestion. Cost share funding for public transit
projects have included federal programs such as the Canadian Strategic
Infrastructure Fund and the Gas Tax Fund. The Gas Tax Fund became permanent
upon the release of the 2008 federal budget. The fund will provide C$2.0 billion
per year from 2009 through 2014 to help municipalities improve infrastructure.
274
Funds are also allocated to provinces through public transit funds and capital trust
programs (C$1.3 billion from 2005 through 2009). In 2008, approximately 21% of
all transit capital expenses (vehicles and fixed infrastructure) were funded by the
federal government, 57% by the provinces and 19% by municipalities. The
balance was funded through debt development levy or other means.
Infrastructure Stimulus Fund: In 2009 and 2010, the federal government will
provide C$4 billion to cover up to 50% of infrastructure projects. Certain
projects will be eligible for the newly announced Green Infrastructure Fund, a
five-year C$1 billion investment program. Transit projects are anticipated to
account for 25% of all eligible projects.
Economic Concerns
Surveys compiled by the APTA
suggest that more than 80% of
transit systems in the U.S. have
been forced to increase fares,
reduce services and routes and/or
reduce employee levels due to
budget constraints.
Operating funds for U.S. TAs (primarily provided by state and local governments
through taxes) have been severely impacted by the recession. Surveys compiled
by the American Public Transportation Association (APTA) suggest that more than
80% of transit systems in the U.S. have been forced to increase fares, reduce
services and routes and/or reduce employee levels due to budget constraints. The
APTA estimates that 60% of transit trips are employment related. On May 25, a
bill was introduced in the U.S. Senate that would authorize $2.0 billion for
emergency transit operating assistance to restore or prevent service reductions,
layoffs and fare increases. The bill was enacted in June 2010.
State and municipal tax collections in the U.S. declined by approximately 8.5%
in 2009 versus 2008 as almost all states experienced a decline in total tax
collection. Tax collections appear to be rebounding somewhat in 2010, with
Q1/10 tax collections up 0.8% year over year. Almost all states experienced a
fall in total tax collection in 2009. Management believes these funding issues
negatively impacted order activity in Q1/10 and have negatively impacted
backlogs (although order activity did rebound somewhat in Q2/10). The backlog
for New Flyer declined to 2,136 in Q2/10 from 2,388 in Q2/09 (although up from
1,785 in Q1/10). A prolonged weakness in government funding for purchases of
new heavy-duty transit buses could ultimately have a material adverse effect on
demand, although demand appears to be holding up in the near term. New Flyer
announced another order for 475 equivalent units (EUs) of compressed natural
gas (CNG) buses (135 firm, 340 options) from the New York Metropolitan Transit
Authority on August 20.
Recently the rate of decline in bus ridership in the U.S. has been moderating. The
APTA indicated that transit bus ridership decreased 3.9% in Q1/10 versus Q1/09,
a rate of decline slower than experienced in Q4/09 of 5.8% compared to Q4/08.
Bus ridership in March 2010 only declined by 0.1% compared to March 2009.
Relative to the U.S., demand for

heavy-duty transit buses in Canada
appears to be more stable with total
transit ridership increasing in Q1/10
relative to Q1/09.
Canada: Relative to the U.S., demand for heavy-duty transit buses in Canada
appears to be more stable. Both total transit ridership and bus ridership
increased in Q1/10 relative to Q1/09. The stronger economy, increased funding
from the federal government and stronger fiscal balance sheets suggest demand
at least should be stable. Although Canadian fiscal deficits are expected to be
reduced over the next few years, we do not expect any material impact for
heavy-duty transit buses. There continues to be significant lobbying efforts
underway to provide longer-term Canadian federal funding for public transit,
including new bus purchases and development of alternative fuel technologies.
The average age of the Canadian heavy-duty transit bus fleet was 7.6 years in
2008 compared to 7.5 years in the U.S. Recent increases to Canadian federal
funding programs appear to have reduced the age of the Canadian fleet.
275
Assessing The Downside

Overall, the impact of reduced overall government spending in the U.S. along
with the ending of infrastructure incentive programs in both the U.S. and
Canada could ultimately be negligible. New Flyer management believes much of
the funds from the stimulus packages were used for infrastructure and highway
upgrades as opposed to direct bus purchases.
Based on current conditions in the

U.S. and Canada, New Flyer
management expects that demand
over the next five years will remain
in the range of 5,500 to 6,000 transit
buses per year.
New Flyer production is booked until

the end of 2010 and most of Q1/11,
however, a decline in order activity
for the remainder of 2010 could
result in lower deliveries in 2011.
According to New Flyer management, the potential pipeline of orders in the U.S.
and Canada as of July 2010 was still at approximately 13,536 EU (the industry
uses the term EU to reflect production where the production of one bus chassis of
up to 40 feet in length equals one equivalent unit, while an articulated 60-foot bus
represents two equivalent units). This amount is an increase from January 3.
Based on current conditions in U.S. and Canada, New Flyer management expects
that demand over the next five years will remain in the range of 5,500 to 6,000
EU heavy-duty transit buses per year. Assuming a 35%-40% market share for
New Flyer suggests annual shipments of 1,925-2,400 for the company. Our 2010
and 2011 annual bus shipment estimates are 2,068 and 2,052, respectively.
There is a risk of a small downturn in public spending for heavy duty transit
buses in 2011. Production is booked until the end of 2010 and most of Q1/11,
however, a decline in order activity for the remainder of 2010 could result in
lower deliveries in 2011. We are modeling for volumes to be flat year over year.
In light of public ridership trends, government desire to provide some stability to
federally funded programs and a stable Canadian market, we do not believe
deliveries will decline more than 15% year over year. Deliveries for the industry
are expected to be 5,500-6,000 in 2010. A 15% decline would suggest deliveries
of 4,700-5,100 units.
We are currently forecasting distributable cash flow per unit at New Flyer to
decline from $1.47 in 2010 to $1.38 in 2011, which would still be enough to
cover New Flyers current dividend of $1.17. While New Flyer management does
not target a specific payout ratio, we believe a payout ratio at this level (85%)
for a prolonged period of time would be at the high end of managements
comfort range particularly if debt covenant ratios were seen to be at risk.
Cost Structure Provides Flexibility: We would not expect the margin impact
of a 10%-15% decline in deliveries in 2010 versus 2011 to be material. A large
portion of the production and manufacturing process costs for heavy-duty buses
are component related costs, or variable costs. New Flyer estimates that 92% of
New Flyers total costs were variable costs in 2009. Having such a cost structure
in place allows New Flyer to adjust production as necessary, with a limited
impact on margins and the ability to match production levels with revenues.
Exhibit 3 provides our estimate of the impact of a 10%-20% decline in
shipments on operating margins and cash flow.
276
Exhibit 2. Cost Structure Bus Operations

Other Direct Costs
5%
Warranty
2%
Labour
7%
Variable Expenses
3%
Operating Expenses
4%
Fixed Overhead
4%
Materials
75%
Given that a large portion of New

Flyer costs is variable, we would not
expect the margin impact of a 10%15% decline in deliveries in 2010
versus 2011 to be material.
Exhibit 3. New Flyer Fixed/Variable Cost Analysis

Bus Deliveries
Sensitivity
Bus Sales
COGS
Fixed Costs*
% Of Total COGS
Variable Costs*
% Of Total COGS
2010E
2,073
2011E
$956.0
$877.3
$87.7
10.0%
$789.6
90.0%
1,866
10%
$860.4
$796.6
$86.0
10.8%
$710.6
89.2%
1,762
15%
$812.6
$756.2
$85.1
11.3%
$671.1
88.7%
1,658
20%
$764.8
$715.0
$83.3
11.7%
$631.7
88.3%
EBITDA
EBITDA Margin
Aftermarket EBITDA
Total EBITDA
D&A
EBIT
Int & Other
EBT
Net Income
FD EPS*
Units
$78.7
8.2%
$24.7
$103.4
$23.7
$79.7
$51.4
$28.3
$19.79
$0.40
49.5
$63.8
7.4%
$23.5
$87.3
$24.0
$63.3
$50.7
$12.6
$8.84
$0.18
49.5
$56.4
6.9%
$23.5
$79.9
$24.0
$55.9
$50.7
$5.2
$3.62
$0.07
49.5
$49.8
6.5%
$23.5
$73.3
$24.0
$49.3
$50.7
($1.4)
($0.97)
($0.02)
49.5
Capex
Sub-debt Interest
Taxes
Distributable Cash Flow
DCF Per Unit
Current Dividend
($6.0)
$34.9
($9.6)
$71.20
$1.44
$1.17
($5.0)
$34.9
($4.3)
$62.19
$1.26
$1.17
($5.0)
$34.9
($1.8)
$57.28
$1.16
$1.17
($5.0)
$34.9
$0.5
$52.94
$1.07
$1.17
* For illustrative purposes only. Not official CIBC estimates.

As evident from Exhibit 4, even with a decline of close to 20%, the distributable
cash flow yield for New Flyer would still be in the 9%-11% range, which we view
as an attractive valuation for an industrial manufacturer operating at the bottom
of the cycle in a less volatile industry.
277
Bus Segment Operating Margin
Exhibit 4. New Flyer Distributable Cash Flow Yield

U.S. & Canadian Market
New Flyer Shipments
% Change From 2010
New Flyer Bus Sales
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
Assumptions:
2011 Aftermarket EBITDA:
2011 Amortization & Interest:
2011 Capex:
2011 Amortization:
2010 Shipments:
3,500
1,400
-32.3%
$630
3,750
1,500
-27.5%
$675
4,000
1,600
-22.6%
$720
U.S. & Canadian Bus Deliveries (Potential Range For F2011)

4,250
4,500
4,750
5,000
5,250
5,500
1,700
1,800
1,900
2,000
2,100
2,200
-17.8%
-13.0%
-8.1%
-3.3%
1.5%
6.4%
$765
$810
$855
$900
$945
$990
5,750
2,300
11.2%
$1,035
6,000
2,400
16.1%
$1,080
6,250
2,500
20.9%
$1,125
6.2%
6.6%
6.9%
7.3%
7.7%
8.1%
8.5%
8.9%
9.2%
9.6%
10.0%
10.4%
10.8%
11.2%
11.5%
11.9%
6.4%
6.8%
7.2%
7.6%
8.0%
8.4%
8.8%
9.2%
9.7%
10.1%
10.5%
10.9%
11.3%
11.7%
12.1%
12.5%
6.6%
7.0%
7.4%
7.9%
8.3%
8.7%
9.2%
9.6%
10.1%
10.5%
10.9%
11.4%
11.8%
12.2%
12.7%
13.1%
6.8%
7.2%
7.7%
8.1%
8.6%
9.1%
9.5%
10.0%
10.5%
10.9%
11.4%
11.9%
12.3%
12.8%
13.3%
13.7%
7.9%
8.5%
9.2%
9.8%
10.4%
11.0%
11.7%
12.3%
12.9%
13.6%
14.2%
14.8%
15.4%
16.1%
16.7%
17.3%
8.1%
8.7%
9.4%
10.1%
10.7%
11.4%
12.0%
12.7%
13.3%
14.0%
14.6%
15.3%
16.0%
16.6%
17.3%
17.9%
8.3%
9.0%
9.7%
10.3%
11.0%
11.7%
12.4%
13.1%
13.7%
14.4%
15.1%
15.8%
16.5%
17.2%
17.8%
18.5%
$24
($75)
($6.0)
$24
2,068
6.9%
7.4%
7.9%
8.4%
8.9%
9.4%
9.9%
10.4%
10.9%
11.4%
11.9%
12.4%
12.8%
13.3%
13.8%
14.3%
7.1%
7.7%
8.2%
8.7%
9.2%
9.7%
10.3%
10.8%
11.3%
11.8%
12.3%
12.8%
13.4%
13.9%
14.4%
14.9%
7.3%
7.9%
8.4%
9.0%
9.5%
10.1%
10.6%
11.2%
11.7%
12.2%
12.8%
13.3%
13.9%
14.4%
15.0%
15.5%
FD Shares Outstanding (mlns.):

Sub Debt Int. Expense:
Tax Rate:
Current Share Price:
7.5%
8.1%
8.7%
9.2%
9.8%
10.4%
11.0%
11.5%
12.1%
12.7%
13.3%
13.8%
14.4%
15.0%
15.5%
16.1%
7.7%
8.3%
8.9%
9.5%
10.1%
10.7%
11.3%
11.9%
12.5%
13.1%
13.7%
14.3%
14.9%
15.5%
16.1%
16.7%
49.5
$35
34.0%
$10.99
Transit Trends
As a result of the recent economic
downturn and increased
unemployment levels, public transit
ridership has declined over the past
year and a half.
In the U.S., total transit ridership across all modes of transit hit a 50-year high
in 2008 with more than 10.5 billion trips taken on U.S. transit systems.
However, as a result of the recent economic downturn and increased
unemployment levels, ridership has declined over the past year and a half. As
cited above, transit bus ridership in the U.S. decreased 3.9% in Q1/10 relative
to Q1/09, however, the rate of decline has been improving. In comparison, the
decline in Q4/09 was 5.8% versus Q4/08. Bus ridership declined by only 0.1% in
March 2010 compared to March 2009.
278
Exhibit 5. U.S. Transit Ridership Levels
Unlinked Trips (millions)
12,000
10,000
8,000
6,000
4,000
2,000
Bus
Rail*
2010E
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Other
* Rail includes light and heavy. Other includes commuter rail, paratransit, trolleybus and misc.
Source: APTA and CIBC World Markets Inc.
The significant decline in the light

vehicle sector over the past few
years could signal more favourable
trends in the public transit sector
over the next few years.
The significant decline in the light vehicle sector over the past few years could
signal more favourable trends in the public transit sector over the next few
years. As evident from Exhibit 6, U.S. light vehicle sales have declined
significantly over the past two years from 16.5 million in 2007 to 11.6 million
expected in 2010. Americans are either holding off on purchasing new vehicles
or driving less altogether. As evident from Exhibit 7, the number of miles driven
by cars in the U.S. has declined from 1.708 trillion in 2005 to 1.615 trillion in
2008. We expect this trend to continue.
Exhibit 6. U.S. Light Vehicle Sales (mlns. of units)
2010E
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
18.0
17.0
16.0
15.0
14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
Source: Wards Auto, company reports and CIBC World Markets Inc.
10
279
Passenger car miles (left)
Number of other 2-ax le 4-tire v ehicle
Total Annual Miles Driven
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
2500
2250
2000
1750
1500
1250
1000
750
500
250
0
1980
1800000
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
1970
Total Annual Miles Driven
Exhibit 7. Annual Miles Driven Light Vehicle Versus Transit Buses
Transit Bus Miles (right)
Source: APTA, company reports and CIBC World Markets Inc.
Transportation costs for rail transit

or bus transit are much less
expensive relative to automobiles.
Rail transit is less expensive than
bus transit, however, the poor public
infrastructure in the U.S. has
resulted in rail transit being less
practical.
As evident from Exhibit 8, transportation costs for rail transit or bus transit are
much less expensive relative to automobiles. Rail transit is less expensive than
bus transit, however, the poor public infrastructure in the U.S. has resulted in rail
transit being less practical. We believe the continuation of high unemployment
levels in the U.S. and higher savings rates by consumers will result in more
citizens moving to bus transit rather than light vehicles. These trends should
ultimately be favourable for New Flyer and the transit bus manufacturers.
Exhibit 8. Annual Passenger Costs Per 15,000 Passenger Miles

Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Bus Commuter Rail

$2,620
$1,961
2,761
2,058
2,722
2,198
2,940
2,163
2,953
2,239
3,090
2,193
2,968
2,260
2,820
2,284
3,012
2,436
3,190
2,492
3,274
2,736
3,444
2,694
3,277
2,668
3,334
2,939
Light Rail
$2,206
2,260
2,009
1,991
2,034
2,004
2,127
2,368
2,328
2,216
2,194
2,357
2,415
2,654
Car
$6,185
6,389
6,723
6,908
7,050
7,363
7,654
7,533
7,754
8,431
7,834
7,823
8,121
8,095
Source: APTA, AAA and CIBC World Markets Inc.
11
280
Exhibit 9. U.S. State Cost Savings In U.S. Cities Transit Versus Vehicles
Top
Markets
1
2
3
4
5
6
7
8
9
10
Monthly
Savings
$1,159
$1,040
$1,030
$959
$952
$935
$903
$852
$839
$834
City
New York
Boston
San Francisco
Chicago
Seattle
Philadelphia
Honolulu
Los Angeles
San Diego
Minneapolis
Annual
Savings
$1,390
$12,478
$12,358
$11,511
$11,429
$11,215
$10,834
$10,224
$10,070
$10,011
Source: APTA, company reports and CIBC World Markets Inc.
As evident from data provided, the Canadian Urban Transit Association (CUTA),
transit passenger trips in Canada has continued to follow a rising trend over the
past two years. Given the continued urbanization in major urban cities and
increased environmental concerns, we expect this trend to continue.
Exhibit 10. Canadian Passenger Trips
Passenger Trips (millions)
20.0
18.0
16.0
14.0
12.0
10.0
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
8.0
Note: Regular service passenger trips are similar to linked trips but are not the same measurement of passenger trips reported for U.S. TAs in
the 2009 Public Transportation Fact Book.
Potential Surge In Replacement Demand Could Be Significant: Buses

purchased in the U.S. and Canada have averaged approximately 5,000-6,000
per year since 2001 (the range was approximately 6,000-9,000 from 1997 to
2001). Recall New Flyer is expecting bus purchases to be 5,500-6,000 in 2010.
We believe there may be a spike in bus purchases in the 2011-2014 timeframe
as a jump in bus purchases from 1999-2001 should be approaching replacement
requirements. Assuming the typical transit bus is replaced every 12 years
suggests annual replacement demand of approximately 7,000-8,000 units per
year sometime during 2011-2014. Management has confirmed this potential
upcoming spike, however, state public spending budgets could limit the upside
from this spike. According to the APTA and CUTA, there were approximately
66,506 active buses in the U.S. in 2008 and 14,161 active buses in Canada. We
expect the number of active buses to remain stable in the U.S. and increase
gradually in Canada. As illustrated in Exhibit 11, a regression analysis of the
seven year moving average growth in passenger trips (independent variable)
and the net increase in buses in service (assuming bus ridership remains flat in
12
281
2010 and increases 1% thereafter and assuming an 11 year replacement cycle)

suggests new bus orders of approximately 5,700 in 2010, 7,506 in 2011, 7,008
in 2012 and 8,510 in 2013.
Exhibit 11. New Bus Order Regression Analysis

10,000
Y=805.5X+699.5
R2 = 0.93
US & Canada New Bus Orders (Units)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
2015E
2014E
2013E
2012E
2011E
2009
2010E
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
Source: APTA, CUTA and CIBC World Markets Inc.
Exhibit 12. Canadian Bus Statistics

Number Of Active Buses
New Bus Purchases

1,600
14,500
14,000
13,500
13,000
12,500
12,000
11,500
11,000
10,500
10,000
1,400
1,200
1,000
800
600
400
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
200
Source: CUTA and CIBC World Markets Inc.
13
282
Exhibit 13. U.S. & Canadian Annual Bus Purchases By TAs
2009
2008
2007
2006
2005
2004
2003
2002
U.S. & Canadian TA Annual Bus Purchases
2010E
New Flyer Market Share (post 2001)
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Source: APTA, CUTA, company reports and CIBC World Markets Inc.
Contract Awards Suggest More Diversification

Two contracts recently awarded to the bus manufacturing division could lead to
new markets for New Flyer over the next few years. Firstly, in January 2010,
New Flyer was awarded a contract by a U.S. state agency for certain models of
transit buses. The contract provides an opportunity for small TAs to purchase
buses through a cooperative without facilitating a full tender process. The 500
potential EUs from the program are currently not included in New Flyer's option
backlog. The contract will expire on December 31. Given the small duration of
the contract, predicting the potential order activity is challenging, however,
management believes it will be lower than would be typical under New Flyer's
other customer contracts.
On April 28, Ottawa's City Council

approved the purchase of 306 new
articulated clean diesel buses (612
EUs) for C$190 million.
The Ottawa contract contains a new

feature for New Flyer. The purchase
allows the city of Ottawa to trade in
its existing fleet of 226 older
articulated buses.
Ottawa Contract Provides Window into Refurbishment Market: On April

28, Ottawa's City Council approved the purchase of 306 new articulated clean
diesel buses (612 EUs) for approximately C$190 million, consisting of 80 buses
purchased on the exercise of options plus an additional 226 articulated buses.
The new buses will be outfitted with 2010 EPA compliant Cummins engines, a
mini-hybrid cooling package, an anti-graffiti package, smart bus technology for
reliability monitoring and an extended industry-leading warranty program. The
extended warranty program allows New Flyer to develop key intelligence on the
maintenance, monitoring and operation of the buses, while operating in a very
close partnership with OC Transpo, Ottawas municipal bus operator.
The Ottawa contract contains a new feature for New Flyer. The purchase allows
the city of Ottawa to trade in its existing fleet of 226 older articulated buses
through a new arrangement where New Flyer has provided incentive pricing.
This fleet was originally built and sold by New Flyer to the city of Ottawa. The
current average age of these buses is approximately nine years.
As part of the transaction, New Flyer will provide OC Transpo a credit for the used
buses based on the assumed scrap values. New Flyer intends to refurbish the buses
and sell them at a profit. In return, the margin on the new bus sales will be lower
than New Flyers traditional margin. Regardless, management anticipates that the
combined profitability of the bus sales, parts sales and used bus sales will provide
an appropriate total return on capital. New Flyer intends to market the refurbished
buses in both domestic and international markets. New Flyer highlighted Central
America, South America, Eastern Europe, and Asia as potential markets for the
refurbished buses. If successful, these initiatives could potentially lead New Flyer to
becoming a supplier to one of these growth markets in the future.
14
283
The first buses entered production in July 2010, with deliveries of the new fleet
anticipated to start in August 2010 and be completed within one year. The
Ottawa contract also presents New Flyer with the opportunity to reverse the
recent trend of reduced order sizes, which was largely caused by deferrals by
some U.S.-based customers. The contract also contains a favourable milestone
billing schedule that positively aligns related cash flows.
Management expects the larger order will have a positive impact on work in
process inventory levels during H2/10 since smaller orders generally increase
operating complexities. Management currently expects the level of EUs in WIP
during 2010 will continue to vary in the range of 245 to 300 EUs.
Aftermarket Parts And Support

New Flyer estimates that the total
U.S. and Canadian aftermarket parts
market size is approximately $750.0
million, of which New Flyer holds an
approximate 15% market share.
The aftermarket parts market consists of approximately 90% government

municipalities and TAs and 10% private operators. New Flyer estimates that the
total U.S. and Canadian market size is approximately $750.0 million on an
annual basis, of which New Flyer holds an approximate 15% market share.
The impact of the recession is being felt by the U.S. TAs who have been required
to reduce expenditures through route cuts and fewer operating hours. This has
resulted in reduced wear on bus fleets, which has resulted in reduced demand for
replacement parts. Additionally, TAs have been reducing customer-held inventory
stocks to preserve cash. Competition from businesses in close proximity to each
TA has increased, as suppliers to the truck market try to diversify into the heavyduty transit market to offset heavy losses in the truck market. Alternatively, the
Canadian aftermarket parts market has continued to grow at a rate slightly higher
than inflation, consistent with the Canadian transit bus market.
The near-term weakness and increased demand in the U.S. market will likely
suggest increased margin pressure at New Flyers aftermarket operations (as
evident in Q2/10). However, longer term we expect New Flyers aftermarket
parts division to become a meaningful growth driver (double-digit growth) as
TAs consider outsourcing parts and maintenance operations as a method to
reduce operating budgets. A rebound in the traditional heavy truck market in
2011 should also offset some of the increased competition from these players.
Ultimately New Flyer should be able to provide a more cost competitive service
for parts and maintenance through greater economies of scale (across North
America), parts commonality, lower wage rates and synergies with warranty
programs. Sales growth at the aftermarket operations has been solid over the
past few years (17.1% revenue CAGR since 2006), with 2009 sales of $108.2
million, but still only represents approximately 10% of overall revenues.
New Flyers bus refurbishment contract with Ottawa represents a particular
avenue the company can utilize to develop the Aftermarket business. The
refurbishment of the buses to be received by New Flyer should help employees
gain experience working with older buses. The increased interaction with the city
of Ottawa should help deepen sales relationships further. Additional
refurbishment type sales contracts with other TAs could provide new
opportunities to continue to grow the aftermarket operations.
15
284
25.0%
22.5%
20.0%
17.5%
15.0%
12.5%
10.0%
7.5%
5.0%
2.5%
0.0%
$120.0
$110.0
$100.0
$90.0
$80.0
$70.0
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
$0.0
2006
2007
2008
Sales
2009
EBITDA
2010E
EBITDA Margin
EBITDA Margin %
US$Mlns
Exhibit 14. New Flyer Aftermarket Operations Sales And EBITDA
2011E
Room For Operational Improvements?

In 2009, one of the primary
operational focuses of New Flyer
was on developing and
implementing strategies to support
Operational Excellence, which
became one of the companys core
operating principles.
In 2009, one of the primary operational focuses of New Flyer was on developing
and implementing strategies to support Operational Excellence, which became
one of the companys core operating principles. The Operational Excellence
focus was related to two key areas: management processes and facility
transformation. Several management processes were enhanced and
strengthened, including the following:
1. Review and development of the companys new corporate strategy, mission
statement and core operating principles.

2. The addition of human resources and quality assurance executive positions
to the executive leadership team.

3. The introduction of a broader cross-company leadership team consisting of
approximately 90 key directors and senior managers.

4. The implementation of standardized manufacturing cell performance
metrics in order to assist in monitoring, improving and achieving

manufacturing and quality performance objectives.
5. The development of the New Flyer Institute in order to provide
comprehensive and standardized training for all New Flyer employees.

Another key area of focus was the transformation of the companys facilities to
support Operational Excellence. These initiatives included:
1. The clean-up and standardization of approximately 70% of the companys
manufacturing cells in accordance with Sort, Set In Order, Shine,

Standardize and Sustain (5S) principles. 5S is the process by which a
manufacturer can ensure there is a place for everything and everything is in
its place, clean and ready for use. New standardization efforts included the
scrapping of unused material, implementing standardized shadow boards
for tools, providing improved signage for production stations and improving
the lighting in the facilities. The 5S transformation was completed in Q2/10.
2. New Flyer partnered with a new paint supplier to improve the efficiency of
the supply and the application of paint to buses on the production line.
16
285
3. The implementation of a freight optimization plan that facilitated the
elimination of the central inventory warehouses at the companys

manufacturing facilities and the implementation of point of use supply of
materials to the production line.
Also in 2009, New Flyer resolved some long-standing warranty issues with two
customers and agreed to provide ongoing warranty and campaign support for
these customers buses.
Customer Mix Appears Reasonable

New Flyers top 10 customers have an average tenure of roughly 14 years,
typically accounting for approximately 50% to 75% of bus manufacturing
revenues. While the top 10 customers typically account for a majority of
revenue, large contract procurements undertaken by many municipalities every
few years generally create a new customer base for the company each year. We
believe New Flyers customer mix is appropriate. Some diversification to
customers outside of Canada and the U.S. would be a positive development.
Exhibit 15. 25 Largest TAs Bus Purchases 2009
6000
5933
7000
5000
3000
2000
1000
2702
2647
2347
2221
2066
1671
1541
1473
1459
1384
1281
1251
1112
1075
1053
1048
1035
948
941
908
882
873
863
747
4000
New York
Los Angeles
*PACE Chicago
*Newark
Chicago
Toronto
*Montreal
Washington
Philadelphia
Seattle
Vancouver
Phoenix
Houston
Ottawa
Orange
Boston
Balitmore
*Denver
Calgary
*Pittsburgh
Portland
Minneapolis
Edmonton
Miami
Las Vegas
* Have not purchased buses from New Flyer.

Product Line
New Flyers product line is one of the most comprehensive in the heavy-duty transit
bus industry, which has contributed to the companys industry leading market
position. The buses range in length from 30 feet to 60 feet and use a variety of
propulsion systems in addition to diesel, including diesel electric or gasoline electric
hybrid systems, CNG or liquid natural gas (LNG) systems, zero emission electric
trolleys and hydrogen fuel cell hybrid systems (this bus was sold to the municipality
of Vancouver for the 2010 Winter Olympics).
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286
Exhibit 16. Product Line

Model
Transit
BRT
Trolley
Fuel Cell
Lengths
30', 35', 40', 60'
35', 40', 60'
40' and 60'
40'
Propulsion System
Clean Diesel, CNG, LNG, Diesel-Electric Hybrid, Gasoline-Electric Hybrid
Clean Diesel, Diesel-electric hybrid
Electric
Hydrogen Fuel Cell Hybrid
Xcelsior
The Xcelsior is expected to be 10%
lighter and more fuel efficient than
the most similar bus currently in
production.
New Flyer recently announced the launch of a new product line, the Xcelsior
Series. The Xcelsior is expected to be 10% lighter and more fuel efficient than the
most similar bus currently in production. The body has been redesigned in an
attempt to minimize maintenance requirements, provide greater accessibility for
passengers, and improve the ride quality (comfort and visibility). The design,
bumper and headlamps were all upgraded as per customer requests. A new
rooftop AC system, improved insulation and a single reduction axle are expected
to improve noise levels. New Flyers first Xcelsior bus was delivered in April 2010.
Depending on customer demand, New Flyer hopes to streamline its product base
into a single Xcelsior model in a variety of lengths and propulsion systems.
Exhibit 17. Xcelsior
Source: New Flyer and CIBC World Markets Inc.
New Flyer Bus Manufacturing Operations

New Flyer has a heavy-duty transit bus production capacity of approximately
2,500 to 3,000 EUs per year based on engineering and production capacities.
The assembly of a transit bus, beginning with frame welding through to final
product, takes approximately five weeks to complete. Larger contracts lead to
higher production volumes, which result in a decrease in production times, while
lower production volumes lead to longer lead times between constructions and
increased costs. The recent contract award from Ottawa should have some
favourable impact on production costs over the next 12 months.
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287
Exhibit 18. New Flyer Operations And Facilities

Location/ Facility
Winnipeg, Manitoba
Function
Established
administration, sub-assembly, structure weld, shell

assembly and paint
Customer Service Facility
Publications Facility
final assembly of buses

aftermarket parts and support
new product development
publications
1973
(expanded 1998)
2008
1998
1992
2008
Express Center
Erlanger, Kentucky
Distribution Center
Fresno, California
Distribution Center
Ottawa, Ontario
Service Facility
Size (Sq. Ft.)
Ownership
Lease Expiry
364,000
Owned
N/A
61,000
52,000
12,000
6,000
Leased
Leased
Leased
Leased
2011
2011
2011
2011
338,000
Leased
2024
89,000
Owned
N/A
Customer inspection/acceptance
1996
(expanded 1998)
1998
27,000
Owned
N/A
parts distribution center
2008
43,000
Leased
2013
parts distribution center
2009
32,000
Leased
2014
warranty support
2010
24,000
Leased
2012
structure weld, shell assembly, paint, final assembly 1999

and customer inspection/acceptance
final assembly
Exhibit 19. Long-term Collective Bargaining Agreements

Facilities
Winnipeg
Union
CAW Local 3003, (Production Unit)
CAW Local 3003, (Inspection Unit)
Crookston
St. Cloud
Unionized Employees
670
28
273
529
Term Length
April 1, 2009 to March 31, 2012
April 1, 2009 to March 31, 2012
January 1, 2006 to December 31,
2010
April 1, 2008 to March 31, 2013
Exhibit 20. New Flyer Backlog And Options Versus Deliveries

12,000
10,000
US$Mlns
8,000
6,000
4,000
2,000
0
2006
2007
Firm Backlog
2008
2009
Option Backlog
2010E
2011E
Deliv eries
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288
Financial Overview
2009 And H1/10 Review: In 2009, revenue at New Flyer was at the highest in
the companys history, exceeding the $1.0 billion mark; EBITDA was $102.7
million, also the highest in the companys history. As mentioned above, in mid2009, New Flyer was informed by the CTA that a large contract would be
deferred. New Flyer was also impacted by a large recall with a certain customer.
As a result of these issues, in addition to fears over reduced government
expenditures in the future and the inability of TAs to purchase heavy-duty buses
at the same rate as in the past, New Flyer began a focused effort on eliminating
any excessive spending. New CEO Paul Soubry has made a concerted effort to
focus on operational and business efficiencies.
In H1/10, revenue at New Flyer reached $469.2 million, down 4.4% versus
H1/09 due to lower shipments. EBITDA in H1/10 totaled $53.1 million, up from
$46.2 million in H1/09 due to a better product mix, increased product
efficiencies and eliminations of excess spending.
H1/10 EBITDA was also positively impacted by a $1.2 million reversal of the
warranty expense relating to taking back the city of Ottawas existing fleet of 226
articulated buses and a change in estimate that resulted in a net $2 million decrease
in performance unit plan (PUP) expenses compared to Q2/09. Q2/09 adjusted
EBITDA was also negatively impacted by inventory write-downs of $1.1 million.
Due to increased operating

efficiencies, better sourcing and
less volatility in the production
schedule, we are forecasting
EBTIDA to increase to $103.4 million
in 2010 from $102.7 million in 2009.
Earnings Outlook: Through the end of 2010 and 2011, we expect New Flyer
bus sales to remain stable. Due to increased operating efficiencies, better
sourcing and less volatility in the production schedule, we are forecasting
EBTIDA to increase to $103.4 million in 2010 from $102.7 million in 2009.
However, we believe fiscal constraints in the U.S. and near-term challenges at
the aftermarket operations in the U.S. will result in a decline in EBITDA in 2011
to $95.9 million. Ultimately, we expect a rising trend in U.S. transit ridership to
result in a rebound in sales and earnings in 2012 versus 2011.
Exhibit 21. Earnings Forecast

Total Shipments
Revenues ($ 000)
Bus Manufacturing
After Market Operations
Total
EBITDA ($ 000)
Bus Manufacturing
Total
EBITDA Margin
Bus Manufacturing
Total EBITDA Margin
EBIT
Interest Expense
Distributions On Shrs (Now Retired)
Taxes
Net Income
FD EPS
FD EPS (Ex. Unusuals & F/X Gains)
S/O (mlns.)
Q1/10
453
Q2/10
545
Q3E/10
550
Q4E/10
520
2010E
2,068
2011E
2,052
2012E
2,084
$216,107
$26,873
$242,980
$253,072
$27,468
$280,540
$250,250
$28,000
$278,250
$16,117
$6,463
$22,580
$24,260
$6,266
$30,526
$19,770
$6,160
$25,930
$18,573
$5,775
$24,348
$78,720
$24,664
$103,384
$72,390
$23,520
$95,910
$76,549
$24,875
$101,424
7.5%
24.1%
9.3%
9.6%
22.8%
10.9%
7.9%
22.0%
9.3%
7.9%
21.0%
9.2%
8.2%
22.5%
9.7%
7.7%
21.0%
9.1%
7.9%
21.3%
9.4%
$2,766
$12,921
$1,626
$1,152
($12,933)
($0.27)
$0.03
47.32
$53,428
$13,235
$19,930
$12,668
$18,348
$12,606
$71,910
$50,728
$77,424
$50,825
$4,340
$35,853
$0.76
$0.16
47.32
$2,469
$4,793
$0.10
$0.10
49.48
$1,952
$3,790
$0.08
$0.08
49.48
$94,472
$51,430
$1,626
$9,913
$31,502
$0.64
$0.36
49.48
$7,202
$13,980
$0.28
$0.28
49.48
$9,044
$17,555
$0.35
$0.35
49.48
$236,600 $956,029 $938,746 $964,116

$27,500 $109,841 $112,000 $117,050
$264,100 $1,065,870 $1,050,746 $1,081,166
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289
Balance Sheet & Cash Flow

New Flyer ended Q2/10 with net debt of $379.7 million, up from $353.8 million
in Q4/09. The increase in net debt was primarily due to working capital
investments in Q1/10 (a high number of smaller orders required the additional
working capital), offset by positive operating cash flow. Net debt to total capital
employed was 75.5%, a decline from 77.9% in Q4/09. If we exclude
subordinated debentures (which are owned by New Flyer unit holders) net debt
to total capital employed was 15.8% versus 11.8% in Q4/09. Our capital
expenditure forecast is approximately $5-$7 million per year in line with levels
in previous years.
Our outlook assumes no material

covenant risk for New Flyer over the
next few years.
Consistent with New Flyers Operational Excellence program, management

continued to focus on reducing the number of units in inventory in Q2/10; with
inventories being reduced from 299 EUs at April 4 to 262 EUs at July 4. Going
forward, management expects the new contract with the city of Ottawa to allow
for a continued reduction in inventories and positively impact New Flyers
liquidity in H2/10.
Exhibit 22. New Flyer Leverage Ratios Relative To Covenants

Senior Leverage Ratio:
Covenant:
Total Leverage Ratio:
Covenant:
Fixed Charge Coverage Ratio:
Covenant:
2008
1.04x
2.25:1
3.80x
5.75:1
1.56x
1.10:1
Q1/2009
1.09x
2.25:1
3.91x
4.75:1
1.50x
1.10:1
Q2/2009
1.31x
2.25:1
4.37x
4.75:1
1.58x
1.10:1
Q3/2009
0.93x
2.25:1
3.90x
4.75:1
1.73x
1.10:1
Q4/2009
0.67x
2.25:1
3.51x
4.75:1
1.77x
1.10:1
2009
0.67x
2.25:1
3.51x
4.75:1
1.77x
1.10:1
Q1/2010
1.04x
2.25:1
4.00x
4.75:1
1.76x
1.10:1
Q2/2010
0.80x
2.25:1
3.51x
4.75:1
1.84x
1.10:1
2010E
0.87x
2.25:1
3.79x
4.75:1
1.74x
1.10:1
2011E
0.94x
2.25:1
4.09x
4.75:1
1.66x
1.10:1
2012E
0.89x
2.25:1
3.88x
4.75:1
1.74x
1.10:1
Large order activity, such as the Ottawa contract, generally results in favourable
improvements in working capital levels since the large contracts allow greater
commonality and economies of scale. The smaller order sizes that New Flyer had
processed in Q1/10 generally required increased engineering, supply and
operating complexities. New Flyer expects inventory to fluctuate in the 245-300
unit range going forward.
Exhibit 23. New Flyer Distributable Cash Flow

EBITDA
- Interest (Ex sub debt interest)
- Taxes
- Capex
Units
Dist. Cash Flow per Unit
Dividend
Dividend Payout Ratio
Dist. Cash Flow Yield
Dividend Yield
2007
$100,446
(33,444)
(20,042)
(1,388)
$45,572
29.41
$1.55
$1.17
75.5%
2008
$94,608
(5,169)
(10,279)
(6,818)
$72,342
47.32
$1.53
$1.17
76.5%
Q1/09
$23,139
(2,205)
(3,412)
(1,322)
$16,200
47.32
$0.34
$0.29
85.4%
Q2/09
$23,024
(3,921)
(874)
(1,287)
$16,942
47.32
$0.36
$0.29
81.7%
Q3/09
$30,014
(4,203)
(4,460)
(1,056)
$20,295
47.32
$0.43
$0.29
68.2%
14.6%
10.6%
14.4%
10.6%
12.9%
10.6%
13.5%
10.6%
16.2%
10.6%
Q4/09
2009
$26,480 $102,657
(2,963) (13,292)
(3,106) (11,852)
(1,858) (5,523)
$18,553 $71,990
47.32
47.32
$0.39
$1.52
$0.29
$1.17
74.6%
76.9%
14.8%
10.6%
14.3%
10.6%
Q1/10
$22,582
(4,206)
(2,282)
(1,707)
$14,387
47.32
$0.30
$0.29
96.2%
Q2/10
$30,526
(4,520)
(1,735)
(1,889)
$22,382
47.60
$0.47
$0.29
62.2%
Q3/10E
$25,930
(3,953)
(1,852)
(1,500)
$18,625
49.48
$0.38
$0.29
77.7%
11.5%
10.6%
17.7%
10.6%
14.2%
10.6%
Q4/10E
2010E
2011E
2012E
$24,348 $103,386 $95,910 $101,424
(3,891) (16,570) (15,868) (15,965)
(1,464) (7,333) (5,402) (6,783)
(1,600) (6,696) (6,400) (6,400)
$17,393 $72,787 $68,241 $72,276
49.48
49.48
49.48
49.48
$0.35
$1.47
$1.38
$1.46
$0.29
$1.17
$1.17
$1.17
83.2%
79.5%
84.8%
80.1%
13.2%
10.6%
13.9%
10.6%
13.0%
10.6%
13.8%
10.6%
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290
Prior Setbacks Impacting Valuation

In 2009, two unrelated events had a
significant negative impact on New
Flyers valuation a major contract
delay and a major product recall. In
2006, a labour disruption caused
production challenges.
In 2009, two unrelated events had a significant negative impact on New Flyers
valuation. New Flyer committed a design error on a large contract for a certain
transit customer. The error led to the total bus weight exceeding the allowable
specification and resulted in the contract being deficient. The second headwind
was related to a large bus order from the CTA, which did not receive final
contract authorization. The contract was for 140 hybrid articulated buses or 280
EU of production. As a result of the deferral of the CTA order, in H2/09, New
Flyer had to adjust production levels to 36 EU units per week with a two-week
line production halt in December 2009. The number of hourly and support
workers were reduced for approximately six months.
New Flyer also had a major labour disruption in 2006 related to contract
negotiations, which negatively impacted production volumes, deliveries and
sales for the year. Overall, the above instances have negatively impacted New
Flyers valuation over time due to the risk of another unexpected event
impacting the stock even though management has been able to resolve these
situations in the past.
Dividend Yield Valuation: In 2006, New Flyers dividend yield averaged 12.55%
as concerns over the labour strike weighed on the share price. However, the
dividend yield declined in 2007 and most of 2008 (average of 10.3%) as sales and
earnings rebounded once again. Since mid-2008, New Flyers dividend yield has
increased again averaging 12.2%. The increase is likely related to a reduced risk
appetite by investors, the issues related to the deficient contract order and the
CTA contract deferral mentioned above. As New Flyer continues to report stable
order activity, sales and cash flow (and assuming the overall stock market
remains stable), we believe New Flyers dividend yield should decline again closer
to the companys average in 2007 and H1/08 of approximately 10.3%. The
continuation of low interest rates in the economy should result in the companys
dividend yield falling below this level. A 10% dividend yield would suggest a share
price of approximately C$11.70 in line with our C$12.50 price target.
Exhibit 24. New Flyer Historical Dividend Yield
18.0%
16.0%
14.0%
Average 11.6%
12.0%
10.0%
8.0%
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
Mar-08
Nov-07
Jul-07
Mar-07
Nov-06
Jul-06
Mar-06
6.0%
Source: Bloomberg, company reports and CIBC World Markets Inc.
Valuation Comps Versus Historical Averages: Investors are most likely to

compare New Flyers valuation to historical trading levels since the company does
not have a well defined peer group. We provide valuations for select industrialrelated trusts in Exhibit 27, which suggest an average multiple of 7.8x 2010E
EBITDA and 6.5x 2011E. The average dividend yield of industrial-related trusts is
10.1%, in line with our price target for New Flyer. The average multiples for the
most applicable North American industrial corporations in our coverage universe
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291
are currently 6.9x 2010E EBITDA and 6.1x 2011E EBITDA; essentially in line with
our valuation of New Flyer. However, we believe New Flyer should trade at a
premium to the corporates due to a more efficient tax structure.
Historically New Flyer has traded at an average of 6.1x EV/EBITDA and in a
range of 3.2x to 8.0x. The valuation fluctuates with the overall market, as well
as sentiment towards the stock primarily related to earnings surprises, order
activity, or product recalls. As highlighted above, some of the unexpected,
short-term significant events can have short-term negative implications for the
share price.
Exhibit 25. New Flyer Historical EV/EBITDA

10.0x
9.0x
8.0x
7.0x
Average 6.1x
6.0x
5.0x
4.0x
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
Mar-08
Nov-07
Jul-07
Mar-07
Nov-06
Jul-06
Mar-06
3.0x
Source: Bloomberg, company reports and CIBC World Markets Inc.

reflects a target dividend yield of 9.4%. Note that our 2011 estimate is reflective
of trough level earnings; the valuation on our 2010 and 2012 estimates is at
2011E EBITDA.
On a dividend yield basis our

valuation is in line with select
industrial trusts of approximately
10%. New Flyers IDS units are not
subject to the 2011 SIFT rule
implementation. We believe the
resulting scarcity of high yield
equities for investors could attract a
premium to New Flyer.
The companys historical average EV/EBITDA multiple is 6.1x. We believe a

slight premium is warranted as the company is currently operating at trough
levels of the cycle. Our valuation is in line with comparable industrial
manufacturers, however, at a discount to select industrial trusts suggesting
the potential for upside to our price target. On a dividend yield basis, our
valuation of 9.4% is in line with select industrial trusts of approximately 10%.
New Flyers IDS units are not subject to the 2011 SIFT rule implementation. We
believe the resulting scarcity of high yield equities for investors could attract a
premium to New Flyer. We believe New Flyer is a cash flow story and will be able
to maintain its distribution levels for several years.
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292

Competition: Market share for New Flyer declined slightly in 2009 to 37%.
Several established players, including Daimler (DAI-DE), Gillig, and Volvo Bus
Corporation (VOLV.B-ST) are continually battling New Flyer for market share.
Recently, several international firms entered the North American bus market;
however the 60% content Buy American rules should limit the potential impact
from international competitors.
U.S. state budget cuts as well as Canadian infrastructure stimulus ending at the
end of 2010, New Flyer management has highlighted some concerns pertaining
to the funding available to TAs throughout North America. An inability of TAs to
purchase buses could negatively impact future sales.
Order Variability: Managements forecast for overall industry order activity in
2010 is between 5,500 and 6,000 units. However, industry volumes can vary
from year to year based on the timing that funding is made available. Increased
order volatility could lead to greater investor uncertainty around the stability of
cash flows.
Supplier Bankruptcy Risk: On August 10, ISE Limited (ISE-TSX), a New Flyer
supplier of hybrid propulsion systems or integration components, announced
that it had filed a voluntary petition to reorganize its business under Chapter 11
of the United States Bankruptcy Code. New Flyer has manufactured 281 buses
with ISE gas-electric hybrid or diesel-electric hybrid propulsion system
components installed in them and 21 hydrogen fuel cell buses where ISE was
the propulsion system integrator. These buses represent approximately 1% of
the New Flyer fleet of buses in service in Canada and the U.S. Of the 302 buses
produced by New Flyer with ISE components, 209 remain under warranty with
warranty obligations expiring over the next five years.
At this time, the amount of ISE warranty obligations that New Flyer may assume
as a result of ISEs bankruptcy is not determinable. New Flyer will support
customers as required and has begun to put support plans in place. Currently,
New Flyer's total order backlog contains firm orders for four EUs and options for
55 EUs that were intended to incorporate ISE hybrid propulsion systems.
Labour Agreements: New Flyer has four collective labour agreements with two
different unions (CAW and CWA). The company experienced a major labour
disruption at its Winnipeg facility in 2006. There is always a risk that such an event
can occur again in the future, resulting in production delays and increased costs.
in terms of revenue, operating costs, and financial obligations. The exposure can
vary from period to period depending on materials used and volume of orders.
New Flyer engages in hedging practices to protect itself from changes in the
value of the C$/US$ exchange rate and by adjusting prices of its products by
attempting to anticipate, as closely as possible, the number of orders for the
year (TAs generally order buses one year in advance).
New Flyers costs are variable costs. Additional costs are generally passed on to
fluctuations, in copper, resins, or oil prices could impact margins.
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293
Warranty And Liability Claims: Similar to most manufacturers, New Flyer is

subject to warranty and liability claims as a normal part of business operations
as well as any product deficiencies. New Flyer generally offers 12-year
warranties on its bus structure, and between one and five years on related
components.
Environmental Legislation: The Environmental Protection Agency (EPA) is
responsible for emissions standards for vehicles in the U.S., while Environment
Canada undertakes the same function in Canada. Strict emissions standards are
set to be completely phased in by the end of 2010. New Flyer expects to comply
with the regulations by working with suppliers in developing new engines and
propulsion technology designed to comply with the current standards. The EPA
will ensure that TAs are purchasing buses that are environmentally friendly, such
as those produced by New Flyer, and that New Flyer is adhering to the strictest
of quality standards to comply with EPA regulations.
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294
Exhibit 26. New Flyer Consolidated Summary Financials ($ 000, except per share)
Shipments
Revenue
EBITDA
EBITDA Margin %
Revenue
EBITDA
EBITDA Margin %
2009
Q1/10
Q2/10
Q3/10E
Q4/10E
2010E
Q1/11E
Q2/11E
Q3/11E
Q4/11E
2011E
2012E
2,264
$991,703
$78,809
7.9%
453
$216,107
$16,117
7.5%
545
$253,072
$21,060
8.3%
550
$250,250
$19,770
7.9%
520
$236,600
$18,573
7.9%
2,068
$956,029
$75,520
7.9%
533
$242,515
$18,431
7.6%
506
$230,389
$17,740
7.7%
506
$232,921
$18,168
7.8%
506
$232,921
$18,051
7.8%
2,052
$938,746
$72,390
7.7%
2,084
$964,116
$76,549
7.9%
$108,163
$23,848
22.0%
$26,873
$6,463
24.1%
$27,468
$6,266
22.8%
$28,000
$6,160
22.0%
$27,500
$5,775
21.0%
$109,841
$24,664
22.5%
$27,000
$5,670
21.0%
$28,000
$5,880
21.0%
$29,000
$6,090
21.0%
$28,000
$5,880
21.0%
$112,000
$23,520
21.0%
$117,050
$24,875
21.3%
Total Sales
$1,099,866 $242,980 $280,540 $278,250 $264,100 $1,065,870 $269,515 $258,389 $261,921 $260,921 $1,050,746 $1,081,166
EBITDA
$102,657
$22,582
$30,526
$25,930
$24,348 $103,386
$24,101
$23,620
$24,258
$23,931
$95,910 $101,424
EBIT
$35,762
$2,766
$53,428
$19,930
$18,348
$94,472
$18,101
$17,620
$18,258
$17,931
$71,910
$77,424
Pre-tax
($14,036) ($11,781)
$40,193
$7,262
$5,742
$41,415
$5,437
$4,913
$5,580
$5,252
$21,182
$26,599
Net Income
($30,380) ($12,933)
$35,853
$4,793
$3,790
$31,502
$3,589
$3,243
$3,683
$3,466
$13,980
$17,555
EBITDA Margin
9.3%
9.3%
10.9%
9.3%
9.2%
9.7%
8.9%
9.1%
9.3%
9.2%
9.1%
9.4%
EBIT Margin
3.3%
1.1%
19.0%
7.2%
6.9%
8.9%
6.7%
6.8%
7.0%
6.9%
6.8%
7.2%
Pre-tax Margin
(1.3%)
(4.8%)
14.3%
2.6%
2.2%
3.9%
2.0%
1.9%
2.1%
2.0%
2.0%
2.5%
Net Margin
(2.8%)
(5.3%)
12.8%
1.7%
1.4%
3.0%
1.3%
1.3%
1.4%
1.3%
1.3%
1.6%
Per Share Statistics
EPS (Basic)
($0.64)
($0.27)
$0.75
$0.10
$0.08
$0.64
$0.07
$0.07
$0.07
$0.07
$0.28
$0.35
EPS (FD Excluding Unusuals)
$0.42
$0.03
$0.16
$0.10
$0.08
$0.36
$0.07
$0.07
$0.07
$0.07
$0.28
$0.35
CFPS (Basic)
$0.55
($0.57)
$0.49
$0.33
$0.20
$0.45
$0.18
$0.42
$0.36
$0.34
$1.42
$1.34
DCFPS (Basic)
$1.52
$0.30
$0.47
$0.38
$0.35
$1.47
$0.43
$0.39
$1.52
$0.30
$1.38
$1.46
Equity Per Share (Basic)
$2.13
$1.76
$2.59
$2.50
$2.49
$2.49
$2.47
$2.45
$2.43
$2.42
$2.42
$2.41
Units Outstanding (mlns.)
47.3
47.3
47.6
49.5
49.5
49.5
49.5
49.5
49.5
49.5
49.5
49.5
Statement Of Cash Flows
Operating Cash Flow
$25,819 ($27,142)
$23,228
$16,387
$9,811
$22,284
$9,042
$23,228
$16,387
$9,811
$22,284
$41,322
Change In Non-cash Working Capital ($11,299) ($32,688)
$5,957
$4,769
($677) ($22,639)
($1,221)
$5,957
$4,769
($677) ($22,639)
$696
Investment Activities
($5,181)
($1,691)
($2,974)
($1,500)
($1,600)
($7,765)
($1,600)
($2,974)
($1,500)
($1,600)
($7,765)
($6,400)
($20,811)
($4,507)
($6,131)
($4,428)
($4,428) ($19,494)
($4,428)
($6,131)
($4,428)
($4,428) ($19,494) ($17,712)
Net Change
($25) ($33,057)
$13,884
$10,459
$3,783
($4,931)
$3,014
$4,863
$5,091
$4,242
$17,210
$19,150
Free Cash Flow
$67,498
$15,517
$19,777
$18,008
$16,905
$70,206
$16,704
$19,777
$18,008
$16,905
$70,206
$66,440
Balance Sheet
Cash
$30,696
$0
$11,523
$21,982
$25,765
$25,765
$28,779
$11,523
$38,733
$42,975
$42,975
$62,125
Total Debt
$384,493 $398,594 $391,251 $391,459 $391,670 $391,670 $391,881 $391,251 $392,304 $392,515 $392,515 $393,360
Equity
$100,689
$83,238 $123,519 $123,884 $123,245 $123,245 $122,406 $123,519 $120,476 $119,514 $119,514 $119,357
Net Debt
$353,797 $398,594 $379,728 $369,477 $365,905 $365,905 $363,102 $379,728 $353,571 $349,540 $349,540 $331,235
Net Debt (Excluding Sub Debt)
$53,797
$98,594
$79,728
$69,477
$65,905
$65,905
$63,102
$58,451
$53,571
$49,540
$49,540
$31,235
Total Capital Employed (TCE)
$454,486 $481,832 $503,247 $493,361 $489,150 $489,150 $485,508 $503,247 $474,046 $469,054 $469,054 $450,592
Net Debt / TCE
77.8%
82.7%
75.5%
74.9%
74.8%
74.8%
74.8%
75.5%
74.6%
74.5%
74.5%
73.5%
Net Debt / TCE (Ex. Sub Debt)
11.8%
20.5%
15.8%
14.1%
13.5%
13.5%
13.0%
12.2%
11.3%
10.6%
10.6%
6.9%
Return On Equity
(30.2%)
(15.5%)
29.0%
3.9%
3.1%
25.6%
2.9%
29.0%
3.9%
3.1%
25.6%
11.7%
ROCE
10.3%
10.3%
11.6%
11.1%
10.9%
10.9%
11.2%
10.2%
10.0%
10.1%
10.1%
11.3%
Trailing Four Quarter Statistics
Trailing Revenues
$1,099,866 $1,069,497 $1,076,525 $1,051,156 $1,065,870 $1,065,870 $1,092,405 $1,076,525 $1,051,156 $1,065,870 $1,065,870 $1,050,746
Trailing EBITDA
$102,657 $102,100 $109,602 $105,518 $103,386 $103,386 $104,905 $109,602 $105,518 $103,386 $103,386
$95,910
Trailing EBIT
$35,762
$19,514
$71,504
$83,409
$94,472
$94,472 $109,807
$71,504
$83,409
$94,472
$94,472
$71,910
Trailing Pre-tax
($14,036) ($32,994)
$18,397
$30,552
$41,415
$41,415
$58,633
$18,397
$30,552
$41,415
$41,415
$21,182
Trailing Net Earnings
($30,380) ($48,094)
$2,429
$16,412
$31,502
$31,502
$48,024
$2,429
$16,412
$31,502
$31,502
$13,980
Trailing EBITDA
9.3%
9.5%
10.2%
10.0%
9.7%
9.7%
9.6%
10.2%
10.0%
9.7%
9.7%
9.1%
Trailing EBIT
3.3%
1.8%
6.6%
7.9%
8.9%
8.9%
10.1%
6.6%
7.9%
8.9%
8.9%
6.8%
Trailing Pre-tax
(1.3%)
(3.1%)
1.7%
2.9%
3.9%
3.9%
5.4%
1.7%
2.9%
3.9%
3.9%
2.0%
(2.8%)
(4.5%)
0.2%
1.6%
3.0%
3.0%
4.4%
0.2%
1.6%
3.0%
3.0%
1.3%
26
295
Company
Industry
Industrial Trusts
Armtec Infrastructure Income Fund Metal Fabricate/Hardware
Foremost Income Fund
Oil & Gas Services
Morneau Sobeco Income Fund
Commercial Services
Vicwest Income Fund
Building Materials
Industrial Trusts Average (Ex. Unusuals)
Corporates
AG Growth International Inc.
Machinery-Diversified
Black Diamond Group Ltd
Commercial Services
Contrans Group Inc. - CL A
Transportation
Greenbrier Companies Inc
Trucking & Leasing
Spartan Motors Inc
Auto Parts & Equipment
Student Transportation Inc
Transportation
Thor Industries Inc
Home Builders
Velan Inc
Corporates Average
Average Of Trusts & Corporates (Ex. Unusuals)
Auto Manufacturers
Country
Ticker
Price Mkt. Cap.

