Quarterlytics / Consumer Cyclical / Auto - Manufacturers / NFI Group

NFI Group

nfi · TSX Consumer Cyclical
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Ticker nfi
Exchange TSX
Sector Consumer Cyclical
Industry Auto - Manufacturers
Employees 5001-10,000
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FY2020 Annual Report · NFI Group
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Financial Results 
Fiscal 2020

March 4, 2021

NFI continues changing the game.

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We continue to innovate and 
drive forward.

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We provide comprehensive 
mobility solutions.

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We have more than 105,000 buses 
in service in 11 countries 
around the world. 

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We are leading the evolution to a 
zero-emission future. 

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NOTES TO READERS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR
THE 13-WEEKS AND 52-WEEKS ENDED DECEMBER 27, 2020

Information in this Management’s Discussion and Analysis (“MD&A”) relating to the financial condition and results of
operations of NFI Group Inc. (“NFI” or the "Company") is supplemental to, and should be read in conjunction with, NFI’s
audited consolidated financial statements (including notes) (the “Financial Statements”) for the 52-week period ended
December 27, 2020.

This MD&A contains forward-looking statements, which are subject to a variety of factors that could cause actual results to
differ materially from those contemplated by such forward-looking statements, including, but not limited to, the factors
described in the Company's public filings available on SEDAR at www.sedar.com. See “Forward-Looking Statements” in
Appendix A. The Financial Statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) and, except where otherwise indicated, are presented in U.S. dollars, which is the functional currency
of NFI. Unless otherwise indicated, the financial information contained in this MD&A has been prepared in accordance
with IFRS and references to “$” or “dollars” mean U.S. dollars.

The quarterly and annual reporting periods for the current and prior year are as follows:

QUARTERLY AND ANNUAL REPORTING PERIODS

Period from December 30, 2019 to December 27, 2020

Period from December 31, 2018 to December 29, 2019

(“Fiscal 2020”)

Period End Date

Quarter 1

Quarter 2

March 29, 2020

("2020 Q1")

June 28, 2020

("2020 Q2")

Quarter 3

September 27, 2020

("2020 Q3")

Quarter 4

December 27, 2020

("2020 Q4")

Fiscal 
year

December 27, 2020

# of 
Calendar 
Weeks

13

13

13

13

52

(“Fiscal 2019”)

Period End Date

March 31, 2019

("2019 Q1")

June 30, 2019

("2019 Q2")

September 29, 2019

("2019 Q3")

December 29, 2019

("2019 Q4")

December 29, 2019

# of 
Calendar 
Weeks

13

13

13

13

52

The quarterly and annual reporting periods for Fiscal 2021 will be as follows:

Period from December 28, 2020 to January 2, 2022

(“Fiscal 2021”)

Period End Date

Quarter 1

Quarter 2

March 28, 2021

("2021 Q1")

June 27, 2021

("2021 Q2")

Quarter 3

September 26, 2021

("2021 Q3")

Quarter 4

January 2, 2022

("2021 Q4")

Fiscal 
year

January 2, 2022

# of 
Calendar 
Weeks

13

13

13

14

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NOTES TO READERS

Specific references and definitions are used throughout this MD&A, please see "Meaning of Certain References" and
"Definitions of Adjusted EBITDA, return-on-invested-capital ("ROIC"), Free Cash Flow, Adjusted Net Earnings, Adjusted
Earnings per Share, and Regions including: North America, UK and Europe, Asia Pacific, and Other" in Appendix A.
References to LTM mean last-twelve months ("LTM"). Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net Earnings
and Adjusted Earnings per Share are non-IFRS measures and should not be considered substitutes or alternatives for
IFRS measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable
way to compare NFI to other companies. See the heading entitled: “Definitions of Adjusted EBITDA, ROIC, Free Cash
Flow, Adjusted Net Earnings, Adjusted Earnings Per Share, regions including: North America, UK and Europe, Asia
Pacific, and Other" in Appendix A for information about these measures, including how they are calculated and the way in
which they are used.

Buses manufactured by New Flyer and ADL's single and double deck buses are classified as "transit buses". ARBOC
manufactures body on-chassis or “cutaway” and "medium-duty" buses that service transit, paratransit, and shuttle
applications. Collectively, transit buses, medium-duty buses and cutaways, are referred to as "buses". A “motor coach” or
“coach” is a 35-foot to 45-foot over-the-highway bus typically used for intercity transportation and travel over longer
distances than heavy-duty transit buses, and is typically characterized by (i) one or two axles in the rear (related to the
weight of the vehicle), (ii) high deck floor, (iii) baggage compartment under the floor, (iv) high-backed seats with a coach-
style interior (often including a lavatory), and (v) no room for standing passengers. “Product lines” include heavy-duty
transit buses, motor coaches, pre-owned coaches, cutaway and medium-duty buses.

Zero-emission buses ("ZEBs") consist of trolley-electric, hydrogen fuel cell-electric, and battery-electric buses. All of the
data presented in this MD&A with respect to the number of transit buses, medium-duty buses, cutaways and motor
coaches in service and delivered, is measured in, or based on, “equivalent units”. One equivalent unit (or “EU”) represents
one production slot, being one 30-foot, 35-foot, 40-foot, 45-foot heavy-duty transit bus, one double deck bus, one medium-
duty bus, one cutaway bus or one motor coach, whereas one articulated transit bus represents two equivalent units. An
two passenger
articulated transit bus is an extra-long transit bus (approximately 60-feet
compartments connected by a joint mechanism. The joint mechanism allows the vehicle to bend when the bus turns a
corner, yet have a continuous interior.

in length), composed of

A summary of the Company’s order, delivery and backlog information can be found in Appendix B.

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Dear Shareholders,

2020 is a year that none of us will ever forget.

As we began the year, we had a plan that would see us deliver record results, and were off to
a great start with a solid first quarter. Then the COVID-19 global pandemic became our
reality. As the pandemic took hold in our geographies, few of us could ever have imagined
the dramatic impact
it would have on our world, our customers, our people, and our
business.

the NFI

While 2020 was a period of challenges, including an immediate standstill of private coach
operations, delayed public customer orders,
idled facilities and furloughs, organizational
changes, economic shocks, closed borders, and stay-at-home orders, we were extremely
In the midst of an
proud to see the response of
unprecedented global pandemic, our people focused on the health and safety of their fellow
team members and on delivering for our customers. Transit is the spinal cord of cities,
and most of our customers provide an essential service - one that connects cities and
people, drives economic activity, and improves congestion and air quality. Throughout the
pandemic, these operators delivered for their customers and ensured that, while the world
stopped, public transit kept moving. We're proud to be able to support these individuals in
everything they do, and we remain committed to ensuring our vehicles perform safely,
reliably and meet all of our customers' expectations.

team around the world.

Our team worked tirelessly to achieve a balance in our decision-making and in dealing with
the realities of the pandemic. This included some very difficult decisions to reduce our
operating costs, headcount and facility footprint. While there were no easy answers, our
people responded to the challenge and drove the NFI Forward initiative ("NFI Forward"), a
group-wide series of projects that is expected to transition NFI from a holding company
structure into a more integrated and efficient systems-driven organization.

The pandemic continues to disrupt all aspects of our daily lives, but there is hope on the
horizon. We are seeing ridership start to return and vaccines are now being deployed. There
is enthusiasm and desire to re-open cities and start moving again. At NFI, we are
committed to doing everything we can to make sure our vehicles are ready for the recovery
by offering products to increase onboard safety and cleanliness for our customers.

Looking beyond the pandemic, we held our annual Investor Day on January 11, 2021, where
we outlined the future of NFI and had an opportunity to successfully connect virtually with our
stakeholder community. We received fantastic feedback from the event, so much so that we
will aim to make this an annual virtual event
to continue to provide you with quality
information, insights and updates.