26-Aug ($ mlns.)
EV
P/E
($ mlns.) 2009A 2010E
EV/EBITDA
2011E 2009A 2010E 2011E
CA
CA
CA
CA
ARF.UN
FMO.UN
MSI.UN
VIC.UN
$18.05
$6.53
$9.40
$12.99
$360
$140
$451
$226
$616
$106
$646
$274
7.1x
14.5x
NMF
6.6x
9.40x
15.0x
14.4x
16.1x
10.5x
14.0x
11.7x
8.8x
14.5x
8.1x
10.8x
7.3x
7.1x
9.9x
6.0x
7.5x
7.5x
8.0x
9.6x
6.3x
7.9x
CA
CA
CA
US
US
US
US
CA
AFN
BDI
CSS
GBX
SPAR
STB
THO
VLN
$39.34
$16.34
$7.80
$10.50
$3.79
$5.86
$23.60
$13.92
$505
$312
$317
$230
$125
$367
$1,214
$309
$580
$358
$327
$631
$135
$528
$1,071
$201
CA
NFI.UN
$10.99
$543.79
$596.37
11.4x
11.1x
10.0x
NMF
9.5x
NMF
NMF
8.8x
10.1x
9.9x
24.8x
14.5x
14.2x
12.4x
NMF
19.0x
NMF
12.4x
7.0x
13.2x
13.5x
NMF
11.8x
10.8x
10.4x
19.0x
9.8x
NMF
9.8x
17.4x
12.7x
12.0x
NMF
9.6x
9.5x
7.9x
10.0x
4.6x
12.9x
NMF
2.7x
8.2x
7.9x
5.8x
9.9x
6.6x
6.6x
8.1x
7.5x
10.5x
7.0x
2.6x
7.3x
7.5x
5.8x
Dividend
Yield
Return On
Capital
EBITDA Net Debt To

Margin Capitalization
7.0x
4.7x
9.0x
5.7x
6.6x
12.0%
6.2%
10.0%
12.0%
10.1%
8.5%
-2.7%
1.8%
31.3%
9.7%
17.6%
11.6%
19.5%
11.7%
15.1%
49.9%
-23.2%
33.4%
43.2%
25.8%
8.1x
5.6x
5.7x
6.1x
4.5x
8.8x
5.6x
4.8x
6.2x
6.3x
6.2x
5.2%
6.6%
4.1%
0.0%
2.6%
9.5%
1.2%
2.3%
3.9%
6.0%
10.6%
15.2%
8.0%
8.1%
-6.8%
6.0%
-2.0%
2.8%
10.2%
5.2%
6.7%
29.0%
25.3%
48.3%
11.1%
6.0%
6.9%
17.9%
1.2%
0.0%
14.6%
14.8%
9.3%
25.3%
19.1%
3.4%
50.2%
5.2%
48.5%
-23.3%
-31.0%
12.2%
16.7%
15.8%
US$/C$:
$1.050
27
Exhibit 27. Transportation Comparables
Data for all comparables obtained from company reports and Bloomberg; New Flyer estimates are CIBC World Markets Inc.
Leverage calculations for New Flyer exclude the debenture portion of the IDS from net debt for comparability.
Source: Bloomberg, Company reports and CIBC World Markets Inc.
296
Appendix A Competitors
Gillig Corporation
Gillig, founded in 1890 in San Francisco, is a privately owned heavy-duty bus
producer. Its product lines include a low floor, hybrid, BRT, and trolley. Gillig is
the second-largest producer of transit buses in North America, producing
between 1,200 and 1,300 buses per year for numerous customers.
www.gillig.com
North American Bus Industries (NABI)

North American Bus Industries was originally founded in 1976 and after various
mergers and alliances became a single distinct brand in 2006 when NABI,
Optima Bus and Blue Bird Corporation merged. The companys focus is design
and propulsion systems ranging from clean diesel, hybrid, CNG and LNG. NABI
serves the North American market and provides a complete line of standard and
low floor, heavy-duty transit buses.

Orion Bus, an Ontario-based company incorporated in 1975, was acquired by
DaimlerChrysler in 2000 and has production facilities in Mississauga, Ontario,
and Oriskany, New York. Orions primary focus is diesel-electric hybrid, CNG,
and diesel buses in a variety of lengths.
Nova Bus
Nova Bus, currently a subsidiary of Volvo Bus Corporation, was established in
1993. Nova Bus has production facilities located in Quebec and Plattsburg, NY.
The company manufactures four different buses: the Nova LFS and LFS HEV
(both 40 feet in length) and the LFS arctic and LFX (both 62 feet in length).
DesignLine International
DesignLine, originally founded in 1985, is based in New Zealand and recently
entered the North American bus industry. It is currently supplying the Baltimore
and NYC TAs with hybrid vehicles. The companys hybrid design utilizes a 30kW,
multi-fuel turbine manufactured by Capstone Turbine Corp. (CPST-OTC).
Foton America Bus Co., Inc.

Foton America Bus Company, established in 2008, is a subsidiary of OEM Beiqi
Foton Motor Company. The company caters primarily to Asian, African, and
European markets but has recently entered the North American market. The
company recently signed a distribution agreement with Macnab Transit Sales
Corporation.
28
297
Appendix B Management &

Board Of Directors
Exhibit 28. New Flyer Management Profiles
Key Executives
Officers
Paul Soubry
Glenn Asham
Wayne R. Joseph
Hans Peper
Paul Smith
David White
Colin Pewarchuk
Chris Stoddart
Kevin Wood
Title
President and CEO
Biography
Held various positions at StandardAero, named President in 2001, COO in 2006 and CEO in
2007. B.Comm from the University of Manitoba, executive development at Harvard Business
School, Canada's Top 40 Under 40 award recipient.
CFO and Treasurer
Worked with Deloitte & Touche for 8 years providing client services in accounting, auditing,
taxation and management consulting. Chartered Accountant with a B.Comm from the
University of Manitoba.
Executive VP,
Held executive level positions at North American Bus Industries, Blue Bird Body Company
Operations
and BAE Systems. B.BA from Ashland University in Ohio
Executive VP, Customer Held a variety of senior management positions within the European farm equipment industry.
Services
Joined New Flyer in 1989, developed the aftermarket and publications organizations. Masters
of Agricultural Engineering.
Executive VP, Sales and Over 15 years of design experience in mechanical technology, has been at New Flyer for 21
Marketing
years.
Executive VP, Supply
Began with New Flyer in 1998 as a Corporate Controller, appointed Executive VP position in
Management
2006. Chartered Accountant with a B.Comm from the University of Manitoba
Executive VP, General Degree in Law from the University of Manitoba, was a lawyer with Aikins, MacAulay &
Counsel and Corporate Thorvaldson LLP from 1997 to 2006.
Secretary
VP, Engineering
Nine years of automotive experience at General Motors, 9 years in freight railcars at National
Services
Steel Car in various senior executive positions. P.Eng from Kettering University in Michigan.
VP, Manufacturing
Held various senior management positions within the transportation industry. B.A from
Ashland University in Ohio and CPIM status from the Association for Operations
Management
Joined New Flyer IDS Holdings

% O/S
January, 2009
73,800
0.16%
1992
209,000
0.44%
July, 2008
0.00%
1989
214,238
0.45%
1988
275,913
0.58%
1998
75,402
0.16%
2006
23,000
0.05%
January, 2008
6,000
0.01%
January, 2009
0.00%
Exhibit 29. New Flyer Board Of Directors

Name
Title
Directors
The Honorable Brian Chairman of the Board
V. Tobin P.C., IDC.D
V. James Sardo
Corporate Director
Wayne M.E. McLeod Corporate Director

Larry Edwards
Corporate Director
John Marinucci, C.A., Executive Officer

ICD.D, H.R.C.C.C
Biography
Former Federal Minister of Industry from October 2000 to January 2002. Premier of
Newfoundland and Labrador form 1996 to 2000. Served as Minister of Fisheries and Oceans
in the federal cabinet from 1993 to 1996. Currently a Senior Business Advisor with
Director of Hydrogenics Corporation since 2003. Served as a board member and trustee for
various companies, prior to which he was the interim CEO of Royal Trust Group
Technologies Limited from 2004 to 2005.
Chairperson of the Institute of Corporate Directors and a fellow of the Chartered Accountants
of Ontario. He has served on several boards of companies in various industries. Retired in
1999 after 20 years as the President, CEO and Chairman of the Board a
Director of Global Power Equipment Group Inc (GPEG) from 1998 to 2008. President and
CEO of GPEG from 1998 to 2006. B.S in Industrial Engineering and Management from
Oklahoma State University and an MBA from Oklahoma City University
Former President and CEO of New Flyer between 2002 and 2009. Chartered Accountant with
a B.Comm from McMaster University. Previous President and CEO of a major Canadian
manufacturer and has held senior executive positions within leading Canadian and US based
organizations.
Joined New Flyer IDS Holdings
% O/S
June, 2005
32,300
0.07%
June, 2005
22,000
0.05%
June, 2005
11,800
0.02%
June, 2005
102,176
0.22%
2002
834,635
1.76%
29
298
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2009 Current
$23.1A
$23.0A
$30.0A
$26.5A
$102.7A
2010 Current
$22.6A
$30.5A
$25.9E
$24.3E
$103.4E
2011 Current
--
--
--
--
$95.9E
Our DIPU estimates are shown below:
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2009 Current
$0.34A
$0.36A
$0.43A
$0.39A
$1.52A
2010 Current
$0.30A
$0.47A
$0.38E
$0.35E
$1.47E
2011 Current
--
--
--
--
$1.38E
30
299
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
Important Disclosure Footnotes for New Flyer Industries Inc.

(NFI.UN)
2g
7
31
or more of a class of equity securities issued by New Flyer Industries Inc.
300
Ag Growth International Inc. (2a, 2c, 2e, 2g, 7) (AFN-TSX, C$38.95, Sector Performer)
Armtec Infrastructure Income Fund (2g) (ARF.UN-TSX, C$18.14, Sector Performer)
Vicwest Income Fund (2g, 7) (VIC.UN-TSX, C$13.00, Sector Underperformer)
Black Diamond Group Limited (BDI-TSX, C$16.51, Not Rated)
Contrans Group Inc. (CCS-TSX, C$8.06, Not Rated)
Daimler AG (DAI-DE, 39.15, Not Rated)
Foremost Income Fund (FMO.UN-TSX, C$6.41, Not Rated)
Greenbrier Companies Inc. (GBX-NYSE, $11.00, Not Rated)
ISE Limited (ISE-TSX, C$0.30, Not Rated)
Morneau Sobeco Income Fund (MSI.UN-TSX, C$9.33, Not Rated)
Thor Industries Inc. (THO-NYSE, $23.45, Not Rated)
Velan Inc. (VLN-TSX, C$13.54, Not Rated)
Volvo AB (VOLV.B-ST, [SEK]82.80, Not Rated)
Winnebago Industries, Inc. (WGO-NYSE, $8.50, Not Rated)
32
301

1
2a
2b
2c
2d
2e
2f
2g
3a
3b
3c
4a
4b
4c
5a
5b
6a
6b
7
8
9
10
CIBC World Markets Corp. has managed or co-managed a public offering of securities for this company in the
past 12 months.
CIBC World Markets Inc. has managed or co-managed a public offering of securities for this company in the
past 12 months.
the past 12 months.
past 12 months.
equity securities.
An executive of CIBC World Markets Inc. or any analyst involved in the preparation of this research report has
to CIBC World Markets Inc. and CIBC World Markets Corp., or a member of his/her household is an officer,
11
12
13
14

33
302
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI.UN)
Date
09/23/2007
09/26/2007
11/13/2007
03/18/2008
04/21/2008
04/21/2008
08/11/2008
09/03/2008
09/03/2008
11/10/2008
09/14/2009
11/15/2009
11/30/2009
34
Change Type
Closing Price
10.63
11.25
11.52
12.11
11.12
11.12
11.92
11.75
11.75
7.83
8.01
9.50
9.80
Rating
SP
SO
SO
R
SO
SO
R
SO
SO
SO
SO
SO
SO
Price Target
9.75
13.50
12.75
12.75
13.25
13.25
13.50
11.25
12.00
13.00
None
Coverage
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Chris Murray
Chris Murray
CIBC World Markets Inc.
303

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

Count
Percent
Count
Percent
133
43.9%
129
97.0%
138
45.5%
128
92.8%
24
7.9%
2.3%
Restricted
(as of 30 Aug 2010)

Restricted
21
87.5%
100.0%

(as of 30 Aug 2010)
Count
Percent
Count
Percent
33.3%

100.0%
66.7%
100.0%
0.0%
0.0%
Restricted
0.0%
Restricted
0.0%
Capital Equipment Sector includes the following tickers: ATA, FTT, NFI.UN.
*Although the investment recommendations within the three-tiered, relative stock rating system utilized by CIBC World Markets Inc.
35
304
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36
305

Initiating Coverage
August 30, 2010
Capital Equipment
Stock Rating:
Sector Outperformer
Executive Summary: Still Time To Get On This Bus

Sector Weighting:
Market Weight
Key Indices:
C$12.50
C$10.99
As of August 30, we are initiating coverage of New Flyer with a Sector

Outperformer rating and a 12- to 18-month price target of C$12.50. New
Flyer is an attractive cash flow story (FCF yield of 13.5% on 2010E), with
some potential upside through improvements in operating efficiencies.
Over the next two years, we are concerned that fiscal spending cuts could
potentially impact funding for U.S. and Canadian municipal transit
authorities; however, we believe this risk is already reflected in the share
price.
An upcoming replacement cycle, environmental concerns and increased

urbanization suggest public transit ridership should eventually rebound.
Over the past two years, the public transit market has taken market share
from the light vehicle market; we expect this trend to continue.
Our C$12.50 price target is based on a 11.3% target free cash flow yield on
2011 and reflects a target dividend yield of 9.4%. Our valuation also
reflects 6.3x 2010E EBITDA and 6.7x 2011E EBITDA. The company's
historical average EV/EBITDA multiple is 6.1x.
Toronto

52-week Range
Shares Outstanding
Float
Dividend/Div Yield
Fiscal Year Ends
Book Value
2010 ROE (E)
Net Debt
Preferred
Common Equity
NM
C$7.99-C$11.76
49.5M
47.1M Shrs
126,680
$514.0M
C$1.17 / 10.6%
December
$2.50 per Shr
NM
$379.7M
Nil
$123.5M
No
EBITDA ($ mlns.)
Prev
2009
2010
2011
EV/EBITDA
2009
2010
2011
Current
$102.7A
$103.4E
$95.9E
5.8x
5.8x
6.2x
Distributable Income Per Unit

2009
2010
2011
P/DI
2009
2010
2011
$1.52A
$1.47E
$1.38E
6.8x
7.1x
7.5x
Source: Reuters
Company Description
New Flyer Industries Inc. is the largest North American
manufacturer of heavy-duty transit buses supplying
www.newflyer.com

1 (416) 594-7285
David Galison
1 (416) 956-3548
Michael.Willemse@cibc.ca
David.Galison@cibc.ca

and ResearchCentral.cibcwm.com
10-104561 2010
306
Executive Summary: Still Time To Get On This Bus - August 30, 2010
New Flyer Industries (NFI.UN-TSX)
Sector Outperformer
Current Price: $11.17

12- To 18-Month Price Target: $12.5
416-594-7285
michael.willemse@cibc.ca
David Galison, MBA
416-956-3548
david.galison@cibc.ca
All Figures in USD$ (000), except per share data

Key Multiples
2010E P/E
2010E
EBITDA
2011E P/E
2011E
EBITDA
New Flyer
Industrial Trusts
nmf
5.8x
nmf
6.2x
13.9x
7.8x
10.8x
6.6x
Corporates
13.6x
7.5x
12.1x
6.3x
Historical Price To Forward Earnings
11.3x
Historical EV/TTM EBITDA
6.1x
Operating Performance
2008A
2009A
2010E
2011E
Return on Equity
59.4%
-30.2%
25.6%
11.7%
Return on Capital Employed
9.4%
10.3%
10.9%
10.1%
EBITDA Margin
9.8%
8.6%
2.2%
9.1%
EBIT Margin
15.0%
2.3%
0.5%
6.8%
EBT Margin
9.9%
-1.3%
3.9%
2.0%
Net Margin
9.1%
-2.8%
3.0%
1.3%
Quality of Earnings
1
Cash Realization Ratio
2008A
2009A
2010E
2011E
0.9x
-2.6x
2.5x
5.3x
6.0x
6.3x
6.3x
6.7x
P/FCF
FCF Yield (inc. W/C chgs)
16.5%
16.0%
15.8%
14.9%
Effective Tax Rate
8.3%
116.4%
23.9%
34.0%
Interest Coverage
3.6x
0.8x
2.0x
1.5x
Investment Thesis
New Flyer was founded in 1930 in Winnipeg, Manitoba, with its primary focus being
motor coaches and school buses. In 1971, the company began to focus on
manufacturing transit buses exclusively. In 1986, the company was acquired by a Dutch
bus manufacturer Den Oudsten BV, which introduced low floor buses in 1988. New
Flyer has facilities located in Winnipeg, Manitoba, St. Cloud, Minnesota, Crookston,
Minnesota, Earlanger. The U.S. facilities allow New Flyer to comply with Buy America
legislation and funding rules.
New Flyer is a leading manufacturer of heavy-duty transit buses to transit authorities
throughout the U.S. and Canada with a market share of 35%-40%. The company also
provides aftermarket parts and service support. New Flyer primarily manufactures
heavy-duty buses of between 30 feet and 60 feet with seating capacity for up to 65
passengers. New Flyers product offerings are among the broadest and most advanced
in the industry.
Ridership Stats
US Bus Transit Passengers (mlns)
New Flyer Shipments
- Orders (1H/10 vs. 1H/09)
Q1/10
Q1/09
y/y
1,297
1,351
-4.0%
453
593
-23.6%
860
1,068
-19.5%
2010E
2011E
Industry Shipment Ests
5,500
5,500
0.0%
New Flyer Shipment Ests

Valuation & Outlook
2,068
2,052
-0.8%
2011E
Income Statement
2008A
2009A
2010E
2011E
Sales
$961.3
$1,099.9
$1,065.9
$1,050.7
Current Price:
$10.99 Rating:
Gross Profit
$140.5
$146.8
$150.8
$143.2
Price Target:
$12.50
EBITDA
$94.6
$102.7
$103.4
$95.9
12-18 Mo Return:
EBIT
$144.4
$35.8
$94.5
$71.9
Price Target Represents:
2009A
2010E
EBT
$95.6
($14.0)
$41.4
$21.2
P/E:
nmf
nmf
nmf
P/CF
7.5x
7.5x
7.9x
$619
Minority Interest
SO
22.4%
Net Income
$87.6
($30.4)
$31.5
$14.0
Enterprise Value:
$592
$619
$0.29
$0.42
$0.36
$0.28
EV/EBITDA:
6.0x
6.3x
6.7x
47.3
47.3
49.5
49.5
EV/Sales:
0.5x
0.6x
0.6x
Units Outstanding
P/BV:
FCF Yield:
Cash Flow
2008A
2009A
2010E
2011E
Operating cash flow
$79.2
$77.5
$79.5
$74.6
Capex
($6.8)
($5.5)
($6.7)
($6.4)

2
Free Cash Flow
$6.5
$15.1
($23.1)
$0.7
$86.0
$83.0
$86.2
$81.0
FCF per Share
$1.82
$1.75
$1.74
$1.64
Balance Sheet
2008A
2009A
2010E
$1,000.0
10.0%
$400.0
4.0%
$200.0
2.0%
$30.7
$25.8
$43.0
$391.7
$3,925.2
Equity
$147.6
$100.7
$123.2
$119.5
Net debt (Cash)
$314.9
$353.8
$365.9
$349.5
Net debt per share
$0.01
$0.01
$0.01
$0.01
Calculated as CFO less Capex
12.0%
6.0%
$384.5
Calculated as CFO divided by Net Income
$1,200.0
$600.0
$30.7
Chart: Sales, EBITDA & EBITDA margin
2011E
$345.6
5.2x
11.3%
8.0%
Total debt
Book Value Per Unit (FD)
5.0x
11.9%
$800.0
Cash
Net debt/EBITDA
5.9x
12.0%
3.3x
3.4x
3.5x
3.6x
$3.12
$2.13
$2.49
$2.42
0.0%
$0.0
F2006
F2007
Sales
F2008
F2009
EBITDA
F2010E
F2011E
EBITDA Margin
Source: WardsAuto, Bloomberg, Company reports and CIBC World Markets Inc.
307
Executive Summary
The following is an executive summary of a 36-page report on New Flyer
Industries Inc., published on August 30 and entitled Still Time To Get On This
Bus. The full report is available on the CIBC World Markets Inc. Research
website.
As of August 30, we are initiating coverage of New Flyer Industries Inc. with a
Sector Outperformer rating and a 12- to 18-month price target of C$12.50. New
Flyer is an attractive cash flow story, with the shares currently reflecting a free
cash flow yield of approximately 13.5% on our 2010 estimates. Over the next
two years, we are concerned that potential funding from U.S. and Canadian
municipal transit authorities (TAs) may be negatively impacted by fiscal
spending cuts; however, we believe this risk is already reflected in the share
price. Ridership in the U.S. has also suffered from the weak U.S. economy.
Regardless, environmental concerns, increased urbanization and replacement
demand should ultimately support the case for increased public transit. We also
believe the significant decline in the U.S. auto sector could eventually signal a
shift towards greater use of public transit in the U.S.
Ultimately, a decline in public spending would likely be temporary with the
market eventually rebounding as bus fleets age and replacement demand drives
spending for new fleets. We believe there may be a spike in bus purchases in
the 2011-2014 time frame as a jump in bus purchases from 1999-2001 should
be approaching replacement. Management has acknowledged the potential for
this upcoming surge in replacement demand (the potential backlog for the
industry continues to improve), however, state public funding constraints could
limit the potential upside from this cycle upturn.
The free cash flow yield on our

conservative 2011 estimate is
approximately 11.3%. New Flyers
2010 payout ratio is approximately
79.5%, which is reflected in the
companys attractive dividend yield
currently at 10.6%.
We believe there may be a spike in

bus purchases in the 2011-2014 time
frame as a jump in bus purchases
made from 1999-2001 should be
approaching replacement.
The free cash flow yield on our conservative 2011 estimate is approximately
11.5%. New Flyer distributes most of the companys free cash flow in dividends
(the companys 2010 payout ratio is approximately 80%), which is reflected in
the companys attractive dividend yield currently at 10.6%.
New Flyer should also continue to hold its position as the market leader in the
North American heavy-duty transit industry, with its leading technology and
broad product offering. Longer term, the cash flow generating power of the
company should be positively impacted by improved operating efficiencies
(generated from the companys operating excellence program), new product
introductions and continued growth of the aftermarket operations. These areas
will be a major focus for new President and CEO Mr. Paul Soubry, who was
appointed in 2009. The aftermarket operations segment currently represents
approximately 10% of overall revenues; however, it is expected to grow (longer
term) as more TAs begin outsourcing the servicing of bus fleets.
reflects a target dividend yield of 9.4%. Note that our 2011 estimate reflects
trough level earnings; the valuation on our 2010 and 2012 estimates is at
2011E EBITDA. The companys historical average EV/EBITDA multiple is 6.1x.
Our valuation is in line with comparable industrial manufacturers. New Flyer
shares are registered as income deposit securities (IDS), which allow for a more
tax efficient structure relative to other industrials with traditional corporate
structures. New Flyers IDS units are not subject to the 2011 SIFT rule
implementation; the resulting scarcity of high yield equities for investors should
ultimately attract a premium to New Flyer.
308
Note that our estimates assume a C$/US$ exchange rate of C$1.05/US$1.00.
Financial Overview
2009 And H1/10 Review: In 2009, revenue at New Flyer was at the highest in
the companys history, exceeding the $1.0 billion mark; EBITDA was $102.7
million, also the highest in the companys history. As mentioned above, in mid2009, New Flyer was informed by the CTA that a large contract would be
deferred. New Flyer was also impacted by a large recall with a certain customer.
As a result of these issues, in addition to fears over reduced government
expenditures in the future and the inability of TAs to purchase heavy-duty buses
at the same rate as in the past, New Flyer began a focused effort on eliminating
any excessive spending. New CEO Paul Soubry has made a concerted effort to
focus on operational and business efficiencies.
In H1/10, revenue at New Flyer reached $469.2 million, down 4.4% versus
H1/09 due to lower shipments. EBITDA in H1/10 totaled $53.1 million, up from
$46.2 million in H1/09 due to a better product mix, increased product
efficiencies and eliminations of excess spending.
H1/10 EBITDA was also positively impacted by a $1.2 million reversal of the
warranty expense relating to taking back the city of Ottawas existing fleet of 226
articulated buses and a change in estimate that resulted in a net $2 million decrease
in performance unit plan (PUP) expenses compared to Q2/09. Q2/09 adjusted
EBITDA was also negatively impacted by inventory write-downs of $1.1 million.
Due to increased operating

efficiencies, better sourcing and
less volatility in the production
schedule, we are forecasting
EBTIDA to increase to $103.4 million
in 2010 from $102.7 million in 2009.
Earnings Outlook: Through the end of 2010 and 2011, we expect New Flyer
bus sales to remain stable. Due to increased operating efficiencies, better
sourcing and less volatility in the production schedule, we are forecasting
EBTIDA to increase to $103.4 million in 2010 from $102.7 million in 2009.
However, we believe fiscal constraints in the U.S. and near-term challenges at
the aftermarket operations in the U.S. will result in a decline in EBITDA in 2011
to $95.9 million. Ultimately, we expect a rising trend in U.S. transit ridership to
result in a rebound in sales and earnings in 2012 versus 2011.
Balance Sheet & Cash Flow

Our outlook assumes no material
covenant risk for New Flyer over the
next few years.
New Flyer ended Q2/10 with net debt of $379.7 million, up from $353.8 million
in Q4/09. The increase in net debt was primarily due to working capital
investments in Q1/10 (a high number of smaller orders required the additional
working capital), offset by positive operating cash flow. Net debt to total capital
employed was 75.5%, a decline from 77.9% in Q4/09. If we exclude
subordinated debentures (which are owned by New Flyer unit holders), net debt
to total capital employed was 15.8% versus 11.8% in Q4/09. Our capital
expenditure forecast is approximately $5-$7 million per year in line with levels
in previous years.
Consistent with New Flyers Operational Excellence program, management
continued to focus on reducing the number of units in inventory in Q2/10; with
inventories being reduced from 299 EUs at April 4 to 262 EUs at July 4. Going
forward, management expects the new contract with the city of Ottawa to allow
for a continued reduction in inventories and positively impact New Flyers
liquidity in H2/10.
Large order activity, such as the Ottawa contract, generally results in favourable
improvements in working capital levels since the large contracts allow greater
commonality and economies of scale. The smaller order sizes that New Flyer had
processed in Q1/10 generally required increased engineering, supply and
309
operating complexities. New Flyer expects inventory to fluctuate in the 245-300

unit range going forward.
Exhibit 1. New Flyer Distributable Cash Flow

EBITDA
- Interest (Ex sub debt interest)
- Taxes
- Capex
Units
Dist. Cash Flow per Unit
Dividend
Dividend Payout Ratio
Dist. Cash Flow Yield
Dividend Yield
2007
$100,446
(33,444)
(20,042)
(1,388)
$45,572
29.41
$1.55
$1.17
75.5%
2008
$94,608
(5,169)
(10,279)
(6,818)
$72,342
47.32
$1.53
$1.17
76.5%
Q1/09
$23,139
(2,205)
(3,412)
(1,322)
$16,200
47.32
$0.34
$0.29
85.4%
Q2/09
$23,024
(3,921)
(874)
(1,287)
$16,942
47.32
$0.36
$0.29
81.7%
Q3/09
$30,014
(4,203)
(4,460)
(1,056)
$20,295
47.32
$0.43
$0.29
68.2%
14.6%
10.6%
14.4%
10.6%
12.9%
10.6%
13.5%
10.6%
16.2%
10.6%
Q4/09
2009
$26,480 $102,657
(2,963) (13,292)
(3,106) (11,852)
(1,858) (5,523)
$18,553 $71,990
47.32
47.32
$0.39
$1.52
$0.29
$1.17
74.6%
76.9%
14.8%
10.6%
14.3%
10.6%
Q1/10
$22,582
(4,206)
(2,282)
(1,707)
$14,387
47.32
$0.30
$0.29
96.2%
Q2/10
$30,526
(4,520)
(1,735)
(1,889)
$22,382
47.60
$0.47
$0.29
62.2%
Q3/10E
$25,930
(3,953)
(1,852)
(1,500)
$18,625
49.48
$0.38
$0.29
77.7%
11.5%
10.6%
17.7%
10.6%
14.2%
10.6%
Q4/10E
2010E
2011E
2012E
$24,348 $103,386 $95,910 $101,424
(3,891) (16,570) (15,868) (15,965)
(1,464) (7,333) (5,402) (6,783)
(1,600) (6,696) (6,400) (6,400)
$17,393 $72,787 $68,241 $72,276
49.48
49.48
49.48
49.48
$0.35
$1.47
$1.38
$1.46
$0.29
$1.17
$1.17
$1.17
83.2%
79.5%
84.8%
80.1%
13.2%
10.6%
13.9%
10.6%
13.0%
10.6%
13.8%
10.6%
Prior Setbacks Impacting Valuation

In 2009, two unrelated events had a
significant negative impact on New
Flyers valuation a major contract
delay and a major product recall. In
2006, a labour disruption caused
production challenges.
In 2009, two unrelated events had a significant negative impact on New Flyers
valuation. New Flyer committed a design error on a large contract for a certain
transit customer. The error led to the total bus weight exceeding the allowable
specification and resulted in the contract being deficient. The second headwind
was related to a large bus order from the CTA, which did not receive final
contract authorization. The contract was for 140 hybrid articulated buses or 280
EU of production. As a result of the deferral of the CTA order, in H2/09, New
Flyer had to adjust production levels to 36 EU units per week with a two-week
line production halt in December 2009. The number of hourly and support
workers were reduced for approximately six months.
New Flyer also had a major labour disruption in 2006 related to contract
negotiations, which negatively impacted production volumes, deliveries and
sales for the year. Overall, the above instances have negatively impacted New
Flyers valuation over time due to the risk of another unexpected event
impacting the stock even though management has been able to resolve these
situations in the past.
Dividend Yield Valuation: In 2006, New Flyers dividend yield averaged 12.55%
as concerns over the labour strike weighed on the share price. However, the
dividend yield declined in 2007 and most of 2008 (average of 10.3%) as sales and
earnings rebounded once again. Since mid-2008, New Flyers dividend yield has
increased again averaging 12.2%. The increase is likely related to a reduced risk
appetite by investors, the issues related to the deficient contract order and the
CTA contract deferral mentioned above. As New Flyer continues to report stable
order activity, sales and cash flow (and assuming the overall stock market
remains stable), we believe New Flyers dividend yield should decline again closer
to the companys average in 2007 and H1/08 of approximately 10.3%. The
continuation of low interest rates in the economy should result in the companys
dividend yield falling below this level. A 10% dividend yield would suggest a share
price of approximately C$11.70 in line with our C$12.50 price target.
Valuation Comps Versus Historical Averages: Investors are most likely to
compare New Flyers valuation to historical trading levels since the company does
not have a well defined peer group. We provide valuations for select industrialrelated trusts in Exhibit 3, which suggest an average multiple of 7.8x 2010E
310
EBITDA and 6.5x 2011E. The average dividend yield of industrial-related trusts is
10.1%, in line with our price target for New Flyer. The average multiples for the
most applicable North American industrial corporations in our coverage universe
are currently 6.9x 2010E EBITDA and 6.1x 2011E EBITDA; essentially in line with
our valuation of New Flyer. However, we believe New Flyer should trade at a
premium to the corporates due to a more efficient tax structure.
Historically New Flyer has traded at an average of 6.1x EV/EBITDA and in a
range of 3.2x to 8.0x. The valuation fluctuates with the overall market, as well
as sentiment towards the stock primarily related to earnings surprises, order
activity, or product recalls. As highlighted above, some of the unexpected,
short-term significant events can have short-term negative implications for the
share price.

reflects a target dividend yield of 9.4%. Note that our 2011 estimate is reflective
of trough level earnings; the valuation on our 2010 and 2012 estimates is at
2011E EBITDA.
On a dividend yield basis our

valuation is in line with select
industrial trusts of approximately
10%. New Flyers IDS units are not
subject to the 2011 SIFT rule
implementation. We believe the
resulting scarcity of high yield
equities for investors could attract a
premium to New Flyer.
The companys historical average EV/EBITDA multiple is 6.1x. We believe a

slight premium is warranted as the company is currently operating at trough
levels of the cycle. Our valuation is in line with comparable industrial
manufacturers, however, at a discount to select industrial trusts suggesting
the potential for upside to our price target. On a dividend yield basis, our
valuation of 9.4% is in line with select industrial trusts of approximately 10%.
New Flyers IDS units are not subject to the 2011 SIFT rule implementation. We
believe the resulting scarcity of high-yield equities for investors could attract a
premium to New Flyer. We believe New Flyer is a cash flow story and will be able
to maintain its distribution levels for several years.

Competition: Market share for New Flyer declined slightly in 2009 to 37%.
Several established players, including Daimler (DAI-DE), Gillig, and Volvo Bus
Corporation (VOLV.B-ST) are continually battling New Flyer for market share.
Recently, several international firms entered the North American bus market;
however the 60% content Buy American rules should limit the potential impact
from international competitors.
U.S. state budget cuts as well as Canadian infrastructure stimulus ending at the
end of 2010, New Flyer management has highlighted some concerns pertaining
to the funding available to TAs throughout North America. An inability of TAs to
purchase buses could negatively impact future sales.
Order Variability: Managements forecast for overall industry order activity in
2010 is between 5,500 and 6,000 units. However, industry volumes can vary
from year to year based on the timing that funding is made available. Increased
order volatility could lead to greater investor uncertainty around the stability of
cash flows.
Supplier Bankruptcy Risk: On August 10, ISE Limited (ISE-TSX), a New Flyer
supplier of hybrid propulsion systems or integration components, announced
311
that it had filed a voluntary petition to reorganize its business under Chapter 11
of the United States Bankruptcy Code. New Flyer has manufactured 281 buses
with ISE gas-electric hybrid or diesel-electric hybrid propulsion system
components installed in them and 21 hydrogen fuel cell buses where ISE was
the propulsion system integrator. These buses represent approximately 1% of
the New Flyer fleet of buses in service in Canada and the U.S. Of the 302 buses
produced by New Flyer with ISE components, 209 remain under warranty with
warranty obligations expiring over the next five years.
At this time, the amount of ISE warranty obligations that New Flyer may assume
as a result of ISEs bankruptcy is not determinable. New Flyer will support
customers as required and has begun to put support plans in place. Currently,
New Flyer's total order backlog contains firm orders for four EUs and options for
55 EUs that were intended to incorporate ISE hybrid propulsion systems.
Labour Agreements: New Flyer has four collective labour agreements with two
different unions (CAW and CWA). The company experienced a major labour
disruption at its Winnipeg facility in 2006. There is always a risk that such an event
can occur again in the future, resulting in production delays and increased costs.
in terms of revenue, operating costs, and financial obligations. The exposure can
vary from period to period depending on materials used and volume of orders.
New Flyer engages in hedging practices to protect itself from changes in the
value of the C$/US$ exchange rate and by adjusting prices of its products by
attempting to anticipate, as closely as possible, the number of orders for the
year (TAs generally order buses one year in advance).
New Flyers costs are variable costs. Additional costs are generally passed on to
fluctuations, in copper, resins, or oil prices could impact margins.
Warranty And Liability Claims: Similar to most manufacturers, New Flyer is
subject to warranty and liability claims as a normal part of business operations
as well as any product deficiencies. New Flyer generally offers 12-year
warranties on its bus structure, and between one and five years on related
components.
Environmental Legislation: The Environmental Protection Agency (EPA) is
responsible for emissions standards for vehicles in the U.S., while Environment
Canada undertakes the same function in Canada. Strict emissions standards are
set to be completely phased in by the end of 2010. New Flyer expects to comply
with the regulations by working with suppliers in developing new engines and
propulsion technology designed to comply with the current standards. The EPA
will ensure that TAs are purchasing buses that are environmentally friendly, such
as those produced by New Flyer, and that New Flyer is adhering to the strictest
of quality standards to comply with EPA regulations.
312
Exhibit 2. New Flyer Consolidated Summary Financials ($ 000, except per share)
Shipments
Revenue
EBITDA
EBITDA Margin %
Revenue
EBITDA
EBITDA Margin %
2009
Q1/10
Q2/10
Q3/10E
Q4/10E
2010E
Q1/11E
Q2/11E
Q3/11E
Q4/11E
2011E
2012E
2,264
$991,703
$78,809
7.9%
453
$216,107
$16,117
7.5%
545
$253,072
$21,060
8.3%
550
$250,250
$19,770
7.9%
520
$236,600
$18,573
7.9%
2,068
$956,029
$75,520
7.9%
533
$242,515
$18,431
7.6%
506
$230,389
$17,740
7.7%
506
$232,921
$18,168
7.8%
506
$232,921
$18,051
7.8%
2,052
$938,746
$72,390
7.7%
2,084
$964,116
$76,549
7.9%
$108,163
$23,848
22.0%
$26,873
$6,463
24.1%
$27,468
$6,266
22.8%
$28,000
$6,160
22.0%
$27,500
$5,775
21.0%
$109,841
$24,664
22.5%
$27,000
$5,670
21.0%
$28,000
$5,880
21.0%
$29,000
$6,090
21.0%
$28,000
$5,880
21.0%
$112,000
$23,520
21.0%
$117,050
$24,875
21.3%
Total Sales
$1,099,866 $242,980 $280,540 $278,250 $264,100 $1,065,870 $269,515 $258,389 $261,921 $260,921 $1,050,746 $1,081,166
EBITDA
$102,657
$22,582
$30,526
$25,930
$24,348 $103,386
$24,101
$23,620
$24,258
$23,931
$95,910 $101,424
EBIT
$35,762
$2,766
$53,428
$19,930
$18,348
$94,472
$18,101
$17,620
$18,258
$17,931
$71,910
$77,424
Pre-tax
($14,036) ($11,781)
$40,193
$7,262
$5,742
$41,415
$5,437
$4,913
$5,580
$5,252
$21,182
$26,599
Net Income
($30,380) ($12,933)
$35,853
$4,793
$3,790
$31,502
$3,589
$3,243
$3,683
$3,466
$13,980
$17,555
EBITDA Margin
9.3%
9.3%
10.9%
9.3%
9.2%
9.7%
8.9%
9.1%
9.3%
9.2%
9.1%
9.4%
EBIT Margin
3.3%
1.1%
19.0%
7.2%
6.9%
8.9%
6.7%
6.8%
7.0%
6.9%
6.8%
7.2%
Pre-tax Margin
(1.3%)
(4.8%)
14.3%
2.6%
2.2%
3.9%
2.0%
1.9%
2.1%
2.0%
2.0%
2.5%
Net Margin
(2.8%)
(5.3%)
12.8%
1.7%
1.4%
3.0%
1.3%
1.3%
1.4%
1.3%
1.3%
1.6%
Per Share Statistics
EPS (Basic)
($0.64)
($0.27)
$0.75
$0.10
$0.08
$0.64
$0.07
$0.07
$0.07
$0.07
$0.28
$0.35
EPS (FD Excluding Unusuals)
$0.42
$0.03
$0.16
$0.10
$0.08
$0.36
$0.07
$0.07
$0.07
$0.07
$0.28
$0.35
CFPS (Basic)
$0.55
($0.57)
$0.49
$0.33
$0.20
$0.45
$0.18
$0.42
$0.36
$0.34
$1.42
$1.34
DCFPS (Basic)
$1.52
$0.30
$0.47
$0.38
$0.35
$1.47
$0.43
$0.39
$1.52
$0.30
$1.38
$1.46
Equity Per Share (Basic)
$2.13
$1.76
$2.59
$2.50
$2.49
$2.49
$2.47
$2.45
$2.43
$2.42
$2.42
$2.41
Units Outstanding (mlns.)
47.3
47.3
47.6
49.5
49.5
49.5
49.5
49.5
49.5
49.5
49.5
49.5
Statement Of Cash Flows
Operating Cash Flow
$25,819 ($27,142)
$23,228
$16,387
$9,811
$22,284
$9,042
$23,228
$16,387
$9,811
$22,284
$41,322
Change In Non-cash Working Capital ($11,299) ($32,688)
$5,957
$4,769
($677) ($22,639)
($1,221)
$5,957
$4,769
($677) ($22,639)
$696
Investment Activities
($5,181)
($1,691)
($2,974)
($1,500)
($1,600)
($7,765)
($1,600)
($2,974)
($1,500)
($1,600)
($7,765)
($6,400)
($20,811)
($4,507)
($6,131)
($4,428)
($4,428) ($19,494)
($4,428)
($6,131)
($4,428)
($4,428) ($19,494) ($17,712)
Net Change
($25) ($33,057)
$13,884
$10,459
$3,783
($4,931)
$3,014
$4,863
$5,091
$4,242
$17,210
$19,150
Free Cash Flow
$67,498
$15,517
$19,777
$18,008
$16,905
$70,206
$16,704
$19,777
$18,008
$16,905
$70,206
$66,440
Balance Sheet
Cash
$30,696
$0
$11,523
$21,982
$25,765
$25,765
$28,779
$11,523
$38,733
$42,975
$42,975
$62,125
Total Debt
$384,493 $398,594 $391,251 $391,459 $391,670 $391,670 $391,881 $391,251 $392,304 $392,515 $392,515 $393,360
Equity
$100,689
$83,238 $123,519 $123,884 $123,245 $123,245 $122,406 $123,519 $120,476 $119,514 $119,514 $119,357
Net Debt
$353,797 $398,594 $379,728 $369,477 $365,905 $365,905 $363,102 $379,728 $353,571 $349,540 $349,540 $331,235
Net Debt (Excluding Sub Debt)
$53,797
$98,594
$79,728
$69,477
$65,905
$65,905
$63,102
$58,451
$53,571
$49,540
$49,540
$31,235
Total Capital Employed (TCE)
$454,486 $481,832 $503,247 $493,361 $489,150 $489,150 $485,508 $503,247 $474,046 $469,054 $469,054 $450,592
Net Debt / TCE
77.8%
82.7%
75.5%
74.9%
74.8%
74.8%
74.8%
75.5%
74.6%
74.5%
74.5%
73.5%
Net Debt / TCE (Ex. Sub Debt)
11.8%
20.5%
15.8%
14.1%
13.5%
13.5%
13.0%
12.2%
11.3%
10.6%
10.6%
6.9%
Return On Equity
(30.2%)
(15.5%)
29.0%
3.9%
3.1%
25.6%
2.9%
29.0%
3.9%
3.1%
25.6%
11.7%
ROCE
10.3%
10.3%
11.6%
11.1%
10.9%
10.9%
11.2%
10.2%
10.0%
10.1%
10.1%
11.3%
Trailing Four Quarter Statistics
Trailing Revenues
$1,099,866 $1,069,497 $1,076,525 $1,051,156 $1,065,870 $1,065,870 $1,092,405 $1,076,525 $1,051,156 $1,065,870 $1,065,870 $1,050,746
Trailing EBITDA
$102,657 $102,100 $109,602 $105,518 $103,386 $103,386 $104,905 $109,602 $105,518 $103,386 $103,386
$95,910
Trailing EBIT
$35,762
$19,514
$71,504
$83,409
$94,472
$94,472 $109,807
$71,504
$83,409
$94,472
$94,472
$71,910
Trailing Pre-tax
($14,036) ($32,994)
$18,397
$30,552
$41,415
$41,415
$58,633
$18,397
$30,552
$41,415
$41,415
$21,182
($30,380) ($48,094)
$2,429
$16,412
$31,502
$31,502
$48,024
$2,429
$16,412
$31,502
$31,502
$13,980
Trailing EBITDA
9.3%
9.5%
10.2%
10.0%
9.7%
9.7%
9.6%
10.2%
10.0%
9.7%
9.7%
9.1%
Trailing EBIT
3.3%
1.8%
6.6%
7.9%
8.9%
8.9%
10.1%
6.6%
7.9%
8.9%
8.9%
6.8%
Trailing Pre-tax
(1.3%)
(3.1%)
1.7%
2.9%
3.9%
3.9%
5.4%
1.7%
2.9%
3.9%
3.9%
2.0%
(2.8%)
(4.5%)
0.2%
1.6%
3.0%
3.0%
4.4%
0.2%
1.6%
3.0%
3.0%
1.3%
313
Company
Industry
Industrial Trusts
Armtec Infrastructure Income Fund Metal Fabricate/Hardware
Oil & Gas Services
Morneau Sobeco Income Fund
Commercial Services
Vicwest Income Fund
Building Materials
Industrial Trusts Average (Ex. Unusuals)
Corporates
AG Growth International Inc.
Black Diamond Group Ltd
Commercial Services
Contrans Group Inc. - CL A
Transportation
Greenbrier Companies Inc
Trucking & Leasing
Spartan Motors Inc
Auto Parts & Equipment
Student Transportation Inc
Transportation
Thor Industries Inc
Home Builders
Velan Inc
Corporates Average
Average Of Trusts & Corporates (Ex. Unusuals)
Auto Manufacturers
Country
Ticker
Price Mkt. Cap.

26-Aug ($ mlns.)
EV
P/E
($ mlns.) 2009A 2010E
EV/EBITDA
2011E 2009A 2010E 2011E
CA
CA
CA
CA
ARF.UN
FMO.UN
MSI.UN
VIC.UN
$18.05
$6.53
$9.40
$12.99
$360
$140
$451
$226
$616
$106
$646
$274
7.1x
14.5x
NMF
6.6x
9.40x
15.0x
14.4x
16.1x
10.5x
14.0x
11.7x
8.8x
14.5x
8.1x
10.8x
7.3x
7.1x
9.9x
6.0x
7.5x
7.5x
8.0x
9.6x
6.3x
7.9x
CA
CA
CA
US
US
US
US
CA
AFN
BDI
CSS
GBX
SPAR
STB
THO
VLN
$39.34
$16.34
$7.80
$10.50
$3.79
$5.86
$23.60
$13.92
$505
$312
$317
$230
$125
$367
$1,214
$309
$580
$358
$327
$631
$135
$528
$1,071
$201
CA
NFI.UN
$10.99
$543.79
$596.37
11.4x
11.1x
10.0x
NMF
9.5x
NMF
NMF
8.8x
10.1x
9.9x
24.8x
14.5x
14.2x
12.4x
NMF
19.0x
NMF
12.4x
7.0x
13.2x
13.5x
NMF
11.8x
10.8x
10.4x
19.0x
9.8x
NMF
9.8x
17.4x
12.7x
12.0x
NMF
9.6x
9.5x
7.9x
10.0x
4.6x
12.9x
NMF
2.7x
8.2x
7.9x
5.8x
9.9x
6.6x
6.6x
8.1x
7.5x
10.5x
7.0x
2.6x
7.3x
7.5x
5.8x
Dividend
Yield
Return On
Capital
EBITDA Net Debt To

Margin Capitalization
7.0x
4.7x
9.0x
5.7x
6.6x
12.0%
6.2%
10.0%
12.0%
10.1%
8.5%
-2.7%
1.8%
31.3%
9.7%
17.6%
11.6%
19.5%
11.7%
15.1%
49.9%
-23.2%
33.4%
43.2%
25.8%
8.1x
5.6x
5.7x
6.1x
4.5x
8.8x
5.6x
4.8x
6.2x
6.3x
6.2x
5.2%
6.6%
4.1%
0.0%
2.6%
9.5%
1.2%
2.3%
3.9%
6.0%
10.6%
15.2%
8.0%
8.1%
-6.8%
6.0%
-2.0%
2.8%
10.2%
5.2%
6.7%
29.0%
25.3%
48.3%
11.1%
6.0%
6.9%
17.9%
1.2%
0.0%
14.6%
14.8%
9.3%
25.3%
19.1%
3.4%
50.2%
5.2%
48.5%
-23.3%
-31.0%
12.2%
16.7%
15.8%
US$/C$:
$1.050
Exhibit 3. Transportation Comparables
Data for all comparables obtained from company reports and Bloomberg; New Flyer estimates are CIBC World Markets Inc.
Leverage calculations for New Flyer exclude the debenture portion of the IDS from net debt for comparability.
Source: Bloomberg, Company reports and CIBC World Markets Inc.
314
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2009 Current
$23.1A
$23.0A
$30.0A
$26.5A
$102.7A
2010 Current
$22.6A
$30.5A
$25.9E
$24.3E
$103.4E
2011 Current
--
--
--
--
$95.9E
Our DIPU estimates are shown below:
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2009 Current
$0.34A
$0.36A
$0.43A
$0.39A
$1.52A
2010 Current
$0.30A
$0.47A
$0.38E
$0.35E
$1.47E
2011 Current
--
--
--
--
$1.38E
10
315

(NFI.UN)
2g
7
11
316
Ag Growth International Inc. (2a, 2c, 2e, 2g, 7) (AFN-TSX, C$38.95, Sector Performer)
Armtec Infrastructure Income Fund (2g) (ARF.UN-TSX, C$18.14, Sector Performer)
Vicwest Income Fund (2g, 7) (VIC.UN-TSX, C$13.00, Sector Underperformer)
Black Diamond Group Limited (BDI-TSX, C$16.51, Not Rated)
Contrans Group Inc. (CCS-TSX, C$8.06, Not Rated)
Daimler AG (DAI-DE, 39.15, Not Rated)
Foremost Income Fund (FMO.UN-TSX, C$6.41, Not Rated)
Greenbrier Companies Inc. (GBX-NYSE, $11.00, Not Rated)
ISE Limited (ISE-TSX, C$0.30, Not Rated)
Morneau Sobeco Income Fund (MSI.UN-TSX, C$9.33, Not Rated)
Thor Industries Inc. (THO-NYSE, $23.45, Not Rated)
Velan Inc. (VLN-TSX, C$13.54, Not Rated)
Volvo AB (VOLV.B-ST, [SEK]82.80, Not Rated)
Winnebago Industries, Inc. (WGO-NYSE, $8.50, Not Rated)
12
317

1
2a
2b
2c
2d
2e
2f
2g
3a
3b
3c
4a
4b
4c
5a
5b
6a
6b
7
8
9
10
past 12 months.
past 12 months.
the past 12 months.
past 12 months.
equity securities.
An executive of CIBC World Markets Inc. or any analyst involved in the preparation of this research report has
11
12
13
14

13
318
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR NEW FLYER
INDUSTRIES INC. (NFI.UN)
Date
09/23/2007
09/26/2007
11/13/2007
03/18/2008
04/21/2008
04/21/2008
08/11/2008
09/03/2008
09/03/2008
11/10/2008
09/14/2009
11/15/2009
11/30/2009
14
Change Type
Closing Price
10.63
11.25
11.52
12.11
11.12
11.12
11.92
11.75
11.75
7.83
8.01
9.50
9.80
Rating
SP
SO
SO
R
SO
SO
R
SO
SO
SO
SO
SO
SO
Price Target
9.75
13.50
12.75
12.75
13.25
13.25
13.50
11.25
12.00
13.00
None
Coverage
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Chris Murray
Chris Murray
319

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

Count
Percent
Count
Percent
133
43.9%
129
97.0%
138
45.5%
128
92.8%
24
7.9%
2.3%
Restricted
(as of 30 Aug 2010)

Restricted
21
87.5%
100.0%

(as of 30 Aug 2010)
Count
Percent
Count
Percent
33.3%

100.0%
66.7%
100.0%
0.0%
0.0%
Restricted
0.0%
Restricted
0.0%
Capital Equipment Sector includes the following tickers: ATA, FTT, NFI.UN.
*Although the investment recommendations within the three-tiered, relative stock rating system utilized by CIBC World Markets Inc.
15
320
Legal Disclaimer
Exchange and CIPF, (b) in the United Kingdom, CIBC World Markets plc, which is regulated by the Financial Services
Authority ("FSA"), and (c) in Australia, CIBC Australia Limited, a member of the Australian Stock Exchange and regulated
by the ASIC (collectively, "CIBC World Markets") and (d) in the United States either by (i) CIBC World Markets Inc. for
distribution only to U.S. Major Institutional Investors (MII) (as such term is defined in SEC Rule 15a-6) or (ii) CIBC
World Markets Corp., a member of the Financial Industry Regulatory Authority (FINRA). U.S. MIIs receiving this report
from CIBC World Markets Inc. (the Canadian broker-dealer) are required to effect transactions (other than negotiating
their terms) in securities discussed in the report through CIBC World Markets Corp. (the U.S. broker-dealer).
expressed in this document are meant for the general interests of wholesale clients of CIBC Australia Limited.
16
321
New Flyer Inc.
New Idea
(NFI.UN-T: C$10.51)
February 9, 2010
Richard Stoneman / (416) 350-3337
rstoneman@dundeesecurities.com
BUY, Medium Risk*

12-month target price: C$13.50
Mansur Khan / (416) 350-3314

makhan@dundeesecurities.com
Time To Catch The Bus

EPS-2009E
EPS-2010E
New
Old
(0.27)
0.55
NA
NA
MEDIUM
Risk*
Fiscal Year End
Dec.28th
52-Week Range
$10.50 - $10.72
47.3
Shares Outstanding (MM)
$1.17
Distribution
$501.6
Market Capitalization ($MM)

One Year Total Return
38.4%
31-Dec
2008A
2009E
2010E
EBITDA
92.4*
96.1
91.3
EV/EBITDA
8.7x
8.4x
8.8x
EPU
2.27
(0.27)
0.55
P/EPU
4.7x
NM
19.3x
DCF Valuation
Discount Rate
Terminal Growth Rate
Valuation
11%
3%
$13.50
* Adjusted EBITDA
* DSC estimates
Source: See Note 1
Initiating Coverage with a BUY

Profitable Green Investment + Yield - Founded in 1930, New Flyer
is the largest heavy-duty bus manufacturer in North America today, with
a 41% market share in heavy buses. The company has a long history of
innovation within the industry, including low floor articulated buses and
hybrid/clean propulsion systems. It has had revenue and EBITDA CAGR
of 16% and 19% respectively since 2002. It has a backlog of
approximately $3.9B with orders and options for 8,990 bus EU (an EU is
a bus equivalent unit), providing visibility to ongoing revenue. Below are
some of the reasons why we feel investors should take note of this stock:
High Payouts Exempt from Trust Conversion - As an Income Deposit

Structure (IDS), New Flyer has a different structure than that of the
prevalent (in Canada) model of income trusts and as such, New Flyer is
not susceptible to the 2011 mandatory conversion date. In the event of a
voluntary conversion, recent comparable conversions have shown the
market reacts favourably to such transactions with their respective stock
prices holding steady or even rising post conversion. The stock is
currently yielding over 11% and had a payout ratio of 71% YTD.
New Management In January 2009, the company hired a new CEO,

Mr. Paul Soubry. Since then the company has refreshed its management
team and instituted a number of changes in its engineering,
manufacturing, human resources and supply management process. In
our view, there is a lot of low hanging fruit that should lead to lower
costs and higher margins.
NFI.UN: Price/Volume Chart
Growth Potential In our view, growth will be driven by improved

execution (higher margins) and an increasing contribution from the
Aftermarket Parts & Service business.
Awkward 2009 Behind Them - The company faced two unusual
Source: Thomson ONE
challenges this year. The first was an engineering design error requiring
rectification affecting 225 equivalent units (EUs). As at year-end, all of
the problem units were delivered to the customer. The second challenge
for New Flyer was the indefinite deferral of 140 hybrid articulated buses
(280 EUs) due to funding issues on the part of the customer. After
increasing the production rate to deliver the anticipated order, the rate
was then lowered its production rate in the 2nd half of this year and
expects a rate of 40-42 EUs per week for next year.
Risk - Customer Funding

While governments claim a green agenda, lower tax revenues and
deficit spending could trigger cutbacks in funding for bus purchases.
Conclusion: BUY with $13.50 Target

Valuation As Is - Assuming no conversion, we estimate the company's
Company Description
Founded in 1930, New Flyer is the largest
manufacturer of heavy-duty transit buses in
North America.
A DundeeWealth Inc. Company
shares will be worth approximately $13.50 a year from now based on a

DCF approach using a conservative 11% discount rate and a 3%
terminal growth rate. We are using a high discount rate to reflect the
uncertainty of bus funding, given the economy and US federal deficit.
Please see Disclosures and Disclaimers on the last two pages of this report.
322
New Flyer Inc.
February 9, 2010
Disclosures & Disclaimers

Dundee Securities Corporation is an affiliate of Dundee Corporation, DundeeWealth Inc., and Goodman & Company,
Investment Counsel Ltd.
Research Analyst Certification: Each Research Analyst involved in the preparation of this Research Report hereby certifies
that: (1) the views and recommendations expressed herein accurately reflect his/her personal views about any and all of
the securities or issuers that are the subject matter of this Research Report; and (2) his/her compensation is not and will
not be directly or indirectly related to the specific recommendations or views expressed by the Research Analyst in this
Research Report.
U.S. Residents: Dundee Securities Inc. is a U.S. registered broker-dealer and an affiliate of Dundee Securities
Corporation. Dundee Securities Inc. accepts responsibility for the contents of this Research Report, subject to the terms and
limitations as set out above. U.S. residents seeking to effect a transaction in any security discussed herein should contact
Dundee Securities Inc. directly.
This Research Report is not an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. The
information contained in this Research Report is prepared from sources believed to be reliable but Dundee Securities
Corporation makes no representations or warranties with respect to the accuracy, correctness or completeness of such
information. Dundee Securities Corporation accepts no liability whatsoever for any loss arising from any use or reliance on
this Research Report or the information contained herein. Any reproduction in whole or in part of this Research Report
without permission is prohibited.
Dundee Securities Research is distributed by email, website or hard copy. Dissemination of initial reports and any
subsequent reports is made simultaneously to a pre-determined list of Dundee Securities' Institutional Sales and
Trading representative clients and Retail Private Client offices. The policy of Dundee Securities with respect to
Research reports is available on the Internet at www.dundeewealth.com.
The compensation of each Research Analyst/Associate involved in the preparation of this Research Report is based
upon, among other things, the overall profitability of Dundee Securities Corporation, which includes the overall
profitability of the Investment Banking Department.
Dundee Securities Corporation
Note 1: All historical data including financial and operating data on the issuer(s) mentioned in this report come from publicly
available documents including statutory filings of these issuer(s). Data may also be sourced from Bloomberg, Baseline,
Thomson ONE.
Explanation of Recommendations and Risk Ratings

Valuation methodologies used in determining the 12-month target price(s) for the issuer(s) mentioned in this report are contained
in current and/or prior research. Target Price N/A: a target price is not available if the analyst deems there are limited
financial metrics upon which to base a reasonable valuation.
BUY: total returns expected to be materially better than the overall market with higher return expectations needed for
more risky securities. NEUTRAL: total returns expected to be in line with the overall market. SELL: total returns
expected to be materially lower than the overall market. TENDER: the analyst recommends tendering shares to a
formal tender offer.
*Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonable
liquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where the
company's business or financial risk is high and is difficult to value. Venture: an early stage company where the
business or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation.
Medium and High Risk Ratings Methodology: Medium and High risk ratings are derived using a predetermined
methodology based on liquidity and volatility. Analysts will have the discretion to raise the risk rating if it is determined a
higher risk rating is warranted. Securities with poor liquidity or high volatility are considered to be High risk. Liquidity and
volatility are measured using the following methodology: a) Price Test: All securities with a price <= $3.00 per share are
considered high risk for the purpose of this test. b) Liquidity Test: This is a two-tiered calculation that looks at the market
capitalization and trading volumes of a company. Smaller capitalization stocks (<$300MM) are assumed to have less
liquidity, and are, therefore, more subject to price volatility. In order to avoid discriminating against smaller cap equities
that have higher trading volumes, the risk rating will consider 12 month average trading volumes and if a company has
traded >70% of its total shares outstanding it will be considered a liquid stock for the purpose of this test. c) Volatility
Test: In this two step process, a stocks volatility and beta are compared against the diversified equity benchmark.
Canadian equities are compared against the TSX while U.S. equities are compared against the S&P 500. Generally, if
the volatility of a stock is 20% greater than its benchmark and the beta of the stock is higher than its sector beta, then
the security will be considered a high risk security. Otherwise, the security will be deemed to be a medium risk security.
Periodically, the equity risk ratings will be compared to downside risk metrics such as Value at Risk and Semi-Variance
and appropriate adjustments may be made. All models used for assessing risk incorporate some element of subjectivity.
Risk in relation to forecasted price volatility is only one method of assessing the risk of a security and actual risk ratings
could differ.
SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS
(subordinate voting shares).
Page 2
323
New Flyer Inc.
February 9, 2010
Ideas of Interest
Dundee Securities Corporation from time to time publishes reports on securities for which it does not and may not
choose to provide continuous research coverage. Such reports are published as Ideas of Interest.
Dundee Securities Equity Research Ratings

77%
69%
% of companies covered by Dundee Securities

Corporation in each rating category
66%
55%
% of companies within each rating category for

which Dundee Securities Corporation or its
affiliates have provided investment banking services
for a fee in the past 12 months.
43%
44%
33%
22%
22%
15%
8% 10%
11%
0%
Buy
Neutral
Sell
As at December 31, 2009

Source: Dundee Securities Corp.
Page 3
324
Investment Research
February 9, 2010
Industrials
Initiating Coverage
BUY (Risk* - Medium)
NFI.UN-T: C$10.60
12-Month Target Price: C$13.50
New Flyer Industries Inc. - Time

to Catch the Bus
Initiating Coverage with a BUY Rating
New Flyer is the largest heavy duty bus manufacturer in Canada & the U.S.
A profitable "green theme" with yield, significant backlog and long-term revenue
visibility; all point to a higher stock price.
With an 11.2% yield and a YTD payout ratio of 71%, the company should attract
yield oriented investors. NFI is an Income Deposit Security structure (IDS), not an
Income Trust and will not be affected by 2011 SIFT rules. NFI's structure is a
"stapled" unit (equity and debt), which is not common in Canada. There are recent
examples of "stapled" structures converting to conventional structures - with no
decline in total value.
New management, with a strong background in manufacturing, should be able to
increase margins through improved execution and modest capital investments.
Results to date this year have been delivered despite two challenges. The first, an
engineering design error where buses were being built 5% over allowable weight
and had to be redesigned and rebuilt. All buses were delivered at year-end. The
second, was an order from Chicago, where funding failed to materialize, as the
buses went into production. Production schedules were disrupted by the problem.
Richard Stoneman / (416) 350-3337
rstoneman@dundeesecurities.com
Mansur Khan / (416) 350-3314
makhan@dundeesecurities.com
Over the past five years, the company has built up an after-market support
operation, with revenues poised to exceed $100 million in 2010, at twice
manufacturing margins. This business has lots of potential to grow further.
Refer to important disclosures on page
325
Contents
Overview ............................................................................................................................................................................. 3
History & background ......................................................................................................................................................... 3
Fund Structure .................................................................................................................................................................... 4
Business segments............................................................................................................................................................. 5
Bus Manufacturing Operations ........................................................................................................................................... 6
Aftermarket Parts & Service ............................................................................................................................................... 6
Customers and Markets...................................................................................................................................................... 7
US Market ........................................................................................................................................................................... 8
Canadian Market ................................................................................................................................................................ 9
Valuation ........................................................................................................................................................................... 13
February 9, 2010
New Flyer Inc.
Page 2
326
OVERVIEW
Today, New Flyer is the leading manufacturer of heavy-duty transit
buses in the United States and Canada and a leading provider of
aftermarket parts and service. With the continued steady growth of
ridership in North America, heavy-duty transit buses form the critical
backbone of urban public transportation systems.
Management estimates the company has a market share of
approximately 41% of the combined US and Canadian heavy-duty
transit bus industry (based on 2008 deliveries). 19 out of the 25 largest
transit authorities in this region operate the company's buses and the
company has active relationships with approximately 235 transit
authorities.
HISTORY & BACKGROUND

Headquartered in Winnipeg, Manitoba, New Flyer was founded in 1930
as a manufacturer of motor coaches and school buses. The name was
changed to Flyer Industries Limited in 1971 along with a change to focus
on heavy-duty transit buses exclusively. The company adopted the
name New Flyer Industries after being acquired by Den Oudsten in 1986
- Holland's largest bus manufacturer and one of the most innovative in
the European bus manufacturing industry. The low-floor bus concept
that is prevalent today in North America was originally accredited to
Oudsten who introduced it in North America in 1988.
Exhibit 1: History of New Flyer
In 1987 New Flyer opened its first US production facility to meet Buy
America legislation. The company now operates US production facilities
in St. Cloud and Crookston, Minnesota. The company has parts
distribution centers in Winnipeg, Kentucky and California.
KPS Special Situations Funds recapitalized the company in March,
2002, restructured and gained control of the company.
February 9, 2010
New Flyer Inc.
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327
In February, 2004 Harvest Partners Inc., a New York based private

equity firm purchased the company with Lighyear Capital, LLC, as a coinvestor.
The company went public on the Toronto Stock Exchange in August,
2005.
New Flyer has been a leader in North American "green" bus transit
innovation:
1988
Low-floor bus
1992
New Generation Articulated electric trolley
1994
Alternative fuel buses (CNG, LNG)
1998
Diesel-electric hybrid bus
2004
Hydrogen-hybrid bus
2008
First LED headlights/electronic Instrument Panel
2009
First production Hydrogen Fuel Cell transit fleet
Fund Structure
The company completed its Income Deposit Securities (IDS) initial public
offering in August of 2005. This structure is more common in the US
than Canada and is often referred to as a "stapled" product, with a slice
of pure debt attached to the common equity.
Each IDS consists of one common share of New Flyer Industries Inc,
plus C$5.53 principal amount of 14% subordinated notes.
Given New Flyer's status as a corporate issuer, it is not impacted by
2011 SIFT rules.
Exhibit 2: Ownership structure
February 9, 2010
New Flyer Inc.
Page 4
328
PAYOUT RATIO
The company has paid at an effective annual rate of C$1.17 since

July, 2007. The payout ratio was 77.0% in 2007, 79.7% in 2008 and
is expected to be below 80% in 2009.
Exhibit 3: Historical Payout ratios

79.7%
77.0%
70.9%
2007
2008
2009 Q3 YTD
BUSINESS SEGMENTS
The company operates its business through the following two segments:
Bus Manufacturing Operations - This segment has historically

comprised approximately 90% of the total revenues of the business,
including year to date 2009. It entails the design, manufacture, and
sales of heavy-duty transit buses of various lengths and propulsion
systems. The company has the capacity to produce 50 bus EUs per
week (an articulated bus equals two equivalent units).
Aftermarket Parts & Service - This segment is involved in the

support of all post-sale activities such as services, parts distribution,
support documentation, and training. Historically, it has represented
approximately 10% of the overall business revenues. The company
currently has three aftermarket parts and service facilities - one in
Winnipeg, one in Kentucky, and a third one in California. Over the
past five years this business has grown at a CAGR of 21% and has
margins that are twice manufacturing margins.
Exhibit 4: Revenue mix
Bus Mfg, 90%
Parts, 10%
Further details are provided below for each business segment.