NFI is Leading the ZEvolutionTM: the evolution to a zero-emission future. (continued->)

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(-> continued)

At NFI, we don’t speak about hypotheticals or unfounded promises of growth or share or
margin. We’re the leaders, and we deliver upon our commitments. We will continue to
innovate and lead the way to a zero-emission bus future. We have the largest vehicle
production capacity in North America and the UK, the broadest propulsion offering, the
deepest customer relationships and unmatched aftermarket and technical support. And we
aren’t just a bus manufacturer—we are a mobility solutions provider. We now offer
telematics, connected vehicles,
infrastructure solutions, aftermarket, battery-leasing,
automated vehicles and advanced driver assistance systems. Our history is painted with
innovation, and our focus on innovation will continue as we move forward and continuously
disrupt ourselves - as we've done for more than a century.

There is a lot to look forward to. We are really excited about where we are and where
we are going. We have exciting product launches ahead, which started with the launch of
the Xcelsior AV in January 2021, North America’s first fully operational heavy-duty Level 4
automated bus. Soon, we will launch new electric vehicle models at New Flyer, unveil the
new D45 Commuter Rapid Transit battery-electric coach at MCI, and begin production of
ARBOC's Equess CHARGE shuttle bus.

We are committed to continuing to innovate in order to ensure better, smarter, safer,
more sustainable, and more connected public transportation. Environmental and social
governance continues to drive our decision making, and NFI is extremely well positioned to
capitalize on both our internal initiatives, including an increase in the diversity of our team,
reduction of our carbon footprint, and through the environmental and social benefits created
by our products. NFI's vehicles and solutions will enable smart city development, reduce
the harmful impacts of climate change, traffic congestion and noise pollution, and create
economic opportunity for current and future generations.

Sincerely,

The Honourable Brian V. Tobin 
P.C., O.C. Chairman of the Board                                      
NFI Group Inc.

Paul Soubry                                  
President & Chief Executive Officer  
NFI Group Inc.

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NFI is a leading global bus manufacturer of mass    
mobility solutions

NA Market Leader in Heavy-Duty 
Transit Buses and Infrastructure 
Solutions

NA Market Leader in Motor 
Coaches

World Leader in Double Deck 
Buses; UK Market Leader in Bus 
and Coach

NA market leader in Low-floor 
Cutaway and medium-duty 
Shuttle buses

Market leader in Bus/Coach Parts

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NFI is leading zero-emission electric mobility 

20 million +
Electric service miles driven

1,371 
Zero-Emission Buses (ZEBs) delivered since 2015

389
ZEBs delivered in 2020 (9% of total deliveries) 
34% improvement from 2019

80+
Cities with an NFI ZEB in service or on order

632
ZEBs in backlog (5.8% of total backlog)

$24.7 million
Infrastructure Solutions revenue in 2020

20% to 25% 
of 2021 production is expected to be ZEBs

8,000
Annual ZEB production capacity

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FY 2020 Highlights (US$)

$2.4 billion
Revenue

4,371
EUs delivered

3,519
EUs in New Orders

24,378
Total Bid Universe

$233.5 million
Liquidity

$158 million
Adjusted EBITDA
$27.5 million
Free Cash Flow
$18 million
NFI Forward 
($0.75)
Adjusted Net Earnings per Share
$4.5 billion
Ending Backlog of 8,504 EUs

Revenue by Geography

Revenue by Product

North 
America
81%

United 
Kingdom 
and 
Europe
14%

Asia 
Pacific 
5%

Transit
67%

Motor 
Coach
14%

Low-Floor 
Cutaway and 
Medium Duty
2%

Aftermarket
17%

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KEY PERFORMANCE INDICATORS

Deliveries (EUs) 

Revenue ($ millions)

The decrease in deliveries from 2019 Q4 to 2020 Q4 was related to lower production volumes as a result of the ongoing impacts of 
the  COVID-19  pandemic.  Lower  deliveries  were  experienced  in  all  of  NFI's  product  lines,  with  the  largest  decline  seen  in  private 
motor  coach.  Fiscal  2020  new  vehicle  deliveries  were  down  by  944  EUs,  or  17.8%,  from  Fiscal  2019,  with  declines  in  heavy-duty 
transit and motor coach somewhat offset by increased deliveries of low-floor cutaway vehicles.   

Total revenue decreased by 22.5% from 2019 Q4 to 2020 Q4 due to the decline in vehicle deliveries. Aftermarket parts sales were 
also lower by 11.4%, primarily due to private operators idling their fleets due to the COVID-19 pandemic. The comparative quarter 
decline is also partly a reflection of the record deliveries achieved in 2019 Q4. Fiscal 2020 revenues were down 16.4% from Fiscal 
2019, due to the ongoing impacts of the COVID-19 pandemic, including lower vehicle deliveries and private sector aftermarket parts 
sales. The acquisition of ADL partially offset the COVID-19 related revenue decline in the fiscal-year comparative.

Net earnings (loss) ($ millions)  

   Adjusted Net Earnings1 (Loss) ($ millions)

The 2020 Q4 net earnings of $8.5 million, a decrease of $25.6 million from 2019 Q4, was mainly driven by lower revenues mentioned 
above. The Company continued to lower variable overhead costs in step with lower production, but was unable to reduce fixed costs 
as quickly. Net earnings were impacted by $5.4 million in exceptional costs related to COVID-19 and $1.0 million in one-time, non-
recurring  restructuring  charges  primarily  related  to  the  NFI  Forward  initiative.  Losses  from  operations  were  partially  offset  by 
government grants of $11.3 million received through the Canadian Emergency Wage Subsidy ("CEWS") and the UK Job Retention ("UK 
Furlough") program.  

The Company reported a net loss of $157.7 million in Fiscal 2020, driven by lower production volumes, extraordinary COVID-19 costs, 
and non-recurring restructuring costs associated with production reductions and the NFI Forward initiative. Fiscal 2020 results were 
also lower as a result of a $50.8 million goodwill impairment charge related to MCI's private motor coach operations, incurred in 2020 
Q1.

2020  Q4  Adjusted  Net  Earnings  of  $8.2  million  was  primarily  driven  by the  same  factors  relating  to  net  earnings,  but  adjusted  for 
several  normalizing  tax  affected  items,  including  $0.7  million  in  one-time,  non-recurring  restructuring  charges  and  $3.7  million  in 
other COVID-19 related costs. Fiscal 2020 Adjusted Net Loss of ($47.2) million is normalized for tax-affected items including $19.0 

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1,8451,2305,3154,371Q4 '19Q4 '20FY 19FY 20$917.7$711.5$2,893.5$2,419.2Q4 '19Q4 '20FY 19FY 20$34.1$8.5$57.7$(157.7)Q4 '19Q4 '20FY 19FY 20$30.9$8.2$101.7$(47.2)Q4 '19Q4 '20FY 19FY 20 
 
 
 
 
                
 
 
million  of  one-time,  non-recurring  restructuring  charges  and  $32.7  million  of  COVID-19  related  costs,  as  well  as  the  $50.8  million 
goodwill impairment and $12.2 million of mark-to-market losses on interest rate swaps.

Adjusted EBITDA1 ($ millions) 

                                Free Cash Flow1 ($ millions)

2020 Q4 Adjusted EBITDA of $65.0 million decreased by $38.9 million from 2019 Q4, or 37.4%, driven by the decrease in deliveries 
and  aftermarket  revenue  mentioned  above.  In  response  to  the  decline  in  revenue  the  Company  was  focused  on  lowering  both 
variable production costs and fixed general and administrative expenses. This included the transformational NFI Forward initiative, 
which  is  anticipated  to  lower  both  direct  and  fixed  costs.  NFI  Forward  achieved  Adjusted  EBITDA  savings  of  $17.0  million,  and  a 
further $1.0 million of Free Cash Flow savings related to interest expenses and leases in Fiscal 2020.