February 9, 2010
New Flyer Inc.
Page 5
329

As the leading manufacturer in the heavy-duty transit bus industry, New
Flyer has the broadest and most advanced product offering in North
America. In specialty areas such as bus rapid transit vehicles, electric
trolleys, and its articulated models, the company is able to achieve
premium pricing vs. its competitors.
Exhibit 5: Historical bus manufacturing revenues

Bus Mnufacturing
1000
900
4-Year CAGR: 10.9%
865.3
804.4
800
($U MM)
700
600
572.8
537.4
540.3
2005
2006
500
400
300
200
100
0
2004
2007
2008
Source: Company reports, Dundee Securities estimates
Aftermarket Parts & Service

The robust annual growth in revenues since 2002 in this segment can be
explained by a number of drivers - the increasing complexity of transit
bus technologies, constrained transit operating budgets, and high transit
bus utilization. In addition, the company's leading share of transit buses
in service (78% as per AIF 2008) provides a compelling opportunity to
grow this segment further. According to management, New Flyer offers
the most comprehensive aftermarket support of all manufacturers in the
industry. As part of its long-term strategy to provide industry-leading
response times to all of its customers in Canada and the US, the
company opened a new parts distribution center in 2008 in northern
Kentucky to better service customers along the eastern US.
Exhibit 6: Historical parts distribution revenues

Aftermarket Parts
120
4-Year CAGR: 21.4%
96.0
100
82.7
($U MM)
80
67.4
53.4
60
44.2
40
20
0
2004
2005
2006
2007
2008
February 9, 2010
New Flyer Inc.
Page 6
330
CUSTOMERS AND MARKETS

The company's primary customers are municipal and local transit
authorities in both the USA and Canada. Over the past five years,
approximately 87% of its annual bus manufacturing revenue has been
derived from repeat customers. According to the company's estimates,
19 out of the 25 largest transit authorities in the US and Canada operate
New Flyer buses.
Exhibit 7: Market Share data
February 9, 2010
New Flyer Inc.
Page 7
331
US Market
Fleet and Ridership Growth:
The two exhibits below are instructive of the steady increase in ridership
in the US relative to its population growth as well as the modal share of
bus ridership compared to heavy rail for example. In general, ridership
levels are at the highest levels last seen five decades ago (APTA).
The increase in the oil price has increased bus ridership over the past
few years, as commuters have opted for public transit. Other themes
include urbanization and "the green" shift.
Ridership data for 2009 has not been published yet.
Exhibit 9: Historical ridership data
Source: APTA 2009 Fact Book
Funding Programs:
In the US, funding for the purchase of transit buses is provided primarily
by the Federal Transit Authority (FTA) with funding derived from
gasoline taxes. Municipal and local transit authorities receive 80% of the
funding for new bus purchases from the federal government for:
February 9, 2010
the replacement of buses in operation for at least 12 years or

500,000 miles
New Flyer Inc.
Page 8
332
the addition of new buses to support fleet growth based on

population and ridership trends. To receive federal funding for new
bus purchases, a minimum of 20% contribution must be in place
from local transit authorities and the purchase must comply with
Buy-America regulations (Source: company reports).
American Recovery & Reinvestment Act (ARRA) - Under the ARRA

program, $8.4B was appropriated for three major transit programs. Out
of this amount, $6.9B was appropriated for the Transit Capital
Assistance Program, which includes a $100MM amount set aside for
transit investment for GHG reduction (TIGGER program). Most of the
remaining amount is to be apportioned under various allocation formulas
(i.e. Section 5307, 5311, and 5340 formulas).
With most of the funding provided by the US government, cities can
trade bus orders, with other cities.
One feature of bus contracting that we find different is that significant
advances are not made by the municipalities, when they contract for
buses. We are familiar with the mass transit business, where these
contract advances put a serious liability on municipalities (politicians)
that cancel contracts. In the bus industry the company takes the risk.
Canadian Market
Fleet and Ridership Growth:
Based on data obtained from the Canadian Urban Transit Association
(CUTA), transit ridership grew at a CAGR of 3.3% from 2003 to 2008
and at a CAGR of 2.7% from 1999 to 2008.
Exhibit 9: Canadian ridership trends

2000000
5-Yr CAGR: 3.3%
1800000
Revenue Passengers ('000s)
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Summary of Canadian Transit Statistics, CUTA, Dundee Securities' estimates
In 2008, CUTA estimates passenger boardings (i.e. revenue passenger

trips and transfers) were approximately 2.74B with bus boardings
comprising 65% of all boardings (see exhibit below):
February 9, 2010
New Flyer Inc.
Page 9
333
Exhibit 10:
Bus, 64.92%
Other, 0.25%
Streetcar, 2.95%
Heavy rail, 23.38%
Commuter rail,
1.79%
Light rail, 6.71%
Source: CUTA
According to information from the Toronto Transit Commission (TTC),

the 5-year CAGR in bus kilometres operated up to 2008 is approximately
3.9%.
The bus fleet growth in Canada has been approximately 3% over the
past five years (see exhibit below). In Ontario, the total bus fleet has
grown at a CAGR of 4.2% over the past five years. The average age
has declined from 11.24 in 2003 down to 6.8 in 2008 (Source: CUTA
information).
Exhibit 11: Canadian Bus Fleet Growth

16000
5-Yr CAGR: 2.94%
14000
12000
11878
11476 11463 11726
11012 11253
12196
12613
13059
13555
Buses
10000
8000
6000
4000
2000
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: CUTA, Dundee Securities estimates
February 9, 2010
New Flyer Inc.
Page 10
334
Funding Programs
A survey conducted by CUTA on the Canadian transit infrastructure
indicates that there is approximately $40.1B in estimated renewal and
expansion costs from 2008 to 2012.
In general, unlike in the US, the funding of transit projects in Canada is
borne mostly by municipal and provincial governments with minimal
subsidy from the federal level. The Canadian federal government has
historically provided far less than the 80% subsidy mark in the US.
Since 2002, the Canadian federal government's transit capital funding
ranged from 2% to 30% of the total while provincial funding ranged from
29% to 50% and municipal funding ranged from 15% to 37% (Source:
CUTA).
Federal Programs - Announced in 2007, the Building Canada Fund will
total $8.8B from 2007 to 2014. In an effort to reduce traffic congestion,
greenhouse gas emissions and air pollution, as well as to provide higher
density transit options for residents, this fund will allocate an amount to
public transit investments.
The federal Gas Tax Fund was extended in 2007 budget to provide $2B
annually until 2014.
In 2009, the federal government also announced the Infrastructure
Stimulus Fund to provide $4B from 2009 to 2010 to cover up to 50% of
infrastructure projects. New Flyer estimates approximately 25% of this
amount will be allocated to transit projects based on historical project
acceptance.
The 2009 budget also announced the Green Infrastructure Fund that will
allocate $1B over a period of five years.
Local Programs - At a more local level, provinces and municipalities
have their own programs. For example, in Alberta, despite some delays
and controversy, the Green Transit Incentives program (Green Trip) is
expected to allocate $2B for light rail and public transit projects.
Likewise, in Ontario, approximately $11.5B was committed through
MoveOntario 2020 to Metrolinx's public transit projects.
Production Capacity
Revenues vary with the number of bus equivalent units manufactured.
Exhibit X illustrates the production rates in 2009, into 2010. Rate
adjustments were made to gear up for the Chicago order and to reduce
production rates, when the order was cancelled.
Exhibit 12: Production rates
February 9, 2010
New Flyer Inc.
Page 11
335
Exhibit 13: Backlog Value US$
4,500,000
4,072,429
3,956,208
4,036,950
Q1-09
Q2-09
3,858,000
4,000,000
3,500,000
2,836,365
U$ '000s
3,000,000
2,500,000
2,000,000
1,836,097
1,500,000
1,000,000
500,000
0
2006
2007
2008
Total Firm Orders
Q3-09
Total Options

NOTE: Graph excludes 4th quarter orders and backlog as details were not provided
Exhibit 13 illustrates the backlog stability over the past year. The
numbers exclude the Chicago order, which was cancelled. The
company recently announced that orders totalled 711 buses (753 EUs)
for the fourth quarter of 2009. A detailed breakdown was not provided.
New Flyer has not seen any major change in its bid universe of
submitted, forecast and ongoing bids, over the past 18-months.
Operational Excellence
In our view, the company under invested in Capex over the past few
years. In 2008 the company had Capex of $6.8 million, with revenues of
$961 million. Fiscal 2007 was even lower with Capex of $1.4 million on
revenues of $421 million. Capex in 2009 should be around $10 million.
The Winnipeg plant can use the investment.
New management, with a strong background in manufacturing, were
hired over the past 18 months. Basic issues such as plant lighting,
painting, organization, cell manufacturing and cell performance metrics
are being addressed. Modest capex, with a payback of less than one
year, can reduce some outsourced machining work.
In our view, operational basic "blocking and tackling" have been ignored,
as the company went through two private equity groups and an IPO into
the high-yield market. For example, each bus is being painted twice,
resulting in additional expenses and weight penalties.
Better
housekeeping and paint booths can solve the problem.
Engineering support services are being put on the shop floor. Supply
chain management has changed to reduce inventory and costs. The
plant was shut over the Christmas break and painted. New lighting is
being installed - the list goes on.
Given the quality drive and common sense initiatives introduced by the
new CEO, we are optimistic that margins can be increased.
February 9, 2010
New Flyer Inc.
Page 12
336
Valuation
Financial Assumptions
To arrive at our valuation, we have made the following assumptions:
In the event the company converts over to a corporate structure, we

have modeled in an effective tax rate of 25%.
Under the conversion scenario, we have also assumed the company

can issue new debentures at a lower rate of approximately 6.5% to
replace the existing debentures paying interest at 14.4%.
The company has manufacturing and parts operations in both the

US and Canada. As such, there would be some natural hedges in
place to mitigate the impact of FX. However, the impact of FX
varies based not only on the FX rate but also on the mix of revenue
between US and Canada, which can change from time to time. The
company actively hedges its FX exposure using a range of derivate
products. It reports in US dollars. We have assumed a constant
Canadian dollar (vs. US dollar) going forward.
Although there has been some concern regarding its debt

covenants, we estimate its Debt/Adjusted EBITDA ratio will
decrease further to about 3.37x by year-end and that this ratio
unlikely to reach the high seen in Q2 of this year (see exhibit below).
Exhibit 14: Debt-to-EBITDA ratios and covenant

Total Leverage Ratios
7.00x
5.75x
Allowable
Covenants
5.75x
6.00x
4.75x
Q4-09E
2010E
2.00x
2.93x
3.37x
Q1-09
3.37x
2008
3.90x
3.91x
3.00x
3.80x
4.00x
4.37x
5.00x
1.00x
0.00x
Q2-09
Q3-09
Debt/Adjusted EBITDA
2011E
Debt/EBITDA Covenant
Source: Company reports, Dundee Securities' estimates
Valuation Scenarios
Under the current structure, we estimate a target price of over
approximately C$13.50 implying a total one year return of almost 40%
(including distribution of $1.17). This target estimate is based on a
discounted cash flow approach using a conservative discount rate of
11% and a terminal growth rate of 3%.
Note that although margins are likely to increase in 2010 given the
production problems are behind them, we have chosen to model in a
conservative EBITDA margin of 7.4% (vs. 2008 margin of 8.4% for
example).
February 9, 2010
New Flyer Inc.
Page 13
337
Exhibit 15
C$
Discount Rates
8.0%
9.0%
9.5%
10.0%
10.5%
11.0%
12.0%
12.5%
0%
$17.37
$14.75
$13.64
$12.64
$11.74
$10.91
$9.46
$8.81
1%
$19.14
$16.03
$14.75
$13.60
$12.57
$11.64
$10.02
$9.31
Terminal Growth Rates

2%
3%
4%
$21.52
$24.84
$29.82
$17.69
$19.89
$22.98
$16.15
$17.98
$20.47
$14.79
$16.33
$18.38
$13.60
$14.90
$16.60
$12.53
$13.64
$15.07
$10.70
$11.53
$12.56
$9.91
$10.63
$11.52
5%
$38.13
$27.61
$24.08
$21.25
$18.92
$16.97
$13.89
$12.65
Source: Dundee Securities' estimates
If we were to assume that New Flyer converts to a corporate structure,

then we would estimate a target price of $9.00 and a return of capital of
$5.53 per unit. Including the same distribution as under the current
structure but without the interest component and classified as a dividend
(likely to be beneficial to investors on an after-tax basis), we estimate a
total one year return to investors of 45%.
Exhibit 16
C$
Discount Rates
8.0%
9.0%
9.5%
10.0%
10.5%
11.0%
12.0%
12.5%
0%
$11.79
$9.78
$8.93
$8.16
$7.45
$6.82
$5.69
$5.19
1%
$13.15
$10.76
$9.77
$8.89
$8.09
$7.37
$6.12
$5.57
Terminal Growth Rates

2%
3%
4%
$14.97
$17.50
$21.31
$12.02
$13.71
$16.06
$10.84
$12.24
$14.14
$9.80
$10.97
$12.54
$8.88
$9.87
$11.17
$8.05
$8.90
$9.99
$6.64
$7.27
$8.06
$6.03
$6.58
$7.26
Return of Capital upon conversion

Annual distribution
Effective tax rate
After-tax distribution/dividend
Total return to investor
5%
$27.65
$19.60
$16.90
$14.73
$12.94
$11.45
$9.08
$8.12
5.53
0.39576
15%
0.34
45%
Source: Dundee Securities' estimates
Investment Risks
February 9, 2010
A decline in government funding of transit projects due to increasing

government deficits and/or the lack of political will to improve public
transportation systems.
Rapid changes in the value of the Canadian dollar to the U.S. dollar,
that are unhedged.
Design/engineering/warranty problems with buses.
Changes in the Buy America and rules within states and provinces
that thwart the ability of municipalities to make sound economic
decisions.
Labour issues such as strikes and walk-outs.
Changes in tax rulings with respect to interest paid to shareholders.
This list is not to be deemed comprehensive. For a more

comprehensive list of risks, investors can reference New Flyer
annual report, posted on www.sedar.com.
New Flyer Inc.
Page 14
338
To Convert or Not To Convert

The question of conversion and its implications on the company's
earnings, valuation, and investor base have been under increased
scrutiny. New Flyer's IDS-related debt is non-callable for another two
years and as such, conversion is highly unlikely. Nonetheless, to
provide investors with some context, we looked at several IDS funds that
recently converted to a corporate structure. To obtain a better sense of
their stock performance post conversion, we looked at the price charts of
B&G Foods, Atlantic Power, and Students Transportation (see below).
Exhibit 17: Stock price charts of recently converted IDS funds
B&G Foods
12.00
Announced - Oct. 2, 2009
Close - Oct. 26, 2009
Stock Price (U$)
10.00
8.00
6.00
4.00
2.00
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
Feb-09
Jan-09
0.00
Atlantic Power
14.00
Announced - Oct. 13, 2009
Close - Oct. 27, 2009
Stock Price (C$)
12.00
10.00
8.00
6.00
4.00
2.00
Oct-09
Nov-09
Dec-09
Oct-09
Nov-09
Dec-09
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
Feb-09
Jan-09
0.00
Students Transportation of America

6.00
Announced - Nov. 12, 2009
Close - Dec. 21, 2009
Stock Price (U$)
5.00
4.00
3.00
2.00
1.00
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
Feb-09
Jan-09
0.00
February 9, 2010
New Flyer Inc.
Page 15
339
APPENDICES
Appendix 1: Historical and expected earnings
($ MM)
Q1-08
Bid Universe (EUs)

Conversion rate
New Orders
Total Backlog ($ MM)
Backlog (MM$/EU)
Production rate (per wk)
Deliveries
EU $
Q2-08
Q3-08
45
586
0.40
45
583
0.40
Q4-08
2008
Q1-09
Q2-09
Q3-09
46
593
0.41
43
558
0.44
3858
0.43
47
616
0.45
Q4-09E
2009E
2010E
12000
30%
3600
12000
30%
3600
43
473
0.45
2240
0.44
41
2050
0.44
Revenues
Bus Manufacturing
After-market service
Total Revenues
199.48
24.955
224.44
234.831
25.585
260.42
232.08
23.08
255.16
198.899
22.40
221.30
865.29
96.01
961.30
244.483
28.87
273.35
246.144
27.37
273.51
277.97
25.65
303.62
213.44
25.65
239.09
982.04
107.53
1089.57
898.74
118.29
1017.03
Cost of sales
Gross margin
184.80
39.64
222.25
38.16
221.67
33.49
192.13
29.17
820.85
140.45
239.02
34.33
238.66
34.86
263.62
40.00
213.99
25.10
955.28
134.29
891.68
125.35
Gross margin (%)

SG&A
SG&A (%)
Bus Mfg EBITDA
Bus Mfg EBITDA (%)

Aftermarket ops EBITDA
Aftermkt ops EBITDA (%)

EBITDA
17.7%
14.7%
12.57
11.615
5.6%
21.41
10.7%
5.58
22.4%
20.79
8.9%
5.09
19.9%
14.6%
12.6%
12.7%
10.84
10.818
45.844
11.188
11.833
17.82
12.855
4.2%
7.7%
5.00
6.5%
3.912
72.87
8.4%
19.58
4.1%
16.98
6.9%
6.09
13.2%
9.99
4.3%
3.3%
16.32
24.01
6.6%
6.36
8.6%
5.35
10.5%
7.17
3.0%
15.81
7.4%
5.13
21.7%
17.5%
20.4%
21.1%
23.2%
20.8%
20.0%
12.3%
40.18
3.0%
73.12
7.4%
22.93
21.3%
30.51
3.0%
66.51
7.4%
25.22
21.3%
10.1%
9.1%
23.25
16.809
93.20
23.07
22.68
29.36
20.94
8.8%
8.8%
9.0%
Adjusted EBITDA
Adjusted EBITDA (%)
Amortization
26.984
12.0%
5.933
17%
-29.628
25.879
9.9%
6.696
20%
12.535
22.82
8.9%
6.50
19%
-8.91
16.767
92.45
29.36
9.7%
5.82
96.05
91.73
25.173
22.682
8.3%
5.259
20.94
6.045
23.073
8.4%
5.826
5.59
22.50
21.91
-48.923
EBIT
50.76
7.32
25.06
Interest expenses
Other
EBT
9.564
4.514
36.68
9.342
2.455
(4.48)
Taxes
Current
Future
Total taxes
4.22
-3.21
1.01
35.68
1.21
Net Earnings
EPU (basic & diluted)
7.6%
8.4%
8.3%
9.7%
6%
91.73
1.39%
1.27%
1.41%
-74.93
-1.701
16.327
16.17
61.23
144.37
19.01
1.44
8.03
15.35
43.83
69.82
10.07
1.81
13.19
11.061
0
50.17
40.032
8.776
95.56
10.92
0.917
7.18
12.636
12.92
9.16
43.69
(11.20)
(4.89)
6.19
45.63
0.92
(2.72)
26.13
3.26
2.91
6.17
3.56
0.82
4.38
-0.759
-2.874
(3.63)
10.28
-2.35
7.93
3.412
-1.016
2.40
0.874
2.598
3.47
4.46
(0.16)
4.30
8.75
1.42
10.17
0.00
(10.65)
(0.29)
8.81
0.22
53.80
1.14
87.63
2.27
(14.67)
(0.31)
(9.19)
(0.19)
(12.89)
(0.27)
26.13
0.55
4.78
0.10
1.36%
96.05
12.3%
11.9%
Other (incl. FX)
26.398
13.2%
EBITDA (%)
Amortization (%)
26.747
4.5%
13.1%
6%
30.79
6.19
0.13
Source: Dundee Securities estimates, Company reports
February 9, 2010
New Flyer Inc.
Page 16
340
Appendix 2: Historical and expected cash flows

Cash Flow
($ MM)
Q1-08
Q2-08
Q3-08
Q4-08
2008
Q1-09
Q2-09
Q3-09
Q4-09E
2009E
2010E
Net Earnings
Amortization
Gains on disposal
Future taxes
Defined benefit expenses
Other
Flow of funds
Cash flow from operations
35.68
5.93
-0.03
-3.21
-0.27
-29.27
8.83
-1.96
6.87
-10.65
6.70
8.81
6.50
4.78
5.83
(0.02)
(1.02)
(0.22)
(2.05)
7.31
(41.33)
(34.03)
2.60
0.01
16.63
9.82
(9.18)
0.65
(9.19)
5.82
(0.21)
(0.16)
(1.00)
16.33
11.58
19.47
31.05
6.19
5.59
0.82
-0.26
-8.66
7.22
-31.63
(24.41)
87.63
25.17
-0.03
-2.35
-0.96
-77.04
32.42
-4.60
27.82
-14.67
5.26
2.91
-0.03
10.83
9.76
-0.58
9.18
53.80
6.05
0.00
-2.87
-0.41
-49.95
6.62
29.57
36.19
11.78
29.33
41.11
(12.89)
22.50
(0.23)
1.42
(1.22)
30.91
40.49
(1.71)
38.78
26.13
21.91
0.00
0.00
0.00
0.00
48.04
(2.52)
45.52
Proceeds from disposal

Acquisition
Other
Cash flow from investing
0.03
-0.614
-1.972
-2.72
(0.58)
(1.97)
(2.72)
0.34
(4.89)
0.00
(4.54)
0
-12.00
0
(12.00)
48.51
-0.84
52.05
-3.68
0.00
0.00
0.00
(16.71)
(1.61)
(2.86)
(21.18)
(18.73)
-3.27
50.52
-1.02
52.35
-3.46
-0.34
-104.47
-6.42
0.372
3.39
25.293
28.68
Share issuance
Costs of share issue
LT debt
Dividends paid
Lease payments
Other
Cash from from financing
FX
Change in cash
Beginning cash
Ending cash
-2.911
-0.36
0.00
-1.51
0.00
-1.51
0.00
0.03
-6.818
0.02
(1.32)
(1.29)
0.33
(1.06)
(1.22)
-6.788
(1.31)
-1.29
(0.73)
(1.22)
-97.06
(1.01)
0.00
0.00
0.00
-3.96
-0.73
0.12
-4.57
99.03
-1.86
104.40
-14.01
-1.43
-201.42
-15.27
(3.79)
(0.35)
0.22
(3.92)
-4.02
(0.37)
(2.69)
-7.08
(4.22)
(0.48)
(0.40)
(5.10)
0.13
-0.39
-0.44
-0.33
(0.12)
0.30
0.20
0.91
28.68
29.59
(28.53)
29.59
1.06
29.66
1.06
30.72
5.43
25.29
30.72
(39.38)
30.72
(8.66)
-7.42
-8.66
(16.07)
25.43
(16.07)
9.36
(4.68)
(0.40)
(5.08)
(18.73)
0.38
34.80
9.36
44.16
13.44
30.72
44.16
14.79
44.16
58.95
February 9, 2010
New Flyer Inc.
Page 17
341
Appendix 3: Historical and expected balance sheet

Balance Sheet
($ MM)
Q1-08
Q2-08
Q3-08
Q4-08
2008
Q1-09
Q2-09
Q3-09
Q4-09E
2009E
2010E
28.68
104.24
111.36
9.17
14.96
29.59
113.25
99.34
8.24
14.77
268.40
265.19
1.06
138.04
104.95
8.40
14.70
0.05
267.20
30.72
99.31
145.79
8.84
13.17
0.97
298.80
30.72
99.31
145.79
8.84
13.17
0.97
298.80
0.00
114.53
171.76
7.36
8.66
0.30
302.62
0.00
132.24
191.11
6.63
8.75
0.36
339.08
9.36
126.73
160.03
6.44
8.84
1.00
312.39
44.16
99.80
125.84
5.07
8.84
1.00
284.70
44.16
99.80
125.84
5.07
8.84
1.00
284.70
58.95
109.99
133.82
5.07
8.84
1.00
317.67
PP&E
Intangibles
Future taxes
Goodwill
34.09
401.17
19.27
167.52
33.98
397.21
15.96
167.52
34.48
393.24
12.93
167.52
34.13
389.27
9.62
167.52
34.13
389.27
9.62
167.52
34.273
385.308
7.435
167.521
34.39
381.34
5.75
167.52
34.72
377.38
6.11
167.52
34.27
373.46
6.11
167.52
34.27
373.46
6.11
167.52
39.70
358.13
6.11
167.52
Total Assets
890.45
879.86
875.37
899.34
899.34
897.15
928.08
898.13
866.07
866.07
889.13
143.257
46.649
27.05
1.248
148.94
34.03
29.57
1.29
167.68
48.32
27.01
1.34
89.68
1.85
335.89
16.07
182.96
56.06
27.69
1.45
176.13
43.37
28.94
1.78
142.97
43.37
28.94
1.78
2.35
216.17
167.68
48.32
27.01
1.34
89.68
1.85
335.89
8.66
180.63
32.63
27.63
1.40
2.94
221.15
164.33
17.67
29.32
1.28
89.57
1.90
304.06
1.39
252.33
0.44
284.67
250.22
-0.4
216.66
0.00
142.97
43.37
28.94
1.78
0.00
(0.40)
216.66
158.63
43.37
28.94
1.78
0.00
-0.40
232.32
4.09
4.20
1.02
147.94
293.27
23.22
3.09
4.12
1.09
140.96
250.50
16.05
3.09
4.12
1.09
140.96
250.50
16.05
2.83
3.94
1.86
133.40
336.01
18.12
777.79
751.70
751.70
748.50
3.02
3.95
2.90
133.86
348.46
19.47
1.86
798.18
2.15
4.56
3.50
133.64
367.74
17.45
2.47
781.74
2.15
4.56
3.50
133.64
367.74
17.45
2.47
748.18
2.15
4.56
3.50
133.64
367.74
17.45
2.47
748.18
2.15
4.56
3.50
133.64
367.74
17.45
2.47
763.84
Cash
AR
Inventories
Prepaids
Future taxes
Other
Bank indebtedness
AP
Deferred revenue
Leases
Current portion of LT debt
Other
Accrued benefit liability

Leases
Performance unit liability
Future taxes
LT Debt
Class B & C + other liabilities
Other
4.545
4.331
150.747
281.813
216.684
1.227
880.50
4.43
4.34
0.69
150.11
335.06
123.62
0.39
834.81
Share capital
Retained earnings (deficit)
120.291 169.79
(110.34) (124.75)
9.95
45.05
217.47
(119.89)
97.58
217.47
(69.82)
147.65
217.47
(69.82)
147.65
217.47
(68.81)
148.66
217.47
(87.57)
129.90
217.47
(101.08)
116.39
217.47
(99.57)
117.90
217.47
(99.57)
117.90
217.47
(92.17)
125.30
Total SE + Liabilities
890.45
875.37
899.34
899.34
897.15
928.08
898.13
866.07
866.07
889.14
879.86
February 9, 2010
New Flyer Inc.
Page 18
342
Disclosures & Disclaimers

Dundee Securities Corporation is an affiliate of Dundee Corporation, DundeeWealth Inc., and Goodman & Company,
Investment Counsel Ltd.
Research Analyst Certification: Each Research Analyst involved in the preparation of this Research Report hereby certifies
that: (1) the views and recommendations expressed herein accurately reflect his/her personal views about any and all of
the securities or issuers that are the subject matter of this Research Report; and (2) his/her compensation is not and will
not be directly or indirectly related to the specific recommendations or views expressed by the Research Analyst in this
Research Report.
U.S. Residents: Dundee Securities Inc. is a U.S. registered broker-dealer and an affiliate of Dundee Securities
Corporation. Dundee Securities Inc. accepts responsibility for the contents of this Research Report, subject to the terms and
limitations as set out above. U.S. residents seeking to effect a transaction in any security discussed herein should contact
Dundee Securities Inc. directly.
This Research Report is not an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. The
information contained in this Research Report is prepared from sources believed to be reliable but Dundee Securities
Corporation makes no representations or warranties with respect to the accuracy, correctness or completeness of such
information. Dundee Securities Corporation accepts no liability whatsoever for any loss arising from any use or reliance on
this Research Report or the information contained herein. Any reproduction in whole or in part of this Research Report
without permission is prohibited.
Dundee Securities Research is distributed by email, website or hard copy. Dissemination of initial reports and any
subsequent reports is made simultaneously to a pre-determined list of Dundee Securities' Institutional Sales and
Trading representative clients and Retail Private Client offices. The policy of Dundee Securities with respect to
Research reports is available on the Internet at www.dundeewealth.com.
The compensation of each Research Analyst/Associate involved in the preparation of this Research Report is based
upon, among other things, the overall profitability of Dundee Securities Corporation, which includes the overall
profitability of the Investment Banking Department.
Dundee Securities Corporation
Note 1: All historical data including financial and operating data on the issuer(s) mentioned in this report come from publicly
available documents including statutory filings of these issuer(s). Data may also be sourced from Bloomberg, Baseline,
Thomson ONE.
Explanation of Recommendations and Risk Ratings

Valuation methodologies used in determining the 12-month target price(s) for the issuer(s) mentioned in this report are contained
in current and/or prior research. Target Price N/A: a target price is not available if the analyst deems there are limited
financial metrics upon which to base a reasonable valuation.
BUY: total returns expected to be materially better than the overall market with higher return expectations needed for
more risky securities. NEUTRAL: total returns expected to be in line with the overall market. SELL: total returns
expected to be materially lower than the overall market. TENDER: the analyst recommends tendering shares to a
formal tender offer.
*Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonable
liquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where the
company's business or financial risk is high and is difficult to value. Venture: an early stage company where the
business or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation.
Medium and High Risk Ratings Methodology: Medium and High risk ratings are derived using a predetermined
methodology based on liquidity and volatility. Analysts will have the discretion to raise the risk rating if it is determined a
higher risk rating is warranted. Securities with poor liquidity or high volatility are considered to be High risk. Liquidity and
volatility are measured using the following methodology: a) Price Test: All securities with a price <= $3.00 per share are
considered high risk for the purpose of this test. b) Liquidity Test: This is a two-tiered calculation that looks at the market
capitalization and trading volumes of a company. Smaller capitalization stocks (<$300MM) are assumed to have less
liquidity, and are, therefore, more subject to price volatility. In order to avoid discriminating against smaller cap equities
that have higher trading volumes, the risk rating will consider 12 month average trading volumes and if a company has
traded >70% of its total shares outstanding it will be considered a liquid stock for the purpose of this test. c) Volatility
Test: In this two step process, a stocks volatility and beta are compared against the diversified equity benchmark.
Canadian equities are compared against the TSX while U.S. equities are compared against the S&P 500. Generally, if
the volatility of a stock is 20% greater than its benchmark and the beta of the stock is higher than its sector beta, then
the security will be considered a high risk security. Otherwise, the security will be deemed to be a medium risk security.
Periodically, the equity risk ratings will be compared to downside risk metrics such as Value at Risk and Semi-Variance
and appropriate adjustments may be made. All models used for assessing risk incorporate some element of subjectivity.
Risk in relation to forecasted price volatility is only one method of assessing the risk of a security and actual risk ratings
could differ.
SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS
(subordinate voting shares).
Ideas of Interest
Dundee Securities Corporation from time to time publishes reports on securities for which it does not and may not
choose to provide continuous research coverage. Such reports are published as Ideas of Interest.
February 9, 2010
New Flyer Inc.
Page 19
343
Dundee Securities Equity Research Ratings

77%
69%
% of companies covered by Dundee Securities

Corporation in each rating category
66%
55%
% of companies within each rating category for

which Dundee Securities Corporation or its
affiliates have provided investment banking services
for a fee in the past 12 months.
43%
44%
33%
22%
22%
15%
8% 10%
11%
0%
Buy
Neutral
Sell
As at December 31, 2009
Source: Dundee Securities Corp.
February 9, 2010
New Flyer Inc.
Page 20
344
Title: New Flyer Industries - NFI.UN (T) Cdn$10.15
Price: Cdn$10.15
StockRating: Outperform
TargetPrice: Cdn$12.00
Headline: Initiating Coverage: Leaner and Greener
February 1, 2010
The NBF Daily Bulletin

Road & Rail

Cdn$10.15
NFI.UN (T)
Outperform
Stock Rating:
New Report
(Initiating)
Cdn$12.00
Target:
(Initiating)
Initiating Coverage: Leaner and Greener
Above Average
Risk Rating:
(Initiating)
HIGHLIGHTS
Stock Data:
Cash Yield
11.5%
Implied Total Return
29.8%
52-week High-Low
$10.54 - $7.38
Bloomberg/Reuters:
NFI-U CN/ NFI.UN
Forecasts: Fiscal YE
2008a
2009e
2010e
Revenue (USmln)
$961.3
$1,138.1
$1,099.8
EBITDA (USmln)
$93.2
$95.9
$95.8
DCPU ($US)
$1.27
$1.34
$1.36
Distribution
$1.17
$1.17
$1.17
Payout Ratio
DC Yield
80%
76%
78%
13.3%
15.0%
14.6%
EV/EBITDA
6.6x
6.0x
6.2x
P/DCPU
7.5x
6.7x
6.9x
Our Outperform rating and $12.00 per unit target price are supported
by the following positive investment attributes:
Largest North American transit bus manufacturer

New Flyer Industries (NFI) has established industry-leading
market share (35%+), anchored by its US$3.9-billion backlog of
firm orders/options & contracts with 20 of the 25 largest transit
authorities. This penetration results in recurring revenue, stable
cash flows and an attractive high-yield equity model.
Growing, defensive underlying demand

Mass transit is an essential service, and with increased
urbanization and North Americas aging fleet (average is 7.5-9
years vs. life of ~12), NFI is well-positioned to capture
incremental spending by transit authorities.
Overshadowed aftermarkets business

Generating 25% of NFIs EBITDA, this segment is highly valued
by customers, rapidly growing (~20% top-line CAGR since
2005 IPO, consistent w/ manufacturing), very profitable (20%+
EBITDA margins vs. manufacturings sub-10%), and we argue,
could be worth more as a standalone entity.
Untraditional exposure to green technology

NFI has a long history of environmentally focused product
innovation, introducing alternative fuel buses (1994),
diesel-electric hybrids (1998), hydrogen-hybrids (2004) and
hydrogen fuel cell buses (initial 20 for B.C. Transit, in time for
the Vancouver Olympics).
Potential IDS unwind opportunity

Our analysis suggests that converting away from the U.S.
income trust structure could create value for unitholders.
Financial Data:
Shares Outstanding (mln)
Market Capitalization (mln)
49.8
$505.9
Net Debt (USmln)
$132.0
Enterprise Value (mln)
$649.7
Net Debt to Capitalization

Net Debt to '09 EBITDA
20%
1.4x
Net Debt to EBITDA Covenants
2.25x
Amount of Unused Credit (mln)
$75
Industry Rating: Overweight

(NBF Economics & Strategy Group)
Company Profile:
Headquartered in Winnipeg, Manitoba, New Flyer Industries
is the leading manufacturer of heavy-duty transit buses in
North America (75% of EBITDA), as well as a
comprehensive provider of aftermarket parts and services
(25% of EBITDA).
Stock Performance
Trevor Johnson, CFA - (416) 869-8511

trevor.johnson@nbfinancial.com
Associate:
Lisa Oatway - (416) 869-7809
lisa.oatway@nbfinancial.com
345
Page 2
Investment Summary
NFI shares a number of characteristics consistent with high yield equities that we rate
Outperform: 1) recurring, visible revenues and transparent cash flows; 2) a defensive service
offering; 3) a dominant market position; 4) reasonable financial health; and 5) a high cash
flow/low capex model conducive to paying sizeable distributions. This favourable
underpinning combined with elements unique to NFI (green angle, potential for a more
attractive capital structure, sum-of-parts valuation greater than whole) all support a positive
bias.
We initiate coverage with an Outperform rating and $12.00 per unit target price, a blend of
yield, relative peer and leveraged buyout (LBO) valuations.
TARGET PRICE DERIVATION
Valuation
Implied Price Weighting
Yield
$11.75
33%
Relative Peer
$11.50
33%
LBO
$12.50
33%
Target Price
$12.00
100%
Source: NBF Estimates, Company Reports
Our target implies 6.6x forward EV/EBITDA and 7.7x forward P/DCPU (distributable cash per
unit), in our view representative of NFIs offering in the context of current capital markets, and
based on its range of historical valuations (EV/EBITDA from 4x-8x; P/DCPU from 5x-12x
since the 2005 IPO).
HISTORICAL FORWARD VALUATION: EV/EBITDA & PRICE/DCPU
12.0x
Price/DCPU (Avg: 7.9x)
EV/EBITDA (Avg: 5.4x)

Target
Levels
10.0x
7.7x
8.0x
6.6x
6.0x
4.0x
2.0x
Sep-05
Apr-06
Nov-06
Jun-07
Jan-08
Aug-08
Mar-09
Oct-09
Source: NBF, company reports
See our initiating coverage research report at www.nbfinancial.com for full

commentary.
346
Page 3
DISCLOSURES:
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months; Sector Perform The stock is projected to perform in line with the sector over the next 12 months; Underperform The stock is expected to
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NFI.UN - ADDITIONAL COMPANY RELATED DISCLOSURES
If a company specific disclosure is not found herein for a listed company, NBF at this time does not provide research coverage or stock rating
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In the past 12 months NBF has not acted as financial advisor, fiscal agent or underwriter for the company that is the subject of this report. NBF may act in
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NBF and/or its Affiliates may have a position in the securities mentioned herein and may make purchases and/or sales of these securities from time to time
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the outstanding shares (of any class of equity securities) of this issuer. (10)
347
INVESTMENT RESEARCH
(NFI.UN-TSX, $7.53)
BUY
12-Month Target Price: $11.00
Riding Safely Through The Storm

2007A
$887.1
$95.9
$66.1
$50.9
77.0%
$1.14
Estimates
Revenue (US$mm)
Adjusted EBITDA (US$mm)
Distributable Cash (C$mm)
Cash Distribution (C$mm)
Payout Ratio
Distribution per IDS Unit (C$)
2008E 2009E 2010E

$981.2 $1,065.0 $1,099.2
$97.3
$103.1
$108.0
$70.0
$81.8
$83.6
$55.1
$57.6
$57.6
78.8%
70.5%
68.9%
$1.17
$1.17
$1.17
Q1/08A Q2/08A Q3/08A Q4/08E

$0.50
$0.42
$0.34
$0.35
$0.29
$0.29
$0.29
$0.29
Quarterly Estimates (C$)

Distributable Cash per Unit
Distribution per IDS Unit
2007A
4.8x
0.5x
15.2%
Valuation
EV/EBITDA
EV/Revenue
Yield
2008E
4.8x
0.5x
15.5%
Stock Data
Previous Close (C$)
Potential Return
52-Week High - Low
Avg. Daily Vol. (3m)
IDS Units Outstanding (millions)
Major Shareholder: Post Advisory Group, LLC
Float (millions)
Market Cap (C millions)
Net Debt (US millions)
Enterprise Value (US millions)
Fiscal Year End
2009E
4.5x
0.4x
15.5%
2010E
4.3x
0.4x
15.5%
$7.53
46%
$12.79 / $5.72
160,830
47.3
5.6%
47.1
$356.3
$130.3
$463.4
31-Dec
Highlights
Recession Resilient Company - New
Flyer
Industries
is
the
leading
manufacturer of heavy duty transit buses
in North America with 42% market
share. Its clients are municipalities and
transit authorities across North America.
Cash Flow Visibility - The US
government provides 80% of the funding
for the purchase of new heavy-duty
transit buses (US sales are 75% of the
total) through the Federal Transit
Administration (FTA). This provides
revenue and cash flow visibility.
Strong Backlog - Company backlog
currently stands at US$4.2 billion, the
equivalent of four years of production,
which will cushion the Company from an
industry downturn.
Private Equity Cashed Out - The
recent financing eliminates an overhang
over the share price. The Company used
the money to buy the remaining stake of
the private equity stakeholders.
Source: Stockwatch
Company Profile
New Flyer is the leading manufacturer of heavy-duty transit buses in the US
and Canada with the broadest product line in the industry and uses a
variety of propulsion systems. The Company also provides comprehensive
aftermarket parts and service. Currently, the Company has three facilities
in Winnipeg, MB, St. Cloud, MN and Crookston, MN and employs
approximately 2,400 employees.
Significant Return - With a cash

distribution of $1.17 per unit, the yield is
compelling at 15.5%. Our price target of
$11.00 is based on a 2009 EV/EBITDA of
6.0x which is above its peers 5.2x. The
unit offers a total return of 62% (yield
and share price appreciation).
Conclusion and Recommendation

We are initiating coverage with a BUY recommendation and a 12-month target price
of $11.00 per unit.
Please refer to the final page(s) of this report for required disclosures.
December 17, 2008
Youssef Abboud (416) 343-2773

Andy Ko, Associate (416) 343-2778
348
Table of Contents
Investment Thesis .............................................................................................................................................................. 3
Company Background ...................................................................................................................................................... 4
Capital Structure................................................................................................................................................................ 5
Business Model................................................................................................................................................................... 5
Order Drivers .................................................................................................................................................................... 7
Order Visibility Means Predictable Cash Flows ......................................................................................................... 8
Competitive Advantage.................................................................................................................................................... 8
Competition........................................................................................................................................................................ 9
Growth Opportunities ...................................................................................................................................................10
Financials ............................................................................................................................................................................10
Cash Distribution Increase? ..........................................................................................................................................12
Leverage .............................................................................................................................................................................12
Valuation ............................................................................................................................................................................12
Conclusion and Recommendation...............................................................................................................................13
Investment Risks ..............................................................................................................................................................13
Appendix A: Financial Statements................................................................................................................................14
Income Statement (US$MM) ........................................................................................................................................14
Balance Sheet (US$MM).................................................................................................................................................15
Cash Flow Statement (US$MM)...................................................................................................................................16
Appendix B: Table of Comparables.............................................................................................................................17
Appendix C: Management and Director Biographies .............................................................................................18
Exchange Tower, 130 King Street, W. Suite 3640, P.O. Box 38 Toronto, ON M5X 1A9 Ph (416) 343-2777 Fax (416) 343-2799
First Canadian Centre, 350 7th Avenue S.W. Suite 3200, Calgary, AB T2P 3N9 Ph (403) 269-5900 Fax (403) 269-8900
Waterfront Centre, Suite 1615, 200 Burrard Street, Vancouver, BC V6C 3L6 (604) 605-5700 (604) 605-5704
December 17, 2008 / p.2

349
Investment Thesis
New Flyer Industries is the leading transit bus manufacturer in North
America with 42% market share. It offers the most diversified product
portfolio. The Companys capital structure of Income Deposit Securities
or IDS is not subject to the new income trust tax regulations that will
come into effect in 2011 and so reflects a sustainable yield.
There are three key reasons to buy New Flyer units:
1) The Company offers revenue visibility and a predictable cash flow.
Clients are municipalities and transit authorities. The US federal
government provides 80% of the funding for the purchase of new
heavy-duty transit buses through Federal Transit Administration
(FTA).
2) Growing ridership due to the economic crisis, infrastructure spending
and environmental regulations will continue to drive long-term
demand for heavy-duty transit buses.
3) The Company s business is less sensitive to the economic cycle and is
more dependent on the transit spending cycle.
Catalysts could come from:
1) An increase in cash distribution to maintain a 75% payout ratio. Based
on our 2009 estimates, this would increase the cash distribution per
unit by 7% to $1.25.
2) Undertaking an acquisition in new segments such as the highway
commuter bus (coach) market where a major player is currently
under bankruptcy restructuring.
Other key points:
The Companys total order backlog at the end of November was

9,923 equivalent units. This represents US$4.2 billion of revenue or
about four years of production to buffer the potential industry down
cycle.
We expect production capacity to increase from 48 units per week

to 50 units in Q3/09 with an estimated 2,450 units in sales in 2009, up
10% year-over-year.
Following a drop in EBITDA/bus in Q3/08, we expect EBITDA per

bus to increase to US$33,700 in 2009 due to better product mix,
which is in line with its 2008 average.
There is no impact from the currency fluctuation on cash distribution

payments which are paid in Canadian dollars. The Company hedges
its net C$ cash position. We expect cash distributions per unit at
$1.17 to be sustainable over at least the next two years.
December 17, 2008 / p.3
350
Our price target is based on a 2009 EV/EBITDA of 6.0x which is

above the peer groups 5.2x.
Major risk is related to the financial difficulties that states and

municipalities are facing as a result of the financial crisis.
We are initiating coverage with a Buy recommendation and price
target of $11.00
Company Background
Founded in 1930 and headquartered in Winnipeg, New Flyer is the
leading manufacturer of heavy-duty transit buses in North America and a
provider of aftermarket parts and services. The Company manufactures
transit buses in 30-foot, 35-foot, 40-foot and 60-foot (articulated or
extra-long) body lengths with seating capacity of up to 65 passengers and
with a variety of propulsion systems. These include diesel, hybrid,
compressed natural gas (CNG) or liquid natural gas (LNG) systems and
zero emission electric trolleys. The Company has the leading market
share at approximately 42% of the combined United States and Canadian
heavy-duty transit bus industry.
In 2007, bus manufacturing operations represented about 91% of the
Companys total revenue while aftermarket parts and services accounted
for the remaining 9%. In addition, 75% of the total revenues are currently
from the US while 25% are from Canada. The Company operates three
manufacturing facilities in Winnipeg (1 plant) and Minnesota (two plants).
Exhibit 1. 2007 Revenue Breakdown By Product
Electric
16%
Hybrid
B uses
11%
B us
Rapid
Transit
(B RT)
1%
A ftermarket
P arts
9%
Diesel
B uses
48%
CNG
B uses
9%
A rticuated
B uses
6%
Source: Company reports, Clarus Securities Inc.
Current management has led the Company since 2002. The Company
was listed on the TSX through an income deposit securities (IDS) offering
in August 2005. New Flyer reports in US dollars while the distributions
to the holders of the IDSs and the underlying common shares and
subordinated notes are in Canadian dollars.
December 17, 2008 / p.4

351
Capital Structure
Income deposit securities (IDS) were developed as an alternative
structure to an income trust. In its simplest form, an IDS unit is simply a
share of a corporation and an interest paying note. The two pieces are
clipped together and traded as a unit. The benefit of an IDS is to take
advantage of the tax benefits provided by US tax law. In the case of New
Flyers, it uses the interest expenses on the subordinates notes to shelter
its Canadian taxable income. IDSs are not subject to the new tax regime
that will affect income trusts in 2011.
Each IDS consists of one common share of NFI and C$5.53 principal
amount of Subordinated Notes. These carry a 14% coupon and expire in
August 2020.
Following a liquidity problem in 2001, KPS Special Situation Fund bought
the company in 2002, brought in the current CEO and then sold it to
Harvest Partners and Lightyear in 2004. In this context, the Company
issued 2.56 million Class B and 31.59 million Class C shares to the group
and the management. After the IPO in 2005, the private equity funds had
the right to request a cash-out of their shares to be funded by New Flyer
units. The Company funded the last cash-out with the most recent issue
in September 2008 when it issued 9.14 million IDS units at $11.20 per
unit which was used to purchase 2.1 million class B and 8.2 million class C
shares.
With this transaction, the private equity group is out and its members
resigned from the board. There are only 2.5 million shares of Class B and
Class C remaining or 5% of the total firm, which are owned by
management. These receive residual and preferential dividends totalling
$0.2218/share . As a result of the recent financing, the Company has 47.3
million of IDS units outstanding.
Business Model
New Flyer has a low capital expenditure and high cash flow business
model, in a replacement-driven stable industry.
Customers
The principal customers are municipalities and local transit authorities in

North America that provide mass transit services. The following are
characteristics of the customer base:
Large Contracts: Top 10 customers account for 50-75% of bus

manufacturing revenue in a given year
Diversified Customer Base: Generally a new group of customers each

year due to periodic procurement cycles by municipalities. The
December 17, 2008 / p.5
352
Company has active business relationships with 240 transit authorities

(operate 83% of total heavy-duty transit buses in Canada and the US)
Repeat Business: 84% of revenue was derived from repeat customers
Long Relationship: Average tenure with largest customers is 8.3 year
Reach: 19 of the 25 largest transit agencies operate New Flyer buses
Exhibit 2. The Largest Transit Agencies in the United States and Canada (2007)
7,000
5,921
6,000
Fleet Operates
New Flyer buses
Number of Vehicle
5,000
4,000
3,075
3,000
2,686
2,200
2,000
1,599
1,575
1,571
1,499
1,371
1,314
1,286
1,282
1,110
1,072
1,000
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Transit Agency
Government Funding
New Flyers customers rely on government funding for public transit

infrastructure. In the US, the US federal government provides 80% of the
funding for the purchase of new heavy-duty transit buses through Federal
Transit Administration (FTA) with funding from gasoline taxes
(US$0.186/gallon from the Highway Trust Fund). Funding is approved
according to population and ridership trends, Buy-America compliance,
and the minimum life hurdle (replacement of buses that have operated a
minimum of 12 years or 500,000 miles). The remaining 20% comes from
local transit levies. US$52.6 billion of federal funding has been committed
for public transit for 2004 to 2009. Approximately US$1.0-1.2 billion of
this FTA funding is required each year to support current levels of
industry bus purchases.
Funding for transit buses in Canada has been provided primarily by
provincial and municipal governments. Since 2003, some cost share
funding (about 10%) has been provided by the federal government. The
new federal Gas Tax Fund will provide C$2.0 billion annually from 2009
to 2014 to improve municipal infrastructure, a portion of which may lead
to transit bus purchases.
December 17, 2008 / p.6

353

Sales Process and Warranty
New Flyers sales and marketing process consists of the following steps:
1. Customer Identification and Bid Solicitation: municipalities planning to
replace fleets approaching the minimum life hurdles (12 years or
500,000 miles) and/or to piggyback off existing customer options
2. Approved Equal Process: non-binding negotiation agreement with the
customer on adjustments to specifications
3. Bid Stage: bidding mainly through request for proposal (RFP) process
that evaluates quality, maintenance, lifetime costs, aftermarket parts
and services in addition to price
4. Signing of Purchase Order: arrange financing, insurance and surety
bonding (performance guarantees and warranty holdbacks)
5. Pre-Production: initiated 31 weeks prior to production to finalize
specifications
6. Manufacturing: production, final inspection by customer, and delivery
Payments terms are usually about 48 days from final delivery with the
cash conversion cycle at about 30 days.
The FTA stipulates the appropriate warranty levels for all US federally
funded contracts. The Company typically provides a one-year base
warranty on the entire bus, a 12-year warranty on structure. Certain
other extended warranties for major subsystems such as engines,
transmissions, axles and air conditioning are purchased for the customer
from the component supplier.
Order Drivers
There are three key drivers for transit buses demand in North America:
1) Ridership growth is a key driver for transit bus demand. The
American Public Transportation Association (APTA) estimates that
ridership grew by 5% in the US in the first nine months and by a
record 6.5% in Q3 of this year. This is compared with a CAGR of
1.6% in the 1996-2007 period in North America. Higher
unemployment rate and lower income are forcing people in the US to
take public transportation.
2) Infrastructure spending and support for public transit projects. This is
likely to be significant with the new Obama stimulus package.
3) Environmental concerns and regulations should provide growth
potential in the market for new propulsion technologies such as
hybrid buses which New Flyer offers. These products have high
margins (the Company does not disclose margins by product).
December 17, 2008 / p.7
354
Order Visibility Means Predictable Cash Flows

New Flyer enjoys significant forward order visibility due to the fleet
planning, budgeting and federal funding application processes that
municipalities and local transit authorities must undertake. Order
cancellations are extremely rare as orders occur up to a year in advance
of delivery and funding is approved and allocated at the time of order.
Many purchase contracts include options to purchase additional buses in
the future. And these options are fully funded similar to the firm orders.
As such, over 90% of these options are generally converted to firm
orders. More importantly, options are transferrable to other transit
authorities together with the approved federal funding.
The Companys total order backlog at the end of November stands at
9,923 equivalent units. This represents US$4.2 billion of revenue or about
four years worth of production to buffer any potential industry down
cycle. This represents a 23% increase over the backlog of US$3.4 billion
at the end of September.
Exhibit 3. Value of Order Backlog (Firm Orders & Options)
4,000
3,500
(US$ in million
3,000
2,500
1,591
2,000
1,500
1,348
987
629
849
2005
2006
1,672
2,100
2,233
1,000
500
1,246
1,312
1,239
1,180
2007
Q1/08
Q2/08
Q3/08
Firm Order Backlog
Option Order Backlog
Competitive Advantage
New Flyer enjoys significant competitive advantages which makes it very
difficult for new entrants in the heavy duty transit segment:
December 17, 2008 / p.8
Government Regulation: Buy America (Rule of Origin) Legislation

stipulates that final bus assembly must occur within the U.S. and
contain at least 60% U.S. material content. New Flyer is in compliance
with production facilities in Winnipeg, Manitoba and Crookston and
St. Cloud, Minnesota.
Established Track Record and Reputation: As the initial federal funding

needs to last 12 years, risk-averse municipalities and transit agencies

355
will only deal with proven players to minimize the risks of operating
downtime and additional costs
Extensive Engineering and Manufacturing Capabilities: Transit buses are

highly engineered and customized to each customers specifications
Strong Customer Relationships and Regulation Know-How: These are key

factors in winning manufacturing contracts in the heavy-duty transit
bus industry and act as barriers to entry
Broadest Product Portfolio: New Flyer has the broadest and most
advanced product offering in the industry
Comprehensive Aftermarket Parts and Services: Offering further

complements the core bus manufacturing business
Competition
There are 5 major competitors in the industry with New Flyer
dominating the market share at 42%. None offer the breadth of product
portfolio that New Flyer offers.
Exhibit 4. Market Share of Major Competitors
Nova 7%
NABI 8%
New Flyer 42%

Orion 17%
Gillig 26%
Gillig Corporation is the second largest producer of transit buses in

North America and produces around 1,300 buses per year (mostly
diesel-powered). Gillig is a privately held based in California and was
recently acquired by CC Industries, a manufacturer of truck trailers.
North American Bus Industries (NABI), based in Alabama, is also
privately-owned by Cerberus Capital Management, L.P. and offers a
complete line of standard and low-floor, heavy-duty transit buses ranging
from 30 to 65.
Orion Bus Industries, based in Ontario, has been owned by Daimler
Buses North America group since 2000.
Nova Bus, based in Quebec, has been owned by Volvo Bus since 2004
and has more than 3,500 Nova LFS vehicles in service. Nova tends to
December 17, 2008 / p.9
356
focus on the Canadian market; however, its new production facility in

New York state targeting the US market will begin production in 2009.
A recent new entrant is DesignLine, a New Zealand-based
manufacturer who has recently relocated to Charlotte, NC. DesignLine
has focused on non-proprietary turbine-electric hybrid buses serving
niche segments, and is becoming more active in US-based bids.
Growth Opportunities
Furthermore, the Company is likely to undertake strategic acquisitions to
broaden scale and geographic reach in the future such as entering the
highway commuter bus (coach) market. For instance, Motor Coach
Industries (MCI), a leading manufacturer of inter-city Greyhound
coaches could be a potential takeover target. They have two facilities,
one in Winnipeg and another plant in North Dakota. Currently under
bankruptcy restructuring, MCI could potentially be a great growth
opportunity for New Flyer to enter the complementary over-the-highway
coach market. During a recent conference call, management indicated
that it is interested in the prospects of what such a potential combination
could bring, after MCIs current restructuring process plays out.
Financials
With a backlog equivalent to four years, the Company is well positioned
to weather the economic storm and keep its cash distribution intact.
Having said that, EBITDA is likely to be volatile on a quarterly basis due
to product mix. Diesel buses, which represent 40% of the total volume
sales, have lower margins compared with higher margin products such as
the hybrid buses. Indeed, Q3 results were a testimony of this volatility.
It is worth noting the spending cycle of this business is not overly related
to the business cycle. The transit cycle usually last two years with backlog
orders rising during a two year period followed by a decline in the
subsequent two years. The Company works out its backlog during the
decline period up to the next cycle. The last cycle started in 2006 and
should end this year (2008). Hence we expect a slowdown in backlog
over the next two years. However, the Company has a huge backlog of
four years which is more than enough to cushion it from the current
downturn.
Looking forward, our key assumptions assume the following:
1) We expect the Company to deliver 2,450 units in 2009, up almost
10% year-over-year. This is based on a production capacity increase
from 48 units per week to 50 units in Q3/09. This is in line with the
management guidance and is based on the historical trend.
December 17, 2008 / p.10

357
2) Slight decline in the average selling price of 1% in 2009 vs. 2008 and
1% increase in 2010 due to better product mix.
3) Sight decline of 1.7% in EBITDA per bus in 2009 mainly as a result of
slightly lower price.
4) Our Cash distribution per IDS unit remains at $1.17 (per annum) in
line with the current distribution.
5) Maintenance capex of $4 million in 2009. The Company generally has
low and predictable ongoing capital expenditure requirements,
primarily limited to maintenance and replacement expenditures.
6) Income taxes of 33.5% in 2009 which is in line the current effective
tax rate. The Company pays only a tax rate on its Canadian
operations.
Exhibit 5. Key Assumptions
2008E
2009E
Volume (bus equivalent units)
2,222
2,450
2,500
Avg. price per unit (US$mm)
0.398
0.395
0.400
Total Revenues (US$mm)
981.2
1,065.0
1,099.2
Gross margin
14.6%
13.9%
2010E
14.2%
Adjusted EBITDA/Bus (US$)
34,301
33,701
34,800
Adjusted EBITDA (US$mm)
97.3
103.1
108.0
Maintenance capital expenditures
(4.0)
(4.0)
(4.0)
Interest on Senior Debt & Capital Leases
(1.6)
(6.5)
(6.5)
Interest on Separate Subordinated Notes
(10.9)
(5.3)
(5.3)
Current Income taxes
(13.8)
(16.3)
(19.5)
Distributable Cash (US$mm)
66.9
71.1
72.7
1.05
1.15
1.15
70.0
81.8
83.6
45.7
55.4
55.4
9.5
2.2
2.2
Total Cash Distributions (C$mm)
55.1
57.6
57.6
Excess of Distributable Cash (C$mm)
14.9
24.2
26.0
U.S. exchange rate (weighted Avg)

Distributable Cash (C$mm)
Summary of Cash Distributions
IDS units (C$mm)
Class B & C (C$mm)
Cash Distribution / IDS Unit (C$)

Payout Ratio
1.17
1.17
1.17
78.8%
70.5%
68.9%
Source: Clarus Securities Inc.
December 17, 2008 / p.11
358
Cash Distribution Increase?