On a yearly basis, Adjusted EBITDA decreased by $164.5 million, or 51.1%, as NFI delivered fewer vehicles in 2020 due to the impacts 
of  the  COVID-19  pandemic.  In  addition,  the  Company  continued  to  incur  fixed  operating  costs  on  a  lower  revenue  base.  These 
negative impacts were somewhat offset by government grants of $53.5 million received through the CEWS and UK Furlough programs, 
and improvements at KMG. Despite headwinds from COVID-19 related absenteeism, KMG achieved positive Adjusted EBITDA for the 
second consecutive quarter, and despite the many operational challenges COVID-19 presented throughout Fiscal 2020, KMG achieved 
year-over-year Adjusted EBITDA improvement of $7.3 million.

Free Cash Flow in 2020 Q4 decreased by $20.0 million, or 40.8%, as compared to 2019 Q4, primarily due to lower Adjusted EBITDA 
and higher maintenance capital expenditures. On a yearly basis, Free Cash Flow decreased by 82.9%, primarily driven by the idling of 
production facilities in the second quarter, which resulted in second quarter Free Cash Flow losses of $43.1 million. 

Declared dividends ($CAD millions) 

Total Liquidity ($ millions)

Effective Q1 2020, quarterly dividends were reduced 50.0% to C$0.2125 per common share in direct response to the impact of the 
COVID-19 pandemic on the Company's end markets and operating business. On a yearly basis, dividends are down 49.7%. While the 
dividend  payment  was  reduced,  the  continued  payment  reflects  the  confidence  of  the  Board  of  Directors  (the  "Board")  in  the 
Company’s business while maintaining the financial flexibility required to operate during a period of significant uncertainty. 

The  Company's  liquidity  position,  which  combines  cash  on-hand  plus  available  capacity  under  credit  facilities,  as  at  December  27,  
2020 was  $233.5 million, up $24.2 million from Q4 2019. On December 23, 2020, NFI announced amendments to its credit facilities: 
NFI amended the Company’s existing $1.25 billion senior revolving credit facility (the “Credit Facility”) and its £50 million revolving 
UK credit facility (the “UK Facility”), and the amended facilities provide NFI with relaxed covenants as it recovers from the impacts 
of the COVID-19 pandemic. Under the terms of the amended facilities, the total leverage and interest coverage ratios for 2021 and 

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$103.8$65.0$322.2$157.7Q4 '19Q4 '20FY 19FY 20$49.0$29.0$160.4$27.5Q4 '19Q4 '20FY 19FY 20$26.6$13.3$105.5$53.1Q4 '19Q4 '20FY 19FY 20$209.3$146.6$436.2$414.5$233.5Q4' 19Q1' 20Q2' 20Q3' 20Q4' 20 
 
 
 
 
2022 have been increased to a higher level. During 2021, the Company has received a waiver of the total net leverage covenant and 
will instead need to comply with a total net leverage ratio that is based on a financial projection for the Company’s 2021 fiscal year. 
In addition to amending the facilities, NFI terminated the unused $250 million unsecured credit facility it entered into in April 2020 
(the  “Sidecar”),  which  was  intended  to  provide  additional  liquidity,  which  the  Company  believes  it  no  longer  requires.  Further 
details regarding the credit facilities and the Company's covenants can be found in the Capital Allocation section of this MD&A.

On March 1, 2021, NFI announced that it had closed a bought-deal equity offering ( the "Offering") with a syndicate of underwriters 
(the "Underwriters") pursuant to which NFI issued 8,446,000 common shares at a price of C$29.60 per share for gross proceeds to the 
Company of C$250 million. The Company intends to use the net proceeds of the Offering to reduce the outstanding balances under 
its  credit  facilities,  which  is  expected  to  strengthen  NFI’s  balance  sheet,  reduce  leverage  and  interest  expense  and  significantly 
increase liquidity.

NFI  believes  that  its  existing  liquidity  combined  with  the  additional  financial  flexibility  provided  from  the  Offering  will  allow  it  to 
pursue  its  operational  and  strategic  goals,  such  as  investments  in  NFI’s  zero-emission  products  and  electric  propulsion  technology, 
investments required under the previously disclosed NFI Forward cost-reduction initiative and other potential growth opportunities, 
in addition to continuing to return capital to shareholders through dividends. 

 Backlog (EUs) 

  ROIC1

At the end of 2020 Q4, the Company's total backlog (firm and options) of 8,504 EUs (valued at $4.3 billion) has decreased compared 
to 8,882 EUs (valued at $4.5 billion) at the end of 2020 Q3. The decrease was primarily driven by the Company delivering units in the 
backlog while new orders were lower during the period due to delays in new contract awards as a result of COVID-19 disruptions to 
public market customers. Backlog was also impacted by the expiry of 120 option EUs and the cancellation of 26 EUs. 

FY  2020  ROIC  decreased  by  68.0%  from  2019  Q4  LTM  due  to  the  decline  in  Adjusted  EBITDA,  driven  by  the  impacts  of  COVID-19, 
combined  with  one-time  non-recurring  lower  of  cost  or  net  realizable  value  adjustments  in  respect  of  the  Company's  pre-owned 
coaches, and goodwill impairment in the MCI business unit.

Footnotes

1.

Non-IFRS Measure - See Appendix A

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4,2243,6623,2406,5185,2205,264FirmOptionsQ4' 19Q3 '20Q4 '209.7%3.1%FY 19FY 20 
 
 
 
 
 
2020 Q4 HIGHLIGHTS

The fourth quarter of 2020 saw NFI continue to recover from the impacts of COVID-19 and deliver significant improvement over both the 
third quarter, as well as over the second quarter of idled production. While results improved in 2020 Q4, the ongoing COVID-19 pandemic 
continued  to  challenge  NFI’s  customers  and  end  markets.  Rising  COVID-19  rates  in  the  U.S.,  Canada,  and  the  UK,  combined  with 
mutations of the virus, ongoing work-from-home mandates and the dramatic decline in travel slowed the announcement of new vehicle 
awards, and delayed or deferred purchases, especially in private coach and UK transit markets.

As  a  result  of  the  pandemic  and  in  order  to  achieve  the  anticipated  benefits  from  the  ongoing  NFI  Forward  initiative,  the  Company 
incurred several one-time costs that have been normalized within Adjusted EBITDA and Adjusted Net Earnings. These adjustments (tax 
effected) include:

•

Restructuring

•

$1.0 million in severance costs and asset impairments primarily related to the NFI Forward initiative.

•

COVID-19
•
•

$4.6 million in asset impairments from aftermarket parts inventory and ADL private coach.
$0.8 million of COVID-19 operating costs that include, but are not limited to, the purchase of personal protective 
equipment, plant sanitation activities and incremental cleaning activities.

Adjusted Net Earnings are also normalized for other related items including:

•
•
•

$2.3 million mark-to-market loss on interest rate swap
$2.2 million unrealized foreign exchange gains
$1.1 million fair value adjustments to the total return swap 

After adjusting for these items, Adjusted Net Earnings is $8.2 million or $0.13 per share.

While  the  pandemic  continued  to  create  challenges  during  the  fourth  quarter,  it  was  a  busy  period  for  NFI  that  saw  the  Company 
experience several events and achieve significant milestones, including the following:

•

•

•

•

•

•

•

•

In  November,  ADL  expressed  support  for  the  UK  Government’s  Ten  Point  Plan  for  a  Green  Industrial  Revolution  and  the 
commitment to invest £120 million to begin the introduction of at least 4,000 more British built ZEBs. ADL is the UK’s leader in 
ZEBs and is extremely well positioned to capitalize on the transition to zero-emission vehicles. An example of this leadership 
position was the ADL BYD partnership's electric vehicles completing 600,000 zero-emission service miles in December 2020. 

NFI’s  North-American  ZEB  strategy  continued  in  earnest  with  awards  in  Nashville  for  vehicles  and  the  associated  charging 
infrastructure.  The  California  Air  Resources  Board  also  approved  MCI’s  zero-emission  coaches  to  be  eligible  to  avail  of  the 
Hybrid and Zero-Emission Truck and Bus Voucher Incentive Program.

ADL’s new market growth strategy continued with the delivery of the first Enviro500 double-deck vehicles to Berlin, Ireland and 
New Zealand. In Berlin, ADL expects to receive an order for an additional 198 units following completion of a testing program. 
In Ireland, there are another 180 EUs on order for 2021 delivery, and ADL delivered two electric vehicles to New Zealand. 

NFI’s commitment to the communities in which it operates was more important than ever in 2020, and NFI and its employees 
were pleased to raise over C$400,000 through its annual United Way fundraising campaign, providing support to 19 communities 
across North America.

In December, MCI announced that the MCI Academy had received its fourth consecutive ASE Training Managers Council National 
Excellence in Training Award, the Grand Award, for its High Voltage Safety Program.

Throughout  the  quarter,  NFI’s  Clean  and  Protect  product  line  helped  customers  provide  a  safer  transportation  experience  as 
customers equipped their vehicles with sanitization, cleaning and air purification products.

ARBOC’s low-floor cutaway growth strategy took significant steps forward as the Company received an order for 53 low-floor 
Spirit  of  Freedom  buses  from  British  Columbia’s  TransLink,  and  Transit  St.  Louis  added  13  new  Metro  Call-A-Ride  vans  to  its 
fleet. 

On  December  23,  2020,  NFI  announced  amendments  to  its  $1.25  billion  Credit  Facility  and  its  £50  million  UK  Facility.  The 
amended facilities provide NFI with relaxed covenants as it recovers from the impacts of the COVID-19 pandemic. In addition to 
amending the facilities, NFI terminated the unused $250 million Sidecar, which was intended to provide additional liquidity in 
2020, which the Company believes it no longer needs.

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The Company continued to pay its quarterly dividend of C$0.2125 per share (annual rate of C$0.85 per share), resulting in a payout ratio 
for Fiscal 2020 of 153.0%%. The Board expects to maintain dividends on a quarterly basis, although such dividends are not assured. 

Leading the ZEvolutionTM

On  January  11,  2021,  NFI  held  its  virtual  Investor  Day  2021,  where  NFI’s  Senior  Leadership  Team  and  Board  provided  detailed 
presentations  regarding  NFI’s  business  and  strategy,  with  a  focus  on  NFI’s  vision  to  drive  the  increased  adoption  of  ZEBs,  what  NFI  is 
calling  the  ZEvolutionTM.  The  event  also  featured  an  informative  discussion  by  a  panel  made  up  of  mobility  experts  from  Canada,  the 
United  States,  and  the  United  Kingdom.  During  the  event,  NFI  announced  its  2021  guidance,  2025  targets  and  longer-term  financial 
outlook, details of which can be found in the Outlook section of this MD&A.

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FINANCIAL RESULTS

Despite  improvements  from  the  third  and  second  quarters,  the  COVID-19  pandemic  continued  to  negatively  impact  NFI's  2020  Q4 
results across all financial metrics, including the Company's deliveries, which declined by 615 EUs, or 33.3%, from 2019 Q4. Lower 
deliveries were experienced in all of NFI's product lines, but the most significantly impacted continued to be the private segments of 
MCI  and  ADL.  Private  market  activity  remained  low  as  operators  continued  to  idle  their  vehicles  in  response  to  government  travel 
restrictions,  social  distancing  and  self-isolation  requirements.  The  comparative  quarter  decline  is  also  partly  a  reflection  of  the 
record  deliveries  achieved  in  2019  Q4,  following  a  significant  build  up  of  work-in-progress  inventory  ("WIP")  in  2019  Q3.  The 
comparative full year decline is partially offset by the acquisition of ADL.

Full details of the Company’s orders, delivery and backlog information can be found in Appendix B. 

Deliveries (unaudited, EUs)

Transit buses

Motor coaches

Medium-duty and cutaway

New Vehicle Deliveries

Pre-owned coach

2020 Q4

2019 Q4 % Change

2020

2019 % Change

913   

221   

96   

1,347 

 (32.2) %

3,318   

389 

109 

 (43.2) %

 (11.9) %

633   

420   

3,931 

1,036 

 (15.6) %

 (38.9) %

348 

 20.7 %

1,230   

1,845 

 (33.3) %

4,371   

5,315 

 (17.8) %

133   

176 

 (24.4) %

329   

469 

 (29.9) %

Revenue 
(unaudited quarterly results, audited full year 
results, dollars in millions)

Transit buses

Motor coaches

Medium-duty

2020 Q4

2019 Q4 % Change

2020

2019 % Change

$ 

457.6  $ 

121.9   

571.1 

192.0 

 (19.9) %

$ 

1,593.4  $ 

1,841.1 

 (13.5) %

 (36.5) %

334.4   

526.5 

 (36.5) %

8.7   

18.2 

 (52.2) %

41.7   

49.8 

 (16.3) %

Total new transit bus, coach and cutaway 
revenue

$ 

588.2  $ 

781.3 

 (24.7) %

$  1,969.5  $  2,417.4 

 (18.5) %

Pre-owned coach revenue

Infrastructure solutions

Fiberglass reinforced polymer components

9.0   

9.0   

1.6   

13.7 

 (34.3) %

3.8 

1.8 

 136.8  %

 (11.1) %

18.4   

24.7   

5.1   

46.0 

 (60.0) %

6.1 

6.6 

 304.9  %

 (22.7) %

Manufacturing Revenue

$ 

607.8  $ 

800.6 

 (24.1) %

$  2,017.7  $  2,476.1 

 (18.5) %

Aftermarket 

Total Revenue

103.7   

117.1 

 (11.4) %

401.5   

417.4 

 (3.8) %

$ 

711.5  $ 

917.7 

 (22.5) %

$  2,419.2  $  2,893.5 

 (16.4) %

North America

United Kingdom and Europe

Asia Pacific 

Other

559.7   

106.6   

44.5   

0.7   

710.6 

174.4 

32.0 

0.8 

 (21.2) %

 (38.9) %

 39.1  %

 (12.5) %

1,966.6   

2,508.2 

 (21.6) %

332.5   

320.1 

117.7   

2.4   

63.7 

1.4 

 3.9  %

 84.8  %

 71.4  %

Manufacturing revenue for 2020 Q4 decreased by $192.8 million, or 24.1%, compared to 2019 Q4. The decrease is primarily driven by 
lower  deliveries  of  both  transit  buses  and  motor  coaches,  as  the  Company  lowered  production  volumes  in  response  to  public 
customer order deferrals and private customer order delays or cancellations, which were both attributable to the economic impacts 
of the COVID-19 pandemic. Pre-owned coach sales decreased due to a decline in deliveries and demand for vehicles as the majority 
of North American and UK private coach operators idled operations during the quarter. Due to these market conditions, the Company 
signed  an  agreement  mid-quarter  to  sell  MCI's  pre-owned  coach  pool  to  a  third  party  for  total  proceeds  of  approximately  $19.0 
million. The Company recognized $5.8 million of revenue related to the sale in 2020 Q4, and expects to recognize the remainder in 
the first half of 2021, depending on the timing of deliveries.  Medium duty revenue was lower due to an unfavourable product mix.

19 

NFI GROUP INC. 2020 REPORT 

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Revenue from Aftermarket operations in 2020 Q4 decreased by $13.4 million, or 11.4% compared to 2019 Q4.  The decline in revenue 
was  primarily  driven  by  lower  private  sector  parts  volumes  within  both  the  NFI  aftermarket  and  ADL  aftermarket  businesses. 
Offsetting some of this pressure was increased sales to public customers for Clean and ProtectTM products aimed at improving vehicle 
safety and cleanliness.  