Cumulative payout ratio has been at 82% since its IPO in 2005 and was at
77.9% over the 2007-2008 period. Based on our 2009 estimates and a
70.5% payout ratio (using current distribution of $1.17 per unit), there is
potential for the Company to increase its cash distribution. Assuming a
payout ratio of 75% in 2009, this would imply a cash distribution increase
of 7% to $1.25 per unit. Having said that, we do not expect any increase
to incur before the Company renegotiates its US$90 million facility which
will expire in August 2009.
Leverage
Apart from the subordinated notes, the Company has US$90 million in a
senior credit facility which will mature in August 2009 that the Company
is negotiating to extend with its Canadian banks. The subordinated notes
do not mature until 2020 and the Company has a revolving credit facility
of $40 million for working capital needs. Debt to EBITDA is at 3.8x
which is much below the covenant requirement of 5.7x. Barring
unforeseen circumstances, we believe the Company should be able to get
an extension on its credit facility and hence there should not be an
impact on the cash distribution.
A Word On Forex
New Flyer reports its results in US$. About 75% of its current revenues
and 80% of the costs are in US dollars which are mainly materials. There
is mainly a translation impact on EBITDA from the fluctuation of the
currency. In other words, a weaker Canadian dollars will reduce EBITDA
(which is reported in US dollars) and vice versa. However, there is
limited impact on the payout, i.e. the cash distributions, as the Company
generates a net inflow of Canadian dollar from its Canadian operations.
New Flyers hedges its net cash position by selling C$ forward against the
US dollar.
Valuation
New Flyer is trading on a 2009 EV/EBITDA of 4.5x compared with the
industry average of 5.2x. We believe New Flyer deserves to trade at
6.0x, above its peers for the following reasons:
1) New Flyers is a leader is in its industry compared with its peers
operating in a more competitive industry. The majority of peers are
involved in the rail car transportation segment.
2) Peers are more sensitive to the economic cycle as they depend on
merchandise shipment compared with New Flyers dependence on
ridership.
Our price target of $11.00 implies an 10.6% cash yield.
December 17, 2008 / p.12

359
Conclusion and Recommendation

New Flyer is a recession resilient story with strong cash flow visibility.
We are initiating coverage with a BUY recommendation and price target
of $11.00 per unit.
Investment Risks
Key risks include:
70% of its workforce is unionized. A strike in its Canadian operations

in 2006 by the CAW halted production for many months. The
current contract expires in March, 2009 and the Company is
preparing to negotiate a new contract with the CAW. In view of
current economic conditions, we believe the CAW will be negotiating
a new contract.
A change in regulations such as Buy America requirements

becomes less stringent, would allow foreign competitors without US
operations to compete in the US market. This is unlikely to happen in
the near term especially with an Obama administration that is looking
to create American jobs.
The current economic crisis is reducing the ability of states and

municipalities to raise money to subsidise bus fares. But even an
increase in fares will still have transit competitive with other forms of
transportation.
The level of transit funding by the federal government financed by a

$0.186 per gallon tax. Lower gas consumption due to the economic
crisis could lead to lower funding (overall absolute amount).
Risks related to capital structure. If the US tax authority decides to

treat the subordinated notes as equity rather than debt for US
Federal Income tax purposes, the Companys inability to deduct
interest on the Subordinated Notes could affect its taxable income
and the cash distribution. But there is no indication this will change
anytime soon. Another issue if the Canadians authorities decide to
treat IDS similar to an income trust which will eliminate the tax
advantage.
Higher raw material prices such as nickel which is used in stainless

steel could have an impact on the Companys margins. However, the
Company was able to pass some cost increases and raw material
prices are declining.
December 17, 2008 / p.13
360
Appendix A: Financial Statements

Income Statement (US$MM)
Deliveries (equivalent units)
Avg price per equivalent unit (US$mm)
2007A
2003
0.402
Q1/08A
503
0.397
Q2/08A
586
0.401
Q3/08A
583
0.398
Q4/08E
550
0.398
2008E
2222
0.398
2009E
2450
0.395
2010E
2500
0.400
2011E
2500
0.400
Bus manufacturing operations

Aftermarket operations
Revenue
% Change
804.4
82.7
887.1
46.0%
199.5
25.0
224.4
1.7%
234.8
25.6
260.4
13.4%
232.1
23.1
255.2
26.6%
219.0
22.2
241.2
2.5%
885.3
95.8
981.2
10.6%
967.8
97.2
1,065.0
8.5%
1,000.0
99.2
1,099.2
3.2%
1,000.0
101.2
1,101.2
0.2%
COGS
Gross Profit (ex-Amortisation)
SG&A and other operating expenses
EBITDA
% Change
Amortization
Foreign exchange (gain) loss
Earnings from operations
% Change
786.7
100.4
100.4
70.1%
23.3
8.1
69.0
90.6%
184.8
39.6
12.6
27.1
19.0%
5.9
(0.1)
21.3
24.2%
222.3
38.2
11.6
26.5
-5.8%
6.7
0.2
19.7
-8.7%
221.7
33.5
10.8
22.6
43.0%
6.5
(0.8)
16.9
79.4%
209.5
31.7
10.1
21.6
-35.8%
6.1
0.0
15.5
-26.0%
838.2
143.0
45.1
97.9
-2.5%
25.3
(0.7)
73.3
6.2%
916.7
148.3
45.2
103.1
5.4%
27.1
0.0
76.0
3.7%
943.4
155.7
47.8
108.0
4.7%
28.0
0.0
80.0
5.2%
944.8
156.4
48.0
108.4
0.4%
28.0
0.0
80.3
0.5%
26.5
0.4
(0.3)
90.2
2.6
(50.4)
(8.3)
0.4
(0.0)
(21.6)
50.8
2.6
(0.0)
9.8
7.3
(3.7)
0.1
(4.6)
25.1
15.5
(9.5)
0.6
(0.0)
(16.4)
98.6
76.0
80.0
80.3
33.4
21.0
(104.8)
25.8
(130.7)
9.6
4.5
36.7
1.0
35.7
9.3
2.5
(4.5)
6.2
(10.7)
10.1
1.8
13.2
4.4
8.8
10.9
0.5
4.1
2.8
1.3
39.9
9.3
49.5
14.3
35.2
43.6
1.9
30.4
16.3
14.2
43.6
1.9
34.4
19.5
14.9
43.6
1.9
34.8
19.6
15.1
95.9
27.0
25.9
22.8
21.6
97.3
103.1
108.0
108.4
(2.4)
(11.3)
(20.0)
62.1
1.063
66.1
(0.8)
(2.9)
(4.2)
19.1
1.014
19.3
(1.2)
(3.5)
(3.3)
17.9
1.006
18.0
(0.8)
(3.2)
(3.6)
15.2
1.034
15.7
(1.2)
(1.6)
(1.3)
(2.8)
14.7
1.150
16.9
(4.0)
(1.6)
(10.9)
(13.8)
66.9
1.046
70.0
(4.0)
(6.5)
(5.3)
(16.3)
71.1
1.150
81.8
(4.0)
(6.5)
(5.3)
(19.5)
72.7
1.150
83.6
(4.0)
(6.5)
(5.3)
(19.6)
73.0
1.150
83.9
28.4
22.5
50.9
15.2
8.6
4.6
13.2
6.1
11.2
2.5
13.6
4.4
12.1
1.9
13.9
1.8
13.8
0.6
14.4
2.5
45.7
9.5
55.1
14.9
55.4
2.2
57.6
24.2
55.4
2.2
57.6
26.0
55.4
2.2
57.6
26.3
77.0%
68.2%
75.7%
88.5%
85.1%
78.8%
70.5%
68.9%
68.6%
Income (loss) from equity investment

Unrealized FX (gain) loss & forward FX contracts
Follow-on offering related costs
Gain on disposition of PP&E
Fair value adj to other liab., Class B & C shares
Other Items
EBIT
Interest expense
Distributions on Class B and C shares
Pre-tax Earnings
Taxes
Net Income
Summary of Distributable Cash
Adjusted EBITDA
Addback (deduct)
Maintenance capital expenditures
Interest on Senior Debt & Capital Leases
Interest on Subordinated Notes (not IDS)
Current Income taxes
Distributable Cash (US$)
U.S. exchange rate (weighted Avg)
Distributable Cash (C$)
Summary of Cash Distributions
IDS units (C$)
Class B & C (C$)
Total Cash Distributions (C$)
Excess of Distributable Cash (C$)
Payout Ratio
Distribution per IDS unit
December 17, 2008 / p.14
1.14
0.29
0.29
0.29
0.29
1.17
1.17
1.17
1.17

361
Balance Sheet (US$MM)

2007A Q1/08A Q2/08A Q3/08A Q4/08E
2008E
2009E
2010E
2011E
CURRENT ASSETS
Cash and short term investments
Accounts receivable
Inventories
Due from related parties
Prepaid expenses and deposits
Derivative financial instruments
Other
Total current assets
25.3
115.6
112.7
10.7
15.4
279.7
28.7
104.2
111.4
9.2
15.0
268.4
29.6
113.2
99.3
8.2
14.8
265.2
1.1
138.0
104.9
8.4
0.0
14.7
267.2
4.8
130.5
99.2
7.9
14.7
257.1
4.8
130.5
99.2
7.9
14.7
257.1
18.4
138.1
109.4
8.4
14.7
289.0
40.5
142.5
116.3
8.9
14.7
323.0
61.2
142.8
116.5
9.0
14.7
344.2
Property, plant and equipment

Intangible assets
Goodwill
Other
Total long term assets
35.6
404.8
19.6
167.5
627.5
34.1
401.2
19.3
167.5
622.0
34.0
397.2
16.0
167.5
614.7
34.5
393.2
12.9
167.5
608.2
34.5
389.5
12.9
167.5
604.4
34.5
389.5
12.9
167.5
604.4
29.9
372.9
12.9
167.5
583.3
25.0
355.8
12.9
167.5
561.3
20.1
338.7
12.9
167.5
539.3
TOTAL ASSETS
907.2
890.4
879.9
875.4
861.5
861.5
872.3
884.3
883.5
CURRENT LIABILITIES
Accounts payable and accrued liabilities
Bank indebtness
dues to parent company
Deferred revenue
Current portion of derivative financial instruments
Current portion of obligations under capital lease
Current portion of long-term debt
Total current liabilities
150.8
55.2
28.5
1.9
1.2
237.6
143.3
46.6
27.1
2.9
1.2
221.1
148.9
34.0
29.6
2.3
1.3
216.2
164.3
17.7
29.3
1.9
1.3
89.6
304.1
155.3
16.7
27.7
1.9
1.5
89.6
292.6
155.3
16.7
27.7
1.9
1.5
89.6
292.6
165.3
18.0
29.3
1.9
1.5
216.0
175.8
19.0
31.2
1.9
1.5
229.4
176.0
19.1
31.2
1.9
1.5
229.7
Accrued benefit liability

Obligations under capital lease
Performance unit plan liability
Future income tax liabilities
Long-term debt
Derivative financial instruments
Other liabilities, Class B and C common shares
Total Liabilities
4.8
4.3
154.3
289.8
1.3
238.3
930.5
4.5
4.3
150.7
281.8
1.2
216.7
880.5
4.4
4.3
0.7
150.1
335.1
0.4
123.6
834.8
4.1
4.2
1.0
147.9
293.3
23.2
777.8
4.1
4.5
1.0
147.9
293.3
23.2
766.7
4.1
4.5
1.0
147.9
293.3
23.2
766.7
4.1
4.5
1.0
147.9
382.8
23.2
779.6
4.1
4.5
1.0
147.9
382.8
23.2
793.0
4.1
4.5
1.0
147.9
382.8
23.2
793.3
120.3
(143.5)
(23.2)
120.3
(110.3)
10.0
169.8
(124.7)
45.0
217.5
(119.9)
97.6
217.5
(122.6)
94.8
217.5
(122.6)
94.8
217.5
(124.7)
92.7
217.5
(126.1)
91.3
217.5
(127.3)
90.2
907.2
890.4
879.9
875.4
861.5
861.5
872.3
884.3
883.5
LIABILITIES AND EQUITY
SHAREHOLDERS EQUITY
Share capital
Deficit
TOTAL
TOTAL LIABILITIES & EQUITY
December 17, 2008 / p.15
362
Cash Flow Statement (US$MM)

Net income (loss)
Amortization of plant and equipment
Amortization of intangible assets
Amortization of deferred charges
Income (loss) from equity accounted investment
Gain on disposition of property, plant and equipment
Future income taxes
Unrealized (gain) loss on cross-currency interest rate swap
Unrealized foreign exchange loss (gain) on non-current monetary items a
Foreign exchange gain on cash held in foreign currency
Accretion in carrying value of long-term debt
Fair value adjustment to other liabilities, Class B and C common shares
Defined benefit expense (note 12)
Defined benefit funding
Other non-cash items
Sub-total
Non cash working capital
Cash flow from operations
2007A
(130.7)
3.7
7.8
(0.3)
2.7
10.5
(0.3)
28.8
1.0
(2.3)
94.5
15.4
18.0
Q1/08A
35.7
2.3
3.7
(0.0)
(3.2)
1.0
(8.3)
(0.4)
(21.6)
0.4
(0.7)
8.8
(2.0)
33.4
6.9
Financing activities
Net Repayment of obligations under capital lease
Share issuance
Costs associated with share issuance
Proceeds from issue of long-term debt
Repayment of long term debt
Costs associated with debt issuance
Repayment of other liabilities, Class B and C common shares
Dividends paid
Other
Cash flow from financing
(0.5)
55.1
(1.1)
49.4
(1.2)
(104.5)
(8.3)
(0.4)
(11.5)
(0.4)
(2.9)
(3.3)
Investing activities
Cash provided from consolidation of New Flyer Holdings, Inc.
Proceeds on disposition of property, plant and equipment
Acquisition of property, plant and equipment
Cash flow from investing
(2.5)
(2.5)
Effect of FX on cash and short-term investments

Increase (decrease) in cash
Cash beginning of period
Cash at year end
1.7
21.1
4.0
25.3
December 17, 2008 / p.16
Q2/08A
(10.7)
2.7
4.0
2.9
(1.4)
2.6
(0.1)
0.0
9.8
0.4
(0.4)
9.8
(0.6)
9.2
Q3/08A
8.8
2.5
4.0
0.8
(0.9)
(3.7)
0.4
0.1
(4.6)
0.4
(0.7)
7.2
(31.6)
Q4/08E
1.3
2.4
3.7
0.9
8.3
2.2
2008E
35.2
9.9
15.4
(0.0)
0.5
(1.3)
(9.5)
(0.1)
0.2
(16.4)
1.2
(0.9)
34.1
(32.0)
2.1
2009E
14.2
10.6
16.6
41.3
(5.4)
35.9
2010E
15
11
17
43
1
(24.4)
10.5
(0.3)
50.5
(1.0)
52.4
(1.6)
(102.9)
(3.5)
(6.4)
(0.3)
48.5
(0.8)
52.1
(0.9)
(95.8)
(3.7)
(1.0)
(0.3)
(4.1)
(4.4)
(1.3)
99.0
(1.9)
104.4
(2.5)
(198.7)
(14.1)
(15.1)
89.6
(89.6)
(16.3)
(16.3)
0.0
(0.6)
(0.6)
(2.0)
(2.0)
(2.7)
(2.7)
(2.4)
(2.4)
0.0
(7.7)
(7.7)
(6.0)
(6.0)
0.4
3.4
25.3
28.7
0.1
0.9
28.7
29.6
(0.4)
(28.5)
29.6
1.1
3.7
1.1
4.8
0.1
(20.5)
25.3
4.8
13.6
4.8
18.4
22
18
40
2011E
15
11
17
43
(0)
44
(16)
(16.3)
43
(16)
(16.3)
(6)
(6)
(6)
(6)
21
40
61

363
Appendix B:Table of Comparables

Transportation Manufacturers
FreightCar America Inc.
American Railcar Industries Inc.
The Greenbrier Companies
Oshkosh Corporation
Spartan Motors Inc.
Average
Income Deposit Securities (IDS)

Medical Facilities Corporation
Student Transportation Of America Ltd
Keystone North America Inc
Average
Ticker
Price
$/unit
Market Cap
(C$MM)
Yield
%
EV/EBITDA
2008E
2009E
Net Debt/EBITDA
2008E
2009E
RAIL
ARII
GBX
OSK
SPAR
$19.71
$11.13
$6.29
$8.41
$3.21
$282.53
$285.77
$125.97
$754.45
$126.46
1.2%
1.1%
5.1%
4.8%
3.1%
3.1%
5.4x
3.0x
6.0x
4.7x
2.3x
4.3x
4.0x
4.5x
6.2x
6.3x
4.9x
5.2x
-9.9x
-4.1x
5.0x
3.8x
0.7x
-0.9x
-7.4x
-6.1x
5.2x
5.1x
1.4x
-0.4x
DR.UN
STB
KNA.UN
$6.90
$3.95
$21.50
$200.03
$215.51
$80.34
15.9%
14.1%
24.0%
18.0%
5.7x
7.6x
4.1x
5.8x
5.4x
6.2x
4.2x
5.2x
2.9x
3.1x
6.0x
4.0x
2.7x
2.5x
6.0x
3.8x
NFI.UN
$7.53
$356.34
15.5%
4.8x
4.5x
1.3x
1.3x
*EV/EBITDA multiples for NFI use Clarus estimates, and Bloomberg Estimates for the others
Sources: Bloomberg, Clarus Securities Inc.
December 17, 2008 / p.17
364
Appendix C: Management and Director Biographies

The Honourable Brian V. Tobin, P.C., ICD.D Chairman Mr.
Tobin served as the Federal Minister of Industry from October 2000 to
January 2002. Previously, he served as the Premier of Newfoundland and
Labrador from 1996 to 2000. Mr. Tobin is currently Senior Business Advisor
with Fraser Milner Casgrain LLP in Toronto. Mr. Tobin serves on a number
of other public company boards being, Aecon Group Inc., Lions Gate
Entertainment Corp., SonnenEnergy Corp. and is Vice-Chairman of the
board of Consolidated Thompson Iron Mines Limited. Mr. Tobin is director
of Canpages Inc. and Marport Canada Inc. He is also Special Advisor for the
Canadian Youth Business Foundation. Mr. Tobin is a member of the Institute
of Corporate Directors and a graduate of the Directors Education Program.
John Marinucci, C.A., ICD.D President, Chief Executive Officer
and Director Mr. Marinucci joined New Flyer in 2002. Mr. Marinucci is a
Chartered Accountant and holds an Honours Bachelor of Commerce degree
from McMaster University. Most recently, Mr. Marinucci served for eight
years as President and Chief Operating Officer for a major Canadian
manufacturer and lessor of freight railcars and is a former President of the
Canadian Association of Railway Suppliers. He has also held executive and
senior management roles within leading Canadian and United States-based
organizations. Mr. Marinucci is also a member of several private company
boards. Mr. Marinucci is a member of the Institute of Corporate Directors
and a graduate of the Directors Education Program.
V. James Sardo Director Mr. Sardo is a corporate director and since
2003 he has been a director of Hydrogenics Corporation, a fuel cell
technology company. Mr. Sardo is also a director of SonnenEnergy Corp.
Mr. Sardo was a director of Royal Group Technologies Limited from 2003
to 2006. Mr. Sardo was also a trustee of Countryside Power Income Fund
from 2004 to 2007; Union Waterheater Income Trust from 2003 to 2007;
and Custom Direct Income Fund form 2003 to 2007. Prior to these
appointments, Mr. Sardo was interim CEO of Royal Group Technologies
Limited from 2004 to 2005, President of the Canadian Operations of Moore
Corporation Limited, a business forms and communications company, from
1999 to 2001 and President and CEO of SMK Speedy International Inc., an
international automotive repair company, from 1997 to 1999. Prior to 1997
Mr. Sardo was Chief Executive Officer of Amre Inc., a Dallas based marketer
of home improvement products from 1994 to 1995 and Chief Executive
Officer of SNE Inc., a manufacturer and marketer of windows and doors
from 1991 to 1994. Mr. Sardo is a member of the Institute of Corporate
Directors and a graduate of the Directors Education Program.
Wayne M.E. McLeod Director Mr. McLeod is a corporate director
and is the chairperson of the Institute of Corporate Directors. Mr. McLeod
currently also serves as a member of the board of directors of Morguard
Investments Inc., SMTC Corporation, and Turbo Power Systems Inc. and a
trustee of Richards Packaging Income Fund. Mr. McLeod was a trustee of
December 17, 2008 / p.18

365
Atlas Cold Storage Income Fund until October 2006 and was a director of
CanWest Mediaworks Inc. until July, 2007. He is also a Fellow of the
Institute of Chartered Accountants of Ontario. He received his Masters of
Business Administration from Harvard University in 1965. Mr. McLeod
retired in 1999 after 20 years with CCL Industries Inc., where he served as
President, Chief Executive Officer and Chairman of the board of directors,
among other positions. Mr. McLeod is also a graduate of the Directors
Education Program.
Larry Edwards Director Mr. Edwards is a corporate director and also
serves on the board of NCI Building Systems, Inc. Mr. Edwards was a
director of Global Power Equipment Group Inc. (GPEG) and its
predecessor Global Energy Equipment Group, Inc. from 1998 until January,
2008. Mr. Edwards served as the President and Chief Executive Officer of
GPEG from June 1998 until his retirement in December 2006. Mr. Edwards
also served as the CEO of GPEGs predecessor company from June 1998
until GPEGs initial public offering in May 2001. From February 1994 until
June 1998, Mr. Edwards served as the President of Jason Incorporateds
power generation division. From 1976 until 1994, Mr. Edwards held various
positions with Braden Manufacturing, including Vice President of Operations,
General Manager and President. Prior to the IDS Offering, Mr. Edwards
served on the Board of Transit Holdings since August 2004. Mr. Edwards
earned a B.S. in Industrial Engineering and Management from Oklahoma
State University and an M.B.A. with honors from Oklahoma City University.
Glenn Asham - Chief Financial Officer and Treasurer Mr. Asham
joined New Flyer in 1992. Mr. Asham obtained his chartered accountancy
designation in 1987 and a Bachelor of Commerce from the University of
Manitoba in 1984. Prior to joining the Company, he worked with Deloitte &
Touche for eight years, providing client services in the areas of accounting,
auditing, taxation and management consulting.
Colin Pewarchuk - Executive Vice President, General Counsel and
Corporate Secretary Mr. Pewarchuk joined New Flyer at the end of
February 2006 as Vice President, General Counsel and Corporate Secretary.
His title was changed to Executive Vice President, General Counsel and
Corporate Secretary in November, 2007. Mr. Pewarchuk obtained a
Bachelor of Commerce (Honors) from the University of Manitoba in 1990
after which he worked for a leading Canadian financial institution as a
personal banker. Mr. Pewarchuk obtained a law degree from the University
of Manitoba in 1996 and prior to joining New Flyer, was a lawyer at the law
firm of Aikins, MacAulay & Thorvaldson LLP since 1997. Mr. Pewarchuk is a
member of the Institute of Corporate Directors and a graduate of the
Directors Education Program.
December 17, 2008 / p.19
366

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Equity Research Ratings
Buy: Attractively valued and expected to appreciate significantly from the current price over the next 12-18 months.
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December 17, 2008 / p.20

367
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December 17, 2008 / p.21
368
December 17, 2008 / p.22

369
December 17, 2008 / p.23
370
EXCHANGE TOWER, 130 KING STREET WEST, SUITE 3640, TORONTO, ON CANADA M5X 1A9
FIRST CANADIAN CENTRE, 350 7TH AVENUE SW, SUITE 3200, CALGARY, AB CANADA T2P 3N9
WATERFRONT CENTRE, 200 BURRARD STREET, SUITE 1615, VANCOUVER, BC CANADA V6C 3L6
TEL: 416-343-2777
INFO@CLARUSSECURITIES.COM
FAX: 416-343-2799
WWW.CLARUSSECURITIES.COM
371
Company Comment
Wednesday, September 10, 2008
(NFI.UN-T C$11.58)

David Tyerman, MBA - 416-863-7108
Neil Forster, MBA, CFA - 416-862-3910

Chris Bowes, MBA - 416-863-7077
david_tyerman@scotiacapital.com
Rating: 1-Sector Outperform
Risk Ranking: Medium
Target 1-Yr:
2-Yr:
C$15.75
C$16.25
ROR 1-Yr:
2-Yr:
46.1%
60.5%
Est. NTM CDPU

CDPU (Curr.)
Yield
Valuation: 7.0x EV/NTM EBITDA (or 7.0x Q2/09E EV / Q3/09E - Q2/10E EBITDA)
C$1.17
C$1.17
10.8%
Coverage Resuming; Target Boosted on

Removal of Share Sale Overhang.
Event
We are resuming coverage following the completion of the recent IDS
unit issue (9.14M units at C$11.20/unit, which was used to purchase
2.1M Class B and 8.2M Class C shares).
What It Means
This transaction should remove a share sale overhang, which has existed
since the company's IPO in August 2005. This could permit the unit
price to move higher over time.
We have boosted our valuation multiple to reflect the upside potential
now that the overhang has been removed. We note that our new target
equates to a 7.4% CDPU yield on a very low payout ratio (65%). It also
equates to a healthy 11.5% DCPU yield, which seems reasonable given
the company's stable business model, huge backlog and good new order
potential.
Qtly CDPU (C$)
2007A
2008E
2009E
2010E
Q1
$0.28 A
$0.29 A
$0.29
$0.29
(FY-Dec.)
Cash Distributions (C$)/Unit
Distributable Cash (C$)/Unit
Price/Earnings
Relative P/E
Revenues
EBITDA
EV/EBITDA
Current Ratio
IBES Estimates
DPU 2008E: C$1.18
DPU 2009E: C$1.18
BVPU08E
ROE08E
Next Reporting Date
Nov-08
Q2
$0.28 A
$0.29 A
$0.29
$0.29
Q3
$0.29 A
$0.29
$0.29
$0.29
Q4
$0.29 A
$0.29
$0.29
$0.29
Year
$1.14
$1.17
$1.17
$1.17
Yield
9.1%
10.1%
10.1%
10.1%
2006A
$1.10
$1.15
6.9
0.4
$608
$59
6.3
1.2
2007A
$1.14
$1.41
9.0
0.5
$887
$92
6.4
1.2
2008E
$1.17
$1.57
6.9
0.5
$997
$108
7.3
1.2
2009E
$1.17
$1.76
6.2
0.4
$1143
$116
7.3
1.3
2010E
$1.17
$1.83
5.9
0.4
$1175
$119
6.9
1.5
N/A
N/A
Units O/S (M)

Float O/S (M)
Total Value (C$M)
Float Value (C$M)
TSX Weight
47.3
35.4
548.0
410.5
-
Pertinent Revisions
New
Old
Target:
1-Yr
C$15.75
C$14.25
2-Yr
C$16.25
C$15.00
New Valuation:
7.0x EV/NTM EBITDA (or 7.0x Q2/09E
EV / Q3/09E - Q2/10E EBITDA)
Old Valuation:
SC Online Analyst Link
Historical price multiple calculations use FYE prices. Source: Reuters; Company reports; Scotia Capital estimates.
All values in US$ unless otherwise indicated.
For important disclosure information see Appendix A of this report.

372
2
Company Comment
Recent Unit Issue Removes Unit Issue Overhang

Private equity overhang eliminated. New Flyer's recent unit issue was the final instalment
in the cash-out process of former private equity owners Harvest Partners and Lightyear
Capital. Harvest and Lightyear bought New Flyer in December 2003 and began their cashout process with the August 2005 IPO of New Flyer.
After the IPO, the private equity funds had the right to request cash-out of their shares in
New Flyer, to be funded by new issues of New Flyer units. This right appears to have
effectively become a ceiling on the unit price, as cash-out requests seemed to occur whenever
the units sustained a high $11/unit price.
The removal of this risk of unit issues to cash out the private equity interests may permit the
unit price to rise.
The unit issue was also slightly accretive to our forecast (Exhibit 1).
Fundamentals should be supportive to the units' price. New Flyer's backlog increased
15% in 1H/08 to 7,960 units (roughly 3.6 years of production), and there is another 14,000
units in the near-term bid pipeline. New Flyer's win rate has been running over 40%,
suggesting the potential for further backlog growth. The company has indicated it will likely
need to increase its build rate in 2009, which we think should generate additional
distributable cash. Our forecast includes a modest increase in build rate to 48 units/week (up
2 units/week), but we think there could be upside to our forecast.
Multiple increase to reflect removal of overhang and strong fundamental outlook. We
have boosted our valuation multiple by 0.5x to reflect the removal of the IDS issue overhang.
We added 0.25x to our valuation multiple to reflect the strong outlook for New Flyer, which
could result in distribution increases, particularly now that they might generate a unit price
increase (unlikely in the past due to the overhang).
Multiple increase to reflect inclusion of term debt in valuation. Our previous target
inadvertently excluded the $90M term facility. We have recalibrated our valuation to include
this item, resulting in a 0.75x multiple increase in our valuation multiple; the historical multiple
was roughly 0.75x higher when we included this item in our historical multiple analysis.
New multiple above historical norm due to better than normal outlook. New Flyer's
historical normal EV/NTM multiple has been in the low 6x range (Exhibit 2). Our new
valuation multiple, 7x, is higher than that level. We believe a premium multiple is in order,
given the company's current superior growth opportunity and the removal of the unit issue
overhang.
373
3
Company Comment
Exhibit 1 Revised Forecast for New Flyer Industries - DCPU Boosted Due To IDS Issue
Q3/08E
Ne w
Old
Fcst
Fcst
0.29
0.29
0%
0%
Q4/08E
Ne w
Old
Fcst
Fcst
0.29
0.29
0%
0%
2008E
New
Old
Fcst
Fcst
1.17
1.17
2%
2%
2009E
Ne w
Old
Fcst
Fcst
1.17
1.17
0%
0%
2010E
Ne w
Old
Fcst
Fcst
1.17
1.17
0%
0%
2011E
Ne w
Old
Fcst
Fcst
1.17
1.17
0%
0%
2012E
New
Old
Fcst
Fcst
1.17
1.17
0%
0%
1.76
12%
1.83
4%
1.78
-3%
1.74
-2%
Yrs Ende d Dec. 31 ($M)

Cash distribution per unit (C$)
% change
2007
1.14
n.m.
Q2/08
0.29
4%
Distributable cash per unit (C$)

% change
1.41
23%
0.37
-10%
0.40
7%
0.39
4%
0.40
33%
0.39
30%
1.57
12%
1.55
10%
Payout ratio
81%
79%
72%
74%
73%
74%
74%
75%
66%
68%
64%
66%
66%
67%
67%
69%
Revenue
% change
887
46%
260
13%
253
26%
253
26%
259
10%
259
10%
997
12%
997
12%
1,143
15%
1,143
15%
1,175
3%
1,175
3%
1,134
-4%
1,134
-4%
1,092
-4%
1,092
-4%
Adjusted EBITDA
EBITDA margin
96
26
10.4% 10.1%
Investment in NCW C & capital assets 1
119
119
10.1% 10.1%
115
115
10.2% 10.2%
10
10
548
426
40
5
2,202
407
39
21
2,202
407
39
21
2,292
448
40
24
2,292
448
40
24
2,304
454
40
26
2,304
454
40
26
2,160
459
40
29
2,160
459
40
29
2,016
464
40
32
2,016
464
40
32
New orders (units)

Firm backlog (units)
2,664
2,844
403
2,754
665
2,854
665
2,854
665
2,971
665
2,971
2,329
2,971
2,329
2,971
2,260
2,939
2,260
2,939
2,187
2,822
2,187
2,822
2,107
2,769
2,107
2,769
2,161
2,914
2,161
2,914
1.010
(0)
11.7% 11.8%
11.5% 11.6%
11.1% 11.2%
12.7% 12.8%
13.6% 13.7%
13.9% 14.1%
14.3% 14.5%
1.034
1.061
1.014
1.061
1.043
1.061
1.061
1.061
Sep-08
548
426
40
5
Jun-08
565
403
40
5
8.6% 10.4%
(0)
113
113
10.3% 10.3%
565
403
40
5
1.073
(1)
115
115
10.1% 10.1%
1.70
-2%
586
401
36
5
CAD / USD (period average)
(1)
106
106
10.8% 10.8%
1.74
-2%
2,003
402
42
17
27
27
10.5% 10.5%
1.78
4%
Bus deliveries (units)

Bus revenue/unit
Bus EBITDA/unit
Aftermarket EBITDA
Return on capital
(16)
27
27
11.0% 11.0%
1.72
11%
1.016
1.043
1.008
1.043
1.043
1.043
NCW C means non-cash working capital.
Source: Company reports; Scotia Capital estimates.
Exhibit 1 Historical EV / NTM EBITDA Mutiple Near 6x
10
EV / NTM EBITDA
9
8
7
6
5
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
374
4
Company Comment
Appendix A: Important Disclosures
Company
Ticker
NFI.UN
Disclosures*
T, U
I, David Tyerman, certify that (1) the views expressed in this report in connection with securities or issuers that I analyze accurately reflect my
personal views and (2) no part of my compensation was, is, or will be directly or indirectly, related to the specific recommendations or views
expressed by me in this report.
The Fundamental Research Analysts' compensation is based on various performance and market criteria and is charged as an expense to
certain departments of Scotia Capital Inc., including investment banking.
Scotia Capital Inc. and/or its affiliates: expects to receive or intends to seek compensation for investment banking services from issuers
covered in this report within the next three months; and has or seeks a business relationship with the issuers referred to herein which
involves providing services, other than securities underwriting or advisory services, for which compensation is or may be received. These
may include services relating to lending, cash management, foreign exchange, securities trading, derivatives, structured finance or precious
metals.
This report may include articles or content prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital.
For Scotia Capital Research analyst standards and disclosure policies, please visit http://www.scotiacapital.com/disclosures
*
Legend
The Fundamental Research Analyst/Associate has visited material operations of this issuer.
Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt
securities of, or have provided advice for a fee with respect to, this issuer.
375
5
Company Comment
Definition of Scotia Capital Equity Research Ratings & Risk Rankings
We have a three-tiered rating system, with ratings of 1-Sector Outperform, 2-Sector Perform, and 3-Sector Underperform. Each analyst
assigns a rating that is relative to his or her coverage universe.
Our risk ranking system provides transparency as to the underlying financial and operational risk of each stock covered. Statistical and
judgmental factors considered are: historical financial results, share price volatility, liquidity of the shares, credit ratings, analyst forecasts,
consistency and predictability of earnings, EPS growth, dividends, cash flow from operations, and strength of balance sheet. The Director of
Research and the Supervisory Analyst jointly make the final determination of all risk rankings.
Ratings
Risk Rankings
1-Sector Outperform
The stock is expected to outperform the average total return of the
analysts coverage universe by sector over the next 12 months.
Low
Low financial and operational risk, high predictability of financial
results, low stock volatility.
2-Sector Perform
The stock is expected to perform approximately in line with the
average total return of the analysts coverage universe by sector
over the next 12 months.
Medium
Moderate financial and operational risk, moderate predictability of
financial results, moderate stock volatility.
3-Sector Underperform
The stock is expected to underperform the average total return of
the analysts coverage universe by sector over the next 12 months.
Other Ratings
Tender Investors are guided to tender to the terms of the
takeover offer.
Under Review The rating has been temporarily placed under
review, until sufficient information has been received and
assessed by the analyst.
High
High financial and/or operational risk, low predictability of financial
results, high stock volatility.
Caution Warranted
Exceptionally high financial and/or operational risk, exceptionally low
predictability of financial results, exceptionally high stock volatility. For risktolerant investors only.
Venture
Risk and return consistent with Venture Capital. For risk-tolerant
investors only.
Scotia Capital Equity Research Ratings Distribution*
Distribution by Ratings and Equity and Equity-Related Financings*

Percentage of companies covered by Scotia Capital Equity
Research within each rating category.
Percentage of companies within each rating category for which
Scotia Capital has undertaken an underwriting liability or has
provided advice for a fee within the last 12 months.
Source: Scotia Capital.
For the purposes of the ratings distribution disclosure the NASD requires members who use a ratings system with terms different than buy,
hold/neutral and sell, to equate their own ratings into these categories. Our 1-Sector Outperform, 2-Sector Perform, and 3-Sector
Underperform ratings are based on the criteria above, but for this purpose could be equated to buy, neutral and sell ratings, respectively.
376
6
Company Comment
Disclaimer
This report has been prepared by SCOTIA CAPITAL INC. (SCI), a subsidiary of the Bank of Nova Scotia. Opinions, estimates and projections
contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein
have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their
accuracy or completeness. Neither SCI nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its
contents. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity
futures contracts. The securities mentioned in this report may not be suitable for all investors nor eligible for sale in some jurisdictions. This
research and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in
whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to
without the prior express consent of SCI. SCI is authorized and regulated by The Financial Services Authority. U.S. Residents: Scotia Capital
(USA) Inc., a wholly owned subsidiary of SCI, accepts responsibility for the contents herein, subject to the terms and limitations set out above.
Any U.S. person wishing further information or to effect transactions in any security discussed herein should contact Scotia Capital (USA) Inc.
at 212-225-6500.
377
Equity Research
Earnings Update
September 3, 2008
Income Trusts
Stock Rating:
Sector Outperformer
Equity Offering Closes; Resuming Coverage At

Sector Outperformer
Sector Weighting:
Market Weight
NFI.UN-TSX (9/3/08)
Key Indices:
$13.50
$11.69
We are resuming coverage of New Flyer following the closing of its IDS
offering for 9.1 mln. units. Net proceeds of $97.3 mln. were used to redeem
the remaining 10.3 mln. Class B and C shares owned by private equity
investors. Also issued was $5.1 mln. in separate subordinated debt.
The public now owns 95% of the equity and management the remaining
5%. The transaction is accretive, reducing the total number of shares
outstanding by approximately 1.2 mln. Our 2008 and 2009 cash flow
estimates increase by $0.02/unit and $0.07/unit, respectively.
Our price target increases from $13.25 to $13.50 as a result of the reduced
share count. Elimination of private equity interest simplifies the ownership
structure and makes it easier for the company to pursue value-enhancing
opportunities, including distribution increases.
The IDS units are attractively valued at 6.2x 2009E EBITDA, a discount of
1.9x versus corp. comps and 0.8x versus trust comps. We expect strong
results for at least the next five years based on the current backlog and
indications of near-term future orders. We maintain our SO rating.
S&P/TSX Income Trust Composite
Projected Total Return

52-week Range
Units Outstanding
Distr. Frequency
DCF Value/IRR
Fiscal Year Ends
EV
2009 EV/EBITDA
Net Debt
P/NAV
Net Debt/CF
25.5%
$9.02-$13.12
49.9M
Monthly
141,439
$582.8M
$14.36 / 12.5%
December
$699.60M
6.2X
$116.8M
0.8X
1.4X
No
EBITDA ($ mlns.)
Prev
2007
2008
2009
EV/EBITDA
2007
2008
2009
Converted into C$.
Cash Distribution Per Share
2007
2008
2009
Cash-on-Cash Yield
2007
2008
2009
Current
$102.5A
$108.1E
$113.1E
6.8x
6.5x
6.2x
$1.14A
$1.17E
$1.17E
9.8%
10.0%
10.0%
Source: Reuters
Company Description
New Flyer is the largest North American heavy-duty
transit bus manufacturer, operating three production
facilities (one in Manitoba and two in Minnesota).
www.newflyer.com
Paul Holden, CFA

1 (416) 594-8417
Paul.Holden@cibc.ca

and cibcwm.com
All figures in Canadian dollars, unless otherwise stated.
08-91633 2008
378
Equity Offering Closes; Resuming Coverage At Sector Outperformer - September 03, 2008
Details Of The Offering

New Flyer Industries (NFI.UNSO) closed its IDS offering of 9.1 million units at
$11.20 per unit, generating approximately $97.3 million in net proceeds
($102.4 million in gross proceeds less $5.1 million in fees). The proceeds were
used to purchase the remaining 10.3 million Class B and C shares held by
Harvest Partners and Lightyear Capital (private equity investors). Management
did not sell any of its shares concurrent with this round of financing, unlike in
the previous two secondary offerings. The public now owns approximately 95%
of the equity outstanding and management the remaining 5%. We provide a
summary of IDS financings for New Flyer in Exhibit 1 and a summary of its
equity structure in Exhibit 2.
Exhibit 1. Summary Of Financings

IDS Units Issued
(mlns.)
Issue Price
($/unit)
Gross Proceeds
($ mlns.)
Separate Subordinated
Debt Issued ($ mlns.)
IPO August 2005
20.0
$10.00
$200.0
$33.3
Secondary July 2007
9.4
11.70
110.1
0.0
Secondary April 2008
8.8
11.40
100.0
4.9
Secondary August 2008
9.1
11.20
102.4
5.1
512.5
43.3
Total
47.3
Exhibit 2. Chronological Summary Of Equity Structure (mlns.)
% Of Total
Shares Held By
Management
(Class B And C)
% Of Total
Total Shares
Outstanding
28.0
51.6%
6.2
11.4%
54.1
19.2
36.1%
4.5
8.4%
53.1
74.9%
10.3
20.2%
2.5
5.0%
51.0
94.9%
0.0
0.0%
2.5
5.1%
49.9
% Of Total
Shares Held By
Private Equity
(Class B And C)
20.0
36.9%
29.4
55.4%
April 2008 Post Secondary Offering
38.2
Current Post August Secondary Offering
47.3
Shares Held By
Public Investors
(Class A)
IPO
July 2007 Post Secondary Offering
New Ownership Structure Provides More

Flexibility
The elimination of the equity interest held by private equity is a positive for the
company, as it provides more flexibility for New Flyer to pursue value-enhancing
opportunities. We believe the private equity investors primary objective with
respect to New Flyer was to sell down their equity interest as quickly as possible
for as much as possible. This likely conflicted with the pursuit of growth
strategies that required significant capital, such as acquisitions, as well as
distribution increases given that cash was being accumulated to buy back Class
B and C shares.
379
Concurrent with the elimination of private equity interest in New Flyer, two
board members who represented the private equity investors resigned from the
board, Ira Kleinman and Richard Moreau. In addition, approval rights over
certain business matters that had been granted to the private equity investors at
IPO are now removed. These changes provide New Flyer with more flexibility to
pursue new strategies, as the objectives/restrictions imposed by the private
equity investors need no longer be considered.
Revising Estimates
We are updating our operating cash flow estimates given the reduction in total
shares outstanding. Our 2008 cash flow estimate increases from $1.53/unit to
$1.55/unit and our 2009 estimate from $1.64/unit to $1.71/unit. We are
keeping our distribution estimates for 2008 and 2009 at $1.17/unit for the time
being, as the company wants to maintain cash for working capital requirements,
but there is a greater probability of a distribution increase now that private
equity interests have been removed.

We are increasing our price target from $13.25 to $13.50 due to the reduction in
total shares outstanding. Our price target multiple of 7.0x EV/2009E EBITDA is
unchanged. Our target multiple is at a slight discount to corporate comparables
and is in line with trust comparables.