Adjusted EBITDA(1)
(unaudited, dollars in millions)

Manufacturing

Aftermarket

Corporate

2020 Q4

2019 Q4 % Change

2020

2019 % Change

54.3 

17.1 

(6.4) 

85.7 

18.4 

 (36.6) %

 (7.1) %

(0.3) 

 (2,033.3) %

102.0 

66.7 

(11.0) 

256.1 

74.6 

(8.5) 

 (60.2) %

 (10.6) %

 (29.4) %

Total Adjusted EBITDA 

$65.0

$103.8

 (37.4) %

$157.7

$322.2

 (51.1) %

Adjusted EBITDA as a percentage of revenue

Manufacturing

Aftermarket 

Total 

 9.1  %

 16.5  %

 9.2 %

 10.7  %

 (15.0) %

 15.7  %

 5.1  %

 11.3 %

 (18.6) %

 5.1  %

 16.6  %

 6.5 %

 10.3  %

 (50.5) %

 17.9  %

 (7.3) %

 11.1 %

 (41.4) %

Net Earnings (Loss) (2)
(unaudited quarterly results, audited full year 
results, dollars in millions, except per share 
amounts)

Manufacturing

Aftermarket

Corporate

2020 Q4

2019 Q4 % Change

2020

2019 % Change

11.5   

11.2   

31.5 

15.5 

 (63.5) %

 (27.7) %

(117.7)   

52.1   

83.3 

63.6 

 (241.3) %

 (18.1) %

(14.2)   

(12.9) 

 10.1  %

(92.1)   

(89.2) 

 3.3  %

Net earnings (Loss)

$ 

8.5  $ 

34.1 

 (75.1) %

$ 

(157.7)  $ 

57.7 

 (373.3) %

Goodwill impairment

Extraordinary COVID-19 costs

Non-recurring restructuring costs

—   

5.4   

1.0   

— 

— 

— 

N/A

N/A

N/A

50.8   

47.4   

27.5   

— 

— 

— 

N/A

N/A

N/A

Adjusted Net Earnings (Loss)(1)

8.2   

30.9 

 (73.5) %

(47.2)   

101.7 

 (146.4) %

Net earnings (Loss) Per Share 
Adjusted Earnings (Loss) Per Share(1)

0.14   

$ 

0.13  $ 

0.55 

0.49 

 (74.5) %

(2.52)   

 (73.5) %

$ 

(0.75)  $ 

0.93 

1.65 

 (371.0) %

 (145.5) %

[1] Non-IFRS Measure - See Appendix A for details. 
[2] Comparative segment allocations have been restated to conform with current period presentation. 

2020 Q4 Manufacturing Adjusted EBITDA decreased by $31.4 million, or 36.6%. The Company continued to lower variable overhead in 
step with production but was unable to reduce fixed costs as quickly, resulting in lower Adjusted EBITDA. The Company has initiated 
the NFI Forward initiative to reduce direct and general and administrative fixed costs. In 2020, NFI has achieved cost savings of $16.6 
million in the Manufacturing Segment. The Q4 decrease in Adjusted EBITDA was partially offset by $11.3 million in government grants 
and improvements at the Company's parts fabrication facility ("KMG"). Despite challenges from COVID-19 related absenteeism, KMG 
achieved  positive  Adjusted  EBITDA  for  the  second  consecutive  quarter,  and  despite  the  many  operational  challenges  COVID-19 
presented throughout Fiscal 2020, KMG achieved year-over-year Adjusted EBITDA improvement of $7.3 million. Manufacturing 2020 
Q4 net earnings decreased by $20.0 million, or 63.5%, due to the items that impacted Adjusted EBITDA, combined with $3.5 million 
in  extraordinary  costs  related  to  COVID-19.  The  previously  described  extraordinary  COVID-19  costs  included  a  $2.7  million 
impairment  charge  on  ADL's  motor  coach  inventory.  Net  earnings  were  also  impacted  by  one-time,  non-recurring  restructuring 
charges of $1.0 million. Restructuring charges are associated with production reductions and the NFI Forward initiative.

20 

NFI GROUP INC. 2020 REPORT 

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2020 Q4 Aftermarket Adjusted EBITDA decreased by $1.3 million, or 7.1%. The impact of lower revenue was offset by cost savings 
from headcount reductions, a favourable product mix, and NFI Forward savings of $0.4 million. 2020 Q4 net earnings decreased by 
$4.3  million,  or  27.7%.  The  decrease  was  driven  by  the  same  factors  that  impacted  Adjusted  EBITDA,  combined  with  a  COVID-19 
related inventory impairment charge of $1.9 million.

Corporate  Adjusted  EBITDA  decreased  by  $6.1  million,  primarily  as  a  result  of  realized  foreign  exchange.  Corporate  expenses 
included in the calculation of net earnings decreased by $1.3 million, or 10.1%, primarily due to higher interest costs, partially offset 
by unrealized foreign exchange gains on non-current monetary items.  

Free Cash Flow(1)
(unaudited, dollars in millions, except per 
share amounts)

2020 Q4

2019 Q4 % Change

2020

2019 % Change

Free Cash Flow

$ 

29.0 

$ 

Free Cash Flow (CAD dollars)

Declared Dividends (CAD dollars) 

39.6 

13.3 

49.0 

64.1 

26.6 

 (40.8) %

$ 

27.5 

$ 

160.4 

 (38.2) %

 (50.0) %

34.7 

53.1 

211.4 

105.5 

 (82.9) %

 (83.6) %

 (49.7) %

Free Cash Flow per Share (CAD dollars)

Dividends per Share (CAD dollars)

$ 

$ 

0.63 

0.21 

$ 

$ 

1.03 

0.43 

 (38.8) %

 (51.2) %

$ 

$ 

0.56 

0.85 

$ 

$ 

3.42 

1.71 

 (83.6) %

 (50.3) %

Payout Ratio (Declared Dividends divided by 
Free Cash Flow 

 33.6 %

 41.5 %

 (19.0) %

 153.0 %

 49.9 %

 206.6 %

[1]Non-IFRS Measure - See Appendix A for details. 

Free  Cash  Flow  in  2020  Q4  decreased  by  $20.0  million,  or  40.8%,  compared  to  2019  Q4,  primarily  due  to  lower  Adjusted  EBITDA,  
higher  maintenance  capital  expenditures,  and  higher  lease  obligation  payments.  The  Company  increased  maintenance  capital 
expenditures in the fourth quarter, after limiting expenditures in the second and third quarters to preserve cash during the idling of 
production  facilities.  Lease  obligation  payments  were  higher  because  the  Company  made  payments,  related  to  previous  quarters, 
that had been deferred to preserve cash during the idling of production facilities. The decrease in fourth quarter Free Cash Flow was 
partially offset by lower income taxes. 

Fiscal 2020 Free Cash Flow was particularly challenged by the idling of nearly all production facilities in the second quarter, which 
resulted  in  second  quarter  Free  Cash  Flow  losses  of  $43.1  million.  Losses  in  the  second  quarter  were  the  primary  driver  of  the 
Company's Fiscal 2020 payout ratio of 153.0% percent. In response to these challenges, the Company reduced quarterly dividends 50% 
to C$0.2125 per common share, effective Q1 2020. 

21 

NFI GROUP INC. 2020 REPORT 

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OUTLOOK

Management anticipates that NFI’s end markets will continue to be impacted by COVID-19 in 2021; however, the Company expects 
improvement in its financial results as markets recover and the NFI Forward initiative continues to deliver improvements to operating 
metrics.  Market  recovery  will  be  dependent  upon  several  factors,  including  government  recovery  and  green  fleet  investments, 
COVID-19  case  rates,  vaccine  distribution,  the  length  of  the  pandemic,  mutations  of  the  virus,  travel  restrictions,  and  economic 
reopening activity. These factors will differ by product and geography. The Company’s vehicle product lines (New Flyer, ARBOC, MCI 
public motor coach, and ADL) are primarily used for public transit, which remains a critical method of transportation for millions of 
users in the Company's markets and is an economic enabler in cities. Within the North American heavy-duty transit and public coach 
businesses, near- and longer-term demand is expected to return, although the duration of the recovery from COVID-19 may affect 
vehicle awards and delivery timing. Management’s recovery expectations are supported by continued support for transit operations 
by  all  levels  of  government  and  the  Company’s  North  American  bid  universe,  which  includes  4,032  EUs  in  active  procurements. 
Management also believes recent advancements in COVID-19 vaccines and the commencement of vaccine rollouts are positive signs 
for continued market recovery. 