Key risks to our price target and estimates include: a high degree of variability
in industry orders, raw material and component costs, product warranty claims,
collective labor agreements, foreign exchange rates and the tax treatment of
interest on subordinated notes.
Refer To Our Summary Financial Model On The Following Page
380
2002
41-week
2003
2004
Pro forma
2005
Pro forma
stub period
2005
2006
Q1/07
Q2/07
Q3/07
Q4/07
2007
Q1/08
Q2/08
Q3/08E
Q4/08E
2008E
2009E
1.13
1.17
1.10
1.05
0.98
1.07
1.00
1.01
0.95
0.95
0.98
0.98
19-week
stub period
Assumptions
Foreign Exchange Rate (C$/US$)
1.57
1.40
1.20
1.13
1.18
Bus Manufacturing
940
1,750
1,938
1,442
555
1,442
491
531
466
515
2,003
503
586
546
504
2,139
2,142
Revenue Per Bus (US$thousands/bus)
Bus Deliveries
251.4
263.7
295.5
374.7
341.6
374.7
409.9
393.1
387.0
415.7
401.6
396.6
400.7
400.5
400.5
399.6
450.0
EBITDA Per Bus (US$thousands/bus)
17.6
27.2
33.8
30.5
37.2
30.5
34.8
40.8
41.6
55.9
43.4
42.3
35.8
45.5
43.4
41.6
42.0
Backlog (US$millions)
966
1,848
2,071
1,836
1,976
1,836
2,256
2,244
2,511
2,836
2,836
2,984
3,339
3,548
3,773
3,773
3,943
236.4
461.4
572.8
540.3
189.6
540.3
201.2
208.7
180.4
214.1
804.4
199.5
234.8
218.7
201.9
854.8
963.9
24.9
37.8
44.2
67.4
19.4
67.4
19.4
20.9
21.3
21.2
82.7
25.0
25.6
26.1
26.0
102.7
118.1
261.3
499.2
617.0
607.7
208.9
607.7
220.6
229.7
201.6
227.9
887.1
224.4
260.4
244.8
227.9
957.5
1082.0
(240.4)
(447.0)
(544.8)
(548.6)
(184.6)
(548.6)
(197.9)
(201.5)
(185.8)
(201.5)
(786.7)
(197.4)
(233.9)
(214.5)
(200.8)
(846.5)
(966.6)
16.6
4.4
(0.1)
20.9
8.0%
47.6
6.1
(1.5)
52.2
10.5%
65.5
8.8
(4.8)
69.5
11.3%
44.0
13.9
1.3
59.2
9.7%
20.6
1.3
2.9
24.8
11.9%
44.0
13.9
1.3
59.2
9.7%
17.1
4.2
1.4
22.7
10.3%
21.7
4.3
1.2
27.2
11.8%
19.4
4.6
(8.6)
15.4
7.6%
28.8
4.4
0.0
27.0
11.9%
86.9
17.4
(12.0)
92.3
10.4%
21.3
5.6
0.3
27.2
12.1%
21.0
5.1
0.3
26.4
10.1%
24.8
5.5
0.0
30.3
12.4%
21.9
5.2
0.0
27.1
11.9%
89.0
21.4
0.7
111.0
11.6%
90.0
25.4
(0.0)
115.4
10.7%
Funds Flow (US$millions)

Revenue
Bus Manufacturing
Total Revenue
Operating Costs and Expenses
Segmented EBITDA
Bus Manufacturing
Unallocated (including realized FX loss (gain))
Total EBITDA
EBITDA Margin
Adjustments For Non-Recurring Items
(0.1)
(1.7)
(0.4)
0.2
(0.0)
0.2
(1.5)
(2.2)
8.4
0.0
3.6
(0.2)
(0.5)
0.0
0.0
(0.7)
0.0
Adjusted EBITDA
20.8
50.5
69.1
59.4
24.8
59.4
21.2
25.0
23.8
25.9
95.9
27.0
25.9
30.3
27.1
110.3
115.4
(10.9)
(10.5)
47.7
57.4
1.06
(11.2)
(1.8)
46.4
52.7
0.97
(1.9)
(3.9)
19.0
22.5
0.42
(11.2)
(1.8)
46.4
52.7
0.97
(2.9)
(5.6)
12.8
15.0
0.28
(2.7)
(4.6)
17.7
19.4
0.36
(2.5)
(3.3)
18.0
18.8
0.35
(3.1)
(8.7)
19.9
19.0
0.38
(11.1)
(22.2)
62.5
66.9
1.25
(2.9)
(4.9)
19.2
19.3
0.36
(3.4)
(3.4)
19.0
19.2
0.38
(3.2)
(4.4)
22.7
21.7
0.43
(3.2)
(4.0)
19.9
19.0
0.38
(12.8)
(16.2)
81.3
79.2
1.55
(12.1)
(16.1)
87.1
85.4
1.71
Capital Flows (US$millions)

Capital Expenditures - Maintenance
Capital Expenditures - Acquisition/Expansion
Net Equity Proceeds
Net Debt Issue
Net Working Capital and Other
(2.5)
0.0
0.0
0.0
(3.7)
(1.0)
(1.1)
0.0
0.0
(1.4)
(0.4)
(51.4)
158.2
(30.7)
(79.3)
(1.0)
(1.1)
0.0
0.0
(1.4)
(0.2)
(0.3)
0.0
0.0
(1.7)
(0.4)
(0.1)
0.0
0.0
(6.0)
(0.3)
(104.5)
101.9
0.0
(2.4)
(1.0)
0.9
0.0
0.0
(4.2)
(1.9)
(104.0)
101.9
0.0
(14.8)
(0.5)
(0.1)
0.0
0.0
(5.5)
(0.9)
(104.0)
95.4
4.9
(0.9)
(0.6)
(101.9)
101.9
5.3
(14.3)
(0.6)
0.0
0.0
0.0
(4.2)
(2.6)
(205.9)
197.3
10.2
(25.4)
(2.7)
0.0
0.0
0.0
(25.5)
Distributions/Dividends Paid
Total Distributions And Dividends Paid (C$)
Dividends To Class B and C Shares (C$)
Distributions To Public Unitholders (C$)
Per Unit
41.5
49.9
27.9
22.0
1.10
42.8
48.6
26.7
21.9
1.10
15.4
18.2
10.1
8.1
0.41
42.8
48.6
26.7
21.9
1.10
10.6
12.4
6.8
5.6
0.28
11.2
12.3
6.7
5.7
0.28
12.7
13.2
4.6
8.6
0.29
13.3
14.4
4.4
13.8
0.29
43.8
46.8
18.4
28.4
1.14
13.1
13.2
4.6
8.6
0.29
13.5
13.6
2.5
11.2
0.29
13.1
12.5
0.6
12.0
0.29
15.1
14.4
0.6
13.8
0.29
54.8
53.8
8.2
45.4
1.17
58.9
57.8
2.3
55.5
1.17
47.3
Interest Expense
Taxes and Other
Operating Cash Flow
Operating Cash Flow (C$)
Per Fully Diluted Unit
Exhibit 3. Summary Financial Model
Weighted Average Units Outstanding

IDS Units - Public
20.0
20.0
20.0
20.0
20.0
20.0
28.4
29.4
24.4
29.4
37.1
41.0
47.3
38.8
Class B and C Shares - Retained Interest
34.1
34.1
34.1
34.1
34.1
34.1
24.8
23.7
29.1
23.7
14.1
9.7
2.5
12.4
2.5
Total Outstanding
54.1
54.1
54.1
54.1
54.1
54.1
53.2
49.9
53.6
53.1
51.3
50.7
49.9
51.2
49.9
122.3
21.4
100.9
122.3
21.4
100.9
121.7
4.0
117.6
118.2
0.0
118.2
121.0
35.6
85.4
124.3
3.6
120.7
129.5
25.3
95.4
129.5
25.3
104.2
128.2
28.7
99.5
138.1
29.6
108.5
143.5
43.9
99.6
143.5
48.0
95.4
143.5
48.0
95.4
143.5
73.5
69.9
Financial Leverage (US$millions)

Long Term Debt - Third Party
Cash
Net Debt
381
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2007 Current
$24.9A
$27.4A
$24.9A
$25.4A
$102.5A
2008 Current
$27.1A
$26.1A
$29.0E
$25.9E
$108.1E
2009 Current
--
--
--
--
$113.1E
Our CD estimates are shown below:
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2007 Current
$0.28A
$0.28A
$0.29A
$0.29A
$1.14A
2008 Current
$0.29A
$0.29A
$0.29E
$0.29E
$1.17E
2009 Current
$0.29E
$0.29E
$0.29E
$0.29E
$1.17E
382

(NFI.UN)
2a
2c
2e
2g
7
CIBC World Markets Inc. has managed or co-managed a public offering of securities for New Flyer Industries
383
CIBC World Markets Price Chart
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS' RECOMMENDATIONS FOR NEW FLYER INDUSTRIES
INC. (NFI.UN)
Date
06/21/2006
06/21/2006
08/25/2006
11/22/2006
03/29/2007
05/10/2007
05/28/2007
06/20/2007
07/16/2007
07/16/2007
09/23/2007
09/26/2007
11/13/2007
03/18/2008
04/21/2008
04/21/2008
08/11/2008
Change Type
Closing Price
8.26
8.26
8.98
8.74
9.30
11.00
11.54
12.13
11.42
11.42
10.63
11.25
11.52
12.11
11.12
11.12
11.92
Rating
SP
SP
SP
SP
SO
SO
SO
R
SO
SO
SP
SO
SO
R
SO
SO
R
Price Target
10.50
9.50
None
9.00
10.00
12.75
13.25
13.25
13.50
9.75
13.50
12.75
12.75
13.25
-
Coverage
Alice Sun Dunning, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
384
CIBC World Markets' Stock Rating System

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None
Ratings Distribution*: CIBC World Markets' Coverage Universe

Count
Percent
Count
Percent
160
45.6%
138
86.3%
157
44.7%
128
81.5%
25
7.1%
15
60.0%
2.3%
Restricted
75.0%
(as of 03 Sep 2008)

Restricted
Ratings Distribution: Income Trusts Coverage Universe

(as of 03 Sep 2008)
Count
Percent
Count
Percent
10
43.5%
60.0%
39.1%
66.7%
8.7%
0.0%
Restricted
8.7%
Restricted
50.0%

Income Trusts Sector includes the following tickers: AER, ARF.UN, BFC.UN, BRE.UN, CBF.UN, CGX.UN, CHE.UN, CHL.UN, CSS.UN,
CWI.UN, DHF.UN, FDG.UN, FMO.UN, LIF.UN, LIV.UN, NFI.UN, PKI.UN, QSR.UN, SIF.UN, SWS.UN, VIC.UN, WTE.UN, YLO.UN.
*Although the investment recommendations within the three-tiered, relative stock rating system utilized by CIBC World Markets do
not correlate to buy, hold and sell recommendations, for the purposes of complying with NYSE and NASD rules, CIBC World Markets
has assigned buy ratings to securities rated Sector Outperformer, hold ratings to securities rated Sector Performer, and sell ratings to
securities rated Sector Underperformer without taking into consideration the analyst's sector weighting.
385
Legal Disclaimer
This report is issued and approved for distribution by (i) in Canada, CIBC World Markets Inc., a member of the
Exchange and CIPF, (ii) in the United Kingdom, CIBC World Markets plc, which is regulated by the Financial Services
Authority ("FSA"), and (iii) in Australia, CIBC Australia Limited, a member of the Australian Stock Exchange and
regulated by the ASIC (collectively, "CIBC World Markets"). This report is distributed in the United States by CIBC World
Markets Inc. and has not been reviewed or approved by CIBC World Markets Corp., a member of FINRA. This report is
intended for distribution in the United States only to Major Institutional Investors (as such term is defined in SEC 15a-6
and Section 15 of the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or
entity that is not a major institutional investor. Major Institutional Investors receiving this report should effect
transactions in securities discussed in the report through CIBC World Markets Corp. This report is provided, for
informational purposes only, to institutional investor and retail clients of CIBC World Markets in Canada, and does not
constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or
solicitation would be prohibited. This document and any of the products and information contained herein are not
intended for the use of private investors in the United Kingdom. Such investors will not be able to enter into agreements
or purchase products mentioned herein from CIBC World Markets plc. The comments and views expressed in this
document are meant for the general interests of wholesale clients of CIBC Australia Limited.
explanation of its contents. CIBC World Markets will not treat non-client recipients as its clients by virtue of their
386
Company Comment
Tuesday, September 04, 2007
(NFI.UN-T C$11.35)
David Tyerman, MBA - 416-863-7108
Neil Forster, MBA, CFA - 416-862-3910
david_tyerman@scotiacapital.com
Rating: 2-Sector Perform
Risk Ranking: Medium
neil_forster@scotiacapital.com
Target 1-Yr:
2-Yr:
C$12.25
C$12.25
ROR 1-Yr:
2-Yr:
18.2%
28.7%
Est. NTM CDPU

CDPU (Curr.)
C$1.17
C$1.17
Yield
Valuation: 8.0x EV/NTM EBITDA (or 8.0x Q2/08E EV / Q3/08E - Q2/09E EBITDA)
10.3%
Initiating Coverage: Plenty of Cash Flow On This

Bus
Event
We are initiating coverage on New Flyer Industries (NFI). Full details
are available in our 36-page report, dated Aug. 30, 2007, and titled,
"Plenty of Cash Flow On This Bus".
What It Means
We believe NFI units are an attractive mid-term investment opportunity.
They offer a good yield (10% range) and modest unit price upside.
We expect NFI to produce a smooth cash flow ride on a 12-month
rolling basis from its large backlog (2.8 years of production at current
rates), stable margins, and low capital requirements (LTM EBITDA of
$83 million on only $88 million of net tangible assets).
But, there may be near-term unit price risk, as we think consensus
EBITDA is 10% too high.
Qtly CDPU (C$)
2006A
2007E
2008E
2009E
Q1
$0.28 A
$0.28 A
$0.29
$0.30
(FY-Dec.)
Cash Distributions (C$)/Share
Distributable Cash (C$)/Share
Price/Earnings
Relative P/E
Revenues
EBITDA
Current Ratio
EBITDA/Int. Exp
IBES Estimates
DPU 2007E: C$1.15
DPU 2008E: C$1.21
BVPU07E
ROE07E
Next Reporting Date
Nov-07
Q2
$0.28 A
$0.28 A
$0.29
$0.30
Q3
$0.28 A
$0.29
$0.29
$0.30
Q4
$0.28 A
$0.29
$0.29
$0.30
Year
$1.10
$1.14
$1.17
$1.21
Yield
12.0%
10.0%
10.3%
10.7%
2005A
$0.41
$0.45
2006A
$1.10
$1.15
2007E
$1.14
$1.40
2008E
$1.17
$1.40
2009E
$1.21
$1.42
$591
$53
1.3
1.8
$608
$59
1.2
2.4
$924
$97
1.2
3.4
$951
$99
1.3
2.9
$972
$101
1.4
3.0
N/A
N/A
Units O/S (M)

Float O/S (M)
Total Value (C$M)
Float Value (C$M)
TSX Weight
29.4
29.4
333.7
333.7
-
Historical price multiple calculations use FYE prices. Source: Reuters; Company reports; Scotia Capital estimates.
Pertinent Revisions
New
Old
N/A
Rating:
2-SP
Risk:
Medium
N/A
Target:
1-Yr
C$12.25
N/A
2-Yr
C$12.25
N/A
CDPU(C$)07E
US$1.14
N/A
CDPU(C$)08E
US$1.17
N/A
CDPU(C$)09E
US$1.21
N/A
New Valuation:
Old Valuation:
N/A
All values in US$ unless otherwise indicated.
For important disclosure information see Appendix A of this report.

387
2
Company Comment
Plenty of Cash Flow On This Bus
Solid story, good mid-term return to unitholders, but near-term risk. We think NFI IDS
units should deliver good mid-term returns (18.2% one-year and 28.7% two-year rates of
return to target) from significant cash distributions (10% yield range) and modest share price
appreciation. However, we think investors will be able to buy the units at lower prices before
they ultimately rise in price, as we think consensus 2008E EBITDA expectations could come
down by roughly 10%. We think C$10.00 to C$10.50 would be a good entry point (roughly
10% lower than the current unit price).
We believe the units should be of greatest interest for income and cash-flow oriented
investors. Distributable cash of roughly C$1.40 per year looks safe and there may be modest
near-term upside, driven by a large backlog, stable margins, and a very low investment
requirement (Exhibit 1). Our operating expectation highlights are as follows:
We think the current backlog and pending bids should support current or better
production rates into at least 2009. NFI has one years worth of production in backlog at
the current 2,200 unit annual production rate, another 1.8 years of production in options, and
pending bids for another 1.6 years of production (although ultimate wins are likely to be only
one-third to maybe 60% of the bids).
Long term underlying demand should be supported by significant replacement demand
and fleet growth of roughly 2% per year. We estimate long-term demand should support
1,800 to 2,000 units of annual demand for NFI, assuming a 35% to 40% market share (our
estimate of NFIs recent market share range). We use 2,000 units in our discounted cash flow
(DCF) terminal year work (2011), as recent order activity suggests NFIs market share could
be upwardly biased. We note that 2011 distributable cash is only slightly lower than current
levels.
Exhibit 1 - Large Stable Cash Producer
Yrs Ended Dec. 31 ($M)

1
Cash distribution per unit (C$)
% change
2005PF
0.41
n.a.
Distributable cash per unit (C$)

% change
1.10
n.a.
1.15
5%
1.40
21%
1.40
0%
1.42
2%
1.43
0%
1.38
-3%
Revenue
% change
591
-4%
608
3%
924
52%
951
3%
972
2%
973
0%
935
-4%
Adjusted EBITDA
EBITDA margin
73
9.0%
59
94
99
101
101
98
9.7% 10.5% 10.4% 10.3% 10.4% 10.5%
Investment in NCWC & capital assets

Bus deliveries (units)
Bus revenue/unit
Bus EBITDA/unit
Aftermarket EBITDA
Return on capital
1
2
2006 2007E 2008E 2009E 2010E 2011E

1.10
1.14
1.17
1.21
1.21
1.17
n.m.
4%
2%
3%
0%
-3%
(18)
20
(3)
1,583
339
39
10
1,442
375
31
14
2,106
400
37
17
2,200
389
36
19
2,200
394
36
21
2,150
399
36
23
2,000
404
36
26
n.a.
4.3%
9.4% 10.2% 10.8% 11.2% 11.2%
2005PF is actual cash distribution per unit for period from Aug. 19, 2005 to Jan. 1, 2006.
NCWC means non-cash working capital.
388
3
Company Comment
Profit margins should be strong (10% EBITDA margin range) and fairly steady on a
rolling 12-month basis, as the company targets relatively consistent per-bus margins (goal of
$40,000 per unit, although we expect less as large orders often push margins lower than
target), and operating risk appears low due to a low fixed cost structure. However, dont be
surprised if margins deviate substantially from trend in individual quarters due to mix.
Investment requirements are very low. NFIs annual capex is roughly $3 million, which is
remarkably low compared with LTM adjusted EBITDA of $83 million. The company is able
to sustain such low investments because of very high asset turnover. For example, NFI
produced $785 million in sales on an average of only $88 million of net non-cash tangible
assets in the last 12 months.
We believe NFIs solid cash flow outlook should yield good mid-term investor returns from
current IDS prices. Our discounted cash flow work suggests the IDS units could be worth
roughly C$15.00 per IDS (see report). We suggest it is probably wise to apply a margin of
error to our DCF estimate (our target implies a 19% discount) as the company could prove
more cyclical than we are modeling. Also, a C$15.00 value would imply a current IDS
distribution yield of 7.8%, which is close to the yield of much larger income security, Yellow
Pages (YLO-U). We think NFI units will probably trade at a 1% to 2% yield premium to
YLO-U due to NFIs much lower liquidity.
Accordingly, we are initiating coverage with a $12.25 one-year target and 2-Sector
Perform rating. Our target is based on an 8.0x EV/NTM EBITDA multiple in one
year. We think this multiple is reasonable given the above DCF work and a healthy
implied free cash yield of 14.0% from our DCF (see report).
Near-term risk from potential consensus downgrades. We believe consensus margins are
too high, likely due to recent strong results. We think NFIs adjusted EBITDA margins will
soften relative to Q2/07 and LTM levels, although remain good, as mix returns to normal
from an unusually positive level in Q2/07, and as the companys large backlog and bid
pipeline appear to include an increased proportion of very large standard product orders (e.g.,
40-foot diesel buses), which tend to be keenly competitive.
NFIs adjusted EBITDA margin was 10.9% in Q2/07 and 10.6% in the last 12 months. We
think EBITDA margins in the low 10% range are more sustainable, assuming the backlog
includes more competitive quotes. We believe a combination of sustained strong sales and a
move to the lower margin range will result in adjusted EBITDA that is roughly 10% lower
than consensus expectations; i.e., adjusted EBITDA in the high $90 million range rather than
the consensus expectations of $107 million to $111 million.
Share price catalysts. We think the near-term catalyst that will drive the shares to the
C$10.00 range will be analyst revisions, which are likely to occur on a quarterly release
(quite possibly Q3/07 or Q4/07 releases). Mid-term, we believe the final sale of New Flyer
Holdings Class B and C shares by legacy shareholders, Harvest Partners and Lightyear
Capital, could prove a catalyst to boost shares toward our target, as the sale of the Class B
and C shares would eliminate the risk of additional significant ISD issues.
389
4
Company Comment
Appendix A: Important Disclosures
Company
Ticker
NFI.UN
Disclosures*
S, T, U
I, David Tyerman, certify that (1) the views expressed in this report in connection with securities or issuers that I analyze accurately reflect my
personal views and (2) no part of my compensation was, is, or will be directly or indirectly, related to the specific recommendations or views
expressed by me in this report.
The Fundamental Research Analysts' compensation is based on various performance and market criteria and is charged as an expense to
certain departments of Scotia Capital Inc., including investment banking.
Scotia Capital Inc. and/or its affiliates: expects to receive or intends to seek compensation for investment banking services from issuers
covered in this report within the next three months; and has or seeks a business relationship with the issuers referred to herein which
involves providing services, other than securities underwriting or advisory services, for which compensation is or may be received. These
may include services relating to lending, cash management, foreign exchange, securities trading, derivatives, structured finance or precious
metals.
This report may include articles or content prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital.
For Scotia Capital Research analyst standards and disclosure policies, please visit http://www.scotiacapital.com/disclosures
*
Legend
Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding
equity securities of this issuer.
The Fundamental Research Analyst/Associate has visited material operations of this issuer.
Within the last 12 months, Scotia Capital Inc. has undertaken an underwriting liability with respect to equity securities of, or has
provided advice for a fee with respect to, this issuer.
390
5
Company Comment
Definition of Scotia Capital Equity Research Ratings & Risk Rankings
We have a three-tiered rating system, with ratings of 1-Sector Outperform, 2-Sector Perform, and 3-Sector Underperform. Each analyst
assigns a rating that is relative to his or her coverage universe.
Our risk ranking system provides transparency as to the underlying financial and operational risk of each stock covered. Statistical and
judgmental factors considered are: historical financial results, share price volatility, liquidity of the shares, credit ratings, analyst forecasts,
consistency and predictability of earnings, EPS growth, dividends, cash flow from operations, and strength of balance sheet. The Director of
Research and the Supervisory Analyst jointly make the final determination of all risk rankings.
Ratings
Risk Rankings
1-Sector Outperform
The stock is expected to outperform the average total return of the
analysts coverage universe by sector over the next 12 months.
Low
Low financial and operational risk, high predictability of financial
results, low stock volatility.
2-Sector Perform
The stock is expected to perform approximately in line with the
average total return of the analysts coverage universe by sector
over the next 12 months.
Medium
Moderate financial and operational risk, moderate predictability of
financial results, moderate stock volatility.
3-Sector Underperform
The stock is expected to underperform the average total return of
the analysts coverage universe by sector over the next 12 months.
Other Ratings
Tender Investors are guided to tender to the terms of the
takeover offer.
Under Review The rating has been temporarily placed under
review, until sufficient information has been received and
assessed by the analyst.
High
High financial and/or operational risk, low predictability of financial
results, high stock volatility.
Caution Warranted
Exceptionally high financial and/or operational risk, exceptionally low
predictability of financial results, exceptionally high stock volatility. For risktolerant investors only.
Venture
Risk and return consistent with Venture Capital. For risk-tolerant
investors only.
Scotia Capital Equity Research Ratings Distribution*
Distribution by Ratings and Equity and Equity-Related Financings*

Percentage of companies covered by Scotia Capital Equity
Research within each rating category.
Percentage of companies within each rating category for which
Scotia Capital has undertaken an underwriting liability or has
provided advice for a fee within the last 12 months.
Source: Scotia Capital.
For the purposes of the ratings distribution disclosure the NASD requires members who use a ratings system with terms different than buy,
hold/neutral and sell, to equate their own ratings into these categories. Our 1-Sector Outperform, 2-Sector Perform, and 3-Sector
Underperform ratings are based on the criteria above, but for this purpose could be equated to buy, neutral and sell ratings, respectively.
391
6
Company Comment
Disclaimer
This report has been prepared by SCOTIA CAPITAL INC. (SCI), a subsidiary of the Bank of Nova Scotia. Opinions, estimates and projections
contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein
have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their
accuracy or completeness. Neither SCI nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its
contents. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity
futures contracts. The securities mentioned in this report may not be suitable for all investors nor eligible for sale in some jurisdictions. This
research and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in
whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to
without the prior express consent of SCI. SCI is authorized and regulated by The Financial Services Authority. U.S. Residents: Scotia Capital
(USA) Inc., a wholly owned subsidiary of SCI, accepts responsibility for the contents herein, subject to the terms and limitations set out above.
Any U.S. person wishing further information or to effect transactions in any security discussed herein should contact Scotia Capital (USA) Inc.
at 212-225-6500.
392
Equity Research
Earnings Update
July 16, 2007
Income Trusts
Stock Rating:
Sector Outperformer
Resuming Coverage; Fundamentals And Valuation

Continue To Look Good
Sector Weighting:
Market Weight
Key Indices:
$13.50
$11.35

52-week Range
Units Outstanding
Distr. Frequency
Tax Deferred (Current Year)
DCF Value/IRR
Fiscal Year Ends
EV
2007 EV/EBITDA
Net Debt
P/NAV
Net Debt/CF
29.3%
$6.60-$12.70
53.1M
Monthly
NA
$602.3M
$15.15 / 11.5%
December
$774.30M
7.4X
$172.0M
0.7X
2.3X
No
Cash Distribution per Unit
Prev
2006
2007
2008
Cash-on-Cash Yield
2006
2007
2008
CF/Unit
2006
2007
2008
P/CF
2006
2007
2008
Current
$1.10A
$1.14E
$1.18E
9.7%
10.1%
10.4%
Prior
$1.35E
$1.40E
Current
$1.01A
$1.39E
$1.49E
8.4x
8.1x
11.2x
8.2x
7.6x
We are resuming coverage of New Flyer following the closing of its IDS
offering for 9.41 mln. units. Net proceeds of $103 mln. were used to
redeem 10.5 mln. Class C shares, reducing fully diluted shares outstanding
from 54.1 mln to 53.1 mln.
Our fully diluted cash flow estimates for 2007 and 2008 increase from
$1.35/unit and $1.40/unit to $1.39/unit and $1.49/unit, respectively. Our
2007 and 2008 distribution estimates remain at $1.14/unit and $1.18/unit,
respectively.
New Flyer is trading at a significant discount to both trust and corporate
comparables on an EV/EBITDA basis for both 2007E and 2008E. Our price
target is raised from $13.25 to $13.50, calculated using the previous target
EV/2007E EBITDA multiple of 8.5x.
Backlog growth and production plans point to strong cash flow growth in
2007. Receipt of new orders and early signs of a rebound in U.S. orders
suggest a longer-term bullish scenario for New Flyer. Healthy fundamentals
and discounted valuations support our Sector Outperformer rating.
Source: Reuters
Company Description
New Flyer is a leading North American heavy-duty
transit bus manufacturer with three production facilities
(one in Manitoba and two in Minnesota).
www.newflyer.com
Paul Holden, CFA

1 (416) 594-8417
Ateet Agarwal
1 (416) 956-6676
Paul.Holden@cibc.ca
Ateet.Agarwal@cibc.ca

and cibcwm.com
07-78888 2007
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, BCE Place, Toronto, Canada M5J 2S8 (416) 594-7000
393
Resuming Coverage; Fundamentals And Valuation Continue To Look Good - July 16, 2007
Details Of The Offering

New Flyer Industries (NFI.UNSO) closed its IDS offering for 9.41 million units
on July 12 at a price of $11.70 per unit, generating approximately $103 million
in net proceeds ($110 million in gross proceeds less $7.0 million in underwriters
fee and other expenses). When New Flyer IPOd in August 2005, 20.0 million
IDS units were issued to the public and 34.1 million class B and class C common
shares were retained by Harvest Partners, Lightyear Capital, and management.
The class B and C shareholders were given the right to request that New Flyer
purchase for cancellation all or part of their 34.1 million shares, as long as the
minimum gross proceeds is $40 million (referred to as the shareholders liquidity
rights). This IDS offering for 9.41 million units corresponds to the first exercise
of the shareholders liquidity rights and the cancellation of 10.5 million class C
shares, details of which are described below:
1. 8.8 million Class C shares from Harvest Partners and Lightyear Capital,
using proceeds of $83.9 million, and implying an average cancellation price

of $9.55/share. Collectively, Harvest Partners and Lightyear Capital
continue to hold 17.1 million shares.
2. 1.7 million Class C shares from management, using proceeds of
$18.5 million, and implying an average cancellation price of $10.89/share.

Management continues to hold 4.0 million shares.
The economic interest in New Flyer following the offering is broken down as
follows: 1) public unitholders 55.4%; 2) Harvest and Lightyear 36.1%; and
3) management 8.4%. We expect future offerings associated with the exercise
of liquidity rights, as it should be anticipated that full ownership is eventually
transferred to the public markets.
Offering Is Cash Flow Accretive On A Fully

Diluted Basis
We calculate per unit cash flow on a fully diluted basis that includes all IDS units
outstanding plus all class B and class C shares outstanding. The total number of
IDS units plus class B and C shares is reduced from 54.1 million to 53.1 million
as a result of the IDS offering and cancellation of shares. Accordingly, our 2007
and 2008 cash flow estimates increase from $1.35/unit and $1.40/unit to
$1.39/unit and $1.49/unit, respectively. Our 2007 and 2008 distribution
estimates are unchanged at $1.14/unit and $1.18/unit, respectively.
Valuation
New Flyer is trading at a significant discount to both comparable trusts and
comparable corporations on an EV/EBITDA basis for both 2007E and 2008E. On
a 2007E basis, New Flyer is trading at a discount of 1.3x relative to comparable
trusts (trading at 8.7x 2007E EBITDA) and a discount of 1.7x relative to
comparable corporations (trading at 9.1x 2007E EBITDA). Comparative valuation
tables are provided in Exhibit 2 on page 5 of this highlight.
394
Investment Recommendation
New Flyer reported Q1/07 per unit cash flow that was up 50% year over year
and we expect more big growth numbers through the remainder of 2007, an
outlook that is supported by two distribution increases already announced this
year. The company began the year with a strong firm order backlog and, with
the receipt of additional orders, is targeting a production rate of 4142
equivalent units per week in H2/07 compared to 38 equivalent units per week in
Q1/07 and around 30 equivalent units per week through H2/06. Management
indicated that the firm order backlog and total backlog, as of May 2007, had
increased by 25% and 26% to US$958 million and US$2.3 billion, respectively,
since the end of 2006. Backlog growth and early indications that U.S. industry
orders are improving point to a longer-term bullish scenario for New Flyer. In
addition, robust growth in New Flyers aftermarket business should continue
based on New Flyers growing share of North Americas active bus fleet.
Discounted valuations appear particularly attractive given near-term growth and
a healthy longer-term outlook. We reiterate our Sector Outperformer rating.

Our price target is raised from $13.25 to $13.50 per unit, calculated using the
previous target EV/2007E EBITDA multiple of 8.5x, which still represents a
discount to the average trust and corporate comparables.

Key risks to our price target and estimates include: a high degree of variability
in industry orders, raw material and component costs, product warranty claims,
collective labor agreements, foreign exchange rates and the tax treatment of
interest on subordinated notes.
395

2002
41-week
2003
2004
Pro forma
2005
Pro forma
stub period
2005
Q1/06
Q2/06
Q3/06
Q4/06
2006
Q1/07
Q2/07E
Q3/07E
Q4/07E
2007E
2008E
1.18
1.11
1.12
1.14
1.13
1.17
1.13
1.13
1.13
1.14
1.14
19-week
stub period
Assumptions
1.57
1.40
1.20
1.21
1.18
Bus Manufacturing
Bus Deliveries
940
1,750
1,938
1,583
555
319
336
392
395
1,442
491
514
540
500
2,045
1,938
Revenue Per Bus (US$thousands/bus)
251.4
263.7
295.5
339.5
341.6
371.3
359.8
365.0
399.6
374.7
409.9
405.0
405.0
405.0
406.2
410.2
EBITDA Per Bus (US$thousands/bus)
17.6
27.2
33.8
39.3
37.2
35.6
11.8
34.2
38.7
30.5
34.8
37.8
38.9
37.1
37.2
39.0
Backlog (US$millions)
966
1,848
2,071
1,976
1,976
1,951
1,913
1,861
1,836
1,836
2,256
2,223
2,179
2,151
2,151
2,036
236.4
461.4
572.8
537.4
189.6
118.5
120.9
143.1
157.9
540.3
201.2
208.2
218.7
202.5
830.6
795.0
24.9
37.8
44.2
53.4
19.4
17.4
15.8
17.4
16.8
67.4
19.4
18.2
20.0
19.3
76.9
88.4
261.3
499.2
617.0
590.8
208.9
135.8
136.7
160.5
174.7
607.7
220.6
226.3
238.7
221.8
907.5
883.5
(240.4)
(447.0)
(544.8)
(536.3)
(184.6)
(120.8)
(129.4)
(143.6)
(154.8)
(548.6)
(197.9)
(203.0)
(213.4)
(199.1)
(814.9)
(788.8)
16.6
4.4
(0.1)
20.9
8.0%
47.6
6.1
(1.5)
52.2
10.5%
65.5
8.8
(4.8)
69.5
11.3%
62.2
10.3
(17.2)
55.3
9.4%
20.6
1.3
2.9
24.8
11.9%
11.4
3.6
0.2
15.2
11.2%
4.0
3.4
(0.0)
7.3
5.4%
13.4
3.5
0.1
17.0
10.6%
15.3
3.4
1.0
19.7
11.3%
44.0
13.9
1.3
59.2
9.7%
17.1
4.2
1.4
22.7
10.3%
19.4
3.9
0.0
23.3
10.3%
21.0
4.3
(0.0)
25.3
10.6%
18.6
4.2
(0.0)
22.7
10.2%
76.1
16.6
(0.0)
92.6
10.2%
75.6
19.0
(0.0)
94.6
10.7%
Funds Flow (US$millions)

Revenue
Bus Manufacturing
Total Revenue
Segmented EBITDA
Bus Manufacturing
Unallocated (including realized FX loss (gain))
Total EBITDA
EBITDA Margin
(0.1)
(1.7)
(0.4)
18.0
(0.0)
0.0
0.1
0.0
0.1
0.2
(1.5)
0.0
0.0
0.0
0.0
0.0
Adjusted EBITDA
20.8
50.5
69.1
73.4
24.8
15.2
7.4
17.0
19.8
59.4
21.2
23.3
25.3
22.7
92.6
94.6
(10.9)
(10.5)
47.7
57.4
1.06
(10.9)
(13.4)
49.1
59.4
1.10
(3.0)
(3.9)
18.0
21.3
0.39
(2.1)
(3.9)
9.1
10.8
0.20
(2.5)
3.1
8.0
9.0
0.17
(2.4)
1.0
15.7
17.5
0.32
(2.4)
(2.0)
15.5
17.6
0.33
(9.3)
(1.8)
48.3
54.8
1.01
(2.4)
(5.2)
13.7
16.0
0.30
(2.7)
(4.0)
16.5
18.6
0.34
(2.7)
(4.2)
18.4
20.7
0.39
(2.7)
(3.2)
16.8
18.9
0.36
(10.6)
(16.6)
65.4
74.3
1.39
(10.9)
(14.3)
69.4
78.9
1.49
Capital Flows (US$millions)

Net Equity Proceeds
Net Debt Issue
(2.5)
0.0
0.0
0.0
(3.7)
(2.5)
0.0
0.0
0.0
(5.2)
(0.4)
(51.4)
158.2
(30.7)
(78.3)
(0.3)
(0.6)
0.0
0.0
2.3
(0.3)
(0.2)
0.0
0.0
3.3
(0.0)
(0.3)
0.0
0.0
(4.6)
(0.3)
(0.1)
0.0
0.0
(4.4)
(1.0)
(1.1)
0.0
0.0
(3.3)
(0.2)
(0.3)
0.0
0.0
(2.6)
(0.6)
0.0
0.0
0.0
(4.8)
(0.6)
(91.6)
91.6
0.0
(6.0)
(0.6)
0.0
0.0
0.0
(4.1)
(2.1)
(91.9)
91.6
0.0
(17.7)
(2.2)
0.0
0.0
0.0
(18.0)
DistributionsTo Public Unitholders (C$)
Per Unit
41.5
49.9
27.9
22.0
1.10
41.3
50.0
28.0
22.0
1.10
15.4
18.2
10.1
8.1
0.41
10.5
12.4
6.9
5.5
0.28
10.8
12.0
6.5
5.5
0.28
10.8
12.1
6.6
5.5
0.28
10.7
12.2
6.7
5.5
0.27
42.8
48.6
26.7
21.9
1.10
10.6
12.4
6.8
5.6
0.28
11.1
12.5
6.8
5.7
0.28
11.7
13.2
5.0
8.2
0.29
12.1
13.6
5.0
8.6
0.29
45.4
51.5
23.6
28.0
1.14
49.3
56.0
20.3
34.7
1.18
IDS Units - Public
20.0
20.0
20.0
20.0
20.0
20.0
20.0
20.0
20.0
20.0
28.2
29.4
24.4
29.4
34.1
34.1
34.1
34.1
34.1
34.1
34.1
34.1
34.1
34.1
25.0
23.7
29.2
23.7
Total Outstanding
54.1
54.1
54.1
54.1
54.1
54.1
54.1
54.1
54.1
54.1
53.2
53.1
53.6
53.1
121.5
(39.1)
160.6
121.5
(39.1)
160.6
121.2
(38.8)
160.0
122.4
(25.9)
148.3
122.2
(26.1)
148.3
121.0
(42.2)
163.2
121.0
(42.2)
163.2
117.4
(39.3)
156.8
117.4
(34.5)
152.0
117.4
(28.5)
145.9
117.4
(24.4)
141.9
117.4
(24.4)
141.9
117.4
(6.4)
123.9
Interest Expense
Taxes and Other
Operating Cash Flow
Financial Leverage (US$millions)

less Net Working Capital (ex. Inventory & Deferred Revenue)
Net Debt (Debt less NWC)
396
Exhibit 2. Valuation Comparables

Current
Price
27.36
19.70
15.89
16.06
37.00
EV/2007E
EBITDA
11.1
8.7
7.4
8.3
8.0
8.7
EV/2008E
EBITDA
9.5
8.2
6.3
8.3
8.0
8.1
2007E
Yield
6.3%
9.2%
10.1%
9.7%
11.3%
9.3%
2008E
Yield
6.6%
9.7%
10.7%
9.7%
11.6%
9.7%
2007E
Payout Ratio
89.6%
76.3%
71.5%
76.7%
88.3%
80.5%
Net Debt/
EV
11.6%
10.0%
5.6%
28.0%
17.4%
14.5%
Net Debt / 2007E

EBITDA
1.3
0.9
0.4
2.3
1.4
1.3
NFI.UN
11.35
7.4
7.2
10.1%
10.4%
69.3%
22.2%
1.6
Capital Goods - Corporates

American Railcar Industries (US$)
Freightcar America Inc. (US$)
Greenbrier Cos Inc. (US$)
Oshkosh Truck Corp. (US$)
Spartan Motors Inc. (US$)
Wabash National Corp (US$)
Average
Symbol
ARII
RAIL
GBX
OSK
SPAR
WNC
Current
Price
41.50
52.73
35.95
65.09
17.16
14.73
EV/2007E
EBITDA
9.9
7.9
8.2
7.4
9.1
11.9
9.1
EV/2008E
EBITDA
7.8
12.6
6.1
6.0
7.7
8.3
8.1
P/2007E
Cash Flow
14.5
12.5
8.5
16.6
na
na
13.0
P/2008E
Cash Flow
11.8
23.8
na
11.2
na
na
15.6
2007E
Div. Yield
0.3%
0.5%
0.9%
0.6%
0.8%
0.0%
0.5%
Net Debt/
EV
-1.8%
-14.1%
33.7%
8.9%
-1.2%
18.1%
7.3%
Net Debt / 2007E

EBITDA
-0.2
-1.1
2.8
0.7
-0.1
2.2
0.7
New Flyer
NFI.UN
11.35
7.4
7.2
8.2
7.6
10.1%
22.2%
1.6
Capital Goods - Trusts

Ag Growth Income Fund
Armtec Infrastructure Income Fund
Superior Plus Income Fund
Wajax Income Fund
Average
Symbol
AFN.UN
ARF.UN
FMO.UN
SPF.UN
WJX.UN
New Flyer
Note: Valuations for FMO.UN use CIBC WM estimates; valuations for all other companies use consensus estimates.
397
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2006 Current
$0.28A
$0.28A
$0.28A
$0.28A
$1.10A
2007 Current
$0.28A
$0.28E
$0.29E
$0.29E
$1.14E
2008 Current
$0.29E
$0.29E
$0.30E
$0.30E
$1.18E
398
Department within the Corporate and Leveraged Finance Division. Research analysts do not receive compensation based
upon revenues from specific investment banking transactions. CIBC World Markets generally prohibits any research
analyst and any member of his or her household from executing trades in the securities of a company that such research
analyst covers. Additionally, CIBC World Markets generally prohibits any research analyst from serving as an officer,
director or advisory board member of a company that such analyst covers.

(NFI.UN)
2a
2c
2f
2g
399
by CIBC World Markets:
American Railcar Industries, Inc. (1, 2f) (ARII-NASDAQ, US$41.50, Sector Performer - Speculative)
Foremost Income Fund (2g) (FMO.UN-TSX, $15.89, Sector Performer)
FreightCar America, Inc. (1, 2f) (RAIL-NASDAQ, US$52.73, Sector Performer - Speculative)
Companies Mentioned in this Report that Are Not Covered by CIBC World Markets:
Ag Growth Income Fund (AFN.UN-TSX, $27.36, Not Rated)
Armtec Infrastructure Income Fund (ARF.UN-TSX, $19.70, Not Rated)
Greenbrier (gbx-NYSE, US$35.95, Not Rated)
Oshkosh Truck Corp (OSK-NYSE, US$65.09, Not Rated)
Spartan Motors Inc. (SPAR-NASDAQ, US$23.31, Not Rated)
Superior Plus Income Fund (SPF.UN-TSX, $16.06, Not Rated)
Wabash National Corp. (WNC-NYSE, US$14.73, Not Rated)
Wajax Income Fund (WJX.UN-TSX, $37.00, Not Rated)
400

1
2a
2b
2c
2d
2e
2f
2g
3a
3b
3c
4a
4b
4c
5a
5b
6a
6b
7
8
9
10
past 12 months.
past 12 months.
the past 12 months.
past 12 months.
equity securities.
A partner, director or officer of CIBC World Markets Inc. or any analyst involved in the preparation of this
research report has provided services to this company for remuneration in the past 12 months.
11
12
13
14

401
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS' RECOMMENDATIONS FOR NEW FLYER INDUSTRIES
INC. (NFI.UN)
Date
06/21/2006
06/21/2006
08/25/2006
11/22/2006
03/29/2007
05/10/2007
05/28/2007
06/20/2007
10
Change Type
Closing Price
8.26
8.26
8.98
8.74
9.30
11.00
11.54
12.13
Rating
SP
SP
SP
SP
SO
SO
SO
R
Price Target
10.50
9.50
None
9.00
10.00
12.75
13.25
-
Coverage
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
Paul Holden, CFA
402

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

(as of 16 Jul 2007)
Count
Percent
Count
Percent
358
39.3%

174
48.6%
443
48.6%
215
48.5%
72
7.9%
27
37.5%
Restricted
20
2.2%
Restricted
19
95.0%

(as of 16 Jul 2007)
Count
Percent
Count
Percent
17
27.4%

12
70.6%
33
53.2%
22
66.7%
11.3%
42.9%
Restricted
8.1%
Restricted
100.0%
Income Trusts Sector includes the following tickers: AER.UN, ALA.UN, APF.UN, ATP.UN, AW.UN, BFC.UN, BPF.UN, BPT.UN, BRK.UN,
CBF.UN, CGX.UN, CHE.UN, CHL.UN, CIX.UN, COU.UN, CSS.UN, CWA.UN, CWI.UN, DHF.UN, EAT.UN, ENF.UN, EP.UN, FCE.UN,
FDG.UN, FLM.UN, FMO.UN, GLF.UN, GLH.UN, GMP.UN, GZM.UN, IEF.UN, IPL.UN, KEG.UN, KEY.UN, LIF.UN, LIV.UN, MPT.UN, NAL.UN,
NFI.UN, NPI.UN, NWF.UN, OSP.UN, PIF.UN, PKI.UN, PRI.UN, PRT.UN, QSR.UN, RSF.UN, SFK.UN, SIF.UN, SP.UN, STB.UN, SWS.UN,
SXP.UN, TAY.UN, TF.UN, TPW.UN, TWF.UN, WTE.UN, XSC.UN, YLO.UN, Z.UN.
Important disclosures required by IDA Policy 11, including potential conflicts of interest information, our system for
at http://research.cibcwm.com/res/Policies/Policies.html or by writing to CIBC World Markets Inc., BCE Place, 161 Bay
Street, 4th Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request.
11
403
Legal Disclaimer
Investment Dealers Association ("IDA"), the Toronto Stock Exchange, the TSX Venture Exchange and CIPF, (ii) in the
United Kingdom, CIBC World Markets plc, which is regulated by the Financial Services Authority ("FSA"), and (iii) in
Australia, CIBC World Markets Australia Limited, a member of the Australian Stock Exchange and regulated by the ASIC
(collectively, "CIBC World Markets"). This report is distributed in the Unites States by CIBC World Markets Inc. and has
not been reviewed or approved by CIBC World Markets Corp., a member of the New York Stock Exchange ("NYSE"),
NASD and SIPC. This report is intended for distribution in the United States only to Major Institutional Investors (as such
term is defined in SEC 15a-6 and Section 15 of the Securities Exchange Act of 1934, as amended) and is not intended for
the use of any person or entity that is not a major institutional investor. Major Institutional Investors receiving this
report should effect transactions in securities discussed in the report through CIBC World Markets Corp. This report is
provided, for informational purposes only, to institutional investor and retail clients of CIBC World Markets in Canada,
and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where
such offer or solicitation would be prohibited. This document and any of the products and information contained herein
are not intended for the use of private investors in the United Kingdom. Such investors will not be able to enter into
agreements or purchase products mentioned herein from CIBC World Markets plc. The comments and views expressed
in this document are meant for the general interests of clients of CIBC World Markets Australia Limited.
without notice.
Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can
change, any reference in this report to the impact of taxation should not be construed as offering tax advice on the tax
own independent tax adviser. This report may provide addresses of, or contain hyperlinks to, Internet web sites. CIBC
World Markets has not reviewed the linked Internet web site of any third party and takes no responsibility for the
12
404
Equity Research
Initiating Coverage
November 23, 2006
Income Trusts
Stock Rating:
Sector Performer
Executive Summary: All Eyes On Q4 For Now,

Potential Rebound In 2007
Sector Weighting:
Market Weight
NFI.UN-TSX (11/22/06)
Key Indices:
$9.00
$8.46

52-week Range
Units Outstanding
Distr. Frequency
DCF Value/IRR
Fiscal Year Ends
EV
2006 EV/EBITDA
Net Debt
P/NAV
Net Debt/CF
19.4%
$6.60-$10.00
54.1M
Monthly
NA
$458.1M
$11.81 / 15.0%
December
$566.70M
7.3X
$108.6M
0.7X
1.8X
No
Prev
2005
2006
2007
Cash-on-Cash Yield
2005
2006
2007
* 2005 pro forma full year
Current
$1.10A*
$1.10E
$1.10E
13.0%
13.0%
13.0%
Cash Flow Per Unit

2005
2006
2007
P/CF
2005
2006
2007
New Flyer manufactures heavy-duty buses for transit authorities in Canada

and the U.S. The company has a leading market share and uses product
innovation and design flexibility as a competitive differentiator. New Flyer
also sells aftermarket parts, a rapidly growing component of the business.
Management guidance following a strike-impacted Q2/06 implies high
expectations for Q4/06, leaving little room for error. The market is likely to
remain focused on Q4/06 for now and to weigh 2007 potential based on
how well management delivers in Q4/06.
Expected aftermarket EBITDA growth of 20+% provides good support for
2007. U.S. industry orders have slumped since 2001, but adequate FTA
funding and growing state and local taxes suggest a return to more normal
levels. Management guidance and the backlog point to a 2007 rebound.
Current valuations at the bottom end of the range reflect lingering risks
following the strike and variability in industry orders. Investors may be wise
to stay on the sidelines before Q4 delivery. We are initiating coverage with a
$9 price target and Sector Performer rating, effective November 22.
$1.10A*
$1.13E
$1.47E
7.7x
7.5x
5.8x
Source: Reuters
Company Description
www.newflyer.com
Paul Holden, CFA

1 (416) 594-8417
Petro Panarites, CFA

1 (416) 594-8249
Paul.Holden@cibc.ca
Petro.Panarites@cibc.ca

and cibcwm.com
06-68506 2006
405
Executive Summary: All Eyes On Q4 For Now, Potential Rebound In 2007 - November 23, 2006
Executive Summary
Company Profile
New Flyer Industries Inc. (NFI.UNSP) is the leading manufacturer of heavyduty buses for transit authorities in Canada and the U.S., with an estimated
market share of 35%. The company is an innovator in terms of new bus design
and features and its ability to meet a wide variety of customer specifications is a
key competitive differentiator. New Flyer has established relationships with 19 of
the top 25 transit authorities in North America and has also recorded sales to
over 280 other transit authorities. New Flyers three manufacturing facilities are
located in Winnipeg, Manitoba, St. Cloud, Minnesota, and Crookston, Minnesota.
New Flyer also sells aftermarket parts, which represents a rapidly growing
component of the business.
It is important to note that New Flyer is not structured as a publicly traded trust
or a publicly traded limited partnership. New Flyers units are composed of
stapled, but separable, common shares and subordinated debt that have been
issued by taxable corporate entities. As such, we believe that the proposed tax
for publicly listed flow-through entities as announced by the Canadian federal
government on October 31, 2006 should not be applicable to New Flyer. This is
in agreement with statements made by the company in its Q3/06 earnings news
release.
Investment Summary
New Flyer is in the midst of recovering from production delays and additional
costs incurred as a result of a strike at its Winnipeg facility in April. The strike
prompted management to issue guidance for 2006 that has set rather high
expectations for Q4/06, namely adjusted EBITDA of US$31.9 million versus
US$17.7 million in Q4/05. We believe guidance leaves little room for error. In
our opinion, the market is currently focused on managements ability to deliver
on its guidance in Q4/06, and will adjust expectations for 2007 accordingly.
New Flyers aftermarket business is in full growth mode with 2006 YTD revenue
coming in 27.1% higher year over year and EBITDA 33.0% higher year over
year. We expect the EBITDA contribution from this business segment to increase
from US$10.3 million in 2005 to US$14.2 million in 2006E and US$17.6 million
in 2007E, lending good support to cash flow growth. Management is
contemplating new initiatives and/or acquisitions in this area, which could boost
growth further.
Industry orders in Canada are at healthy levels due to an improvement in
federal and provincial funding, following a prolonged period of underinvestment.
The Canadian Urban Transit Association expects orders to average 1,044 units
per year for 20052010, significantly higher than the average of 524 units for
19902004. On the other hand, U.S. industry orders have slumped since 2001,
with 2005 deliveries coming in at 2,690 units compared to a 19902005 average
of 3,500 units. Adequate federal funding and growing state and local tax
revenue point to a rebound in industry orders, and management is citing an
improvement in industry orders, supported by growth in its firm order backlog.
We estimate that the firm order backlog has expanded by approximately 540
equivalent units since the beginning of the year. However, a significant portion
of firm orders is the result of option exercise and these options have not been
fully replaced by new orders, creating some questions regarding the
sustainability of a rebound.
406
Current valuations that are in the bottom end of the range for select business
trust and IDS comparables reflect lingering risks following the strike and a high
degree of industry order variability. A price to DCF (10%) of 0.7x suggests that
the current price may not adequately reflect New Flyers long-term potential.
That said, upside will likely be limited ahead of Q4/06 results, and we would
recommend remaining on the sidelines until results are delivered. We are
initiating coverage on New Flyer with a $9 price target and a Sector Performer
rating, effective November 22.

Order Variability: Industry-wide bus orders have been rather lumpy from year
to year, resulting in potential cash flow variability for New Flyer. The availability
of government funding for transit needs is a key driver of order volume and may
fluctuate depending on tax revenue and budget priorities, contributing to order
lumpiness.
Raw Material And Component Costs: Raw materials and components account
for the majority of bus manufacturing costs, approximately 73% in 2005. This
includes raw materials, such as carbon and stainless steel, aluminum, copper,
resins, and oil-based products that may experience significant price fluctuations.
Roughly 50% of raw material and component costs are fixed through annual
price contracts with suppliers plus New Flyer will often obtain fixed price quotes
for customer-specific orders at time of bid to obtain margin protection. However,
a material change in prices could negatively impact margins and cash flow,
particularly if New Flyer is unable to pass through higher input costs to
customers.
Product Warranty Claims: New Flyer is subject to product warranty claims as
an ordinary part of its business. The company typically provides a 12-year
warranty on its bus structure (sometimes up to 18 years) and one- to five-year
warranties on certain other major bus components. Expected warranty costs are
built into New Flyers pricing and costs have been fairly stable over the past
three years: US$11.9 million in 2003, US$10.2 million in 2004 and US$12.3
million in 2005. However, excessive warranty claims in any period could
negatively impact results. In addition, any negative publicity as a result of
excessive warranty claims could be damaging to New Flyers reputation.
Labour Agreements: Approximately 65% of New Flyers employees are
represented by unions through four collective labour agreements. The current
agreements expire as follows: March 31, 2008 St. Cloud facility; December 31,
2010 Crookston facility; March 31, 2009 Winnipeg facility; and March 31,
2009 Inspection unit at Winnipeg facility. Any labour disruption, such as that
which occurred in April at the Winnipeg facility, could result in production delays
and increased costs.
through revenue, operating costs, and financial obligations that are a mix of U.S.
dollar and Canadian dollar flows. Depending on the revenue split between
Canadian dollars and U.S. dollars, which can vary materially from period to
period, the companys net currency exposure will fluctuate. New Flyer actively
hedges its expected currency exposure as firm orders are planned into
production. Changes in the C$/US$ exchange rate from year to year may impact
Tax Treatment Of Interest On Subordinated Notes: It is possible that the
U.S. Internal Revenue Service or U.S. courts may take the position that the IDS
units are a single security classified as equity or that the subordinated notes be
407
classified as equity for federal income tax purposes, which could negatively
impact cash flow and distributions.
Please see our full report for further details.
408
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2005 Current
--
--
--
--
$1.10A
2006 Current
$0.28A
$0.28A
$0.28A
$0.28E
$1.10E
2007 Current
$0.28E
$0.28E
$0.28E
$0.28E
$1.10E
409

(NFI.UN)
2f
2g
410
411

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

(as of 22 Nov 2006)
Count
Percent
Count
Percent
322
39.2%

164
50.9%
400
48.7%
194
48.5%
70
8.5%
31
44.3%
Restricted
17
2.1%
Restricted
15
88.2%

(as of 22 Nov 2006)
Count
Percent
Count
Percent
23
40.4%

22
95.7%
29
50.9%
25
86.2%
7.0%
75.0%
Restricted
1.8%
Restricted
100.0%
Income Trusts Sector includes the following tickers: AER.UN, ALA.UN, ATP.UN, AW.UN, BFC.UN, BPF.UN, BRK.UN, CBF.UN, CGX.UN,
CHE.UN, CHL.UN, CIX.UN, CLC.UN, CLR.UN, CSS.UN, CWI.UN, CWM.UN, DET.UN, EAT.UN, ENF.UN, FCE.UN, FDG.UN, FLM.UN,
GLF.UN, GMP.UN, GZM.UN, IPL.UN, JAZ.UN, KEG.UN, KEY.UN, LIF.UN, LIV.UN, MEW.UN, NAL.UN, NFI.UN, NWF.UN, OSP.UN, PIF.UN,
PKI.UN, PRI.UN, PRT.UN, QSR.UN, RSF.UN, SFK.UN, SIF.UN, STB.UN, SWS.UN, TAY.UN, TF.UN, TPW.UN, TRK.UN, TWF.UN, UWH.UN,
WTE.UN, XSC.UN, YLO.UN, Z.UN.
412
Legal Disclaimer
without notice.
413
Equity Research
Initiating Coverage
November 22, 2006
Income Trusts/Income Deposit Securities
Stock Rating:
Sector Performer
All Eyes On Q4 For Now, Potential Rebound In 2007

Sector Weighting:
Market Weight
NFI.UN-TSX (11/21/06)
Key Indices:
$9.00
$8.46

52-week Range
Units Outstanding
Distr. Frequency
DCF Value/IRR
Fiscal Year Ends
EV
2006 EV/EBITDA
Net Debt
P/NAV
Net Debt/CF
19.4%
$6.60-$10.00
54.1M
Monthly
NA
$458.1M
$11.81 / 15.0%
December
$566.70M
7.3X
$108.6M
0.7X
1.8X
No
Prev
2005
2006
2007
Cash-on-Cash Yield
2005
2006
2007
Current
$1.10A*
$1.10E
$1.10E
13.0%
13.0%
13.0%
Cash Flow Per Unit

2005
2006
2007
P/CF
2005
2006
2007
New Flyer manufacturers heavy-duty buses for transit authorities in Canada

and the U.S. The company has a leading market share and uses product
innovation and design flexibility as a competitive differentiator. New Flyer
also sells aftermarket parts, a rapidly growing component of the business.
Management guidance following a strike-impacted Q2/06 implies high
expectations for Q4/06, leaving little room for error. The market is likely to
remain focused on Q4/06 for now and to weigh 2007 potential based on
how well management delivers in Q4/06.
Expected aftermarket EBITDA growth of 20+% provides good support for
2007. U.S. industry orders have slumped since 2001, but adequate FTA
funding and growing state and local taxes suggest a return to more normal
levels. Management guidance and the backlog point to a 2007 rebound.
Current valuations at the bottom end of the range reflect lingering risks
following the strike and variability in industry orders. Investors may be wise
to stay on the sidelines before Q4 delivery. We are initiating coverage with a
$9 price target and Sector Performer rating, effective November 22.
$1.10A*
$1.13E
$1.47E
7.7x
7.5x
5.8x
Source: Reuters
Company Description
www.newflyer.com
Paul Holden, CFA

1 (416) 594-8417
Petro Panarites, CFA

1 (416) 594-8249
Paul.Holden@cibc.ca
Petro.Panarites@cibc.ca

and cibcwm.com
06-68334 2006
414
All Eyes On Q4 For Now, Potential Rebound In 2007 - November 22, 2006
Table of Contents
Executive Summary ................................................................................ 3
Company Profile .................................................................................. 3
Investment Summary ........................................................................... 3
Financial Review..................................................................................... 5
A Quick Look At YTD Results ................................................................. 5
Assessing The Impact Of The April Strike ................................................ 6
Meeting 2006 Guidance ........................................................................ 7
Growth In The Aftermarket Business ...................................................... 8
Industry Analysis ................................................................................. 10
Competitive Landscape ....................................................................... 10
Gauging Future Order Potential............................................................ 10
Financial Analysis And Estimates.......................................................... 19
Understanding Taxes And Cash Flow .................................................... 19
Financial Forecasts ............................................................................. 20
Valuation Analysis And Recommendation ............................................. 23
Price Target Calculation ...................................................................... 23
Investment Conclusion ....................................................................... 23
Key Risks To Price Target.................................................................... 24
415
Executive Summary
Company Profile
New Flyer Industries Inc. (NFI.UNSP) is the leading manufacturer of heavyduty buses for transit authorities in Canada and the U.S., with an estimated
market share of 35%. The company is an innovator in terms of new bus design
and features and its ability to meet a wide variety of customer specifications is a
key competitive differentiator. New Flyer has established relationships with 19 of
the top 25 transit authorities in North America and has also recorded sales to
over 280 other transit authorities. New Flyers three manufacturing facilities are
located in Winnipeg, Manitoba, St. Cloud, Minnesota, and Crookston, Minnesota.
New Flyer also sells aftermarket parts, which represents a rapidly growing
component of the business.
It is important to note that New Flyer is not structured as a publicly traded trust
or a publicly traded limited partnership. New Flyers units are composed of
stapled, but separable, common shares and subordinated debt that have been
issued by taxable corporate entities. As such, we believe that the proposed tax
for publicly listed flow-through entities as announced by the Canadian federal
government on October 31, 2006 should not be applicable to New Flyer. This is
in agreement with statements made by the company in its Q3/06 earnings news
release.
Investment Summary
New Flyer is in the midst of recovering from production delays and additional
costs incurred as a result of a strike at its Winnipeg facility in April. The strike
prompted management to issue guidance for 2006 that has set rather high
expectations for Q4/06, namely adjusted EBITDA of US$31.9 million versus
US$17.7 million in Q4/05. We believe guidance leaves little room for error. In
our opinion, the market is currently focused on managements ability to deliver
on its guidance in Q4/06, and will adjust expectations for 2007 accordingly.
New Flyers aftermarket business is in full growth mode with 2006 YTD revenue
coming in 27.1% higher year over year and EBITDA 33.0% higher year over
year. We expect the EBITDA contribution from this business segment to increase
from US$10.3 million in 2005 to US$14.2 million in 2006E and US$17.6 million
in 2007E, lending good support to cash flow growth. Management is
contemplating new initiatives and/or acquisitions in this area, which could boost
growth further.
Industry orders in Canada are at healthy levels due to an improvement in
federal and provincial funding, following a prolonged period of underinvestment.
The Canadian Urban Transit Association expects orders to average 1,044 units
per year for 20052010, significantly higher than the average of 524 units for
19902004. On the other hand, U.S. industry orders have slumped since 2001,
with 2005 deliveries coming in at 2,690 units compared to a 19902005 average
of 3,500 units. Adequate federal funding and growing state and local tax
revenue point to a rebound in industry orders, and management is citing an
improvement in industry orders, supported by growth in its firm order backlog.
We estimate that the firm order backlog has expanded by approximately 540
equivalent units since the beginning of the year. However, a significant portion
of firm orders is the result of option exercise and these options have not been
fully replaced by new orders, creating some questions regarding the
sustainability of a rebound.
416
Current valuations that are in the bottom end of the range for select business
trust and IDS comparables reflect lingering risks following the strike and a high
degree of industry order variability. A price to DCF (10%) of 0.7x suggests that
the current price may not adequately reflect New Flyers long-term potential.
That said, upside will likely be limited ahead of Q4/06 results and we would
recommend remaining on the sidelines until results are delivered. We are
initiating coverage on New Flyer with a $9 price target and a Sector Performer
rating, effective November 22.
417
Financial Review
A Quick Look At YTD Results
We provide a summary of the three quarters that New Flyer has reported in
2006, including the strike-impacted Q2/06. Total revenue YTD is down 4.6%
year over year, with revenue declines in both Q1 and Q2, and a slight increase
in Q3. Operating costs and expenses have also declined, but to a lesser extent,
implying margin compression. As a result of lower revenue and reduced
margins, adjusted EBITDA declined 28.8% YTD compared to the same period in
2005. While the majority of the year-over-year fall-off is attributable to the
strike-impacted Q2, all three quarters have produced rather material year-overyear declines in adjusted EBITDA.
Exhibit 1. Consolidated Financial Results (US$ mlns.)

Total Revenue
Y/Y Change
Q1/06
135.8
(4.3%)
Q2/06
136.7
(11.4%)
Q3/06
160.5
1.7%
2006 YTD
433.0
(4.6%)

Y/Y Change
(120.8)
(4.0%)
(129.4)
(4.7%)
(143.6)
3.1%
(393.8)
(1.8%)
Adjusted EBITDA
Y/Y Change
15.2
(10.8%)
7.4
(61.5%)
17.0
(12.2%)
39.6
(28.8%)
11.2%
(0.8%)
5.4%
(7.0%)
10.6%
(1.7%)
9.1%
(3.1%)
Adjusted EBITDA Margin

Y/Y Change
The positive note is that New Flyer has posted extremely strong results from its
aftermarket operations. Revenue is up 27.1% YTD while operating costs and
expenses are up by a comparably smaller 25.6%. As a result, EBITDA has grown
by a staggering 33.0% over the first three quarters.
Exhibit 2. Aftermarket Operations Results (US$ mlns.)

Revenue
Y/Y Change
Q1/06
17.4
30.5%
Q2/06
15.8
16.9%
Q3/06
17.4
34.3%
2006 YTD
50.6
27.1%

Y/Y Change
13.7
32.2%
12.4
13.9%
13.9
31.3%
40.1
25.6%
EBITDA
Y/Y Change
3.6
24.4%
3.4
29.2%
3.5
47.7%
10.5
33.0%
EBITDA Margin
Y/Y Change
20.9%
(1.0%)
21.4%
2.0%
20.2%
1.8%
20.8%
0.9%
Results from bus manufacturing have been somewhat disappointing, which is at

least partly attributable to the April strike. Deliveries are down 14.9% YTD, and
have shown a decline in each quarter. Revenue per equivalent unit is 8.5%
higher year over year due to changes in product mix and higher material costs
that have been passed through to customers. However, higher revenue per
equivalent unit has been more than offset by the 13.3% increase in operating
costs and expenses per equivalent unit, as the labour stoppage led to production
418
inefficiencies both during the strike period and during the production ramp-up
following the strike. As a result of lower volume and lower margins, EBITDA for
bus manufacturing is down a rather substantial 39.6% YTD. The question is how
much of this is directly attributable to the strike-impacted Q2.
Exhibit 3. Bus Manufacturing Results (US$ mlns.)

Q1/06
319
(22.4%)
Q2/06
336
(20.2%)
Q3/06
392
(1.5%)
2006 YTD
1,047
(14.9%)
Revenue
per equivalent unit
Y/Y Change
118.5
0.371
18.6%
120.9
0.360
7.6%
143.1
0.365
0.3%
382.4
0.365
8.5%

per equivalent unit
Y/Y Change
107.1
0.336
20.2%
116.9
0.348
18.1%
129.7
0.331
3.0%
353.7
0.338
13.3%
EBITDA
per equivalent unit
Y/Y Change
11.4
0.036
5.7%
4.0
0.012
(70.3%)
13.4
0.034
(19.9%)
28.7
0.027
(29.0%)
9.6%
(1.2%)
3.3%
(8.6%)
9.4%
(2.4%)
7.5%
(4.0%)
Deliveries
Y/Y Change
EBITDA Margin
Y/Y Change
Assessing The Impact Of The April Strike

New Flyer announced on April 5, 2006 that unionized employees at its Winnipeg
facility, representing approximately 37% of New Flyers total workforce, initiated
a strike. The strike was resolved on April 30, 2006 with the ratification of a new
three-year collective agreement that expires March 31, 2009. It is unlikely that
the company will be facing another work stoppage during our 20062007
forecast horizon as labour agreements at New Flyers other facilities expire on:
1) March 31, 2008 at St. Cloud and 2) December 31, 2010 at Crookston.
We have adjusted Q2/06 to account for 89 bus deliveries (associated EBITDA of
US$3.6 million) that were delayed from Q1/06 and for 25 bus deliveries that
were delayed from Q2/06 (associated EBITDA of US$1.3 million) to Q3/06, to
better isolate Q2/06 results.
Bus Deliveries: Deliveries decreased by 149 equivalent units compared to

Q2/05, of which 101 equivalent units were attributable to the strike. This
implies that deliveries were approximately 48 equivalent units lower year
over year, excluding lost production associated with the strike and adjusted
for the timing of delayed deliveries.
Bus Manufacturing Revenue: We estimate that adjusted EBITDA was

approximately US$15.0 million lower in Q2/06 versus Q2/05 after taking
delayed deliveries into account. The company estimates that the strike
negatively impacted adjusted EBITDA by US$9.5 million, broken down as
follows: 1) US$5.1 million related to lost production of 101 equivalent units;
2) US$3.7 million attributable to indirect manufacturing overhead costs in
order to support higher production levels at U.S. facilities; and 3) US$0.7
million due to labour inefficiencies. While the strike accounts for the
majority of the year-over-year decline in adjusted EBITDA, Q2/06 results
still compare unfavourably to Q2/05 adjusting for the strike.
419
Exhibit 4. Adjusted Q2/06 Results (US$ mlns.)
Bus Deliveries
Adjusted EBITDA
Q2/06
336
4.1
Adjustments For
Timing of Deliveries
(64)
(2.3)
Adjusted Q2/06
272
1.8
Q2/05
421
16.7
Y/Y Change
(149)
(15.0)
Meeting 2006 Guidance

Management issued guidance for 2006 concurrently with Q2/06 results as
follows: 1) 1,648 equivalent units and) adjusted EBITDA substantially equal to
US$71.5 million. We compare these guidance numbers to what the company
achieved from Q1 to Q3 and what has to be achieved in Q4 to hit the numbers.
Exhibit 5. 2006 Guidance And Q4/06 Implications

Deliveries
Adjusted EBITDA (US$ mlns.)
Q1-Q3
1047
39.6
Q4 Implied
601
31.9
2006 Guidance
1648
71.5
Guidance of 1,648 equivalent units does not appear achievable following Q3

deliveries of 392 equivalent units. Management now expects production in Q4 to
average 40 equivalent units per week, which equates to 480 equivalent units
using a 12 week quarter (there is a one-week shutdown in December for the
holidays). Management also expects to bring down work in process by
approximately 70 equivalent units, resulting in total expected Q4 deliveries of
550 units. Based on 550 deliveries in Q4, 2006 total deliveries would equal
1,597 equivalent units, about 51 short of original guidance.
New Flyer will need to produce adjusted EBITDA of US$31.9 million in Q4 to
reach its guidance figure. We estimate that the aftermarket operations will
generate EBITDA of US$3.7 million in Q4 (see the Financial Forecast section for
assumptions behind this estimate), implying that bus manufacturing will have to
achieve EBITDA of around US$28.2 million. Based on the delivery of 550
equivalent units this corresponds to roughly US$51,320 in EBITDA per
equivalent unit delivered. We believe an improvement in EBITDA per equivalent
unit delivered in Q4 compared to disappointing results YTD is probable given the
factors listed below; however, the implied number of US$51,320 may be a
challenge.
1. The trend over the past three years shows improving margins, but at a
decelerating rate. With the exception of 2006 YTD, New Flyer has
experienced improvements in EBITDA per equivalent unit in every period
owing to higher average revenue per bus and improving margins, due at
least in part to productivity gains. 2006 YTD EBITDA per equivalent unit
stands out as an aberration due to the strike, even after adjusting for
US$4.4 million in identifiable strike-related costs, as fixed costs were
spread among far fewer deliveries and the sales mix was more skewed to
lower margin buses.
420
Exhibit 6. EBITDA Per Equivalent Unit Delivered

60000
+30.6% v s. 2005
50000
(US$)
40000
+24.2% Y/Y
+16.3% Y/Y
2004
2005
+54.6% Y/Y
30000
20000
10000
0
2002
2003
2006 YTD*
Q4 Implied
Lev el
* does not include US$4.4 million in costs attributed to the strike

2. A shift in the sales mix towards higher-margin deliveries, such as electric
trolley buses and bus rapid transit (BRT) units.

3. A higher number of deliveries spread across fixed costs. Fixed costs for
2005 were estimated at 9% of total bus manufacturing costs, equating to

US$42.8 million. We assume additional administrative costs of US$0.8
million associated with running a public company for a full year (compared
to 19 weeks in 2005) and assume 3% cost inflation to arrive at an
estimated fixed cost for 2006 of US$44.8 million. If these costs are spread
evenly throughout the year and our assumptions prove reasonable, then
EBITDA per equivalent unit could benefit by up to roughly US$6,650 by
simply producing at a higher run rate in Q4 compared to 2005.
Exhibit 7. Assumed Fixed Cost Per Equivalent Unit Delivered

Assumed Fixed Costs (US$ mlns.)
Deliveries
Assumed Fixed Costs/Delivery (US$)
2005
42.8
1,583
27,016
Q4/06E
11.2
550
20,363
Growth In The Aftermarket Business

New Flyer has produced robust growth in its aftermarket parts business over the
last several years both in terms of revenue and EBITDA, and has actually
experienced accelerated growth 2006 YTD. Management estimates that New
Flyer buses currently constitute roughly 21% of the active transit bus fleet in
North America. This share of the active bus market should grow over time if the
company can maintain or expand its share of new orders, which currently stands
at approximately 35%, producing additional demand for New Flyers aftermarket
parts as the active fleet size expands. Management may consider expanding its
participation in the parts market either through new initiatives or acquisitions.
The aftermarket operations is forecast to account for more than 20% of total
EBITDA in 2006 compared to 14% in 2005.
421
Exhibit 8. Aftermarket Operations (US$ mlns.)
Revenue
Y/Y Growth
EBITDA
Y/Y Growth
EBITDA Margin
2002
41-weeks
24.9
2003
52-weeks
37.8
4.4
6.1
17.7%
16.1%
2004
53-weeks
44.2
17.1%
8.8
44.8%
19.9%
2005
52-weeks
53.4
20.8%
10.3
17.0%
19.3%
2006 YTD
39-weeks
50.6
27.1%
10.5
33.0%
20.8%
2006E
52-weeks
68.3
27.8%
14.2
38.0%
20.8%
2007E
52-weeks
81.9
20.0%
17.6
23.9%
21.5%
422
Industry Analysis
Competitive Landscape
New Flyer faces competition primarily from four companies:
Gillig Corporation
Gillig is privately owned by California-based Herrick Pacific. Gillig is the secondlargest producer of transit buses in North America and had an estimated market
share of around 21% as of 2004. Its manufacturing facility is based in Hayward,
California and the company focuses on the U.S. market. Gilligs ownership has
not changed since 1973, an indication that it has not undergone some of the
financial hardships experienced by other competitors. This is at least partly
attributable to a disciplined approach in terms of pricing and production
capacity. As a result of having limited capacity (1,200 to 1,300 units per year),
Gillig generally does not bid on large orders. We view Gillig as New Flyers
primary competitor in the U.S. market.

Orion was founded in 1975 in Ontario and was subsequently acquired by
DaimlerChrysler (DCXNYSE) in 2000. Orions 2004 North American market
share was estimated at 17%, placing it third among transit bus manufacturers.
The company operates one production facility in Mississauga, Ontario and one in
Oriskany, New York. Assisted by the location of its production facilities, Orion
has strong relationships with the Toronto Transit Commission (TTC) and New
York City Transit. The company has received a number of orders for its dieselelectric hybrid transit buses, including a large order from the TTC.
North American Bus Industries Inc. (NABI)

NABI was acquired by Cerberus Capital Management L.P., a private equity
investor, in January 2006. NABI had an estimated market share of 13% in 2004
and has traditionally focused on the U.S. market. Its headquarters and
operations are based in Anniston, Alabama. There were a number of senior
management changes at NABI following the acquisition by Cerberus, including
the appointment of a new CEO. Subsequently, the company has introduced a
system of performance metrics and has lowered costs in order to be profitable at
the current low rate of production.
Nova Bus
Nova Bus was created in 1993 through the reorganization of MCIs transit bus
division and was acquired by a subsidiary of Volvo Bus Corporation (FNYSE) in
1998. The company pulled out of the U.S. market in 2002 to focus on the
Canadian market, and, as such, has a relatively minor share of the total North
American market. Nova Bus operates two plants in Quebec, one in SaintEustache, the other in Saint-Franois-du-Lac. Favourable capital funding policies
by the Quebec government for made-in-Quebec transit buses gives Nova Bus a
competitive advantage in that province.
Gauging Future Order Potential

The Canadian Market
There are approximately 12,500 active transit buses and trolley buses in Canada
[latest available numbers from the Canadian Urban Transit Association (CUTA)],
10
423
and this number has grown by a relatively modest 0.8% CAGR from 1990 to
2004. During this period purchases of new buses were fairly lumpy from year to
year, but with a noticeable spike in 2003/2004. From 1990 to 2002, new bus
purchases averaged 444 buses per year, well below what we calculate to be a
sustainable replacement rate of 625 buses, assuming an 18-year average useful
life. Due to an extended period of underinvestment, the average age of active
heavy-duty buses in Canada is estimated at 10.5 years versus 7.3 years in the
U.S. The surge in new unit purchases in 2003 and 2004 is an indication that
transit authorities have begun to renew bus fleets and that available funding has
improved.
Exhibit 9. Canadian Bus Statistics

Number Of Active Buses And Trolley Buses
New Bus And Trolley Bus Purchases
14,000
1,200
12,000
1,000
10,000
Av erage
800
8,000
600
6,000
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1990
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
1991
200
1990
2,000
1991
400
4,000
For the past three decades, the majority of capital funding for transit authorities
in Canada has come from provincial and municipal sources, while the federal
government has traditionally represented a relatively small source of funding.
Exhibit 10. Capital Funding For Canadian Transit (excluding debt servicing)
2002
2003
Federal Other
Federal
3%
9%
Other
Prov incial
8%
13%
Prov incial
39%
44%
Municipal
Municipal
45%
39%
Source: CUTA, Summary of Canadian Transit Statistics 2004 and CIBC World Markets Inc.
Provincial and local governments experienced ballooning budget deficits during

the first half of the 1990s, resulting in a lack of sufficient funding for transit
expenditures that extended out for the better part of a decade. However, the
fiscal situation has improved, given aggregate surpluses in four of the last seven
years, including the last two years.
11
424
Exhibit 11. Total Government Budget Balances, Excluding Federal

Government ($ mlns.)
20,000
10,000
0
(10,000)
(20,000)
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
(30,000)
Source: Department of Finance Canada and CIBC World Markets Inc.
The lack of capital funding in the 1990s placed transit authorities in a difficult
position they could not access sufficient funds to replenish fleets at an
appropriate rate and aging fleets led to higher operating costs, compounding
budgetary constraints further. Exhibit 12 depicts the growing funding problem
facing municipalities due to the growth in net operating costs (operating costs
less service revenue) and municipalities increasing share of those deficits. Thus,
it is reasonable to expect that any increase in the availability of funds for bus
replacement by provincial governments or the federal government be fully taken
up by municipalities in order to alleviate their growing operating burden.
Moreover, the less money that has to be allocated to operating requirements,
the more that can potentially be allocated to capital requirements, including the
procurement of new transit buses. With municipalities paying the majority of
operating expenditures and a relatively lower proportion of capital expenditures,
there is a strong incentive for municipalities to procure buses that have lower
expected operating expenses, even when those buses come at a higher capital
cost. An example of this is TTCs recent order for 510 hybrid-electric buses from
Orion over a three-year period for a reported $750,000 per unit, at least 50%
more than a conventional clean diesel bus, but with estimated annual fuel
savings of $10,000.
Exhibit 12. Municipal Contribution To Transit Operating Funding
Net Operting Cost ($ mlns)
1200
1100
1000
Ontario offloads GO
Ontario takes back
Transit To
GO Transit
64%
62%
60%
municipalities
58%
900
56%
800
54%
700
52%
600
50%
1995
1996
1997
1998
1999
Municipal Contribution
2000
2001
2002
2003
% of total
12
425
There were two significant developments for transit funding in Canada that
contributed to higher bus orders in 2003 and 2004, and that bode well for future
order potential:
1. Substantial improvements in funding from the government of Ontario
starting in 2002 following the withdrawal of all direct funding of public

transit in 1998. The Ontario Transit Renewal Program was announced in
2001, with a $3.25-billion commitment over 10 years for transit needs, and
enabling transit authorities to fund one-third of renewal purchases through
the program. The current government has introduced the ReNew Ontario
initiative, which is a comprehensive five-year infrastructure plan, allocating
$11.4 billion to transportation infrastructure initiatives by 2010. In March
2006, the Ontario government introduced the Move Ontario initiative that
includes $160 million in funding for the development of bus rapid transit
systems in Brampton and Mississauga. In addition, the Ontario government
commenced gas tax funding for transit beginning in 20042005 with 1 cent
per litre allocated to public transit. The allocation rose to 1.5 cents per litre
in 20052006 and permanently increased to 2 cents per litre starting
October 2006. Proceeds from the gas tax funding are expected to total
around $300 million per year.
2. Federal government commitments to transit funding. The federal
government provided minor contributions to transit funding through the

1970s, 80s, and 90s. Then, in 2002, the federal government expressed a
concern about the level of total transit funding and in November released a
document entitled Canadas Urban Strategy: A Blueprint for Action that
cited a national transit/transportation program as a key priority. While a
sustainable program has yet to be developed, the government has allocated
funding for municipalities and public transit in recent budgets:
2003: Committed $1 billion over 10 years under the Municipal

Rural Infrastructure Fund in recognition of growing
infrastructure challenges.
2004: A New Deal for Communities was introduced with the

intention of ensuring that municipalities have reliable and
predictable long-term funding and to provide more effective
program support for pressing priorities, including infrastructure
requirements. The deal included: 1) acceleration of the $1
billion Municipal Rural Infrastructure Fund commitment from 10
years to five years; 2) GST/HST relief for municipalities,
benefits of which were estimated at $7.3 billion over 10 years;
and 3) a commitment by the federal government to work with
provincial governments to provide gas tax revenue-sharing
with municipalities. In addition, the federal government took a
step towards direct funding for public transit by allocating $385
million to GO Transit.
2005: The New Deal for Cities and Communities was updated
and included the finalization of a gas tax transfer program to
support environmentally sustainable infrastructure, including
public transit. The program will follow a five-year phase-in with
an intention of dedicating 5 cents per litre to municipalities,
estimated at $2 billion annually starting in 20092010. In
addition, the budget highlighted two significant federal
contributions for transit infrastructure: 1) $103 million towards
the renovation of the Montreal metro system and 2) $350
million towards the renewal of the TTC, including the
modernization and expansion of bus services.
13
426
Exhibit 13. Funding Profile For Gas Tax Sharing

Equivalent share of gas tax per litre
Estimated Funding ($ mlns.)
2005-06
1.5 cents
600
2006-07
1.5 cents
600
2007-08
2 cents
800
2008-09
2.5 cents
1,000
2009-10
5 cents
2,000
Source: 2006 Federal Budget.
2006: The government established the public transit capital trust to

support capital investments in public infrastructure, including transit
buses. $900 million will be allocated to the trust over the next three
years, which was confirmed after the government met its 2005-2006
surplus objective of $2 billion. In addition, Bill C-66 was passed in
November 2005, allocating up to $400 million to public transit in fiscal
years 2005-06 and 2006-07.
Exhibit 14. Summary Of Expected Funding For Municipalities

Municipal Rural Infrastructure Fund
Public Transit Capital Trust
Bill C-66
GST/HST Rebate
Gas Tax Revenue Funding
Total
2006-07
200
300
400
625
600
2,125
2007-08
332
300
650
800
2,082
2008-09
450
300
685
1,000
2,435
2009-10
550
720
2,000
3,270
Total
1,532
900
400
2,680
4,400
9,912
Source: 2006 Federal Budget and CIBC World Markets Inc.
Transit authorities in Canada are in a far better position today than they were
five years ago in terms of capital funding for replacement and expansion. The
federal government recognized the lack of reinvestment in transit systems and
has stepped up to the plate via multiple initiatives aimed at improving fiscal
balances for municipalities and specifically targeting funds at public transit. In
addition, action by the Ontario government has improved the availability of
funding in that province. Therefore, we believe that bus purchases over the next
several years should be substantially higher than during the 1990s. Supporting
our opinion is the CUTAs expectation for an average of 1,044 new bus orders
per year from 20052010, of which replacement accounts for 82% and
expansion 18%.
The U.S. Market

There were approximately 81,600 active transit and trolley buses in the U.S. as
of 2004 [latest available figures from American Public Transportation Association
(APTA)] and this number has grown at a reasonable CAGR of 2.3% from 1990
through 2004. Bus purchases experienced a sustained upward trend from 1993
through 2001, but have since declined for four consecutive years. Total
purchases in 2004 and 2005 dipped below the 3,500 annual average from 1990
2005.
14
427
Exhibit 15. U.S. Bus Statistics

Number Of Active Buses And Trolley Buses
New Bus And Trolley Bus Purchases
100,000
7,000
6,000
80,000
Av erage
5,000
60,000
4,000
40,000
3,000
2,000
20,000
1,000
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Funding for transit in the U.S. is significantly different than in Canada, as the
U.S. federal government has played a major role in transit funding since 1964
when then Urban Mass Transportation Act was passed. Funding commitments for
the Federal Transit Administration (FTA) are passed in six-year cycles and the
last commitment was under SAFETEA-LU (Safe, Accountable, Flexible, Efficient
Transportation Equity Act A Legacy for Users), which was passed into law in
August 2005. SAFETEA-LU guaranteed US$52.6 billion in funding, a record level
and representing about a 46% increase over the previous commitment level.
The FTA supplies up to 80% of capital requirements for: 1) replacement buses
that are older than 12 years or have more than 500,000 miles of service and 2)
fleet expansion that is supported by population and ridership trends. As a result,
the federal government supplies around 40% of total public transit capital
requirements.
Exhibit 16. Capital Funding For U.S. Transit 2003

Local
State
18%
13%
Other
29%
Federal
40%
With a rather significant and consistent level of federal funding available to

transit authorities, funding availability at the state and local level appears to be
the more relevant swing factor with respect to funding for new buses.
Historically, there has been a rather strong relationship between growth in tax
revenue for local and state governments compared to the number of bus
deliveries, lagged one year, as shown in Exhibit 17. Tax revenue experienced
reasonably strong growth in 20032005 while heavy-duty bus orders slowed.
Possible explanations for the recent divergence in this relationship include: 1)
high fuel costs have resulted in budget constraints, reducing money available for
15
428
capital requirements; 2) some transit authorities have found the FTA funding
process under SAFETEA-LU overly complex and time consuming; and 3) a delay
in orders while municipalities assess the potential impact from new
environmental legislation, with California being the prime example.
7000
12%
6000
10%
8%
4000
6%
3000
4%
2000
Bus Deliv eries, Lagged One-Year
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0%
1992
1991
2%
1990
1000
1989
Deliveries
5000
Growth In Tax Revenue
Exhibit 17. Bus Deliveries (lagged one year) Versus State And Local Tax
Revenue
Grow th In Tax Rev enue
Source: APTA, U.S. Census Bureau and CIBC World Markets Inc.
We fully expect bus deliveries in the U.S. to rebound from current levels to a
number that is at least equal to the average delivery figure of 3,500 from 1990
2005, and more than likely, is higher than 3,500 due to constant growth in the
total active fleet size. We estimate that replacement purchases could average
around 5,000 buses per year over the next several years assuming a 15-year
average life. If we assume that going forward the number of active buses grows
by 1.5% per year (conservative versus the 2.3% from 19902004), we would
expect expansion bus orders of roughly 1,200 per year, for total U.S. industry
bus orders that could reach upwards of 6,200 buses. It appears that a significant
improvement in U.S. purchases is in order; however, the timing of a rebound is
uncertain, and we look to New Flyers backlog for early indications of industry
activity.
Looking For Signs Of A Rebound In New Flyers Backlog

New Flyers backlog provides relatively good visibility with respect to potential
deliveries as customer orders are generally received one year prior to scheduled
delivery. The total backlog has decreased by 5.8% since the beginning of the
year, but firm orders have increased by 28.1%, and we estimate that this
represents around an additional 540 equivalent units. Management interprets
the growth in the firm order backlog as an improvement in the U.S. heavy-duty
transit bus market, and we believe it is reasonable to assume that deliveries in
2007 could be higher than 2006 by around 540 equivalent units based on
growth in the firm order backlog. The chart in Exhibit 18 depicts the relationship
between the firm order backlog at the beginning of each year and corresponding
revenue from bus manufacturing.
16
429
Exhibit 18. Firm Order Backlog Compared To Bus Manufacturing

Revenue (US$ mlns.)
1000
800
600
400
200
Firm Orders, Beginning of Year
2006E
2005
2004
2003
2002
Bus Manufacturing Rev enue
We offer a word of caution with respect to developments in the companys

backlog. Options have developed as an important source of new orders and,
consequently, New Flyer actively seeks to grow its option backlog; exercised
options accounted for 34% of New Flyer buses manufactured in 2005 and 66%
in 2004. Of the US$561.9 million in firm orders received year to date, 64.8% is
from the exercise of options. However, New Flyer has not been able to fully
replenish its option order book as US$364.2 million in options were exercised
through the first three quarters of 2006 while only US$75.5 million in new
options were awarded. It is possible that the exercise of options are simply the
first sign of increasing industry demand, as it is quicker for transit authorities to
exercise options that already have FTA funding in place, than to apply for FTA
funding for new orders. However, before assuming a sustainable improvement in
deliveries, we will look for growth in New Flyers total backlog, including options
that represent an important source of future revenue.
Exhibit 19. Value Of Firm Orders And Options (US$ mlns.)

2500
2000
1500
1000
500
0
1998
1999
2000
2001
2002
Firm Orders
2003
2004
2005
Q3/06
Options
Top North American Transit Authorities

New Flyer has ongoing customer relationships with 19 of the top 25 transit
authorities in North America. Order announcements from these transit
authorities could provide early indications on the development of New Flyers
17
430
882
848
832
830
808
802
783
Minneapolis, MN
Portland, OR
San Francisco, CA
Miami, FL
Edmonton, AB
Phoenix, AZ
Cleveland, OH
893
Orange, CA
878
907
Baltimore, MD
Ottawa, ON
997
1,074
Denver, CO
Pittsburgh, PA
1,088
1,373
Seattle, WA
Boston, MA
1,421
Washington, DC
1,251
1,431
Philadelphia, PA
1,137
1,546
Vancouver, BC
1,560
Houston, TX
Montreal, PQ
New York, NY (DOT)
1,638
3,053
2,721
2,024
Toronto, ON
Chicago, IL
Los Angeles, CA
Newark, NJ
New York, NY
4,667
order backlog. Exhibit 20 depicts the top 25 transit authorities based on the
number of active buses in service in 2004 and identifies which transit authorities
have a customer relationship with New Flyer.
Exhibit 20. Top 25 Transit Agencies In North America 2004
New Fly er Customers
18
431
Financial Analysis And

Estimates
Understanding Taxes And Cash Flow
Public unitholders have an approximate 36.9% economic interest in New Flyer
through the ownership of 20.0 million IDS units. Each IDS unit includes $5.53 in
principal of subordinated notes that bear an interest rate of 14%, equivalent to
$0.77/unit per year. The interest on the subordinated notes provides a tax shield
for New Flyer, as with other forms of interest-bearing debt, resulting in lower
corporate income tax. However, unitholders are fully taxed on the interest at
applicable personal income tax rates. IDS unitholders also receive common
dividends, currently being paid at an annual rate of $0.33/unit, and which
provide no tax shield for corporate income tax.
The remaining 63.1% of the economic interest in New Flyer is held through 34.2
million Class B and Class C common shares. These shares receive dividends only
and thus are paid on an after-tax basis. The dividend rate is currently $0.82/unit
annualized, equivalent to the total income received on an IDS unit, after
adjusting for an assumed corporate income tax rate of 36.5%. Note, implied in
this calculation is that 100% of the tax shield associated with the IDS stapled
subordinated notes accrues to the IDS unitholders, and that the class B and C
shareholders should not accrue any of the tax shield benefit. We believe this to
be a correct assumption for allocating after-tax cash flow.
Exhibit 21. IDS Versus Common Share Income

Interest Income
Dividend Income
Plus Assumed Tax Shelter If Converted
Total
IDS Unit
$0.77
0.33
1.10
Class B/C Share

$0.82
0.28
1.10
When measuring actual cash flow results, it may not be accurate to simply
assume a 36.5% corporate income tax rate, as that rate will likely vary based on
actual results and associated tax filings. Thus, rather than attempt to generate a
cash flow number that is proportioned between IDS unitholders and Class B and
Class C shareholders based on a tax assumption that may not accurately reflect
actual taxes paid, we use actual operating cash flow on a fully diluted basis
(total operating cash flow divided by total IDS units plus class B and C shares
outstanding). We believe this number to be more appropriate for assessing
actual operating performance, as it makes no adjustments based on assumed
tax rates. However, operating cash flow per unit should not be compared to per
unit distributions, including for the purpose of calculating payout ratio. We
calculate payout ratio using total cash flow and total distributions and dividends
paid, and not on a per unit basis.
19
432
Financial Forecasts
Model Assumptions For Bus Manufacturing
Bus Deliveries: We are forecasting total deliveries of 1,597 equivalent units in
2006, based on management guidance for average production of 40 equivalent
units per week in Q4 and a reduction in work in process of 70 equivalent units.
For 2007, we estimate 2,040 equivalent unit deliveries, using managements
expectation that Q4 production levels will continue through 2007, supported by
the increase in New Flyers firm order backlog through Q3/06, which we
estimate at approximately 540 equivalent units.
EBITDA Per Bus: EBITDA per bus is calculated at US$33,500 per equivalent
unit for 2006, assuming US$45,000 in Q4/06, which factors in a greater number
of higher-margin deliveries, including electric trolley buses and BRT units, and
fixed costs spread over greater volume. We assume an average operating profit
per bus of US$39,900 in 2007, similar to the US$39,300 in 2005, and in
consideration of higher volumes. Further productivity gains and favourable
product mix could result in an operating profit per bus that is higher than we
have assumed, while higher costs without full pass through to customers could
result in lower-than-assumed margins.
Backlog: We are forecasting New Flyers backlog to decline to US$1,835 million
by the end of 2006 compared to US$1,976 million at the end of 2005. While the
dollar value of firm orders is expected to increase, the dollar value of options is
expected to decrease by a greater amount, consistent with the trend 2006 YTD,
and somewhat accelerated due to a higher number of assumed deliveries in
Q4/06. The backlog is assumed to decrease marginally to US$1,770 million by
the end of 2007 due to the high number of expected deliveries in 2007 and a
continued decline in the option backlog.
Model Assumptions For Aftermarket Operations

We estimate aftermarket EBITDA of US$14.2 million in 2006 and US$17.6
million in 2007. Our 2006 estimate is based on revenue growth of 30% and an
EBITDA margin of 20.8% in Q4, which we believe to be reasonable compared to
respective 2006 YTD numbers of 27.1% and 20.8%. Our 2007 estimate uses
assumed revenue growth of 20% and an assumed EBITDA margin of 21.5%,
reflecting marginally slower growth and volume-related margin expansion.
Foreign Exchange Rate Assumptions

Our foreign exchange rate assumption is C$/US$1.14 for both 2006 and 2007.
Cash Flow And Distributions Forecast

Our per unit operating cash flow estimates are calculated using fully diluted units
and common shares outstanding, whereas our distribution estimates are for IDS
units only, and therefore, are not directly comparable for calculating metrics
such as payout ratio.
We are forecasting 2006 operating cash flow of $1.13/unit and distributions of
$1.10/unit. For 2007, we estimate operating cash flow of $1.47/unit and
distributions of $1.10/unit. 2007 cash flow growth is mainly derived from higher
assumed deliveries and continued growth in aftermarket revenue.
2007 Sensitivity Analysis

Exhibit 22 provides sensitivities for the major assumptions underlying our 2007
operating cash flow estimate.
20
433
Exhibit 22. Cash Flow Sensitivities

2007E
Assumptions
Deliveries (equivalent units)
Operating Profit Per Bus (US$)
Revenue Growth
EBITDA Margin
Cash Flow Estimate ($/unit)
Cash Flow Sensitivities
Foreign Exchange Rate - C$/US$0.05
Deliveries +100 equivalent units
Operating Profit Per Bus +US$1,000
Revenue Growth +5%
EBITDA Margin +1%
1.14
2,040
39,900
20.0%
21.5%
1.47
+0.07/unit
+0.08/unit
+0.02/unit
+0.01/unit
+0.01/unit
Source: CIBC World Markets Inc.
Using our base assumptions for 2007 and running different scenarios for U.S.
industry orders we derive potential operating cash flow results, as shown in
Exhibit 23. Note that our assumption for 2007 deliveries closely corresponds to
what we calculate to be a normalized replacement rate in the U.S.
Exhibit 23. Scenario Analysis For U.S. Industry Orders 2007E

U.S. Industry Scenario
Low Over Last 16 Years (1992)
High Over Last 16 Years (2001)
Average For Past 16 years
Normalized Replacement, No Growth
Normalized Replacement, Plus 1.5% Growth
Industry Orders
Canada
1,044
1,044
1,044
1,044
1,044
U.S. Market Share

1,958
35%
5,854
35%
3,501
35%
5,000
35%
6,200
35%
New Flyer
Deliveries
1,051
2,414
1,591
2,115
2,535
Estimated
Cash Flow
$0.64/unit
$1.78/unit
$1.09/unit
$1.53/unit
$1.88/unit
21
434

2002
41-week
stub
period
2003
Q4/05
2005
19-week
stub
period
Q1/06
Q2/06
Q3/06
Q4/06E
2006E
2007E
Pro
forma
Q3/05
6-week
stub
period
Assumptions
1.57
1.20
1.21
1.18
1.18
1.18
1.18
1.11
1.12
1.15
1.14
1.14
Bus Manufacturing
Bus Deliveries
Revenue Per Bus (US$ 000s/bus)
EBITDA Per Bus (US$ 000s/bus)
Backlog (US$ mlns.)
1,750
263.7
27.2
1,848
1,938
295.5
33.8
2,071
1,583
339.5
39.3
1,976
202
328.8
29.5
1,906
353
348.9
41.5
1,976
555
341.6
37.2
1,976
319
371.3
35.6
1,951
336
359.8
11.8
1,913
392
365.0
34.2
1,861
550
380.0
45.0
1,835
1,597
370.3
33.5
1,835
2,040
375.0
39.9
1,771
Funds Flow (US$ mlns.)

Revenue
Bus Manufacturing
Total Revenue
236.4
24.9
261.3
461.4
37.8
499.2
572.8
44.2
617.0
537.4
53.4
590.8
66.4
5.8
72.2
123.2
13.6
136.7
189.6
19.4
208.9
118.5
17.4
135.8
120.9
15.8
136.7
143.1
17.4
160.5
209.0
17.7
226.7
591.4
68.3
659.7
765.0
81.9
846.9
(240.4)
(447.0)
(544.8)
(536.3)
(65.0)
(119.7)
(184.6)
(120.8)
(129.4)
(143.6)
(198.2)
(592.0)
(747.9)
Segmented EBITDA
Bus Manufacturing
Corporate (including realized FX loss (gain))
Total EBITDA
EBITDA Margin
16.6
4.4
(0.1)
20.9
8.0%
47.6
6.1
(1.5)
52.2
10.5%
65.5
8.8
(4.8)
69.5
11.3%
62.2
10.3
(17.2)
55.3
9.4%
6.0
1.3
(0.5)
6.7
9.3%
14.7
1.3
2.1
18.1
13.2%
20.6
1.3
2.9
24.8
11.9%
11.4
3.6
0.2
15.2
11.2%
4.0
3.4
(0.0)
7.3
5.4%
13.4
3.5
0.1
17.0
10.6%
24.8
3.7
0.0
28.4
12.5%
53.5
14.2
0.2
67.9
10.3%
81.4
17.6
0.0
99.0
11.7%

Adjusted EBITDA
(0.1)
20.8
(1.7)
50.5
(0.4)
69.1
18.0
73.4
0.4
7.1
(0.4)
17.7
(0.0)
24.8
0.0
15.2
0.1
7.4
0.0
17.0
0.0
28.4
0.1
68.0
0.0
99.0
(10.9)
(10.5)
47.7
57.4
1.06
(10.9)
(13.4)
49.1
59.4
1.10
(1.2)
2.1
8.1
9.5
0.18
(1.8)
(6.0)
9.9
11.7
0.22
(3.0)
(3.9)
18.0
21.3
0.39
(2.1)
(3.9)
9.1
10.8
0.20
(2.5)
3.1
8.0
9.0
0.17
(2.4)
1.0
15.7
17.5
0.32
(2.7)
(4.8)
21.0
24.1
0.45
(9.6)
(4.6)
53.8
61.1
1.13
(10.9)
(18.2)
69.9
79.4
1.47
Capital Flows (US$ mlns.)

Net Equity Proceeds
Net Debt Issue
(2.5)
0.0
0.0
0.0
(3.7)
(2.5)
0.0
0.0
0.0
(5.2)
(0.2)
(51.1)
158.2
(30.7)
(79.3)
(0.1)
(0.3)
0.0
0.0
1.0
(0.4)
(51.4)
158.2
(30.7)
(78.3)
(0.3)
(0.6)
0.0
0.0
2.3
(0.3)
(0.2)
0.0
0.0
3.3
(0.0)
(0.3)
0.0
0.0
(4.6)
(0.6)
0.0
0.0
0.0
(9.7)
(1.3)
(1.1)
0.0
0.0
(8.5)
(2.6)
0.0
0.0
0.0
(24.5)
Distributions To Public Unitholders (C$)
Per Unit
41.5
49.9
27.9
22.0
1.10
41.3
50.0
28.0
22.0
1.10
5.0
5.9
3.3
2.6
0.13
10.5
12.4
6.9
5.5
0.27
15.4
18.2
10.1
8.1
0.41
10.5
12.4
6.9
5.5
0.28
10.8
12.1
6.6
5.5
0.28
10.8
12.1
6.6
5.5
0.28
10.6
12.2
6.7
5.5
0.28
42.9
48.7
26.7
22.0
1.10
42.8
48.7
26.7
22.0
1.10

IDS Units - Public
Total Outstanding
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
20.0
34.1
54.1
118.6
33.9
84.7
118.6
33.1
85.6
118.6
33.9
84.7
118.6
33.9
84.7
118.5
29.8
88.7
119.8
24.6
95.2
119.8
28.7
91.2
119.8
38.4
81.5
119.8
38.4
81.5
119.8
62.9
57.0
Interest Expense
Taxes and Other
Operating Cash Flow
Financial Leverage (US$ mlns.)

less Net Working Capital
Net Debt (Debt less NWC)
2004
2005
Pro
forma
1.40
940
251.4
17.6
966
22
435
Valuation Analysis And

Recommendation
A summary of New Flyers valuations relative to select manufacturing/
processing-based business trusts and IDSs covered by CIBC World Markets is
provided in Exhibit 25. By most metrics, New Flyer is trading at a discount to
comparable group averages despite financial leverage that is below average. We
believe a discount is warranted given significant variability in industry orders,
reducing the comparative stability and predictability of New Flyers business,
particularly relative to the group of IDS comparables. The rather significant
discount on a 2007E basis likely reflects the markets focus on Q4/06E results in
the context of management guidance and the prospect that 2007 expectations
may change based on Q4 delivery, both in terms of EBITDA and order activity.
In addition, a price to DCF (10%) of 0.7x may imply that New Flyer is trading at
a valuation that does not fully reflect its long-term potential.
Exhibit 25. Select Business Trust And IDS Comparables

Company
Select Business Trust Comparables
Chemtrade Logistics Income Fund
Clearwater Seafoods Income Fund
Connors Bros. Income Fund
Menu Foods Income Fund
Swiss Water Decaffeinated Coffee Income Fund
Symbol
CHE.UN
CLR.UN
CBF.UN
MEW.UN
SWS.UN
Current
Price
EV/2006E
EBITDA
EV/2007E
EBITDA
2006E Yield
2007E Yield
$8.10
$4.65
$9.60
$6.40
$9.10
6.9x
5.2x
8.6x
6.0x
7.1x
5.9x
5.7x
7.7x
5.9x
6.5x
17.7%
6.5%
14.1%
0.0%
9.4%
18.0%
12.9%
14.1%
8.4%
9.3%
Average
Range
Select IDS Comparables
Atlantic Power Corporation
Otelco Inc.
Primary Energy Recycling Corporation
Student Transportation of America
6.8x
5.2x to 8.6x
ATP.UN
OTT
PRI.UN
STB.UN
$9.99
$19.75
$9.70
$11.20
Average
Range
10.1x
8.8x
8.9x
10.3x
9.6x
8.8x to 10.3x
NFI.UN
$8.46
7.3x
Net Debt / Payout Ratio

2006E
Net Debt/EV 2006E EBITDA
37.8%
30.4%
41.6%
21.6%
-4.6%
2.2x
1.7x
3.2x
1.3x
-0.3x
109%
35%
93%
0%
73%
6.3x
9.5%
12.6%
25.4%
5.7x to 7.7x 0.0% to 17.7% 8.4% to 18.0% -4.6% to 41.6%
1.6x
-0.3x to 3.2x
62%
0% to 109%
43.4%
30.4%
29.6%
18.0%
3.8x
2.4x
2.2x
1.6x
80%
93%
95%
98%
8.3x
10.1%
10.2%
30.4%
7.8x to 8.7x 8.5% to 11.6% 8.5% to 11.9% 18.0% to 43.4%
2.5x
1.6x to 3.8x
92%
80% to 98%
0.9x
81%
8.2x
7.8x
8.7x
8.6x
5.0x
10.4%
8.5%
11.6%
9.6%
13.0%
10.6%
8.5%
11.9%
9.8%
13.0%
18.4%

Our initial price target for New Flyer is set at $9.00 per unit using an EV/2007E
EBITDA of 5.3x and implying a 2007E forward yield of 12.2%. Our 5.3x target
multiple is at the low end of the range in consideration of the risk that Q4 results
may fall short of management guidance, relatively aggressive production
expectations for 2007, and general variability of industry orders.
Investment Conclusion
The April strike at New Flyers Winnipeg facility had a material impact on
deliveries and EBITDA in Q2/06. Management guidance implies that the
company can make up for the strike-related shortfall in Q4/06, an objective
23
436
that, in our opinion, leaves little margin for error. Our preference is to leave
some room for error, and thus our 2006 estimates are positioned moderately
below management guidance. There are a number of risks, such as higher-thananticipated costs associated with accelerated production levels, production
delays, or liquidated damages, which could lead to results that fall short of
expectations.
Bus orders in Canada are currently at healthy levels, following an extended
period of underinvestment thanks to improved provincial and federal funding
that are expected to support new bus orders at least through 2010. U.S. orders
have slumped since peaking in 2001, and have dropped below the trailing 16year average. The availability of capital from federal sources and growing tax
revenue at the state and local level suggest that orders are due for a rebound,
and some simple computations suggest that under normalized replacement
rates, orders could move materially higher. Management has cited improving
U.S. industry activity, supported by growth in the firm order backlog. However,
the total backlog has declined since the start of the year as New Flyer has not
received new option orders sufficient to replace exercised options. Order activity
during Q4/06 and Q1/07 may provide more certainty regarding the sustainability
of increased production.
We believe that current valuations, which are at the low end of the range for
select business trust and IDS comparables, reflect risks associated with the
potential for Q4/06 results to fall short of guidance and industry orders that tend
to be fairly lumpy. If management can deliver on its 2006 guidance and as
potential deliveries for 2007 become more certain, there may be room for
multiple expansion. A price to DCF (10%) of 0.7x implies that current valuations
may not adequately reflect long-term potential.
We are initiating coverage on New Flyer with a Sector Performer rating in
consideration of near-term risks that, for now, offset potential cash flow upside
associated with a rebound in U.S. industry orders and rapid growth in the
aftermarket operation.

Order Variability: Industry-wide bus orders have been rather lumpy from year
to year, resulting in potential cash flow variability for New Flyer. The availability
of government funding for transit needs is a key driver of order volume and may
fluctuate depending on tax revenue and budget priorities, contributing to order
lumpiness.
Raw Material And Component Costs: Raw materials and components account
for the majority of bus manufacturing costs, approximately 73% in 2005. This
includes raw materials, such as carbon and stainless steel, aluminum, copper,
resins, and oil-based products that may experience significant price fluctuations.
Roughly 50% of raw material and component costs are fixed through annual
price contracts with suppliers plus New Flyer will often obtain fixed price quotes
for customer-specific orders at time of bid to obtain margin protection. However,
a material change in prices could negatively impact margins and cash flow,
particularly if New Flyer is unable to pass through higher input costs to
customers.
Product Warranty Claims: New Flyer is subject to product warranty claims as
an ordinary part of its business. The company typically provides a 12-year
warranty on its bus structure (sometimes up to 18 years) and one- to five-year
warranties on certain other major bus components. Expected warranty costs are
built into New Flyers pricing and costs have been fairly stable over the past
24
437
three years: US$11.9 million in 2003, US$10.2 million in 2004 and US$12.3
million in 2005. However, excessive warranty claims in any period could
negatively impact results. In addition, any negative publicity as a result of
excessive warranty claims could be damaging to New Flyers reputation.
Labour Agreements: Approximately 65% of New Flyers employees are
represented by unions through four collective labour agreements. The current
agreements expire as follows: March 31, 2008 St. Cloud facility; December 31,
2010 Crookston facility; March 31, 2009 Winnipeg facility; and March 31,
2009 Inspection unit at Winnipeg facility. Any labour disruption, such as that
which occurred in April at the Winnipeg facility, could result in production delays
and increased costs.
through revenue, operating costs, and financial obligations that are a mix of U.S.
dollar and Canadian dollar flows. Depending on the revenue split between
Canadian dollars and U.S. dollars, which can vary materially from period to
period, the companys net currency exposure will fluctuate. New Flyer actively
hedges its expected currency exposure as firm orders are planned into
production. Changes in the C$/US$ exchange rate from year to year may impact
Tax Treatment Of Interest On Subordinated Notes: It is possible that the
U.S. Internal Revenue Service or U.S. courts may take the position that the IDS
units are a single security classified as equity or that the subordinated notes be
classified as equity for federal income tax purposes, which could negatively
impact cash flow and distributions.
25
438
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2005 Current
--
--
--
--
$1.10A
2006 Current
$0.28A
$0.28A
$0.28A
$0.28E
$1.10E
2007 Current
$0.28E
$0.28E
$0.28E
$0.28E
$1.10E
26
439

(NFI.UN)
2f
2g
27
440
Atlantic Power Corporation (2a, 2c, 2e) (ATP.UN-TSX, $9.99, Sector Performer)
Chemtrade Logistics Income Fund (2g) (CHE.UN-TSX, $8.10, Sector Performer)
Clearwater Seafoods Income Fund (2g) (CLR.UN-TSX, $4.65, Sector Underperformer)
Connors Bros. Income Fund (2g) (CBF.UN-TSX, $9.60, Sector Performer)
Menu Foods Income Fund (2g) (MEW.UN-TSX, $6.40, Sector Performer)
Otelco, Inc (2a, 2d, 2f, 2g) (OTT-AMEX, US$20.50, Sector Performer)
Primary Energy Recycling Corporation (PRI.UN-TSX, $9.70, Sector Outperformer)
Student Transportation of America (2a, 2c, 2e, 2g) (STB.UN-TSX, $11.20, Sector Outperformer)
Swiss Water Decaffeinated Coffee Income Fund (2g) (SWS.UN-TSX, $9.10, Sector Outperformer)
DaimlerChrysler AG (DCX-NYSE, US$60.11, Not Rated)
Ford Motor Company (F-NYSE, US$8.56, Not Rated)
28
441

1
2a
2b
2c
2d
2e
2f
2g
3a
3b
3c
4a
4b
4c
5a
5b
6a
6b
7
8
9
10
past 12 months.
past 12 months.
the past 12 months.
past 12 months.
equity securities.
11
12
13
14

29
442
30
443

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

(as of 21 Nov 2006)
Count
Percent
Count
Percent
322
39.1%

164
50.9%
401
48.7%
195
48.6%
70
8.5%
31
44.3%
Restricted
18
2.2%
Restricted
16
88.9%

(as of 21 Nov 2006)
Count
Percent
Count
Percent
23
39.7%

22
95.7%
30
51.7%
26
86.7%
6.9%
75.0%
Restricted
1.7%
Restricted
100.0%
Income Trusts Sector includes the following tickers: AER.UN, ALA.UN, ATP.UN, AW.UN, AYP.UN, BFC.UN, BPF.UN, BRK.UN, CBF.UN,
CGX.UN, CHE.UN, CHL.UN, CIX.UN, CLC.UN, CLR.UN, CSS.UN, CWI.UN, CWM.UN, DET.UN, EAT.UN, ENF.UN, FCE.UN, FDG.UN,
FLM.UN, GLF.UN, GMP.UN, GZM.UN, IPL.UN, JAZ.UN, KEG.UN, KEY.UN, LIF.UN, LIV.UN, MEW.UN, NAL.UN, NFI.UN, NWF.UN, OSP.UN,
PIF.UN, PKI.UN, PRI.UN, PRT.UN, QSR.UN, RSF.UN, SFK.UN, SIF.UN, STB.UN, SWS.UN, TAY.UN, TF.UN, TPW.UN, TRK.UN, TWF.UN,
UWH.UN, WTE.UN, XSC.UN, YLO.UN, Z.UN.
31
444
Legal Disclaimer
without notice.
32
445
Equity Research
Initiating Coverage
May 29, 2006
Income Trusts
Stock Rating:
Sector Performer
Executive Summary - Initiating Coverage

Sector Weighting:
Market Weight
Key Indices:
$10.00
$9.14

52-week Range
Units Outstanding
Float
Distr. Taxability
Distribution/Distr. Yield
Fiscal Year Ends
EBITDA
2006 EV/EBITDA
Net Debt
Net Asset Value
Common Equity
21.4%
$7.25-$10.00
54.1M
20.0M Units
100.0%
$494.9M
$1.10 / 12.0%
December
$73.70M
9.4X
$214.5M
NM
NM
No
2005
2006
2007
Cash-on-Cash Yield
2005
2006
2007
2005 is on a pro forma basis.
Prev

2005
2006
2007
Payout Ratio
2005
2006
2007
Current
$1.10A
$1.10E
$1.10E
12.0%
12.0%
12.0%
Effective May 26, we are initiating coverage of New Flyer Industries Inc.
(NFI.UN) with a Sector Performer rating and a $10.00 price target. A closing
price of $9.14 and our 2006E and 2007E distributions payable of $1.10
imply a total return of 21.4%, of which 12% is from distributions.
NFI.UN has the largest market share in North American heavy-duty transit
bus manufacturing with ~36% of new bus orders and ~20% of the
aftermarket parts market share. Bus manufacturing represents ~89% of
F2006E revenue with the balance from its aftermarket parts division.
NFI.UN's competitive advantages: 1) broadest product offering; 2) good
reputation for timely delivery and quality of product; and 3) short duration
of holdback payments. Industry challenges: 1) variability in demand; 2)
variability in government funding; and 3) some margin risk.
Our SP rating reflects our belief that NFI.UN is currently fairly valued.
Growth of its aftermarket division & the winning of additional contracts are
largely offset by deferred orders in F05 & F06 due to government budget
constraints impacting CF in F06E & F07E, & by liquidity rights overhang.
$1.15A
$1.10E
$1.18E
95.7%
100.0%
93.3%
Source: Reuters
Company Description
New Flyer is the leading heavy-duty bus manufacturer in
the US and Canada with three production facilities (1 in
Manitoba and 2 in Minnesota).

1 (416) 594-7232
Vivian Lo
1 (416) 956-3643
Alice.Sun.Dunning@cibc.ca
Vivian.Lo@cibc.ca

and cibcwm.com
06-60894 2006
446
Executive Summary - Initiating Coverage - May 29, 2006
Executive Summary
Please see our full 58-page report dated May 26, 2006 for details.
Effective May 26, 2006, we are initiating coverage of New Flyer Industries Inc.
(NFI.UN) with a Sector Performer rating and a $10.00 price target. The current
trading price of $9.14 and our 2006E and 2007E distributions payable of
$1.10/unit imply a total return of 21.4%, of which 12.0% is from distributions
and 9.4% from capital gains.
Structured as an income deposit security (IDS), NFI.UN completed its initial
public offering (IPO) in August 2005. The IDS units represent: 1) one Common
Share (Class A) in New Flyer Industries Inc. and 2) $5.33 principal amount of
the 14% Subordinated Units issued by New Flyer Industries Canada ULC.
Among the five largest transit bus manufacturers in Canada and the U.S., which
together represent approximately 90% of the market, NFI.UN is the largest
manufacturer holding approximately 36% of the industrys new bus orders as at
January 2005. The majority of NFI.UNs business is bus manufacturing,
supplemented by a growing aftermarket parts services division that represented
9% of total pro forma 2005 revenue and approximately 11% of 2006E revenue.
NFI.UN has the broadest range of products available in the industry, including
standard and low-floor buses with various types of fuel propulsion, electric
trolleys, and bus rapid transit products. The company has ongoing relationships
with 19 out of the 25 largest transit authorities in Canada and the U.S., and
regularly receives orders from repeat customers. Within the last three years,
85% of revenue was from customers from the prior five years. However, the
composition of its customer base could vary from year to year, depending on the
transit authorities requirements as well as funding availability. Furthermore, the
geographical mix of sales could also fluctuate on a year-to-year basis with 13%
of sales in Canada and 87% in the U.S. in 2004, to 31% of sales in Canada and
69% in the U.S. in 2005. Currency hedges are put into place according to the
expected Canada/U.S. sales mix.
The industry is competitive, as the demand is only for 4,000 to 4,500 buses
each year. Based on historical trends, we believe that the following factors are
key to profitability in this industry: 1) the ability to win requests for proposals
(RFPs) by meeting customers highly detailed specifications with regard to
customization; 2) the ability to deliver a high-quality product on time, and
provide strong aftermarket parts service; 3) the ability to accurately determine
the cost of manufacturing the bus and the sale price accordingly; and 4) an
efficient production process. The U.S. federal government provides up to 80% of
the cost for new transit buses, provided that a manufacturer meets certain
criteria; in Canada, funding is predominately through municipal and provincial
governments.
We believe growth opportunities for NFI.UN includes:
1. increasing premium product sales such as environmentally friendly
propulsion systems;
2. growing the higher-margin aftermarket parts services division, which
currently holds a 20% market share;

3. complementary acquisitions over the longer term.
However, NFI.UN could also face the following challenges:
447
1. variability in government funding that could impact order flow (budget
constraints in the US in 2005, which are expected to continue in 2006, have

resulted in deferred orders. As buses are delivered approximately one year
after a request for proposal, these deferred orders are expected to
negatively impact cash flow in 2006E and 2007E);
2. variability in the timing of bus replacement demand;
3. warranty guarantees and potential product recalls/retrofit;
4. delayed payment from customers due to payment withholding clause to
ensure performance by NFI.UN;

5. margin risk should material costs, 50% of which is not protected from price
increases, rise substantially beyond what was factored into the bid price;
6. labour relations as 69% of its employees are represented by unions under
four collective bargaining agreements; and

7. currency risk.
In addition, Class B (subordinated) and C shareholders, who represent the

continuing investors and management optionholders, have the right to request
NFL Holdings Inc., (a subsidiary of New Flyers Industries Inc.) to purchase for
cancellation, all or part of their 34.1 million shares, as long as the minimum
gross proceeds is $40 million. NFL Holdings Inc. would, therefore, need to
finance the purchase with cash on hand, and/or raise debt and/or equity at the
IDS level to meet this requirement. As at Q1/06, NFL Holdings Inc. had a total of
US$3.6 million in cash and cash equivalents. If NFL Holdings Inc. fails to finance
the purchase of the exercised Class B and C shares, then those shares in
question will receive dividends at 110% of that declared to Class A (IDS)
shareholders. Note that the cost base to Class B and C shareholders is calculated
to be approximately US$8.11/share.

Our $10.00 price target was calculated by taking the average of three valuation
methods rounded to the nearest $0.25.
Exhibit 1. Price Target for NFI.UN

Method of Analysis
2006 EV/EBITDA
Discounted Cash Flow
Target Yield
Average (rounded to nearest $0.25)
Price Target
$9.36
$10.79
$10.00
$10.00
448
2006E EV/EBITDA Multiple Method NFI.UN operates in an industry

with few publicly traded competitors rendering it more difficult to make an
apples-to-apples comparison. As a result, we have chosen to take the
average 2006E EV/EBITDA of all IDSs, IPSs, and income trusts classified
under industrial goods (capital goods and transportation) under CIBC World
Markets coverage universe as a benchmark and adjust for factors unique to
NFI.UN. Using an average multiple of 8.0x, we increased it to arrive at a
target multiple of 9.0x to adjust for: 1) the higher credit quality of NFI.UNs
customers as the majority are government transit authorities and the
probability of payment default is minimal; 2) a constant minimum level of
demand as transit buses are recognized as an essential mode of
transportation that requires continual replacement; and 3) NFI.UNs
dominant market share in North America as evidenced by the number of
delivered units as well as introduction of innovative designs that have
become industry standards. Although NFI.UN has the broadest product
offering in the industry providing customers with a wide range of choices,
thereby increasing the probability NFI.UN would be considered for a
contract, it does not guarantee that NFI.UN would win the RFP.
Consequently, our target multiple does not reflect this aspect of NFI.UN.
Using our 2006E EBITDA of US$73.7 million and a weighted average
US$/C$ forecast exchange rate of 0.88, we arrive at a price target of $9.36.
Discounted Cash Flow (DCF) Method In determining the discount

rate, our assumptions include an 11.3% cost of equity, 7.0% cost of debt
and a corporate tax rate of 36.5%, to arrive at a $10.79 price target.
Again, with few direct comparables, we have chosen to compare NFI.UN to
the average of all IDSs, IPSs, and income trusts classified under industrial
goods (capital goods and transportation) under CIBC World Markets
coverage.
Target Yield Method In our target yield analysis, we use a forecast of

the 10-year Government of Canada bond yield of 4.0%, the historical yield
spread between NFI.UN and the 10-year bond, and then adjust for
qualitative and quantitative factors specific to NFI.UN. We tightened the
yield spread to reflect: 1) quality of management, as new management has
improved operations of the company in recent years; 2) asset quality and
diversification; and 3) a low payout ratio. We widened the yield to reflect:
1) limited external growth opportunities; 2) limited organic growth, as RFPs
for new contracts depend on the availability of government funding and
timing of demand from transit authorities; 3) margin risk, as not all
material costs have been fixed (i.e., steel, aluminum); and 4) the inherent
discount applied to NFI.UN related to the structure of the company. We
arrive at a target yield of 11.1% and applying our 2006E and 2007E
distributions payable forecast of $1.10, this implies a price target of $10.00.