NFI is Leading the ZEvolutionTM

At  its  January  2021  Investor  Day,  NFI  unveiled  its  vision  to  drive  the  increased  adoption  of ZEBs,  what  the  Company  is  calling  the 
ZEvolutionTM.  NFI  envisions  a  consistent  adoption  of  zero-emission  vehicles  over  the  next  10  to  15  years  as  operators  in  North 
America, the UK, Europe and Asia Pacific markets transition their fleets to electric vehicles. NFI has been building electric vehicles 
since  1969  and  offers  the  broadest  offering  of  ZEBs,  including  battery-electric  buses  and  coaches,  hydrogen  fuel-cell  buses  and 
electric trolleys. 

NFI  is  the  leader  in  North  America  and  the  UK  for  ZEBs  and  is  expected  to  be  a  significant  beneficiary  from  the  increased 
acceleration to ZEBs. Currently, ZEBs make up 7.4% of NFI’s backlog (up from 3.6% at the end of 2019 Q4), and make up 30% of the 
Company’s total North American bid universe. 

A  critical  component  of  NFI’s  strategy  is  to  provide  complete  mobility  solutions,  including  vehicles,  infrastructure  installation, 
telematics,  and  aftermarket  support.  NFI  has  the  largest  vehicle  production  capacity  in  North  America  and  the  UK,  and  can 
manufacture ZEBs at all of its vehicle facilities. NFI has electric vehicles in service with 15 of the top 25 transit agencies in North 
America, and the Company's battery-electric and fuel-cell electric vehicles have completed over 4.5 million miles of zero-emission 
service in North America, and more than 16.0 million zero-emission miles in the UK. The Company has also installed infrastructure 
with numerous agencies, which saw the Company grow its Infrastructure SolutionsTM revenue by more than 300% year-over-year, from 
2019 to 2020. The Company has delivered more ZEBs than any competitor in the UK, and is also now selling its innovative battery-
electric  coach  in  the  US  and  Canada,  with  the  first  public  order  for  25  coaches  to  be  delivered  in  2021.  ARBOC’s  zero-emission 
battery electric bus, the Equess CHARGETM, will begin production in the second half of 2021, following completion of Altoona testing. 
Management anticipates that based on the Company’s leadership position, product offering, experience and customer relationships it 
is well positioned to capitalize on the long-term transition to ZEBs in both core and new markets. 

Government Support for Recovery and Zero-Emission Transition 

During the global pandemic, government support for transit operations has remained strong, recognizing the critical role transit plays 
in  re-mobilizing  cities  and  supporting  economic  recovery.  In  addition  to  billions  of  dollars  in  COVID-19  operations  relief  funds, 
governments  have  also  committed  billions  for  long-term  fleet  investments  and  the  transition  to  zero-emission,  battery-electric 
vehicles. 

In the United States, the Fixing America's Surface Transportation Act ("FAST Act"), which is the primary federal funding mechanism, 
was extended for one year. The FAST Act extension includes funds to maintain the Highway Trust Fund's solvency at current funding 
levels,  which  equates  to  $12.3  billion  for  transit  programs  through  fiscal  year  2021,  with  dedicated  funding  of  $1.2  billion  for  bus 
appropriations in 2021. The proposed successor to the FAST Act is the $494 billion Investing in a New Vision for the Environment and 
Surface Transportation in America Act (“INVEST in America Act”) drafted early in 2020. This new draft Act includes $105 billion for 
transit capital purchases, including a five-time increase in funding for zero-emission buses from the previous FAST Act.

In  October  2020,  the  Canadian  federal  government  announced  $1.5  billion  in  financing  through  the  Canada  Infrastructure  Bank  to 
support the adoption of ZEBs and charging infrastructure; the financing is expected to be delivered over a 24- to 36-month period. 
The  Canadian  government  followed  this  with  a  landmark  announcement  in  February  2021  that  will  see  $14.9  billion  invested  in 
Canadian  public  transit.  The  program  includes  $5.9  billion  in  dedicated  project  funds  starting  in  2021,  and  ongoing  permanent 
funding of $3 billion per year beginning in 2026-2027. 

22 

NFI GROUP INC. 2020 REPORT 

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The  UK,  despite  numerous  headwinds  faced  in  2020,  saw  an  increase  in  government  support  and  more  subsidies  available  to  bus 
operators than ever before. The government’s new Ten Point Plan for a Green Industrial Revolution, announced November 18, 2020, 
is a follow-up to the UK government's original plan to invest £5 billion for buses, cycling and walking, and continued to highlight the 
government's commitment to introduce 4,000 more British-built zero-emission buses into service.

In Asia Pacific markets, the New Zealand government provided an election pledge that only zero-emission buses will be purchased by 
2025, and that they will target decarbonizing their entire public transit fleet by 2035. ADL’s partnership with BYD has a solid position 
in the New Zealand market and management expects it will be a beneficiary of this transition. The Hong Kong government continues 
to  advance  trials  and  applications  for  electric  commercial  vehicles  which  may  provide  opportunities  for  ADL  given  its  strong 
relationships with the largest commercial operators in the market.   

Looking  forward,  management  is  encouraged  by  the  desire  of  President  Biden  to  rebuild  a  cleaner  and  more  resilient  economy 
through investments in zero-emission and low-carbon public transportation. A campaign priority of the new Biden administration is to 
“provide every American city with 100,000 or more residents with high-quality zero-emission public transportation options through 
flexible federal investments,” and Prime Minister Trudeau’s plan has an aggressive target of 5,000 zero-emission buses and coaches 
by 2025. 

As the market leader in North American transit and coach operations and the UK's leading provider of zero-emission buses through 
the  ADL  BYD  partnership,  management  believes  NFI  is  extremely  well  positioned  for  both  the  near-  and  long-term  based  on  the 
multi-year  commitments  being  made  by  governments  in  all  of  the  Company's  core  markets.  Management  anticipates  significant 
opportunities  for  NFI  to  grow  top-line  revenue  from  increased  market  demand  for  its  products  with  strong  underlying  financial 
support from government bodies. 

Financial Guidance

As  management  anticipates  market  recovery,  geographic  expansion,  increased  sales  of  ZEBs,  and  continued  realization  of  savings 
from the NFI Forward Initiative, in January 2021 it provided Adjusted EBITDA guidance for Fiscal 2021 with a range of $220 million to 
$240 million. This range could represent growth in Adjusted EBITDA of over 50% on a year-over-year basis when compared to Fiscal 
2020. Management and the Board remain confident in the following guidance:

2021 Financial Guidance

Revenue

$2.8 billion to $2.9 billion

ZEB (electric) as a percentage of manufacturing sales

20% to 25%

Adjusted EBITDA1

$220 million to $240 million

Cash Capital Expenditures – including NFI Forward

Adjusted Effective Tax Rate (“ETR”)

$50 million

~31%

Seasonality

1

Decline in Q1; year-over-year growth in Revenue and Adjusted 
EBITDA in Q2, Q3 and Q4

The  above  table  outlines  guidance  ranges  for  selected  Fiscal  2021  consolidated  financial  metrics.  These  ranges  take  into 
consideration management's current outlook combined with Fiscal 2020 results and are based on the assumptions set out below. The 
purpose of the financial guidance is to assist investors, shareholders, and others in understanding certain financial metrics relating 
to expected Fiscal 2021 financial results for evaluating the performance of NFI's business. The information may not be appropriate 
for other purposes. Information about guidance, including the various assumptions underlying it, is forward-looking and should be 
read in conjunction with the section “Forward-Looking Statements” in Appendix A and the related disclosure and information about 
various economic competitive and regulatory assumptions, factors, and risks that may cause actual future financial and operating 
results to differ from management’s current expectations. 

The guidance provided above is driven by numerous expectations and assumptions including, but not limited to, the following:

•

•

Revenue: Growth is expected to be driven by the Company’s solid backlog, strong government financial support, new order 
growth  from  the  anticipated  recovery  within  North  American  public  transit  markets  and  the  United  Kingdom  transit 
market,  combined  with  an  expected  increase  in  sales  activity  in  Asia  Pacific  and  European  markets.  In  addition, 
management believes there is potential for improvement in private coach aftermarket parts sales.  