The bus manufacturing business is not an easy business to be successful at due
to the risks associated with this industry, including: 1) variability of government
funding could impact order flow and, therefore, annual distributable cash flow;
2) variability in timing of replacement demand could impact order flow and
annual distributable cash flow; 3) significant warranty claims and product recalls
could adversely impact profitability; 4) delayed payment receipt due to payment
withholding clause post-delivery could impact working capital requirement; 5)
potential margin squeeze due to rising raw material costs could impact
profitability; 6) work stoppages by unionized workers; and 7) early termination
of multi-year contracts.
449
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2005 Current
--
--
--
--
$1.10A
2006 Current
--
--
--
--
$1.10E
2007 Current
--
--
--
--
$1.10E
3 Qtr.
4 Qtr.
Yearly
Our DCFPU estimates are shown below:
1 Qtr.
2 Qtr.
2005 Current
--
--
--
--
$1.15A
2006 Current
$0.18A
$0.23E
$0.35E
$0.35E
$1.10E
2007 Current
$0.32E
$0.29E
$0.29E
$0.29E
$1.18E
450

(NFI.UN)
2a
2c
2d
2e
2f
2g
4a
4b
CIBC World Markets Corp. has received compensation for investment banking services from New Flyer
New Flyer Industries Inc. is a client for which a CIBC World Markets company has performed non-investment
banking, non-securities-related services in the past 12 months.
services from New Flyer Industries Inc. in the past 12 months.
451
452

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

(as of 28 May 2006)
Count
Percent
Count
Percent
314
38.9%

171
54.5%
177
45.6%
388
48.1%
77
9.5%
37
48.1%
Restricted
20
2.5%
Restricted
20
100.0%

(as of 28 May 2006)
Count
Percent
Count
Percent
22
34.9%
21
95.5%
28
44.4%
24
85.7%
10
15.9%
70.0%
4.8%
Restricted
100.0%
Restricted
Income Trusts Sector includes the following tickers: AER.UN, APF.UN, AW.UN, AYP.UN, BFC.UN, BPF.UN, BPT.UN, BRK.UN, CBF.UN,
CDI.UN, CF.UN, CGX.UN, CHE.UN, CLC.UN, CLE.UN, CLR.UN, COU.UN, CSS.UN, CWI.UN, CWM.UN, DET.UN, DHF.UN, EAT.UN,
ENF.UN, EP.UN, FCE.UN, FDG.UN, FLM.UN, FZR.UN, GLH.UN, GZM.UN, ICE.UN, IEF.UN, IPL.UN, KEG.UN, KEY.UN, LIF.UN, LIV.UN,
MEW.UN, MPT.UN, NAL.UN, NFI.UN, NIF.UN, NPI.UN, NWF.UN, OSP.UN, PIF.UN, PKI.UN, PRT.UN, QSR.UN, RSF.UN, SFK.UN, SIF.UN,
SPF.UN, SWS.UN, TAY.UN, TIL.UN, TPW.UN, TWF.UN, UWH.UN, WTE.UN, YLO.UN, Z.UN.
453
Legal Disclaimer
without notice.
454
Equity Research
Initiating Coverage
May 26, 2006
Income Trusts/Income Deposit Securities
Stock Rating:
Sector Performer
Transit Bus Order Deferrals Drive Demand For

Aftermarket Parts In The Near Term
Sector Weighting:
Market Weight
Key Indices:
$10.00
$9.14

21.4%
52-week Range
$7.25-$10.00
Units Outstanding
54.1M
Float
20.0M Units
Distr. Taxability
100.0%
$494.9M
Distribution/Distr. Yield
$1.10 / 12.0%
Fiscal Year Ends
December
EBITDA*
$73.70M
2006 EV/EBITDA
9.4X
Net Debt
$214.5M
Net Asset Value
NM
Common Equity
NM
No
*EBITDA and Net Debt figures are in US$.
2005
2006
2007
Cash-on-Cash Yield
2005
2006
2007
2005 is on a pro forma basis.
Prev

2005
2006
2007
Payout Ratio
2005
2006
2007
Current
$1.10A
$1.10E
$1.10E
12.0%
12.0%
12.0%
Effective May 26, we are initiating coverage of New Flyer Industries Inc.
(NFI.UN) with a Sector Performer rating and a $10.00 price target. A closing
price of $9.14 and our 2006E and 2007E distributions payable of $1.10
imply a total return of 21.4%, of which 12% is from distributions.
NFI.UN has the largest market share in North American heavy-duty transit
bus manufacturing with ~36% of new bus orders and ~20% of the
aftermarket parts market share. Bus manufacturing represents ~89% of
F2006E revenue with the balance from its aftermarket parts division.
NFI.UN's competitive advantages: 1) broadest product offering; 2) good
reputation for timely delivery and quality of product; and 3) short duration
of holdback payments. Industry challenges: 1) variability in demand; 2)
variability in government funding; and 3) some margin risk.
Our SP rating reflects our belief that NFI.UN is currently fairly valued.
Growth of its aftermarket division & the winning of additional contracts are
largely offset by deferred orders in F05 & F06 due to government budget
constraints impacting CF in F06E & F07E, & by liquidity rights overhang.
$1.15A
$1.10E
$1.18E
95.7%
100.0%
93.3%
Source: Reuters
Company Description
New Flyer is the leading heavy-duty bus manufacturer in
the US and Canada with three production facilities (1 in
Manitoba and 2 in Minnesota).

1 (416) 594-7232
Vivian Lo
1 (416) 956-3643
Alice.Sun.Dunning@cibc.ca
Vivian.Lo@cibc.ca

and cibcwm.com
06-60638 2006
455
Transit Bus Order Deferrals Drive Demand For Aftermarket Parts In The Near Term - May 26, 2006
Table of Contents
Executive Summary ................................................................................ 3
Investment Summary ............................................................................. 5
Liquidity Right Overhang....................................................................... 5
Industry Concerns................................................................................ 6
NFI.UNs Advantages ............................................................................ 7
Demographic Trends Support Demand.................................................... 9
Valuation .............................................................................................. 11
Transit Bus Industry Overview ............................................................. 12
Procurement Process .......................................................................... 14
Regulatory Environment ..................................................................... 16
Company History .................................................................................. 18
Management Team ............................................................................... 20
Corporate Governance ........................................................................ 21
NFI.UNs Business ................................................................................ 23
Products ........................................................................................... 25
Aftermarket Parts And Services ........................................................... 26
Competition .......................................................................................... 27
Barriers To Entry................................................................................ 29
Structure Characteristics Of Income Deposit Securities..................... 30
Opportunities For Growth ..................................................................... 33
Risks..................................................................................................... 35
Capital Funding .................................................................................... 39
Financial Summary ............................................................................... 41
Assumptions And Forecasts.................................................................... 41
Appendix A. .......................................................................................... 46
Management Biographies....................................................................... 46
Appendix B. .......................................................................................... 48
Directors Biographies ........................................................................... 48
Appendix C. .......................................................................................... 50
IDS Structure ....................................................................................... 50
Appendix D. .......................................................................................... 51
Competitors ......................................................................................... 51
456
Executive Summary
Effective May 26, 2006, we are initiating coverage of New Flyer Industries Inc.
(NFI.UN) with a Sector Performer rating and a $10.00 price target. The current
trading price of $9.14 and our 2006E and 2007E distributions payable of
$1.10/unit imply a total return of 21.4%, of which 12.0% is from distributions
and 9.4% from capital gains.
Structured as an income deposit security (IDS), NFI.UN completed its initial
public offering (IPO) in August 2005. The IDS units represent: 1) one Common
Share (Class A) in New Flyer Industries Inc. and 2) $5.33 principal amount of
the 14% Subordinated Units issued by New Flyer Industries Canada ULC.
Among the five largest transit bus manufacturers in Canada and the U.S., which
together represent approximately 90% of the market, NFI.UN is the largest
manufacturer holding approximately 36% of the industrys new bus orders as at
January 2005. The majority of NFI.UNs business is bus manufacturing,
supplemented by a growing aftermarket parts services division that represented
9% of total pro forma 2005 revenue and approximately 11% of 2006E revenue.
NFI.UN has the broadest range of products available in the industry, including
standard and low-floor buses with various types of fuel propulsion, electric
trolleys, and bus rapid transit products. The company has ongoing relationships
with 19 out of the 25 largest transit authorities in Canada and the U.S., and
regularly receives orders from repeat customers. Within the last three years,
85% of revenue was from customers from the prior five years. However, the
composition of its customer base could vary from year to year, depending on the
transit authorities requirements as well as funding availability. Furthermore, the
geographical mix of sales could also fluctuate on a year-to-year basis with 13%
of sales in Canada and 87% in the U.S. in 2004, to 31% of sales in Canada and
69% in the U.S. in 2005. Currency hedges are put into place according to the
expected Canada/U.S. sales mix.
The industry is competitive, as the demand is only for 4,000 to 4,500 buses
each year. Based on historical trends, we believe that the following factors are
key to profitability in this industry: 1) the ability to win requests for proposals
(RFPs) by meeting customers highly detailed specifications with regard to
customization; 2) the ability to deliver a high-quality product on time, and
provide strong aftermarket parts service; 3) the ability to accurately determine
the cost of manufacturing the bus and the sale price accordingly; and 4) an
efficient production process. The U.S. federal government provides up to 80% of
the cost for new transit buses, provided that a manufacturer meets certain
criteria; in Canada, funding is predominately through municipal and provincial
governments.
We believe growth opportunities for NFI.UN includes:
1. increasing premium product sales such as environmentally friendly
propulsion systems;
2. growing the higher-margin aftermarket parts services division, which
currently holds a 20% market share;

3. complementary acquisitions over the longer term.
457
However, NFI.UN could also face the following challenges:

1. variability in government funding that could impact order flow (budget
constraints in the U.S. in 2005, which are expected to continue in 2006,

have resulted in deferred orders. As buses are delivered approximately one
year after a request for proposal, these deferred orders are expected to
negatively impact cash flow in 2006 and 2007);
2. variability in the timing of bus replacement demand;
3. warranty guarantees and potential product recalls/retrofit;
4. delayed payment from customers due to payment withholding clause to
ensure performance by NFI.UN;

5. margin risk should material costs, 50% of which is not protected from price
increases, rise substantially beyond what was factored into the bid price;
6. labour relations as 69% of its employees are represented by unions under
four collective bargaining agreements; and

7. currency risk.
In addition, Class B (subordinated) and C shareholders, who represent the

continuing investors and management optionholders, have the right to request
NFL Holdings Inc., (a subsidiary of New Flyers Industries Inc.) to purchase for
cancellation, all or part of their 34.1 million shares, as long as the minimum
gross proceeds is $40 million. NFL Holdings Inc. would, therefore, need to
finance the purchase with cash on hand, and/or raise debt and/or equity at the
IDS level to meet this requirement. As at Q1/06, NFL Holdings Inc. had a total of
US$3.6 million in cash and cash equivalents. If NFL Holdings Inc. fails to finance
the purchase of the exercised Class B and C shares, then those shares in
question will receive dividends at 110% of that declared to Class A (IDS)
shareholders. Note that the cost base to Class B and C shareholders is calculated
to be approximately US$8.11/share.
Our $10.00 price target is determined using the average of three valuation
methods, rounded to the nearest $0.25:
1. 2006E EV/EBITDA: $9.36
2. Discounted cash flow (DCF): $10.79
3. Target yield: $10.00
458
Investment Summary
We are initiating coverage of NFI.UN with a Sector Performer rating and a
$10.00 price target. Although NFI.UN has a dominant market share in an
essential, replacement product market of heavy-duty transit buses given its
broad product offering, strong record of quality, timely deliveries and
after-market service, we believe that performance in 2006 and 2007 could be
negatively impacted by budget constraints at the U.S. state and municipal
levels, which resulted in deferred orders in 2005 and are expected to continue
into 2006. As it takes approximately one year from the request for proposal to
delivery, deferred orders in 2005 and 2006 would impact cash flow in 2006 and
2007. In addition, we believe that the liquidity rights given to Class B and Class
C shareholders (held by continuing investors and management optionholders)
could be viewed as an overhang in the market.
Liquidity Right Overhang

The liquidity right allows the Class B (subordinated) and C shareholders (or
continuing investors and management optionholders) to request NFL Holdings
Inc. (a subsidiary of New Flyer Industries Inc.) to purchase for cancellation, all
or any portion of the 34.148 million Class B and C shares, so long as the
minimum gross proceeds exceed $40 million on each occasion. For the IDS to
raise enough funds to satisfy the liquidity right exercised, this would imply using
cash on hand, and/or raising debt and/or equity at the IDS level, which could
negatively impact distributable cash flow through increased interest expense if
debt is used. Note that as at the end of Q1/06, NFL Holdings Inc. had cash and
cash equivalents of approximately US$3.6 million. Should NFL Holdings Inc. fail
to secure the necessary financing to buy back the shares as exercised by Class B
and C shareholders, then the shares in question would receive 110% of the
dividend income (not the interest income) paid to Class A (public) shareholders.
Note, however, that Class C shares must be retained by the Continuing Investor
for a minimum of one year after the closing of the IPO (or until August 19,
2006), and Class B shares must be held until the later of 1) two years after the
closing of the IPO and 2) termination of subordination. Distributions to Class B
Shares are subordinated in favor of distributions to Class A and Class C shares
until the following criteria are met:
1. New Flyer Industries Inc.s EBITDA for the 52-week period ending F2006
and for the 52-week period ending Q2/07 is at a minimum of US$69.1

million, or
2. New Flyer Industries Inc.s EBITDA for any 52-week period beginning with
F2007 is at a minimum of US$69.1 million. In addition, distributable cash

earned and distributions declared on NFI.UN are not less than $1.10/unit
per year (Distribution Target) in the prior 24-month period.
If after August 19, 2008, New Flyer Industries Inc. fails to meet the EBITDA and
distribution targets, holders of Class B shares will have the option to terminate
the subordination of all Class B shares, and thereafter, the amounts payable on
exercise of the Liquidity Right and/or Redemption Right will be reduced
proportionately based on the applicable distribution shortfall, if any.
Given that Class B and C shares were issued to Continuing Investors and
Management Optionholders (in exchange for their existing share ownership of
the predecessor company) at our calculated price of US$8.11 (US$277.3 million
for 2.6 million Class B shares and 31.6 million Class C shares), we believe that
profit-taking through exercise of its liquidity right could take place if NFI.UN is
trading above the shareholders cost base.
459
Industry Concerns
The business of building heavy-duty transit buses may be faced by periodic
difficulties since order flow is dependent on federal, state (in the U.S.)/provincial
(in Canada), and municipal funding which could vary year over year, depending
on the political environment and budgetary constraints. In the lean years when
government budgets reduce demand for replacement buses, manufacturers may
be faced with lower backlogs, which could be translated into lower deliveries and
revenue in the following year as it takes approximately one year from bid to
delivery of new buses. If the manufacturer underprices a request for proposal
in order to win the contract, profitability may be negatively impacted if
combined with higher-than-expected warranty claims, or financial penalties from
delayed deliveries.
In years when government budgets allow for significant fleet replacement,
manufacturers have to be careful not to over-extend themselves in winning
contracts, as this could lead to: 1) delayed deliveries and penalties; 2) increased
costs associated with additional shifts at the factories; 3) lower quality of
workmanship from the newly trained employees; 4) increased
repairs/retrofits/warranty claims lowering profitability; or 5) increased working
capital needs, which could cause the company to be over-levered, resulting in
the loss of bonding ability. Even if the acceptance rate of delivered buses is high,
an over-extended manufacturer could still face liquidity concerns as an
increasing number of contracts have a payment withholding clause for a period
of up to several years post-acceptance of delivered buses to ensure prompt
repairs, if any, by the manufacturers during the warranty period.
This vicious cycle of financial deterioration was played out several times at
various heavy-duty transit bus manufacturers (see Exhibit 1) including NFI.UN,
three times, prior to the current management team taking over: 1) the company
under the predecessor name of Western Flyer Coach was acquired by a Manitoba
government agency in 1971 after running into financial difficulties and 2) the
company was acquired by a Holland manufacturer in 1986; and 3) the company,
under the predecessor name of Flyer Industries Ltd. was acquired by KPS
Special Situations Fund in 2002 after running into financial difficulties.
Of the six largest North American manufacturers: 1) Neoplan (MANDE) was
shut down in early 2006, as a result of financial difficulties resulting from
delayed deliveries and retrofit requirements; 2) North American Bus Industries
Inc. (NABI) was sold to Cerberus Capital Management LP in January 2006
following financial difficulties; 3) Orion Bus Industries saw a complete shutdown
in 1994 due to financial difficulties and was sold to Western Star Trucks Holdings
in 1995, and subsequently to Freightliner [a subsidiary of DaimlerChrysler
(DCXNYSE)] in 2000; 4) Nova BUS Corporation was bailed out by the
government of Quebec in the 1990s with the promise to provide them with the
majority of all bus contracts for the province; 5) New Flyers predecessor was
bailed out by the Manitoba government in 1971, then acquired by a Holland
manufacturer in 1986, and eventually acquired by a financial investor in 2002,
each time as a result of financial difficulties; and 6) the only heavy-duty transit
manufacturer with the most stable ownership is Gillig Corporation, which focuses
only on the U.S. market and has been under one owner since 1973.
460
Exhibit 1. Ownership History Of The Top Six Heavy-duty Transit Bus Manufacturers
Company
Gillig Corporation
Neoplan U.S.A Corporation
New Flyer
Ownership
Inception to 1973: Family Owned
1973 to Present: Acquired by SG Herrick Corporation
Years Under
One Owner
36
Inception to 1998: Family Owned

1998 to 2006: Acquired by Willis Stein & Partners LP
Early 2006: Shutdown
1930 to 1948: Western Auto & Truck Body Works Ltd.

1948 to 1971: Name change to Western Flyer Coach
1971 to 1986: Acquired by a Manitoba government agency after running into financial difficulties, & the name was changed to Flyer
Industries Ltd.
1986 to 2002: Acquired by Den Oudsten BV (Holland)
2002 to 2005: Acquired by KPS Special Situations Fund after running into financial difficulties in 2001
2005 to Present: IPO of NFI.UN
15
6
3
North American Bus Industries Inc. (NABI) Inception to 1980's: Communist government sponsored company
1980's to 1992: Became a private company (Ikarus) after the fall of the Soviet empire
1992 to 1997: Acquired by First Hungary Fund & renamed NABI Kft.
1997 to 2006: Name change to NABI Rt.
Jan. 2006: Sold to Cerberus Capital Management LP (a private U.S.-based equity fund manager)
Nova BUS Corporation
12
14
1991 to 1993: Nova QUINTECH

1993 to 1994: Name change to Nova BUS
1994 to 1998: Bombardier acquired 25% of Nova BUS; Bail out by Quebec Government with a promise to provide Nova with the
majority of all bus contracts for the province
1998 to Present: Acquired by Prevost Car Inc. (subsidiary of Volvo Bus Corporation)
1976 to 1994: Operated as two companies (Ontario Bus Industries Ltd. & Bus Industries of America, Inc.)
1994: Complete shut down of both companies due to financial difficulties.
1995 to 2000: Acquired by Western Star Trucks Holdings
2000 to Present: Acquired by Freightliner (a subsidiary of DaimlerChrysler)
Average
4
8
18
5
6
11.25
Source: 2002 Bus Industry Annual Report, Bus Book Publishing
NFI.UNs Advantages
We believe that NFI.UNs success in the heavy-duty bus industry is owed to its
high quality of product, timely deliveries, low repair/warranty/retrofit
requirements, rational pricing, as well as to its broad range of product offerings.
To be successful in the heavy-duty bus manufacturing industry, key factors
include: 1) high reliability and dependability of products delivered; 2) proper
pricing; 3) the ability to meet customers specifications, and 4) timely deliveries.
In our discussions with several industry sources, delayed deliveries, poor quality
of products resulting in excessive warranty claims and/or retrofit requirement,
as well as under-pricing, contributed to past failures.
Survey Of North Americas 19 Largest Transit Authorities

In an effort to assess customer sentiment towards NFI.UNs product compared
with other competing bus manufacturers, we conducted a survey with North
Americas 19 largest transit authorities on product and services received over
the last three years (i.e., since the arrival of the new management team). While
only eight responded, the overall opinion was that NFI.UNs products and
services were preferred over the competition. NFI.UN received positive feedback
for on-time delivery and acceptance rate while the competition was less
successful, with description of horrendous in some cases. The repair rate on
NFI.UNs buses was generally lower than the competition, and any problems
were more readily identifiable (usually within several months of delivery) than
other manufacturers where problems would surface up to three years after
operation. Participants in our survey are listed in Exhibit 2.
461
Exhibit 2. Transit Authority Survey Participants

Transit Authority
Baltimore, MD
Boston, MA*
Chicago, IL*
Cleveland, OH
Edmonton, AB
Houston, TX
Los Angeles, CA
Minneapolis, MN
New York, NY
Orange, CA
Ottawa, ON
Philadelphia, PA
Phoenix, AZ
Portland, OR
San Francisco, CA
Seattle, WA
Toronto, ON
Vancouver, BC
Washington, DC
Survey Participation
Yes
Yes
Yes
No
No
Yes
No
No
No
No
No
No
Yes
Yes
No
No
Yes
Yes
No
* New Flyer is currently in the process of delivering buses to the transit authority
Source: CIBC World Markets Inc.
New Management Team Builds On Broad Product Offering

NFI.UN has historically been a market leader in the heavy-duty transit bus
industry, introducing several innovative designs. Compared to other
manufacturers, NFI.UN has the widest range of products available, potentially
making it easier to satisfy the various customization requests by transit
authorities. Prior to the arrival of the new management team in 2002, the
company ran into financial difficulties with delayed delivery penalties and quality
concerns. Since the arrival of the new management team, there have been no
delayed deliveries in the past three years, but warranty claims have remained
consistent at approximately $12 million per year.
Management indicated that its strategy on RFPs is not to be the lowest bidder,
but to be the best all-around provider of quality manufacturing, design, timely
delivery, and aftermarket support. As customers have experienced poor
aftermarket support in the past, this aspect of a manufacturer is receiving
greater focus in the RFP process. With NFI.UNs track record of low repair rates
and timely aftermarket service, we believe that this could provide the company
with a competitive advantage.
With respect to working capital liquidity, some manufacturers may experience
constraints resulting from a payment holdback clause in place with some
customers. The payment holdback could have a duration from several months to
several years as an incentive for the manufacturer to complete any outstanding
repairs. The longer the holdback period, the less working capital is available to
the manufacturer for the next contract. For NFI.UN, as most of the contracts are
from repeat customers who are familiar with their record of performance and
who have new orders with the company, management has been successful in
negotiating for shorter holdback periods averaging three to four months. With
one of its new customers, there is a holdback of approximately $1 million for a
period of one year, as that customer does not have new orders with NFI.UN.
462
Demographic Trends Support Demand

We believe that the long-term demand for heavy-duty transit buses is positive,
given that it is an essential mode of public transportation that must be replaced
every 12 to 18 years. Without replacement, the maintenance and repair costs
would likely increase. Drivers of demand could include:
1. Population Growth: As North American population growth is expected to be
20% in Canada and 23% in U.S. over the next 25 years (Exhibit 3), this
could lead to increased use of public transit as commuters avoid the
resulting traffic congestion in the city centres.
2. Improved Bus Design: Bus designs such as low floors to accommodate the
elderly or disabled riders, or bicycle racks for the youth could promote
ridership.
3. Rising Fuel Cost: Gasoline prices rising above $1/litre could be an incentive
for commuters to use public transit instead of driving.

4. Increased Investment in Public Transportation: Improvement in the
infrastructure for public transportation, such as dedicated bus lanes, could

shorten commute time and thus, promote ridership in buses. In addition,
the 2006 Federal Budget provides for tax credit for bus pass holders, which
could also encourage the use of public transit.
Exhibit 3. Population Growth Forecast As At July 2005

2005
2010
2015
2020
2025
2030
2005 to 2030
Canada:
Population (millions)
Growth Rate over Prior Period (%)
32.3
33.6
4%
35.0
4%
36.3
4%
37.6
4%
38.8
3%
20%
United States:
Population (millions)
Growth Rate over Prior Period (%)
295.5
308.9
5%
322.4
4%
335.8
4%
349.4
4%
363.6
4%
23%
Source: Statistic Canada, U.S. Census Bureau, and CIBC World Markets Inc.
Although the competing solution to traffic congestion in urban centres could be

subways or rapid transit systems, the cost and time required to implement such
solutions far exceed the addition of new buses and routes. In addition, studies
have shown that bus ridership could grow with the construction of subway
systems, as commuters would use the bus to get to the subway stations.
Currently Fairly Valued

Although we believe that NFI.UN could see continued growth in its aftermarket
division in 2006, we believe that this would be offset by several issues: 1) an
estimated small decline in buses delivered in 2006 reflecting deferred orders in
2005 and 2006 due to reduced government funding in the U.S.; 2) our estimate
of higher costs in 2006 and partial recovery of production lost from the onemonth strike at its Winnipeg facility; and 3) the liquidity rights given to Class B
and C shareholders could be an overhang in the market.
The aftermarket division should see continued growth since fleet replacement
has been deferred in 2005, and is expected to continue in 2006, due to budget
constraints, especially in the U.S. As a result, the aging fleet of buses would
likely require more maintenance and parts replacement. We are forecasting for a
small decline in buses delivered in 2006 to reflect deferred orders in 2005 due to
the budget constraints at the state and municipal levels, as well as our
463
assumption of partial recovery from the one-month strike at its Winnipeg facility
in April. Since budget constraints are expected to continue in 2006, we are
forecasting for continued weakness in 2007, offset by the lack of strike activity.
We believe that the trading price of NFI.UN could be capped since a trading
value in excess of the IPO price could potentially trigger Class B and C
shareholders to exercise their liquidity rights requiring NFI.UN to purchase for
cancellation, a minimum of US$40 million in value of units. To finance the share
purchase, NFI.UN would have to use cash on hand, and/or increase its debt
(thus increasing interest expense), and/or issue additional IDS units to replace
the shares that were exercised by Class B and/or Class C shareholders through
their liquidity rights. Note that Class B and C shares were issued at a calculated
price of US$8.11/share (or C$9.11/share using a US$/C$ rate of 0.90) and the
earliest exercise of the liquidity right is August 2006 for Class C shareholders.
With our price target of $10.00 and the current trading price of $9.14, this
would imply a potential total return of 21.4%, which is in line with the average
of our coverage universe of 24.7%. We believe that the units are currently fairly
valued.
10
464
Valuation
Our $10.00 price target was calculated by taking the average of three valuation
methods rounded to the nearest $0.25.
Exhibit 4. Price Target for NFI.UN

Method of Analysis
2006 EV/EBITDA
Discounted Cash Flow
Target Yield
Average (rounded to nearest $0.25)
Price Target
$9.36
$10.79
$10.00
$10.00
11
2006E EV/EBITDA Multiple Method NFI.UN operates in an industry

with few publicly traded competitors rendering it more difficult to make an
apples-to-apples comparison. As a result, we have chosen to take the
average 2006E EV/EBITDA of all IDSs, IPSs, and income trusts classified
under industrial goods (capital goods and transportation) under CIBC World
Markets coverage universe as a benchmark and adjust for factors unique to
NFI.UN. Using an average multiple of 8.0x, we increased it to arrive at a
target multiple of 9.0x to adjust for: 1) the higher credit quality of NFI.UNs
customers as the majority are government transit authorities and the
probability of payment default is minimal; 2) a constant minimum level of
demand as transit buses are recognized as an essential mode of
transportation that requires continual replacement; and 3) NFI.UNs
dominant market share in North America as evidenced by the number of
delivered units as well as introduction of innovative designs that have
become industry standards. Although NFI.UN has the broadest product
offering in the industry providing customers with a wide range of choices,
thereby increasing the probability NFI.UN would be considered for a
contract, it does not guarantee that NFI.UN would win the RFP.
Consequently, our target multiple does not reflect this aspect of NFI.UN.
Using our 2006E EBITDA of US$73.7 million and a weighted average
US$/C$ forecast exchange rate of 0.88, we arrive at a price target of $9.36.
Discounted Cash Flow (DCF) Method In determining the discount

rate, our assumptions include an 11.3% cost of equity, 7.0% cost of debt
and a corporate tax rate of 36.5%, to arrive at a $10.79 price target.
Again, with few direct comparables, we have chosen to compare NFI.UN to
the average of all IDSs, IPSs, and income trusts classified under industrial
goods (capital goods and transportation) under CIBC World Markets
coverage.
Target Yield Method In our target yield analysis, we use a forecast of

the 10-year Government of Canada bond yield of 4.0%, the historical yield
spread between NFI.UN and the 10-year bond, and then adjust for
qualitative and quantitative factors specific to NFI.UN. We tightened the
yield spread to reflect: 1) quality of management, as new management has
improved operations of the company in recent years; 2) asset quality and
diversification; and 3) a low payout ratio. We widened the yield to reflect:
1) limited external growth opportunities; 2) limited organic growth, as RFPs
for new contracts depend on the availability of government funding and
timing of demand from transit authorities; 3) margin risk, as not all
material costs have been fixed (i.e., steel, aluminum); and 4) the inherent
discount applied to NFI.UN related to the structure of the company. We
arrive at a target yield of 11.1% and applying our 2006E and 2007E
distributions payable forecast of $1.10, this implies a price target of $10.00.
465
Transit Bus Industry

Overview
NFI.UN is a leading manufacturer of heavy-duty transit buses in Canada and the
United States. The company also provides aftermarket parts and service to its
customers, which are primarily municipal local transit authorities. Heavy-duty
transit buses are typically 30 feet to 60 feet in length and able to carry between
25 and 65 seated passengers. Dependability is a top priority for transit
authorities as transit buses must be able to operate for up to 20 hours per day,
seven days per week under constant stop-and-go conditions, and have a useful
life of typically 12 to 18 years. The majority of transit buses run on diesel, but a
growing proportion of new purchases are for alternative propulsion systems
including: diesel-electric or gasoline-electric hybrids; compressed natural gas
(CNG) or liquid natural gas (LNG) systems; or zero emission electric trolleys.
See Exhibit 5 for bus propulsion trends.
Exhibit 5. Bus Propulsion Trend By Fuel Type In The U.S.

Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
CNG &
Blends
225
353
678
1,074
1,562
2,148
2,494
3,072
4,137
5,497
6,178
6,035
6,744
Diesel
50,595
49,716
50,158
48,050
47,177
47,174
47,745
49,249
49,743
50,894
49,755
48,545
51,391
Electric &
Other
18
31
37
41
24
33
41
68
80
113
146
181
631
Ethanol &
Blends Gasoline
86
257
86
283
82
243
82
234
347
230
395
250
375
194
57
197
15
204
203
241
231
276
LNG &
Blends
80
287
357
347
347
346
707
772
842
879
928
974
1,003
Methanol
160
351
399
396
63
19
17
12
12
12
11
-
Propane
28
28
31
29
25
12
9
25
57
87
90
101
292
Other
176
203
202
91
66
70
26
12
100
130
112
174
189
Source: American Public Transportation Association, Public Transportation Fact Book, 56th Edition, April 2005
The transit industry is subject to, and influenced by, a number of government
regulations covering safety, environment, accessibility, and rules of origin. The
availability of government funding is a large determinant of the timing of new
transit bus purchases. In the U.S., the federal government will fund up to 80%
of the cost of buying transit buses if certain conditions are met. Operating and
maintenance costs are borne by the transit authority through fares collected and
local and state funds. In Canada, on the other hand, federal funding is
substantially less at 8.8% in 2002, and 2.5% in 2003, with municipalities and
provinces paying for the bulk of the capital cost of new buses. Please see
Exhibits 6 and 7. Note that the most recent data available is from 2003.
12
466
Exhibit 6. Capital Funding Sources In Canada (exclusive of debt

servicing)
2002
2003
Other
Federal
13%
9%
Other
Federal
8%
3%
Prov incial
44%
Prov incial
39%
Municipal
Municipal
45%
39%
Source: Summary of Canadian Transit Statistics 2004 Operating Data, CUTA.
Exhibit 7. Capital Funding Sources For Transit Infrastructure & Buses In

The U.S.
2002
2003
Other
Other
28%
29%
Local
20%
Federal
Federal
40%
40%
Local
State
18%
State
Source: Public Transportation Fact Book, 56th Edition, April 2005, American Public Transportation Association.
However, new legislation in 2005 (New Deal for Cities & Communities) in
Canada provided additional support from the federal government in the form of
gasoline tax transfer of up to $600 million for environmentally sustainable
infrastructure projects, which could include heavy-duty buses. As well, in the
2006 budget, it was announced that a Public Transit Capital Trust would be
established to support capital investments in public transit infrastructure
including rapid transit, transit buses, intelligent transportation systems, and
high-occupancy vehicle and bicycle lanes. A one-time payment of $900 million
will be earmarked for the provinces and territories to be paid into the trust,
contingent on sufficient funds being available from the 2005-2006 surplus in
excess of $2 billion.
Since new buses tend to be more efficient and require less maintenance, the
availability of federal funds in the U.S. provides operators a greater incentive to
buy new buses rather than to try and maintain or refurbish older buses. The
result is a much younger fleet of transit buses in the U.S. than in Canada with
an average age of 7.5 years compared to 10.5 years, respectively.
There were 77,393 heavy-duty transit buses in active service in the U.S.
(64,904) and Canada (12,489) in 2004, according to the most recent data
available. Given the arduous operating demands on transit systems, the bulk of
new transit bus purchases in any year are to replace existing, older buses.
13
467
According to the Canadian Urban Transit Authority (CUTA), from 1993 to 2003,
88% of new heavy-duty transit buses sold in Canada was to the replacement
market while the company estimates the replacement market in the U.S. at over
80% of new buses sold. In addition to the replacement market, transit fleets are
expected to grow in the future to meet demands from expanding urban and
suburban areas, rising environmental concerns, and an aging population (see
page 9 for more details).
Procurement Process
Transit procurement generally follows the same practices as municipal and
public sector procurement, issuing public notices for RFPs. RFPs (which take into
account quality, ability to provide on-time delivery and aftermarket parts and
service, and price) have largely replaced the former practice of awarding
contracts simply to the lowest bidder through an Invitation For Bid (IFB)
process. The RFP issued will contain detailed specifications for the new bus
purchases that can be several hundred pages long. Although the U.S. has
Standard Bus Procurement Guidelines (with performance clauses, surety
bonding, component warranties, and fire ratings among other details) that are
usually followed, the specification documents are still lengthy due to the
customization from customer to customer. During the Approved Equal Process,
competing manufacturers will enter into non-binding negotiation agreements
with the customer in order to discuss the customization requests. There are
certain specifications that cannot be managed economically, given the
constraints of the core designs. Consequently, the manufacturer can suggest
other components or design options to meet performance requirements of the
customer. Once a bid has been awarded there is usually a one-month period of
documentation negotiation prior to the purchase order being issued by the
customer. Usually for U.S. customers, a purchase order is not issued until all
required funding is arranged, the Buy America (discussed under the heading
Regulatory Environment Funding Laws) audit is complete, and applicable
insurance and bonding is in place. The time from issuing an RFP to delivery of
the buses is usually about one year.
Common Procurement
Some transit jurisdictions have banded together so that they can minimize
administrative costs and benefit from economies of scale from larger orders for
common buses.
In Quebec, the nine major transit systems are all part of the Quebec Urban
Transit Association or the Association du transport urbain du Quebec (ATUQ).
Quebec municipalities and the province each fund 50% of the bus purchases.
The ATUQ will issue a bus tender for all of its members every four to five years.
ATUQ will hold the contract with the bus manufacturer, and have sub-contracts
with each participating transit system. However, it is very difficult for nine
transit systems to agree on one common bus. In a recent tender, the bus
manufacturers were asked to quote separately on 74 options so that each transit
system could select the bus that met their needs.
In British Columbia, BC Transit (a provincial crown corporation) is responsible
for the bulk of transit services in the province except for the Greater Vancouver
region. BC Transit owns the bus fleet, which consists of 30-foot, 35-foot, 40foot, and double deckers. It then can deploy the fleet in a flexible manner to
meet changing service requirements. For example, it directed a higher
proportion of its low-floor buses to Kelowna based on the accessibility
requirements of that citys growing proportion of seniors. BC Transit writes a
common specification for its procurement of buses, but will allow some
customization between municipalities.
14
468
In the U.S., a number of transit authorities pooled their resources to specify or

purchase buses. Chicago, Boston, and New York adjusted their specifications to
demand stainless steel shells and a longer warranty period given the harsh and
salty road conditions during the winter months. As well, the Florida Public
Transit Association has been encouraging and facilitating joint statewide
procurements for a number of years.
Given the better economics in operations and maintenance afforded by common
performance-based specifications for buses, we would expect to see the practice
of common procurement continue to increase.
Rising Prices For New Transit Buses

According to the American Public Transportation Association (APTA) fleet survey,
the cost of new heavy-duty transit buses has well outpaced inflation over the
past couple of decades. The survey looked at the price of new 40-foot long, 102inch wide diesel buses over the 17-year period ending 2004. Average bus prices
in the U.S. increased 110% over the time period while inflation grew 60%. The
price increase on a per seat basis was much higher at 152%, largely owing to
the adoption of low-floor buses that have a lower seating capacity.
During that same 17-year period ending 2004, the cost of new buses rose even
more dramatically in Canada in which the average bus price increased 167%,
while inflation grew 47%. On a per-seat basis, prices grew by 211%. Part of the
reason for the more rapid growth of prices in Canada compared to the U.S.
during that period was the stronger US$ relative to the C$. However, with the
weakening of the US$ relative to the C$ in the past 18 months, bus prices in
Canada have declined by approximately 10%.
There were a number of factors that have caused bus prices to increase,
excluding the currency impact, including:
The introduction of Buy America legislation. Choosing U.S. content over

lower-cost suppliers from other sources to maintain the 60% U.S. content
and forcing manufacturers to finish assembly in the U.S. has caused prices
to rise, not just for buses sold in the U.S. but also for those buses that are
sold back into Canada.
Uncertainty in the C$/US$ currency exchange has likely prompted

manufacturers to add a contingency in their prices for the currency risk.
New emission standards introduced in 1993, 1998, 2000, and 2004, with the
next one to be implemented in 2007 have had an impact on engine costs.
Additional features and technological improvements have been added to

bus designs. For example, anti-lock brakes, traction control, ergonomic
seats for drivers, GPS systems, door interlocks for safety, air conditioning,
or electronic destination signs that did not exist 20 years ago.
Another major trend that has caused the price of buses to rise has been an
increasing level of customization. Forty years ago, General Motors (GM) (GMNYSE)
was the dominant transit bus manufacturer in North America with its New Look
model. Small competitors at the time, such as NFI.UNs predecessor company, Flyer
Industries, produced a clone of GMs model. By limiting the number of options
offered, costs could be kept low. When GM exited the bus manufacturing business in
the early 1980s, the dynamics of the business changed, with new entrants who
were hungry for market share, and the balance of power moved from the bus
manufacturer to the customer. Requests for customized options are now
accommodated by the bus manufacturers because there are now five major
manufacturers competing for the same volume of business, which is relatively low at
approximately 4,000 to 4,500 units per year between U.S. and Canada.
15
469
Regulatory Environment
Funding Laws
In the U.S., federal funding is authorized through the Federal Transit
Administration (FTA) which will provide up to 80% of the capital cost to: 1)
replace existing buses that are older than 12 years or 500,000 miles of service
and 2) purchase new buses to support fleet expansion based on population and
ridership trends. Federal funding for public transit legislation is passed in sixyear cycles and is a subset of the highway bill. In August 2005, the Safe,
Accountable, Flexible, Efficient Transportation Equity Act A Legacy For Users
(SAFETEALU) was signed into law and provides a 46% increase in federal
transit funding for transit through 2009 compared to its predecessor legislation.
The FTA allocates the federal funds by both a formula basis (the largest portion
being designated for urban areas) and to targeted projects and planning and
research. To qualify for federal funding there are a number of regulatory and
legislative hurdles that must be met, including Buy America legislation. The
Buy America provision stipulates that all rolling stock (including buses)
purchased with federal grants must be made with 60% American content, with
the final assembly taking place on American soil. Buy America laws have been
in place since 1978 and manufacturers are subject to compliance audits. With its
two facilities in Minnesota, NFI.UN has no problems complying with the Buy
America law.
In Canada, traditionally over 80% of the capital cost of new transit bus
purchases are funded by municipal and provincial governments. According to the
CUTA, in 2003 provinces contributed 43.5% of the total capital funding for the
urban transit authority while municipalities provided 46%. However, the 2005
federal budget provided for up to $600 million in funding to provinces, territories
and first nations for environmentally sustainable infrastructure projects, some of
which could be allocated to bus purchases, and the 2006 federal budget
provided for $900 million in a Public Transit Capital Trust to support capital
investments in public transit infrastructure, including transit buses. Federal
funding is expanding from rail projects to include bus-based systems and if
these funds continue to increase, we would expect to see more replacement bus
purchases and the average age of the Canadian fleet to decrease to be more in
line with that in the U.S. Although there is no federal Buy Canadian legislation,
the Province of Quebec maintains a 20% Canadian content rule for new bus
purchases by its nine major transit systems.
Environmental Laws
There are a number of environmental regulations that affect the heavy-duty
transit bus industry. Enforcement of these regulations is overseen by the
Environmental Protection Agency in the U.S. (the EPA) and Environment
Canada. Both entities require new and more stringent emissions standards for
2007 for new heavy-duty engines, which will be phased in over a three-year
period. Although the onus of meeting these requirements is on the engine
suppliers, the bus manufacturer has the final responsibility. NFI.UN sources its
engines from two suppliers, Cummins Inc. (CMINYSE) and Caterpillar Inc.
(CATNYSE). According to management, Cummins has provided a schedule in
order for it to meet the new emission standards by the end of 2006. Caterpillar
has not provided any schedule, but has promised to meet the new standards.
Management believes that Cummins is a market leader in terms of design, and
should be able to meet the new standards by 2007, especially since the trucking
industry, which represents approximately 95% of Cummins business, is also
subject to the same emission standards by 2007.
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470
Accessibility Laws
According to the Americans with Disabilities Act of 1990, all transit buses
ordered after August 1990 must be accessible to the mobility-impaired and aid
the hearing- and sight-impaired. Similar regulations, though not as stringent,
were passed in Canada with the Transportation Act of 1996. The Disabilities Act
presented a number of design challenges for bus manufacturers. Initially,
manufacturers installed wheelchair lifts, usually in the front door stepwell.
However, the lifts were prone to breaking down resulting in the bus having to be
taken out of service. NFI.UN introduced the low-floor model bus in 1988 to the
North American market (its parent company at the time had first introduced the
low-floor design in Europe) with somewhat sluggish initial sales. With the
passage of the Disabilities Act in 1990, the low-floor design has been
overwhelmingly accepted in the industry with all major manufacturers now
producing low-floor models. Subsequently, the wheelchair lifts have largely been
replaced with ramps that require infrequent maintenance.
Motor Vehicle Safety Standards

Any bus sold in the U.S. and Canada must comply with provincial, state, and
federal safety standards. The Canadian Motor Vehicle Safety Standards are very
similar to the U.S. Federal Motor Vehicle Safety Standards. Federal certification
requires rigorous testing and the use of approved materials and equipment.
Since 1989, the Federal Transit Administration has mandated that no new buses
could be purchased with federal funds unless the bus has been tested at the Bus
Testing and Research Center at the Pennsylvania Transportation Institute in
Altoona, Pennsylvania. The bus is not required to pass the test, but the agency
purchasing the bus must certify that they have seen the testing report from
Altoona. NFI.UNs entire product offering has been certified under applicable
federal standards in both Canada and the U.S. and the company includes its
continued compliance in customer contracts.
Motor Vehicle Road Use Standards

NFI.UNs customers are subject to the motor vehicle road use regulations
established by provincial and state authorities. Via its customer contracts,
NFI.UN is also responsible for compliance with such regulations when bus
performance or design is involved. Due to the interconnectedness of some of the
regulations, there are instances where regulations lag current industry
standards, practices, and design limitations of meeting other regulations.
Currently, a number of buses, including some manufactured by NFI.UN, do not
meet regulations governing maximum axle weight in certain jurisdictions due to
performance requirements. Transit bus operators have often been granted
waivers from the province or state where they operate buses not in compliance.
However, Ontario has not yet granted any waivers. To date, only one of
NFI.UNs customers has required that NFI.UN reconfigure its buses to comply
with local axle weight regulations. Management intends to address provincial
and state axle weight restrictions with its customers on a contract-by-contract
basis.
17
471
Company History
The Early Beginnings
NFI.UN was originally founded in 1930 in Winnipeg to manufacture motor
coaches and school buses. In 1971, the focus was switched to heavy-duty
transit buses, and in 1986, the company was purchased by Hollands largest bus
manufacturer, which was an innovation leader in the European bus
manufacturing industry being the first to manufacture low-floor buses in Europe
and introducing the same concept to North America through New Flyer in 1988.
As the companys growth expanded into the U.S., a final assembly plant was
established in 1987, which was subsequently moved to Crookston, Minnesota in
1996.
Turmoil In The Late 1990s

With continuing growth in market share, the company expanded its Winnipeg
and Crookston capacities by approximately 50% in 1998; opened a dedicated
aftermarket parts and service facility in Winnipeg in the same year; and in 1999,
constructed a state-of-the-art assembly plant with fully integrated production
capabilities in St. Cloud, Minnesota in response to the amended Buy-America
legislation.
The rapid expansion led to an increased customer base and market share;
however, it also led to engineering capacity constraints, poor supply
management, and manufacturing and quality control issues. The resulting
production bottleneck led to delayed deliveries, significant liquidated damages of
approximately $12 million in 2000, increased work-in-progress inventory, and
liquidity issues as the need for working capital increased. By late 2000, the
company was unable to secure surety bonding facilities, preventing it from
accepting new orders that required performance bonds to protect against nonperformance by suppliers.
Recovery With A New Management Team

In March 2002, controlling interest of the company was acquired by a private
investor group, allowing it to recapitalize and secure new surety bonding. The
current President and CEO, Mr. John Marinucci, was recruited to lead process
improvements. He hired three key managers, all of whom had worked with him
previously at National Steel Car Limited (builders of rail cars) since 1997, and
the team was successful in reducing cost, consolidating and rationalizing
operations and workforce, reducing engineering lead-time, and instituting tight
controls over work-in-progress. As well, working capital requirements were
reduced by restructuring manufacturing lines so that higher-cost components
were installed at the end of the assembly process. As shown in Exhibit 8, the
new management was successful in growing the order backlog from a declining
trend. Note, however, that only 35% of the Q1/06 backlog was firm orders with
the balance being options. Historically, most options were exercised within three
to three-and-a-half years, with some options extended. In addition, Exhibit 9
reflects the improving trend in adjusted EBITDA (adjusted for the effects of
certain non-recurring and/or non-operations-related items that have impacted
the business and are not expected to recur, as well as for lease costs for the
period prior to October 2004 relating to a sale and leaseback of one of the
companys production facilities) since 2002.
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472
Exhibit 8. Total Order Backlog
Backlog Value in US$000's
2,500
2,000
New
Period of Rapid
Ex pansion
1,500
1,000
500
Management
982
1362
1348
1268
Working Capital
Constraints
185
121
511
158
894
843
588
0
1998
1999
2000
445
290
454
2001
2002
Firm Orders
866
709
629
683
2003
2004
2005
Q1/06
Option
Exhibit 9. Adjusted EBITDA* History (2002 to 2005)

80,000
EBITDA (US$000s)
70,000
60,000
53 week 2004
2005
CAGR: 37%
40,000
20,000
73,367
50,487
50,000
30,000
70,343
20,765
10,000
2002
2003

* Adjusted EBITDA excludes one-time items
19
473
Management Team
Employment Contract For Executive Officers
The senior management team (including John Marinucci, President and CEO;
Glen Asham, CFO & Treasurer; Michel Aziza, EVP, Engineering Services; and
William Wright, EVP, Manufacturing Operations) of NFI.UN (all management
biographies are available in Appendix A) has entered into three-year
employment agreements (expiring in 2008) with automatic one-year renewals,
unless either party gives 12 months notice of non-renewal. Non-competition
covenant applies for a period of 12 months, and non-solicitation covenant
applies for a period of 24 months following termination or constructive
termination. Upon termination or constructive termination without cause or
resignation for specified good reason, each executive is entitled to payment of
his base salary, and the continuation of benefits for 12 months, as well as
payment of accrued bonuses and participation in the long-term incentive plan. A
summary of managements compensation and Directors ownership of units are
detailed below in Exhibits 10 and 11. Note that senior management holds 11.5%
in Class B and Class C shares as detailed under the heading Share Capital of
NFL Holdings Inc. on page 31.
Exhibit 10. 2005 Compensation
John Marinucci
President & CEO
Glenn Asham
CFO & Treasurer
Michel Aziza
Executive VP, Engineering Services
William Wright
Executive VP, Manufacturing Operations
Michael Farrugia*
Executive VP, Supply Management
Fiscal Year
2005
Annual Compensation
Salary
Bonus
Other
$677,158
$853,125
$66,271
LTIP Payout
$68,290
2005
199,808
281,250
20,375
68,290
2005
296,712
375,000
22,740
68,290
2005
293,014
375,000
29,707
68,290
2005
307,521
386,250
26,412
NA
* Michael Farrugia retired effective December 31, 2005 and David White commenced his duties as Executive Vice-President, Supply
Management, effective January 1, 2006.
Exhibit 11. Management Ownership Of NFI.UN
The Honourable Brian Tobina,b
Position
with NFI
Director
V. James Sardo a,b
Director
Corporate Director and Trustee
16-Jun-05
5,000
Director
Corporate Director
16-Jun-05
500
Wayne M.E. McLeod
Principal Occupation
Senior Business Advisor,
Fraser Milner Casgrain LLP
Director
Since
16-Jun-05
# of NFI.UN
Units Held
2,000
Member of the Audit Committee

b Member of the Compensation, Nomination, & Corporate Governance Committees
a
Long-term Incentive Plan

A long-term incentive plan (LTIP) is in place for senior management of NFI.UN.
Initially, fully vested cash awards may be granted to eligible participants by the
compensation, nominating, and corporate governance committee of NFL
20
474
Holdings Inc. However, the committee has the discretion to make future awards
payable in IDS units purchased in the market, and/or make the award subject to
multi-year vesting. The LTIP is awarded based on the amount by which
distributable cash per IDS unit exceed the base threshold of $1.10 per annum.
The amount of the award is calculated based on the table in Exhibit 12. Note
that the base threshold of $1.10/IDS per year is set for an initial term of three
years, and is subject to adjustment after August 19, 2006 by the compensation,
nominating, and corporate governance committee.
Exhibit 12. Long-term Incentive Plan

% By Which Distributable Cash/IDS Exceeds the Base
Threshold
5% or less
>5% to 10%
>10%
Available for LTIP Award as % of Excess Distributable

Cash
10%
15% of excess >5% to 10%
20% of excess >10%
Corporate Governance
There will be a minimum of three and a maximum of 20 directors. The board
currently consists of five members (biographies are available in Appendix B):
The Canadian directors, who reside in Canada and are independent of

NFI.UN, include The Honourable Brian Tobin (Chairman), V. James Sardo,
and Wayne M.E. McLeod
John Marinucci
Ira D. Kleinman (independent of NFI.UN)
The audit committee is comprised of a minimum of three directors and will

include the Canadian directors. The committee is comprised of Wayne M.E.
McLeod (Chairman), The Honourable Brian Tobin, and V. James Sardo, each of
whom is an independent member. The committee will be responsible for
overseeing the accounting and financial reporting of NFI.UN, as well as ensuring
the adequacy of internal accounting controls and procedures. The committee will
also be responsible for recommending to the board of directors the selection of
independent auditors of NFI.UN.
The directors of NFI.UN will be responsible for delegating compensation,
nominating, and corporate governance functions to the committee formed by the
directors of NFL Holdings Inc. NFI.UN will not have a separate compensation,
nominating, and corporate governance committee.
New Flyer Holdings, Inc. (NFL Holdings Inc.)

The ownership structure of NFI.UN is detailed in Appendix C. The board of
directors of the IDS is comprised of seven members, the majority of whom are
U.S. residents. The board currently includes:
21
The Honourable Brian Tobin and V. James Sardo, nominated by New Flyer
Industries Inc. (Wayne M.E. McLeod is entitled to attend all meetings as an
observer).
John Marinucci (CEO and President of NFI.UN and NFL Holdings Inc.),
nominated by New Flyer Industries Inc.
475
Wayne Berman and Larry Edwards, both of whom are independent of New
Flyer and reside in the U.S., nominated by New Flyer Industries Inc.
Ira D. Kleinman and Colin Farmer, both of whom are independent and
reside in the U.S., nominated by the Continuing Investor (New Flyer Transit
LP)
The compensation, nominating, and corporate governance committee consists of

V. James Sardo (Chairman), The Honourable Brian Tobin, and Ira D. Kleinman,
all of whom are independent directors, with two Canadian directors and one
nominated by the Continuing Investor. The committee is responsible for making
recommendations regarding the appointment of officers of New Flyer Industries
Inc. and NFI.UN, and the hiring, compensation, and termination of senior
officers of New Flyer Industries Inc. and New Flyer Holdings Inc. Furthermore,
the committee oversees any employee bonus/incentive plans, including the longterm incentive plan.
22
476
NFI.UNs Business
NFI.UN is a leading manufacturer of heavy-duty buses for transit authorities in
both the U.S. and Canada. As demand from the two countries change each year
according to the age of the fleets and funding availability, sales to each country,
as well as the make-up of its top 10 customers (which could account for
between 55% to 75% of revenue) could change from year to year. As an
example, as per Exhibit 11, sales in Canada made up 13% in 2004, but this
increased to 31% in 2005.
Exhibit 11. Sales By Geography

2004
2005
Canada
13%
Canada
31%
US
US
69%
87%
Although the annual customer base may change, the company regularly receives
orders from repeat customers, and in the last three years, approximately 85%
of revenue was from customers from the prior five years. In addition, NFI.UN
has ongoing relationships with 19 of the 25 largest transit authorities in the U.S.
and Canada (see Exhibit 12), as well as prior sales to over 250 other transit
authorities.
23
477
Exhibit 12. Top 25 Transit Authorities In North America, By Number Of

Revenue Vehicles In 2003
Transit Agency
MTA New York City Transit
New Jersey Transit Corporation
Los Angeles County Metropolitan Transportation Authority
Chicago Transit Authority
Toronto Transit Commission (TTC)
Socit de transport de Montral (STM)
Washington Metropolitan Area Transit Authority
King County Dept of Transportation - Metro Transit Division
Southeastern Pennsylvania Transportation Authority
Metropolitan Transit Auth of Harris County, Texas
Greater Vancouver Transportation Authority (Translink)
Massachusetts Bay Transportation Authority
Denver Regional Transportation District
Pace
Port Authority of Allegheny County
Miami-Dade Transit
Orange County Transportation Authority
Ottawa - OC Transportation
Tri-County Metropolitan Transportation District of Oregon
Metro Transit
San Francisco Municipal Railway
Maryland Transit Administration
Edmonton Transit System (ETS)
Calgary Transit
The Greater Cleveland Regional Transit Authority
Urbanized Area
(Primary City)
New York, NY
Newark, NJ
Los Angeles, CA
Chicago, IL
Toronto, ON
Montreal, QC
Washington, DC
Seattle, WA
Philadelphia, PA
Houston, TX
Vancouver, BC
Boston, MA
Denver, CO
Arlington Heights, IL
Pittsburgh, PA
Miami, FL
Orange, CA
Ottawa, ON
Portland, OR
Minneapolis, MN
San Francisco, CA
Baltimore, MD
Edmonton, AB
Calgary, AB
Cleveland, OH
# of Revenue
Vehicles
5,735
2,982
2,727
2,033
1,735
1,563
1,447
1,412
1,389
1,284
1,170
1,104
1,072
1,054
1,014
933
923
905
877
837
832
817
802
794
755
Customer of
New Flyer
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Source: APTA, CUTA and CIBC World Markets Inc.
NFI.UN generates revenue from both the delivery of buses to customers, as well
as from aftermarket parts service. As budget constraints have delayed
replacement of older vehicles, the demand for aftermarket parts has grown over
time, as reflected by NFI.UNs compound annual growth rate (CAGR) of 14%
(see Exhibit 13).
Exhibit 13. Growth Of Aftermarket Parts Division

60
53.4
44.2
Revenue (US$ mln.)
50
37.8
40
30
27.8
30.6
32
CAGR: 14%
20
10
0
2000
2001
2002
2003
2004
2005
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478
Products
As the transit industry trend is to standardize fleets in order to reduce
maintenance costs and simplify operations, NFI.UNs breadth of product
offerings (see Exhibit 14) may provide it with a competitive advantage as less
customization may be required to meet the specifications of the various transit
authorities.
Exhibit 14. NFI.UN's Product Offerings
Bus Length (foot)

30, 35, 40
40 (Invero - Premium)
30
35*
40*
60*
60 (bus rapid transit)
40 BRT
Maximum
Seating
Capacity
39
44
25
30
39
64
64
39
Diesel
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
CNG
Yes
No
Yes
Yes
Yes
No
No
No
Propulsion
DieselElectric
Hybrid
LNG
Yes
Yes
No
Capable
Capable
No
Yes
Capable
Yes
Yes
No
Yes
No
Yes
No
No
GasolineElectric
Hybrid
Yes
Yes
No
No
Yes
No
No
No
Electric
Trolley
Yes
No
No
No
Yes
Yes
No
Yes
* Available in both high-floor and low-floor models

In addition, NFI.UN has been an innovator in introducing new product lines that
meet the various needs of riders, environmental regulations, and other
legislation. As an example, the low-floor bus design, which is now an industry
standard, was first introduced into North America in 1988. In 1992, the
company introduced an onboard local network system that controls many of the
electrical functions of a transit bus. This system is now standard in all NFI.UN
buses. In 1994, the company introduced the first compressed natural gas (CNG)
bus to the transit industry, and in 1996, they delivered the first articulated body,
60-foot, low-floor bus. NFI.UN introduced hybrid propulsion in transit buses in
1998, and the first articulated hybrid bus in 2002. The most recent new product
introduced by NFI.UN is the 40-foot, low-floor, stainless steel bus in 2005, in
response to demand from transit authorities in areas where high humidity and
road salt in the winters could cause corrosion problems.
Low-risk Innovation
NFI.UN continues to develop new products with approximately US$2.5 million
set aside annually for research and development (R&D). The funds for R&D are
fully expensed as part of the operating expense when incurred. The companys
approach to product development limits capital investment by seeking customer
sponsorship of innovative concepts before further development continues. As
well, the innovative designs are tested by a select group of customers to ensure
their viability in the marketplace. Once successfully tested with potential
customers, the New Product Development Group will refine the design, create
prototypes, complete further testing, develop practical solutions to problems
identified by engineering/marketing/ customers before the new products are
introduced to the market.
Advantages And Disadvantages Of Innovation

While the advantages of developing new products are to be the first to offer the
product and capture a larger market share, and to have the ability to command
premium pricing for the innovative product, disadvantages associated with
innovation include: 1) the innovative design can be easily copied by competitors
who did not have to spend money on R&D, testing, and marketing of the new
25
479
product; 2) it may take time to convince customers to be the first to buy the
new design for fear that it may have flaws; and 3) as transit authorities always
require more than one bid on their contracts, if there are no comparable designs
from other manufacturers for the new product, the innovator is not rewarded for
the new design and, as a result, may not have a competitive advantage.
Aftermarket Parts And Services

NFI.UNs aftermarket parts and services division began in 1998. As the
complexity of the buses increased over time, combined with constrained transit
operating budget that result in older fleets requiring more maintenance,
aftermarket parts and services has become a more important deciding factor for
transit customers. Aftermarket services provided by NFI.UN include: 1)
providing maintenance and operational documentation on buses delivered; 2)
providing field support, engineering, and warranty management; and 3)
providing operator and maintenance training. Note that unionized employees of
the transit authority must do the actual maintenance of a transit fleet, and
therefore, is not part of NFI.UNs aftermarket service. Pricing for aftermarket
service is included as part of the bid price for the bus contract; however, parts
are sold and priced to customers on an as-needed basis. Proprietary parts on
NFI.UN buses provide the company with the greatest profit margin, while
supplier parts generate lower margins. In addition to procuring a broad range of
service parts for a variety of models, NFI.UN also distributes its own line of
service parts under the Kinetik brand, manufacturing of which is mostly
outsourced.
Exhibit 15 below provides the details of NFI.UNs production facilities.
Exhibit 15. Production Facilities

Location
Winnipeg, Manitoba
Aftermarket Parts and Service
Function
Administration, sub-assembly, structure weld, shell assembly
and paint
Aftermarket parts and service
New product development
Structure weld, shell assembly, paint, final assembly and
customer inspection/acceptance
Final assembly
Express Center
Production warehouse, customer inspection/acceptance
Jersey City, New Jersey

Service Center
Aftermarket parts and service
Established
Size (Sq. ft.) Ownership
Lease Expiration
1973
(expanded 1998)
1998
1996
364,000 Owned
NA
51,530 Leased
12,303 Leased
2010
2006
1999
338,000 Leased
2024
1996
(expanded 1998)
1998
89,000 Owned
NA
27,500 Owned
NA
2001
24,800 Leased
2006
26
480
Competition
Market Share
Although there are many transit bus manufacturers in North America, the five
largest [Orion, Nova BUS, Gillig, NFI.UN, and North American Bus Industries
(NABI) see Appendix D for details] represent approximately 90% of the
market. Of the five, Nova BUS sells mainly in Quebec due to its relationship with
the Quebec government. The company had previously sold buses to both
Canada and the U.S.; however, with an unsuccessful foray south of the border
that strained its financial health, the company was eventually rescued by the
Quebec government with the promise to provide them with the majority of bus
contracts for the province.
NFI.UN, on the other hand, has a dominant market share in North America. In
the most recent survey by the American Public Transportation Association
(APTA), NFI.UN accounted for approximately 33% of new buses built in the U.S.
in 2004 (the most recent data available), and 34.6% of new buses on order as
at January 2005 (see Exhibit 16). Note that although the APTA survey strives to
include all bus orders, there can be no guarantee that all transit authorities
reported all their orders on a timely basis.
Exhibit 16. U.S. New Bus & Trolleybus Market By Manufacturer

Company
Champion Motor Coach
Dennis Specialist Vehicles
El Dorado-National
Gillig Corporation
Goshen Coach
Mid Bus
Motor Coach Ind. Int.
Neoplan U.S.A Corp.
New Flyer
North American Bus Industries
Optima Bus Corporation
Turtle Top
Van Hool
All Others
Total
Built in 2004
Number
42
34
0
30
778
28
47
100
129
1062
508
50
324
17
0
60
3209
%
1.3%
1.1%
0.0%
0.9%
24.2%
0.9%
1.5%
3.1%
4.0%
33.1%
15.8%
1.6%
10.1%
0.5%
0.0%
1.9%
100.0%
On Order Jan/05
Number
%
1
0.0%
0
0.0%
50
2.0%
20
0.8%
405
16.5%
47
1.9%
2
0.1%
2
0.1%
320
13.0%
851
34.6%
452
18.4%
69
2.8%
85
3.5%
10
0.4%
86
3.5%
60
2.4%
2460
100.0%
Source: APTA survey. Bus data are about 70% and trolleybus data 100% of national totals.
NFI.UNs success may be partly attributed to its broad product offering as

illustrated in Exhibit 17. In addition, the companys record of on-time delivery
has been exemplary with no significant penalties in the last three years under
the new management team.
27
481
Exhibit 17. Product Offering From The Top Five Heavy-duty Bus
Manufacturers
Bus Type
30-Foot
35-Foot
40-Foot
45-Foot
60-Foot Articulated
Diesel
CNG
LNG
Diesel/Electric - Parallel
Diesel/Electric - Series
Gasoline/Electric
Hydrogen Hybrid
Electric Trolley
Carbon/Stainless Steel
Bus Rapid Transit
NFI.UN
Gillig
NABI
Orion
Nova
Although the U.S. has the Buy America legislation in which all replacement
buses must have at least 60% American content with final assembly taking place
on American soil, it is rather easy for Canadian manufacturers to satisfy that
rule by opening a final assembly plant in the U.S. According to some of the U.S.
manufacturers that we interviewed, it appears that it is more difficult for them to
penetrate the Canadian market. Reasons why it may be more difficult for U.S.
manufacturers to gain market share in Canada could include: 1) to recoup the
additional customs costs, U.S. manufacturers would have to increase their
product prices, which makes them less competitive against Canadian
manufacturers; 2) the Canadian market is substantially smaller than the U.S.
market with approximately 1,000 buses purchased each year; there are already
three Canadian manufacturers competing in this small market place; and 3) the
Canadian transit authorities may prefer to deal with Canadian manufacturers
and may give them preference when issuing requests for proposals, effectively
shutting out their American counterparts. As a result, U.S. transit busmanufacturing companies generally do not compete in the Canadian market,
leaving NFI.UN and Orion with the majority of the market share in Canada.
Aftermarket Parts And Service

According to the CUTA, strong after-sales support is among the top three
features deemed important to both the Canadian transit authorities and the
manufacturers themselves. As the aftermarket parts service becomes a more
integral part of the decision-making process for the transit authorities, it is
important that transit bus manufacturers will be able to provide replacement
parts for a stipulated period of time, typically in excess of 10 years. All five of
the largest North American heavy-duty bus manufacturers have an aftermarket
parts division that supplements their main bus manufacturing division. With the
exception of Nova BUS, whose aftermarket division is an exclusive provider of
Nova BUS and Prevost parts, the remaining four companies all supply
proprietary parts, as well as supplier and commodity parts/products. In general,
manufacturers tend to receive higher profit margins on proprietary parts than
supplier or commodity parts. As the aftermarket parts business is margin-based
with products sold at cost plus a fixed margin, there is practically no inflation
risk involved.
As a percentage of total revenue, NABI reported the highest contribution from
the aftermarket business of 16% to 17% in 2004, followed by Gillig at 10% to
12% of 2005 revenues, while NFI.UN reported 7% in 2004 and 9% in 2005.
28
482
Barriers To Entry
While there are only five major North American manufacturers in the heavy-duty
bus industry, the probability of new entrants is slim due to the high barriers to
entry, which include:
Significant Capital Investment A considerable amount of capital is required
to establish a bus manufacturing company, as it involves securing a production
facility, engineering capabilities, aftermarket parts service, and working capital
to purchase the necessary parts because payment is made only upon delivery.
In addition, the company must be able to maintain financial stability in order to
support ongoing surety bonding for future contracts.
Extensive Engineering Capabilities A successful bus manufacturer would
have to have extensive engineering capabilities in place to effectively respond to
the various customization requests by customers or dictated by legislative
changes.
Established Reputation And Track Record The quality and dependability of
the product delivered may be an important deciding factor when transit
authorities select bus manufacturers, given the significant amount of time and
capital invested in purchasing a fleet of buses. Manufacturers with an
established reputation and track record of timely delivery, quality of product to
the customers specifications, and timely service on repairs and warranties, may
have a competitive advantage over new entrants.
In the U.S., a new heavy-duty bus manufacturer was able to enter the market in
2003, with financial support from the city of Roswell, the State of New Mexico,
and Pioneer Bank. Millennium Transit Services LLC took over the former Nova
BUS manufacturing plant in Roswell, New Mexico, and to ensure that the former
employees did not lose their jobs, both the state and the city were willing to
provide financial backing to Millennium. In July 2005, the new entrant was
successful in securing its first major order of 289 suburban and transit buses for
New Jersey Transit, however, its first delivery has yet to be made.
29
483
Structure Characteristics Of
Income Deposit Securities
NFI.UN is structured as an Income Deposit Security (IDS) whereby each IDS
unit represents: a) one Common Share (Class A) of New Flyer Industries Inc.
and b) $5.53 principal amount of Subordinated Notes issued by New Flyer
Industries Canada ULC (NFI ULC). Consequently, distributions received by the
IDS investors would consist of dividend income, as well as interest income.
Subordinated Notes
The Subordinated Notes are subordinate to all senior indebtedness of NFI ULC,
but senior to any subordinated indebtedness of NFI ULC. They bear an interest
rate of 14% per annum, and mature on August 19, 2020. The principal
outstanding on the Subordinated Notes held by IDS investors total
approximately $110.6 million, while the principal outstanding on a separate,
private placement bearing the same terms total approximately $33.3 million.
Deferred Interest Payments

Monthly interest income is paid to investors on or before the 15th day of each
month (or the next business day if such day is not a business day); however,
prior to August 19, 2010, interest payments may be deferred on the election of
NFI ULC, the issuer of the Subordinated Notes, if the most recently calculated
fixed charge coverage ratio [(EBITDA Unfunded Capex Income
Taxes)/(Scheduled Payments on Indebtedness + Interest Expense)] is less than
the Interest Deferral Threshold of 1.15 to 1.00. The maximum period of interest
deferral prior to August 19, 2010 is limited to 24 months in aggregate. All
deferred interest owed on the Subordinated Notes, plus interest on the deferred
payments (bearing interest rate of 14% per annum compounded monthly) must
be paid in full to investors by August 19, 2010.
After August 19, 2010, NFI ULC may elect to defer interest payments on the
Subordinated Notes on no more than four occasions for not more than eight
months per occasion, if the board of directors deems that such a deferral is
reasonably necessary for cash management purposes, or to reduce the
likelihood of default under any senior debt. The deferred interest, plus the
interest on the deferred payments at a rate of 14% per annum compounded
monthly, must be repaid on or before maturity.
Optional Redemption
On or after August 19, 2012, NFI ULC may elect to redeem the Subordinated
Notes at any time in whole or in part for cash. Notice to holders of the
Subordinated Notes must be given no less than 30 days, nor more than 60 days
at a redemption price as indicated in Exhibit 18.
Exhibit 18. Subordinated Notes Optional Redemption Schedule

Year
2012
2013
2014
2015
2016
2017+
Redemption Price as % of Principal Amount

105%
104%
103%
102%
101%
100%
30
484
Share Capital Of NFL Holdings Inc.

Share capital of the underlying operations (NFL Holdings Inc.) was issued to
three groups: Class A shares to IDS investors, and Class B and C shares to
Continuing Investors and Management Optionholders. In total, 20.0 million Class
A shares, 2.6 million Class B shares, and 31.6 million Class C shares were issued
during the IPO in August 2005. As per Exhibit 19, the publics ownership of NFL
Holdings Inc. via IDS units is approximately 36.9%, with Management
Optionholders holding 11.5%, and Continuing Investors holding the lions share
at 51.6%.
Exhibit 19. Share Capital (economic interest, not voting interest)
Class A Shares
Class B Shares
Class C Shares
Total
% of Total Shares
IDS Investors
20,000,000
20,000,000
36.90%
Management
Optionholders
Continuing Investor
463,875
5,717,712
6,181,587
11.50%
2,098,654
25,867,959
27,966,613
51.60%
Total
20,000,000
2,562,529
31,585,671
54,148,200
However, each Class A share will carry multiple voting rights of approximately
1.38 votes per share (as at December 31, 2005), resulting in 51% of the voting
rights in NFL Holdings Inc., until Class B and Class C shares together represent
no more than 49% of the total number of outstanding shares of NFL Holdings
Inc. at which time Class A shares will then carry one vote per share.
Subordination Of Class B Shares

Distributions to Class B Shares are subordinated in favor of distributions to Class
A and Class C shares until the following criteria are met:
1. New Flyer Industries Inc.s EBITDA for the 52-week period ending F2006
and for the 52-week period ending Q2/07 is at a minimum of US$69.1

million, or
2. New Flyer Industries Inc.s EBITDA for any 52-week period beginning with
F2007 is at a minimum of US$69.1 million. In addition, distributable cash

earned and distributions declared on NFI.UN are not less than $1.10/unit
(distribution target) in each of the 12 months of the prior 24-month period.
If after August 19, 2008, NFI.UN fails to meet the EBITDA and distribution
targets, holders of Class B shares will have the option to terminate the
subordination of all Class B shares, and thereafter, the amounts payable on
exercise of the Liquidity Right and/or Redemption Right (described below) will be
reduced proportionately based on the applicable distribution shortfall, if any.
Liquidity & Redemption Right of Class B and Class C Shares

Liquidity Right: Class B and C shareholders have to right on one or more
occasions (no more than twice in any 12-month period) to request NFL Holdings
Inc. (on a best-efforts basis) to purchase for cancellation, all or any portion of
the Class B and C shares, so long as the minimum gross proceeds exceed US$40
million on each occasion. Given that Class B and C shares were issued to
Continuing Investors and Management Optionholders (in exchange for their
existing share ownership of the predecessor company) at our calculated price of
US$8.11 (US$277.3 million for 2.6 million Class B shares and 31.6 million Class
C shares), we believe that profit-taking through exercise of its liquidity right
could take place if NFI.UN is trading above the shareholders cost base.
31
485
Redemption Right: NFL Holdings Inc. has the right (not the obligation) to
purchase for cancellation, all or any portion of the outstanding Class B and/or
Class C shares, starting six months after the closing of the IPO.
In order to purchase the Class B and C shares for cancellation, NFL Holdings Inc.
must use its best efforts to obtain the necessary financing (in the form of cash
on hand, issuance of additional IDS units and/or debt), and exercised Class B
and C shares will receive the fair market value on the closing date of the
transaction. If NFL Holdings Inc. is unable to obtain financing upon the exercise
of Liquidity Right by Class B and C shareholders, then a portion of the dividend
of the Class B and C shares subject to the Liquidity Right will receive 110% of
the dividend (not interest) paid to Class A shares.
Note, however, that Class C shares must be retained by the Continuing Investor
for a minimum of one year after the closing of the IPO (or until August 19,
2006), and Class B shares must be held until the later of 1) two years after the
closing of the IPO and 2) termination of subordination.
32
486
Opportunities For Growth

While NFI.UN is currently enjoying its position of being the market leader in the
heavy-duty transit bus industry, management intends to continue to grow its
market share, increase the sale of its premium products and its aftermarket
parts, focus on cost control, as well as look to bus segments other than heavyduty transit buses. Potentially, expansion into complementary markets and
strategic acquisitions of other transit manufacturers may be considered.
Growing Market Share

To continue to grow its market share, management intends to focus on product
innovation with approximately US$2.5 million being devoted to research and
development annually. In addition, management believes that the industry trend
of moving from the traditional Invitation for Bid (IFB) to Requests for Proposal
(RFP) solicitation process could be advantageous to NFI.UN as the companys
quality of product, timely deliveries, and aftermarket parts and services would
have a greater impact in the decision-making process for the customers. In the
IFB process, manufacturers are required to submit a bid and the contract is
awarded to the lowest-priced compliant bidder. However, in the RFP process, the
winning bid may not be the lowest-priced bidder, but manufacturer who can also
provide the customer with quality of product, maintenance, timely deliveries,
and aftermarket parts and services. Over the last two years, management
estimates that approximately 74% of its business has been initiated through the
RFP process, and over the last three years, NFI.UN has won contracts with 27
new transit customers.
Increasing Premium Product Sales

Management plans to continue to grow its premium product line such as the
environmentally friendly hybrid propulsion systems, as well as its Invero line of
buses with improved driver ergonomics, lower-cost maintenance, and improved
aesthetics. Although premium buses could cost in excess of $45,000 more than
a comparable diesel bus, according to a survey done in 2002 by Bus Book
Publishing, Inc., NFI.UNs sales and marketing representatives (six Winnipegbased and six field representatives with geographic coverage of Canada and the
U.S.) will endeavor to remind potential customers of the cost-savings from
operating alternative or hybrid fuel buses over the life of the vehicle compared
to the traditional diesel fuel buses. However, note that hybrid and alternative
fuel buses are also offered by several major manufacturers including Gillig,
NABI, and Orion.
Growing Aftermarket Parts And Services

Management plans to leverage its strong customer relationships and its leading
market share of buses currently in service in the U.S. and Canada to continue to
expand its aftermarket parts and services division. Currently, management
estimates that NFI.UN has approximately 36% of the market share in heavyduty buses delivered, but only 20% of the aftermarket installed base. In
addition, with the bus replacement program in 2005 and 2006 deferred due to
funding concerns, the aging fleets are expected to require greater aftermarket
parts and services in the coming years. Another strategy is to provide
aftermarket parts and services to accounts outside of heavy-duty buses (such as
commuter coaches, certain types of trucks, and medium-duty buses), as well as
to increase supplier parts sales. However, note that sales growth of supplier
parts comes at the expense of lower margins.
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487
Longer-term Growth
Longer-term growth through strategic acquisitions may be considered, especially
if the purchase would provide NFI.UN with entry into a new product area or new
customer base. Management may also consider entering complementary
markets such as medium- and light-duty vehicles, as well as highway coach
buses, although the latter would require proper administration of the volatile
financing of coach bus purchases.
34
488
Risks
The bus manufacturing business is not an easy business to be successful at due
to the risks associated with this industry, including: 1) variability of government
funding could impact order flow and, therefore, annual distributable cash flow;
2) variability in timing of replacement demand could impact order flow and
annual distributable cash flow; 3) significant warranty claims and product recalls
could adversely impact profitability; 4) delayed payment receipt due to payment
withholding clause post-delivery could impact working capital requirement; 5)
potential margin squeeze due to rising raw material costs could impact
profitability; 6) work stoppages by unionized workers; and 7) early termination
of multi-year contracts.
Variability In Transit Funding

Although transit orders are largely financed by the federal government in the
U.S., and by the provincial and municipal governments in Canada, the level of
funding could vary from year to year, depending on budget availability, and the
political environment. As an example, in 2005, budgetary constraints at the
state and municipal levels in the U.S. resulted in lower market demand. NFI.UN
management expects this would be carried into 2006. In Canada, the 2005
federal budget provided for up to $600 million for environmentally sustainable
infrastructure structure projects, some of which could be allocated to bus
purchases, while the 2006 federal budget provided for $900 million (contingent
on sufficient funds being available from the 2005-2006 surplus in excess of $2
billion) to be paid into a Public Transit Capital Trust to support capital
investments in public transit infrastructure, including transit buses and rapid
transit.
Variability In Timing Of Replacement Demand

As the initial procurement of transit fleets does not take place in regular
intervals or in regular volume, bus replacement demand could come in waves
with slowdowns in some years, and higher orders in others. While heavy-duty
buses have an economic lifespan of 12 years, on average, its useful lifespan
could be as long as 18 years.
Warranty Claims
Typically, contracts with transit authorities must contain minimum warranty
levels for the bus, structure, and major subsystems. NFI.UN typically provides a
12-year warranty on its bus structure and a one- to five-year warranty on
certain other bus components. The ongoing costs associated with the warranties
are priced into the bus purchase contracts. However, if the delivered product is
of poor quality with deficiencies or defective materials, the unforeseen costs
could exceed the budgeted amount in the contracts, resulting in lower
profitability of the contract and, ultimately, lower distributable cash flow to IDS
investors. With the arrival of the new management team at NFI.UN, warranty
claims have remained consistent at the annual rate of approximately $12 million
(see Exhibit 20). There were no significant structural issues, with most claims
owing to failure of components.
35
489
Exhibit 20. Historical Warranty Claims

$14.0
$12.3
$11.9
$12.0
$10.2
C$ millions
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
2003
2004
2005
Payment Withholding Clause

Although buses have been in production for many years, the extreme
customization by transit authorities, and the frequent redesign resulting from
legislative changes could lead to higher-than-expected operational issues with
new buses delivered. Although transit customers have protection against nonperformance and quality of product through performance bonds and warranties,
some transit agencies may require the inclusion of a payment withholding clause
that allows them to withhold a portion of payment for up to several years after
the buses are delivered. The withheld payment acts as an incentive to the
manufacturer to complete any fixes/retrofits to the delivered buses. The triple
protection sought by some transit agencies evolved from poor service by
manufacturers in the past, where the delivered buses had operational problems
detected upon receipt, or after several months of operations, which were not
repaired or replaced by the manufacturer in a timely manner, if at all. In some
instances, either the manufacturer declared bankruptcy and was unable to
provide the repair, or the manufacturer admitted that they were incapable of
making the necessary repairs.
Delayed payment receipt, combined with repair or retrofit requirements could
negatively impact the profitability and working capital requirements of the
manufacturer. A weakened balance sheet could also result in the inability of the
company to secure surety bonding facilities, which could limit its ability to take
new orders.
At NFI.UN, management estimates that approximately $3 million in payments
are being withheld by its customers as at December 31, 2005. On average,
NFI.UN has been able to negotiate for withholding periods of approximately
three months after delivery, since most of the counterparts are repeat
customers who are aware of their quality and timely repair work. In addition,
they typically have additional contracts to be completed by NFI.UN. The one
exception is one customer that has a withholding period of approximately one
year at a withholding value of approximately $1 million. This customer does not
have an upcoming contract with NFI.UN.
Margin Risk
At NFI.UN, material cost (consisting of such components as steel, fabricated
components, powertrain parts, air conditioning units, seats, windows, panels,
roofs, etc.) makes up approximately 73% of bus manufacturing (see Exhibit 21).
Of this, approximately 50% is protected from price increases through annual,
negotiated, fixed-price supply contracts, as well as from fixed-price contracts for
customer-specific materials at the time of NFI.UNs bid for a new contract. The
36
490
major components that do not typically receive firm quotes at the time of the
bid include: raw steel, metal fabricated parts, fiberglass parts, flooring, and
exterior and interior aluminum panels. Although the bid price will include a profit
margin and potential material cost increase, a significant increase in material
cost could have a negative impact on the contracts profitability and, ultimately,
distributable cash flow to IDS holders. Note that NFI.UN has some short-term
price protection in raw steel as management entered into a two-year fixed price
contract in July 2005.
Exhibit 21. 2005 Cost Structure

Other Direct Costs
Warranty
Labour
5%
3%
7%
Variable Ov erhead
3%
Fix ed Ov erhead
5%
Operating Ex penses
4%
Materials
73%
Labor Relations
Approximately 69% of NFI.UNs employees are represented by unions under four
collective bargaining agreements. As at publication of this report, the of the
Production Unit of the 670 unionized workers [under the Canadian Auto Workers
(CAW) collective bargaining unit] at the Winnipeg facility had just ended a 25day strike after a new collective agreement was reached with the help of a
conciliator. The remaining 26 unionized workers representing the Inspection Unit
will hold a ratification vote on May 29, 2006 based on the same terms as the
main Production unit. The Production Unit strike began on April 5 as the two
sides could not reach an agreement on various issues before the expiry of the
previous labor agreement at midnight on March 31. Although CAW and
management resumed negotiations on April 20, the two groups mutually decided
to end discussions the next day. On April 26, upon the request of the CAW and
agreement by NFI.UN, a conciliator was appointed by the Province of Manitoba
to assist the two groups in reaching a new agreement. Within four days, the two
groups announced that a new, three-year collective agreement expiring March
31, 2009 was reached. Key changes within the new contract includes: 1)
changes in management rights to allow outsourcing that would significantly
improve operational efficiency; 2) a 9.2% increase (or $0.60/hour increase per
year over three years) in wages; and 3) an annual increase in employees
defined benefits pension plan, including financial incentives for early retirement
at age 62. Note that only the Winnipeg facility has a defined benefits pension
plan. Both Crookston and St. Cloud have a defined contribution plan for its
employees. At the time of the IPO, $2.9 million from the proceeds of the offering
was set aside to address the deficit in the defined benefit pension plan, resulting
in a net unfunded position of approximately $3.5 million. In January 2006, a
special contribution of $2.7 million reduced the unfunded position to $0.8
million. Going forward, there is no guarantee that further past service
contribution to the pension would not be required.
37
491
While the Winnipeg facility was on strike, all manufacturing of bus shells were
transferred to NFI.UNs St. Cloud facility with assembly work taking place at
both St. Cloud and Crookston. Management indicated that the additional shift at
its St. Cloud facility hired to take on work from the Winnipeg plant during the
strike would be kept on until at least the end of 2006 in order to be caught up
with production lost during the strike, thus increasing operating costs in 2006.
Early Termination Rights And Options

Contracts entered into could be multi-year agreements with a portion being firm
orders and the remaining as optional orders to be exercised. As customers may,
without notice or penalty, terminate their relationship with the manufacturer any
time after the completion of the current order, there is no guarantee that the
options would be exercised. However, in the U.S., options may be transferred
from one transit authority to another, so long as the recipient qualifies for the
Federal funding. Note that of NFI.UNs total backlog as at Q1/06 of
approximately US$2.0 billion is comprised of 35% firm orders and 65% options.
Typically, the backlog is turned over every three to three-and-a-half years.
Currency Risk
NFI.UN enters into C$/US$ hedges in order to mitigate against unfavourable
movements in the exchange rate. While this risk can be reduced, it likely cannot
be eliminated as management enters into foreign exchange contracts based on
projections of deliveries. But the proportion of transit bus deliveries in the U.S.
and Canada vary each year, making currency requirements more difficult to
predict. In 2005, approximately 69% of total revenue was generated in the U.S.
with the balance from Canada. We forecast that the U.S. will represent
approximately 73% of revenue in 2006 based on management's guidance. Note
that distributions made to IDS unitholders are in Canadian dollars. Although
dividends to Class B and C shareholders are declared in Canadian dollars, actual
payments are made in U.S. dollars at a fixed rate of C$/US$1.2038 (or
US$/C$0.8307) to continuing investors while management optionholders receive
payments in Canadian dollars.
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492
Capital Funding
As typical of an IDS structure, NFI.UN has approximately US$123.7 million
($143.9 million face value) of subordinated notes outstanding. US$95.1 million
($110.6 million face value) represents the paper-clipped debt portion of the
IDS unit and distributes interest payments to the unitholders. The IDS must also
have identical subordinated notes held by a third party, which is represented by
the separate subordinated notes totaling US$28.6 million ($33.3 million face
value). Exhibit 22 provides the details of NFI.UNs financial obligations.
Exhibit 22. NFI.UN's Financial Obligations As At Q1/06

Limit Outstanding as at
(US$ mln.) 4-2-06 (US$ mln.)
Subordinates Notes
IDS - Subordinated notes
Separate subordinated notes
95.1 (C$110.6)
28.6 (C$33.3)
Senior Credit Facility

Secured revolving credit facility
40.0
nil
Letter of credit facility
50.0
15.5
Secured term loan facility
90.0
90.0
Leases
Capital Lease
Operating Lease
4.2
37.1
Interest Rate
Fixed 14%
Fixed 14%
US$ denominated drawings = (LIBOR or U.S. base
rate) + 2.5%
C$ denominated drawings = (Canadian prime rate or
BA rate) + 2.5%
Between 2.28% and 20.7%
NFI.UN also has a Senior Credit Facility which consists of:

1. US$40-million secured revolving credit facility
2. US$50-million letter of credit facility
3. US$90-million secured term loan facility
Financial covenants related to the senior credit facility, subordinated notes

forming the IDS unit, as well as the separate subordinated notes are detailed in
Exhibit 23. Should NFI.UN fail to meet its covenants, the companys creditors
could accelerate the loans, thereby making all amounts outstanding payable
immediately. As at the end of Q1/06 (April 2, 2006), NFI.UN was in full
compliance with the financial covenants.
Exhibit 23. NFI.UN's Financial Covenants

Restrictive Covenants
Senior Leverage Ratio
Total Leverage Ratio
Fixed Charge Coverage Ratio
Limit
Maximum 2.25x
Maximum 6.0x
(reduces to 5.75x on 31-Dec-07)
Minimum 1.1x
Current (as at April 2, 2006)

1.3x
3.0x
2.4x
Leases
In addition to the above financial obligations, NFI.UN also has a US$4.2 million
capital lease outstanding. The capital leases related to equipment, computer
39
493
hardware, and software licenses bear interest rates of between 2.28% and
20.7% and expiring between 2006 and 2013.
NFI.UN has one off-balance sheet financing item representing an operating lease
of US$37.1 million outstanding as at fiscal year-end 2005. Exhibit 24 below
provides details on lease payments required.
Exhibit 24. Lease Obligations

US$ 000s
Capital Lease
Operating Lease
Total
4,176
37,104
2006
985
2,426
2007
809
1,998
2008
682
2,034
2009
507
2,071
2010
488
1,733
2011+
705
26,842
Long-term Debt
NFI.UN currently has approximately US$213.2 million in long-term debt
outstanding and US$15.5 million short-term debt outstanding. This represents a
long-term debt to capitalization of 34% and a 2006E net-debt-to-EBITDA
multiple of 2.9x. This is significantly higher than the 2006E net-debt-to-EBITDA
average of income trusts under CIBC World Markets coverage classified under
Industrials Capital Goods and Transportation of 0.6x. However, NFI.UNs IDS
structure is different than an income trust structure as described in the IDS
Structure section (on page 50). Therefore, it will inherently appear to be more
leveraged due to the paper-clipped subordinated debt portion of the IDS,
equivalent to the intercompany debt for income trusts, which is treated as
equity.
Hedges And Swaps

In order to mitigate against unfavourable changes to the C$/US$ exchange rate,
NFI.UN has entered into forward contracts. The total notional amounts of these
contracts are $23.9 million at an effective exchange rate of 0.8696 with delivery
dates ranging from January 12, 2006 to January 12, 2007.
In addition, NFI.UN has entered into a cross-currency interest rate swap. The
initial notional principal amount is $108.0 million at a fixed rate of 7.13%, which
matures on August 19, 2009. As a result, this would help manage any
unfavourable interest rate movements associated with its US$90-million
floating-rate term credit facility, as NFI.UN would have predictable interest
payments with the interest rate now fixed.
40
494
Financial Summary
Assumptions And Forecasts
Bus Manufacturing
We have based our forecast on future bus deliveries by estimating an average
weekly delivery rate per quarter adjusting for work-in-progress as well as for special
situations, such as the strike at the Winnipeg plant in Q2/06. In addition, the price
per equivalent unit used in our assumption reflects the average delivery price, not
the average backlog price. For F2006, we estimate that the total equivalent units
delivered could total 1,567. This is lower than 2005 of 1,583 equivalent units,
attributable to: 1) a lower order rate in 2005 reflecting a reduction in state and local
funding in the U.S., as discussed in previous sections. Since it takes approximately
one year from the RFP process to delivery, a small number of orders in 2005 would,
therefore, negatively impact 2006 deliveries; 2) impact from the one-month strike
at the Winnipeg facility, as we estimate that the shortfall of 95 units would be
partially made up by the additional shift hired at the St. Cloud facility. Going into
2007, we forecast NFI.UN would continue to see an increase in deliveries to 1,612
equivalent units reflecting a recovery from the Winnipeg strike; however, the
increase is not as substantial as 2004 levels because we expect deliveries would
continue to be negatively impacted by deferred orders in 2006 related to the
ongoing funding problems experienced in the U.S.
In 2004 and 2005, the bus manufacturing division generated adjusted EBITDA
margin (adjusted for one-time non-recurring costs and before foreign exchange
gains/losses) of 11.4% and 11.6% respectively. However, we forecast 2006
margins would be slightly weaker at 11.0% due to: 1) a slight decline in
Canadian bus prices reflecting a stronger Canadian dollar compared to 2005; 2)
higher costs associated with the one-month strike at the Winnipeg facility; and
3) slower revenue growth as demand is expected to remain weak due to
continued budget constraints at the municipal and local government levels.
Going into 2007, we expect some modest improvement to 11.3%, as the
additional costs from the Winnipeg strike would have been eliminated. However,
we are not estimating for a full recovery to prior levels until 2008E, as 2007E
deliveries would still reflect 2006E orders that were priced during a period of low
demand and our assumption of lower sales prices.
Aftermarket Parts
Over the past six years, aftermarket parts revenue has grown by a compound
annual growth rate of 14%. However, recent annual growth was higher at 21%
in F2005 over F2004, and 30.5% in Q1/06 over Q1/05. As management is
aggressively growing this division by entering the medium-duty vehicle market
as well as increasing daily quotation sale, we have assumed a growth rate of
25% in F2006 and 20% in F2007. As discussed earlier, the medium-duty and
daily quotation aftermarkets have lower margins than NFI.UNs existing
aftermarkets business although it represents a smaller portion of the operations.
As a result, although we forecast for continued strength in this business we
expect margins to decline as the lower-margin business begin to contribute a
greater proportion to the division. Our estimated EBITDA margin of 19.3% for
F2006 and 18.6% for F2007, compares to F2005 of 19.3% and 20.9% in Q1/06.
Net of cost savings from the one-month strike at the Winnipeg plant, we expect
operating costs and expenses would increase slightly on a per-unit basis in 2006
as the strike has resulted in a transfer of production from the Winnipeg facility to
St. Cloud, Minnesota where an additional shift was hired. Higher costs would be
associated with transportation expenses as well as those related to training the
new shift at St. Cloud to increase the production level.
41
495
Distributable Cash And Distributions Payable

In order to determine distributions payable by New Flyer Holdings Inc., we must
first gross up the amounts payable to Class B and C shareholders. Class B and C
shareholders receive two dividend streams (preferred and residual)
representing the same per unit amounts paid to NFI.UN unitholders, who receive
distributions through interest payments (via subordinated notes) and dividend
payments (via Class A shares). However, since distributions made to Class B and
C shareholders are in the form of dividends only (i.e., no interest payment and
therefore no tax benefit to the company), the actual amount received by Class B
and C shareholders in respect of NFI.UNs interest payment portion is adjusted
by a tax rate of 36.5% (the adjusted amount represents taxes payable to the
government). Therefore, the total dollar amount received by Class B and C
shareholders is less than the amount received by NFI.UN unitholders. As a
result, we calculate distributions payable based on the grossed-up amount, as
the excess would still be required to be paid by the company in the form of
taxes. Our 2005 pro forma distributable cash flow is $62.2 million or $1.15/unit,
and with distributions payable of $59.6 million or $1.10/unit, this implies a
payout ratio of 96%. (Note that Class B and C shareholders received net
$0.817/unit or $1.10/unit on a grossed-up amount. The gross-up is applicable to
preferred dividend amount, which is approximately 60% of the total dividend.)
For 2006, we expect New Flyer Holdings Inc. to generate approximately $59.8
million ($1.10/unit) in distributable cash flow and with distributions payable of
$59.6 million ($1.10/unit), this translates into a payout ratio of approximately
100%. We expect a recovery in 2007 with distributable cash flow of $64.2 million
($1.18/unit), implying a payout ratio of 93% at the current distribution rate of
$1.10.
Please refer to Exhibit 25 below for details on our assumptions and forecasts.
Exhibit 25. Assumptions

Pro-forma 2005A
2006E
2007E
Average Price per Delivered Equivalent Unit*

(US$000/EU)
US
% Change YoY
Canada
% Change YoY
339.49
7.0%
339.49
73%
354.76
4.5%
344.58
1.5%
362.75
2.3%
351.47
2.0%
Number of Delivered Buses - Quarterly Basis

Q1
Q2
Q3
Q4
Total
% Change
411
421
398
353
1,583
-18.3%
319
330
459
459
1,567
-1.0%
403
403
403
403
1,612
2.9%
Breakdown of Delivered Buses

Total Buses Delivered
% US
Implied # of EU Delivered To U.S.
% Canada
Implied # of EU Delivered To Canada
1,583
69.2%
1,095
30.8%
488
1,567
73.4%
1,150
26.6%
417
1,612
73.4%
1,183
26.6%
429

* One equivalent unit (EU) represents one 30-foot, 35-foot or 40-foot heavy-duty transit bus. One articulated bus represents two equivalent units.
42
496
Exhibit 26. Financial Forecast Earnings

(US$ 000s unless otherwise indicated)
Revenue
Bus
US
% Change YoY
Canada
% Change YoY
Total Bus Revenue
Pro-forma 2005A
2006E
2007E
371,739
-26%
165,670
142%
537,409
407,990
10%
143,610
-13%
551,601
429,205
5%
150,708
5%
579,913
37,712
22.8%
15,683
16.1%
53,395
47,140
25.0%
19,604
25.0%
66,744
56,568
20.0%
23,525
20.0%
80,093
Total Revenue
% Change YoY
590,804
-4.2%
618,344
4.7%
660,006
6.7%
Operating Costs & Expenses

Bus Manufacturing
% Change YoY
Aftermarket
% Change YoY
Other (corporate-related)
Total Operating Costs & Expenses
484,506
-6%
43,104
22%
18,005
545,615
490,649
1.3%
53,880
25.0%
77
544,606
514,533
4.9%
65,195
21.0%
79
579,806
Foreign exchange gain

Unrealized FX Gain (Loss)
Fair Value Adjustments
Business Disposition Expense
Amortization
Total Interest Expense
Distributions on Class B & Class C Shares
Loss on Disposition of PP&E
Income tax
As a % of revenue
Net Income
826
(4,724)
16,637
(1,758)
(16,999)
(30,030)
(8,588)
(143)
(14,261)
2.4%
(13,851)
(23,200)
(24,223)
(23,312)
(23,200)
(24,292)
(23,312)
(14,926)
2.4%
(11,923)
(15,931)
2.4%
(6,536)
Aftermarket
US
% Change YoY
Canada
% Change YoY
Total Aftermarket Revenue
43
497
Exhibit 27. Financial Forecast Distributable Cash

(US$ 000s unless otherwise indicated)
Net Income
Pro-forma 2005A
(13,851)
2006E
(11,923)
2007E
(6,536)
Adjustments
Amortization
Interest Expense
Distributions on Class B & Class C Shares
Loss on disposal of assets
Fair value adjustment to other liability
Unrealized FX gains/losses
Share-based compensation expense
Income Taxes
EBITDA
Business disposition costs
FMV adjustment to inventory
Management and transaction fees
Adjusted EBITDA
16,999
30,030
8,588
143
(16,637)
4,724
8,726
14,261
52,983
1,758
9,311
9,315
73,367
23,200
24,223
23,312
23,200
24,292
23,312
14,926
73,738
15,931
80,199
73,738
80,199
11.6%
19.3%
11.0%
19.3%
11.3%
18.6%
Maintenance capex
% Change YoY
Capital lease payment
Interest expense on New Credit Facility & capital lease
Interest on Separate Subordinated Notes
Cash taxes
As a % of revenue
Distributable Cash Flow (US$)
(1,100)
(810)
(8,049)
(3,928)
(7,976)
1.4%
51,504
(1,515)
2.5%
(985)
(6,704)
(4,054)
(7,420)
1.2%
53,060
(1,553)
2.5%
(809)
(6,631)
(4,196)
(7,920)
1.2%
59,090
Interest from Subordinated Debt

Interest from Subordinated Debt Hedged
Interest from Subordinated Debt Unhedged
12,821
12,821
13,465
13,465
-
13,465
13,465
-
Distributable Cash for Dividend Payments

Distributable Cash for Dividend Payments Hedged
Distributable Cash for Dividend Payments Unhedged
38,683
38,683
39,595
7,345
32,250
45,625
45,625
Amount Hedged Through Forward Contracts

FX Hedge Rate (US$/C$)
CIBCWM FX Rate (US$/C$)
0.8280
20,810
0.8696
0.9000
0.9000
Distributable Cash Flow (C$)

Interest Payable on IDS Subordinated Notes
Total Dividends Payable
Total Distributable Cash Available
15,484
46,719
62,203
15,484
44,280
59,764
13,465
50,695
64,160
Adjusted EBITDA Margins:

Bus EBITDA as % of revenue
Aftermarket EBITDA as % of revenue
44
498
Exhibit 28. Financial Forecast Distributable Cash Flow and

Distributions Payable
(C$ 000s except per unit amounts)
Total Distributable Cash Available
Pro Forma 2005A

62,203
2006E
59,764
2007E
64,160
Available To Class B and C Shareholders

Preferred Dividend Paid (Net)
Tax Rate
Preferred Dividend (Grossed-up)
Residual Dividend Paid
Total Dividends Payable (Grossed-up)
16,792
36.5%
26,444
11,119
37,563
16,792
36.5%
26,444
11,119
37,563
16,792
36.5%
26,444
11,119
37,563
Available To IDS Unitholders

Interest on Subordinated Notes
Dividends
Total Available To IDS Unitholders
15,484
9,156
24,640
15,484
6,717
22,201
15,484
11,113
26,597
Distributions Payable (C$)

Payable To Class B and C Shareholders (Grossed-up)
Payable To Class B and C Shareholders (Net)
per unit
37,563
27,911
$0.817
37,563
27,911
$0.817
37,563
27,911
$0.817
Payable To IDS Unitholders

Interest on Subordinated Notes
Dividends Payable on Class A
per unit
22,000
$0.774
$0.326
$1.100
22,000
$0.774
$0.326
$1.100
22,000
$0.774
$0.326
$1.100
Total Distributions Payable (Grossed-up)
59,563
59,563
59,563
Payout ratio
95.8%
99.7%
92.8%
Weighted Class A shares outstanding

Weighted Class C shares outstanding
Weighted Class B shares outstanding
Fully Diluted IDS units (000s)
20,000
31,586
2,563
54,148
20,000
31,586
2,562
54,148
20,000
31,586
2,562
54,148
45
499
Appendix A.
Management Biographies
John Marinucci
Mr. Marinucci joined New Flyer in 2002 as President and CEO and most recently
held the position of President and COO for eight years at a major Canadian
Canadian Association of Railway Suppliers. Mr. Marinucci is also a member of
several private company boards of directors.
Glenn Asham
Mr. Asham joined NFI.UN in 1992 and prior to that, he provided client services in
accounting, auditing, taxation and management consulting at Deloitte & Touche
for eight years.
Michel Aziza
Michel Aziza is a Harvard graduate with a Masters in Business Administration, as
well as a professional engineer holding a Bachelor of Applied Science degree.
Joining the executive team of the company in 2002, Mr. Aziza has prior
leadership experience that includes executive and senior management roles with
leading Canadian organizations.
William Wright
William Wright joined the executive team of New Flyer in 2002. Mr. Wright holds
Bachelor of Science degrees in both Mechanical and Electrical Engineering and is
a graduate of GMI (General Motors Institute). Mr. Wright has a strong
manufacturing background, having previously served as Vice President of
Manufacturing in the heavy equipment manufacturing industry. Mr. Wright has
also held senior production and manufacturing engineering management
positions in the automotive sector
Hans Peper
Mr. Peper, Executive Vice President, Customer Services, joined New Flyer in
1989 and has contributed to the development of market-leading positions in
both the aftermarket parts and publication organizations of the company. With
his leadership, New Flyer consolidated all aftermarket activities into one
business unit, covering all aspects of industry-leading service, parts and training
support to the companys customers. Over his professional career, Mr. Peper has
operated in various senior management positions within the European farm
equipment industry.
Paul Smith
Mr. Smith, Executive Vice President, Sales & Marketing, oversees the companys
sales and marketing activities encompassing customer relations management,
competitive bus contract bidding, managing the administration of bus contracts,
and providing market forecasting. With over 15 years design experience in the
mechanical technical field, Mr. Smith has spent the last 16 years with New Flyer.
Mr. Smith has served as a designer in the engineering department for six years,
for various projects including the original low-floor prototype bus. Over the
last 10 years, Mr. Smith has operated in the companys sales department,
serving in senior roles, managing projects that include Houston Metro, Metro
Transit in Seattle, New York City Transit, and Chicago Transit Authority.
46
500
David White
Mr. White, Executive Vice President, Supply Management, began his tenure with
New Flyer in 1998 as Corporate Controller and later moved to the executive
team, serving as Vice-President, Supply Management in 2002. Prior to joining
New Flyer, Mr. White was employed with Deloitte & Touche for eight years as a
senior manager in Audit and Assurance.
Colin Pewarchuk
Mr. Pewarchuk joined New Flyer as Vice President, General Counsel and
Corporate Secretary at the end of February 2006. Prior to joining New Flyer, Mr.
Pewarchuk was a lawyer at the Aikins, MacAulay & Thorvaldson LLP law firm.
47
501
Appendix B.
Directors Biographies
John Marinucci
Mr. Marinucci joined New Flyer in 2002 as President and CEO and most recently
held the position of President and COO for eight years at a major Canadian
Canadian Association of Railway Suppliers. Mr. Marinucci is also a member of
several private company boards of directors.
The Honourable Brian V. Tobin

Prior to serving as the Federal Minister of Industry from October 2000 to
January 2002, Mr. Tobin was the Premier of Newfoundland and Labrador from
1996 to 2000. From 1980 to 1996, Mr. Tobin served as a Member of Parliament
and as Minister of Fisheries and Oceans in the federal cabinet from 1993 to
1996. Mr. Tobin is currently Senior Business Advisor with Fraser Milner Casgrain
LLP and serves on the board of directors of a number of public companies.
V. James Sardo
Mr. Sardo currently serves as director of several public companies, such as
Countryside Power Income Fund (Chairman) (COU.UNSO), Royal Group
Technologies Limited, Hydrogenics Corporation, and a trustee of UE Waterheater
Income Fund (UWH.UNSO) and Custom Direct Income Fund (CDI.UNSP).
Previous positions include interim CEO of Royal Group Technologies Limited,
President of the Canadian Operations of Moore Corporation Limited, and
President and CEO of SMK Speedy International Inc. Mr. Sardo is also a member
of the Institute of Corporate Directors.
Wayne Berman
Mr. Berman is Chairman of the Federalist Group LLC and currently serves as Vice
Chairman of JLT America, Trustee at the Centre for study of the Presidency, and
Vice Chairman of Lane McVicker. In addition, Mr. Berman has served on the
Board of Trustees from The Library of Congress and on the Board for the Center
for Strategic and International Studies.
Larry Edwards
Mr. Edwards is currently the Chairman of the Board of Global Power Equipment
Group Inc. and previously served as President and CEO. He also held the
position of President of Jason Incorporateds power generation division. Mr.
Edwards has also held various positions with Braden Manufacturing, including
Vice President of Operations, General Manager and President.
Wayne M.E. McLeod

Mr. McLeod is a corporate director and currently serves as a director on the
boards of Morguard Investments Inc., SMTC Corporation, CanWest Mediaworks
Inc., and Turbo Genset Inc. He is also a trustee of Richards Packaging Income
Fund and Atlas Cold Storage Income Trust (FZR.UNSU). Mr. McLeod retired in
1999 after 20 years with CCL Industries Inc., where he held the position of
President, CEO and Chairman, among other positions.
48
502
Ira D. Kleinman
Mr. Kleinman is a Senior Managing Director of Harvest Partners Inc. He currently
serves as a member of the boards of directors of Associated Materials Inc.,
Community Distributors Inc., Global Power Equipment Group Inc., Lund
International Holdings Inc and Natural Products Group LLC. Prior to joining
Harvest Partners Inc., Mr. Kleinman held various financial positions at American
International Group and the Bank of New York.
Colin M. Farmer
Mr. Farmer is a Principal of Harvest Partners Inc. and is currently on the boards
of directors of Cycle Gear Inc. and Lund International Holdings Inc. Before
joining Harvest Partners Inc. in 1998, Mr. Farmer was a Financial Analyst at
Robertson Stephens & Co. working in corporate finance and mergers and
acquisitions.
49
503
Appendix C.
IDS Structure
NFI.UN completed its IPO in August 2005. 20 million IDS units were issued at
$10.00 yielding 11.0% and raising total proceeds of $200 million. Each IDS unit
represents one common share in New Flyer Industries Inc. (NFI) and $5.53
principal amount of the 14% subordinated notes issued by New Flyer Industries
Canada ULC ($110.6 million aggregate principal amount). The IDS holder
receives dividend payments from the common shares in NFI and interest
payments from the subordinated notes on a monthly basis. In addition, another
$33.3 million aggregate principal amount of separate subordinated notes was
issued through a private placement, terms of which are identical to the
subordinated notes. Total proceeds of: 1) $200 million from the IDS offering; 2)
$33.3 million from the sale of separate subordinated units; and 3) US$90 million
from its senior credit facility were used to purchase an indirect 36.9% economic
interest in New Flyers Holding Inc. through Class A shares. Continuing Investors
and New Flyer LLC retain the remaining 63.1% interest through Class B and
Class C shares. Please see Exhibit 27 below.
Exhibit 27. IDS Structure
50
504
Appendix D.
Competitors
North American Bus Industries Inc. (NABI)
NABI is a wholly owned subsidiary of NABI Rt, which was incorporated in 1992.
NABIs headquarters and operations are located in Anniston, Alabama along with
two bus assembly plants. NABI receives vehicle bodies from NABI Rt and
completes the final assembling process using parts that are compliant with the
Buy America legislation. The two manufacturing and engineering facilities are
dedicated to the production of purpose-designed transit vehicles customized for
the North American market. In January 2006, NABI was purchased by Cerberus
Capital Management L.P., a private U.S.-based equity fund manager.
Gillig Corporation
Gillig Corporation (Gillig) is a privately held company owned by California-based
Herrick Pacific. Gillig is the second-largest producer of transit buses in North
America with a plant located in Hayward, California.
Nova BUS
Nova Bus was created in 1993 with the reorganization of MCIs transit bus
division. Nova BUS is a bus manufacturing company based in Saint-Eustache,
Quebec. Nova BUS was subsequently acquired by Prevost Car Inc., a subsidiary
of Volvo Bus Corporation (FNYSE) in March 1998. The company has two plants
located in Quebec: 1) the assembly of the Nova LFS takes place at the SaintEustache plant and 2) the structure of the vehicles as well as parts and
components used in manufacturing buses are produced at the Saint-Francoisdu-Lac plant. Nova BUS pulled out of the American bus market in 2002 and has
since completely focused on the Canadian transit market. It offers only one type
of product, the Nova LFS, which is a low-floor urban transit bus. The company
also offers aftermarket parts replacement and services through its eight
warehouses throughout North America and has approximately 2,800 Nova LFS
buses in operation in North America.
Orion Bus Industries (Orion)

Orion was established in 1975 in Ontario and was subsequently acquired by
DaimlerChrysler in 2000. The company has two production facilities located in
Ontario and New York. Production of the buses begin at the Ontario plant and
then shipped to New York, where the installation of seats, engines,
transmissions, heating and air condition systems, etc. is completed in addition to
final testing of the buses. Orion has recently temporarily laid off employees in
order to balance the production line. The first round of temporary layoffs began
in late January 2006 and the second round began in early February. According to
a press release, the layoffs were due to several factors, including a delay in the
completion of a pilot bus for a new order.
Neoplan U.S.A.
Founded in 1981, Neoplan U.S.A. was a major transit bus manufacturing
company based in Colorado with three types of buses including standard floor,
low floor, and articulated buses. To our understanding, Neoplan had experienced
problems related to its operations and increasing warranty obligations, coupled
with an overall decline in demand faced by the industry over the last couple of
years. As a result, Neoplan ceased operating in January 2006.
51
505
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2005 Current
--
--
--
--
$1.10A
2006 Current
--
--
--
--
$1.10E
2007 Current
--
--
--
--
$1.10E
3 Qtr.
4 Qtr.
Yearly
Our DCFPU estimates are shown below:
1 Qtr.
2 Qtr.
2005 Current
--
--
--
--
$1.15A
2006 Current
$0.18A
$0.23E
$0.35E
$0.35E
$1.10E
2007 Current
$0.32E
$0.29E
$0.29E
$0.29E
$1.18E
52
506

(NFI.UN)
2a
2c
2d
2e
2f
2g
4a
4b
53
CIBC World Markets Corp. has received compensation for investment banking services from New Flyer
New Flyer Industries Inc. is a client for which a CIBC World Markets company has performed non-investment
banking, non-securities-related services in the past 12 months.
services from New Flyer Industries Inc. in the past 12 months.
507
Atlas Cold Storage Income Trust (2g) (FZR.UN-TSX, $6.42, Sector Underperformer)
Countryside Power Income Fund (2a, 2c, 2e, 2g) (COU.UN-TSX, $9.78, Sector Outperformer)
Custom Direct Income Fund (2g) (CDI.UN-TSX, $7.92, Sector Performer)
UE Waterheater Income Fund (2a, 2c, 2e) (UWH.UN-TSX, $14.90, Sector Outperformer)
Caterpillar (CAT-NYSE, US$73.96, Not Rated)
Cummins Inc (CUM-NYSE, US$46.20, Not Rated)
DaimlerChrysler AG (DCX-NYSE, US$53.22, Not Rated)
Ford Motor Company (F-NYSE, US$7.15, Not Rated)
General Motors (GM-NYSE, US$27.90, Not Rated)
MAN AG (MAN-DE, 28.40, Not Rated)
54
508

1
2a
2b
2c
2d
2e
2f
2g
3a
3b
3c
4a
4b
4c
5a
5b
6a
6b
7
8
9
10
past 12 months.
past 12 months.
the past 12 months.
past 12 months.
equity securities.
11
12
13
14

55
509
56
510

Abbreviation
Rating
Description
SO
Sector Outperformer
SP
Sector Performer
Stock Ratings
SU
NR
Not Rated
Restricted
Sector Weightings**
O
Overweight
Market Weight

Underweight
NA
None

(as of 25 May 2006)
Count
Percent
Count
Percent
314
38.9%

171
54.5%
177
45.6%
388
48.1%
77
9.5%
37
48.1%
Restricted
20
2.5%
Restricted
20
100.0%

(as of 25 May 2006)
Count
Percent
Count
Percent
22
34.9%
21
95.5%
28
44.4%
24
85.7%
10
15.9%
70.0%
4.8%
Restricted
100.0%
Restricted
Income Trusts Sector includes the following tickers: AER.UN, APF.UN, AW.UN, AYP.UN, BFC.UN, BPF.UN, BPT.UN, BRK.UN, CBF.UN,
CDI.UN, CF.UN, CGX.UN, CHE.UN, CLC.UN, CLE.UN, CLR.UN, COU.UN, CSS.UN, CWI.UN, CWM.UN, DET.UN, DHF.UN, EAT.UN,
ENF.UN, EP.UN, FCE.UN, FDG.UN, FLM.UN, FZR.UN, GLH.UN, GZM.UN, ICE.UN, IEF.UN, IPL.UN, KEG.UN, KEY.UN, LIF.UN, LIV.UN,
MEW.UN, MPT.UN, NAL.UN, NFI.UN, NIF.UN, NPI.UN, NWF.UN, OSP.UN, PIF.UN, PKI.UN, PRT.UN, QSR.UN, RSF.UN, SFK.UN, SIF.UN,
SPF.UN, SWS.UN, TAY.UN, TIL.UN, TPW.UN, TWF.UN, UWH.UN, WTE.UN, YLO.UN, Z.UN.
57
511
Legal Disclaimer
without notice.
58
512

New Flyer Initiating

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Table of Contents

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

These reports were compiled using a product of Thomson Reuters

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES: INITIATING COVERAGE WITH MARKET PERFORM RATING(REPORT)

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

NEW FLYER INDUSTRIES-INITIATING COVERAGE

These reports were compiled using a product of Thomson Reuters

NEW FLYER INDUSTRIES - INITIATING COVERAGE-INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE-INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - REINITIATING COVERAGE

NEW FLYER INDUSTRIES - REINITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - REINITIATING COVERAGE

These reports were compiled using a product of Thomson Reuters

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

NEW FLYER INDUSTRIES - INITIATING COVERAGE

These reports were compiled using a product of Thomson Reuters

INSTITUTIONAL EQUITY RESEARCH: DIVERSIFIED INDUSTRIES

New Flyer Industries Inc.

Notes from Toronto

Financial Metrics (US$)

Market Capitalization ($mm):

3-Month Avg. Daily Volume ('000):

(FYE Dec 31)

$1,451.1 $1,552.1 $2,450.7

New Flyer Industries Inc.

Chris Murray, P. Eng., CFA

We Expect Synergies to Materially Grow: When announcing the transaction to

Samarth Modwal, Associate

ALTACORP CAPITAL INC.

Operating & Financial Highlights

Trend Free Cash Flow (FCF)

Cash provided by operations

Dividends Declared on Common Shares (C$)

Average CAD/USD Rate

Free cash flow (C$)

92,829 104,615 173,985 198,313

Dividend Per Share (C$)

Dividends on Common Shares

Trend Key Operating Metrics

229,034 651,891 610,915 500,725