ZEB sales: Growth in ZEB sales is based on the Company’s backlog and expected new orders from increased market demand 
for zero-emission vehicles.

23 

NFI GROUP INC. 2020 REPORT 

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•

•

•

•

Adjusted EBITDA: Adjusted EBITDA growth is based on expected revenue growth, anticipated margins from vehicles in the 
Company’s current backlog and anticipated new orders, expected increases in the sales of ZEBs and cost reductions from 
the NFI Forward initiative. NFI expects to realize approximately $30 million of savings from NFI Forward in 2021, and to 
reach cumulative savings of approximately $47 million at the end of 2021, starting from the inception of the program in 
the third quarter of 2020. The lower end of the Adjusted EBITDA range is based on scenarios where production is negatively 
impacted by slower market recovery, limited ongoing impacts of COVID-19 and delays in achieving cost reductions from the 
NFI Forward initiative.

Cash Capital Expenditures: Fiscal 2021 cash capital expenditures are expected to be allocated between maintenance and 
NFI Forward projects, based on approximately a seventy/thirty percent split.

Adjusted  ETR:  The  Adjusted  Effective  Tax  Rate  is  based  on  current  tax  rates  in  the  jurisdictions  in  which  NFI  operates, 
anticipated  financial  results,  the  Company’s  corporate  structure  and  the  assumption  that  there  will  not  be  significant 
changes in applicable tax rates in 2021.

COVID-19: Management has assumed that the impact of COVID-19 on the Company’s business in 2021 will be significantly 
lower  than  in  2020,  including  no  significant  idling  of  any  of  the  Company’s  facilities,  increased  buying  activity  from 
customers and limited supply disruptions. The overall impact of COVID-19 is expected to reduce steadily through the end of 
2021.

Management cautions readers that the consolidated NFI Group's annual results have an element of seasonality due to the nature of 
each unique market segment and the varied annual production and vacation schedule of each production facility. With the addition 
of ADL, this has become even more pronounced with the third and fourth quarters now being periods with higher delivery volumes. 
Management anticipates that on a year-over-year basis the first quarter of 2021 results will be lower than the same period in 2020, 
while  the other three quarters  of the year should see improvement from 2020 results. Management also advises readers that NFI's 
first quarter, second and third quarters are 13-week periods, while the fourth quarter is a 14-week period for a 53-week fiscal year. 

Strengthening the Balance Sheet

Proceeds of C$250  million  received from the Company’s Offering  are being utilized to reduce the outstanding balance under NFI’s 
revolving  senior  credit  facility.  This  is  expected  to  strengthen  NFI’s  balance  sheet,  reduce  leverage  and  interest  expense,  and 
significantly  increase  liquidity.  NFI  believes  that  this  will  provide  the  Company  with  additional  financial  flexibility  to  attract  new 
investors  and  to  pursue  its  operational  and  strategic  objectives,  which  include  investments  in  NFI’s  zero-emission  products  and 
electric  propulsion  technology,  investments  required  under  the  previously  disclosed  NFI  Forward  cost-reduction  initiative  and 
investigating other potential growth opportunities, in addition to continuing to return capital to shareholders through dividends.

NFI Forward Update

On July 27, 2020, NFI responded to the impacts of COVID-19 by launching its transformative cost reduction initiative, NFI Forward, to 
significantly  reduce  manufacturing  overhead  and  selling,  general  and  administration  ("SG&A")  from  2019  levels.  NFI  Forward 
initiatives are on track to meet management’s previously announced expectations. 

Management  continues  to  expect  that  the  aggregate  programs  of  NFI  Forward  will  drive  approximately  $67.0  million  in  annual 
Adjusted  EBITDA  savings,  plus  an  additional  $10.0  million  in  annualized  Free  Cash  Flow  generation,  driven  by  interest  savings  and 
lower  lease  payments.  NFI  Forward  is  expected  to  deliver  an  8%  to  10%  reduction  in  both  manufacturing  overhead  and  SG&A 
expenses,  based  on  2019  production  rates,  with  investments  of  approximately  $15  million  to  $20  million  required  to  deliver  these 
savings. In 2020, the NFI Forward initiative has achieved approximately $17.0 million in Adjusted EBITDA savings, and a further $1.0 
million in Free Cash Flow savings. These savings appear in NFI’s gross margins and Adjusted EBITDA, as a reduction to direct material 
costs, manufacturing overhead, and SG&A. 

In addition to the focus on cost savings and additional Free Cash Flow generation, management is also prioritizing working capital 
improvements through the NFI Forward initiative and other strategic projects aimed at improving supplier payment terms, accounts 
payable turns and inventory turnover, with specific focus on private vehicle inventory. 

24 

NFI GROUP INC. 2020 REPORT 

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SELECTED QUARTERLY AND ANNUAL FINANCIAL AND OPERATING INFORMATION

The following selected unaudited interim condensed consolidated and audited annual consolidated financial and operating information of 
the  Company  has  been  derived  from  and  should  be  read  in  conjunction  with  the  historical  and  current  Financial  Statements  of  the 
Company.

(U.S. dollars in thousands, except per Share figures)

Fiscal Period

Quarter

Revenue

Earnings (loss) 
from operations

Net earnings 
(loss)

Adjusted 
EBITDA(1)

Earnings (loss) 
per Share

2020

2019

2018

Q4 $ 

Q3  

Q2  

Q1  

711,523  $ 

32,531  $ 

8,465  $ 

64,956  $ 

663,934 

333,334 

710,384 

(16,453)   

(72,001)   

(25,406)   

(24,912)   

(74,050)   

(67,239)   

60,885 

(24,229)   

56,071 

Total $ 

2,419,175  $ 

(81,329)  $ 

(157,736)  $ 

157,683  $ 

Q4

Q3

Q2

$ 

917,741  $ 

69,958  $ 

725,347 

683,353 

25,200 

37,000

Q1
Total $ 

566,995 
2,893,436  $ 

40,906 
173,064  $ 

34,127  $ 

(1,085)   

8,507

16,149 
57,698  $ 

103,875  $ 

76,868 

81,122 

60,302 
322,167  $ 

Q4

Q3

Q2

Q1

$ 

662,020  $ 

60,570  $ 

42,815  $ 

79,868  $ 

605,342 

673,025 

578,634 

53,469

72,063 

51,753 

37,031 

49,740 

30,356 

70,245 

91,400 

73,841 

Total $ 

2,519,021  $ 

237,855  $ 

159,942  $ 

315,354  $ 

0.14 

(0.40) 

(1.18) 

(1.08) 

(2.52) 

0.55 

(0.02) 

0.14 

0.26 
0.93 

0.69 

0.59 

0.81 

0.48 

2.56 

COMPARISON OF FOURTH QUARTER 2020 RESULTS

(U.S. dollars in thousands)

Statement of Earnings Data

Revenue

North America

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

483,011  $ 

617,553  $ 

1,651,144  $ 

2,142,895 

United Kingdom and Europe

88,900   

154,820 

268,916   

277,669 

Asia Pacific

Other

Manufacturing operations

North America

United Kingdom and Europe

Asia Pacific

Other

Aftermarket operations

Total revenue

Earnings (loss) from operations

Earnings (loss) before interest and income taxes

Net earnings (loss)

Adjusted EBITDA(1)

Capital expenditures

[1]Non-IFRS Measure - See Appendix A for details. 

35,930   

28,202 

97,669   

55,456 

—   

— 

—   

— 

607,841   

800,575 

2,017,729   

2,476,020 

76,704   

17,696   

8,625   

657   

93,053 

19,549 

3,775 

789 

315,415   

365,304 

63,596   

20,075   

2,360   

42,447 

8,247 

1,418 

103,682   

117,166 

401,446   

417,416 

711,523  $ 

917,741  $ 

2,419,175  $ 

2,893,436 

32,531  $ 

69,958  $ 

(81,329)  $ 

173,064 

36,023  $ 

71,546  $ 

(72,223)  $ 

173,050 

8,465  $ 

34,127  $ 

(157,736)  $ 

57,698 

64,956  $ 

103,875  $ 

157,683  $ 

322,167 

9,686  $ 

7,618  $ 

27,016  $ 

41,757 

$ 

$ 

$ 

$ 

$ 

$ 

25 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NET EARNINGS (LOSS) TO ADJUSTED EBITDA

Management believes that Adjusted EBITDA is an important measure in evaluating the historical operating performance of the Company. 
However, Adjusted EBITDA is not a recognized earnings measure under IFRS and does not have a standardized meaning prescribed by IFRS. 
Accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Readers of this MD&A are cautioned 
that Adjusted EBITDA should not be construed as an alternative to net earnings or loss determined in accordance with IFRS as indicators of 
the Company's performance, or cash flows from operating activities determined in accordance with IFRS as a measure of liquidity and cash 
flow. The Company defines and has computed Adjusted EBITDA as described under “Definitions of Adjusted EBITDA, ROIC, Free Cash Flow, 
Adjusted Net Earnings and Adjusted Earnings per Share” in Appendix A. The following tables reconcile net earnings or losses to Adjusted 
EBITDA based on the historical Financial Statements of the Company for the periods indicated. 

(U.S. dollars in thousands)

Net earnings (loss)
Addback(1)

Income taxes

Interest expense

Amortization

Loss (gain) on disposition of property, plant and equipment
Fair value adjustment for total return swap(11)
Unrealized foreign exchange loss (gain) on non-current monetary 
items and forward foreign exchange contracts

Costs (recoveries) associated with assessing strategic and 
corporate initiatives(8)
Past service costs(13) and other pension costs (recovery)
Non-recurring costs (recoveries) relating to business acquisition

Fair value adjustment to acquired subsidiary company's 
inventory and deferred revenue(10)
Proportion of the total return swap realized(12)
Equity settled stock-based compensation
Recovery on currency transactions(14)
Prior year sales tax provision (15)
Extraordinary COVID-19 costs(16)
Impairment loss on goodwill(17)
Non-recurring restructuring costs(9)

Adjusted EBITDA(1)
Adjusted EBITDA is comprised of:

Manufacturing

Aftermarket

Corporate

(Footnotes on page 26 and 27)

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

8,465  $ 

34,127  $ 

(157,736)  $ 

57,698 

12,987   

14,571   

26,126   

(257)   

(1,584)   

26,118 

11,301 

31,134 

52 

273 

1,644   

83,869   

41,997 

73,355 

110,784   

104,570 

(56)   

118   

(3,237)   

(1,640)   

(9,050)   

165   

7   

—   

—   

641   

608   

—   

37   

5,413   

—   

1,014   

(616)   

70 

364 

2,156 

(203)   

437 

— 

300 

— 

— 

— 

1,396   

(408)   

—   

—   

(525)   

1,770   

—   

184   

47,362   

50,790   

27,541   

(46) 

949 

60 

13,069 

(1,601) 

365 

31,004 

(626) 

1,566 

(4,287) 

4,094 

— 

— 

— 

$ 

$ 

$ 

$ 

64,956  $ 

103,875  $ 

157,683  $ 

322,167 

54,263  $ 

17,103  $ 

(6,410)  $ 

85,715  $ 

101,964  $ 

256,097 

18,413  $ 

66,748  $ 

(254)  $ 

(11,029)  $ 

74,572 

(8,502) 

26 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SUMMARY OF FREE CASH FLOW

Management uses Free Cash Flow as a non-IFRS measure to evaluate the Company’s operating performance and liquidity and to assess the 
Company’s ability to pay dividends on the Shares, service debt, and meet other payment obligations. 

The Company generates its Free Cash Flow from operations and management expects this will continue to be the case for the foreseeable 
future.  Net  cash  flows  generated  from  operating  activities  are  significantly  impacted  by  changes  in  non-cash  working  capital.  The 
Company uses its credit facilities to finance working capital and therefore has excluded the impact of working capital in calculating Free 
Cash Flow. 

The following is a reconciliation of net cash generated by operating activities (an IFRS measure) to Free Cash Flow (a non-IFRS measure) 
based  on  the  Company’s  historical  Financial  Statements.  See  “Definitions  of  Adjusted  EBITDA,  ROIC,  Free  Cash  Flow,  Adjusted  Net 
Earnings and Adjusted Earnings per Share” in Appendix A.

(U.S. dollars in thousands, except per Share figures)

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

Net cash generated by operating activities

$ 

88,105  $ 

163,761  $ 

66,061  $ 

Changes in non-cash working capital items(4)
Interest paid(4)
Interest expense(4)
Income taxes paid(4)
Current income tax expense(4)
Principal portion of finance lease payments

Cash capital expenditures

(50,191)   

15,913   

(15,231)   

4,124   

(5,733)   

(7,829)   

(9,447)   

(85,382)   

15,447 

(15,631)   

7,228 

(30,842)   

(1,400)   

(6,968)   

(68,762)   

63,307   

(61,835)   

26,693   

(26,580)   

(18,887)   

(25,703)   

98,608 

91,324 

47,676 

(50,546) 

40,167 

(61,339) 

(12,456) 

(37,575) 

Proceeds from disposition of property, plant and equipment

2,259   

— 

2,765   

174 

Costs (recovery) associated with assessing strategic and 
corporate initiatives(8)
Fair value adjustment to acquired subsidiary company's 
inventory and deferred revenue (10)
Defined benefit funding(5)
Defined benefit expense(5)
Past service costs(13) and other pension costs (recovery)
Proportion of the total return swap(12)
Recovery on currency transactions(14)
Prior year sales tax provision (15)
Non-recurring restructuring costs(9)
Extraordinary COVID-19 costs(16)
Foreign exchange gain (loss) on cash held in foreign currency(6)

Free Cash Flow(2)
U.S. exchange rate(3)
Free Cash Flow (C$)(2)
Free Cash Flow per Share (C$)(7)
Declared dividends on Shares (C$)
Declared dividends per Share (C$)(7)

165   

(616)   

1,396   

13,069 

—   

1,118   

(756)   

7   

641   

—   

37   

446   

5,413   

(28)   

2,156 

1,969 

(1,322)   

70 

(203)   

— 

300 

364 

—  $ 

102 

—   

5,507   

(5,307)   

(408)   

(525)   

—   

185   

22,216   

47,362   

(11)   

31,004 

8,140 

(5,849) 

(1,601) 

(626) 

(4,287) 

4,094 

364 

— 

83 

$ 

29,013  $ 

49,033  $ 

27,474  $ 

160,424 

1.2869   

39,561   

0.6327   

13,287   

1.3076 

64,116 

1.0269 

26,561 

1.2645   

34,741   

0.5558   

53,140   

$ 

0.2125  $ 

0.4253  $ 

0.8500  $ 

1.3180 

211,439 

3.4200 

105,462 

1.7062 

(1)  Adjusted  EBITDA  is  not  a  recognized  earnings  measure  and  does  not  have  standardized  meaning  prescribed  by  IFRS.  Therefore, 
Adjusted EBITDA may not be comparable to similar measures presented by other issuers. See “Definitions of Adjusted EBITDA, ROIC, 
Free  Cash  Flow,  Adjusted  Net  Earnings  and  Adjusted  Net  Earnings  per  Share”  in  Appendix  A.  Management  believes  that  Adjusted 
EBITDA is a useful supplemental measure in evaluating performance of the Company.

(2) Free  Cash  Flow  is  not  a  recognized  measure  under  IFRS  and  does  not  have  a  standardized  meaning  prescribed  by  IFRS.  Therefore, 
Free Cash Flow may not be comparable to similar measures presented by other issuers. See Appendix A for “Definitions of Adjusted 
EBITDA, ROIC, Free Cash Flow, Adjusted Net Earnings and Adjusted Earnings per Share”.

(3) U.S. exchange rate (C$ per US$) is the weighted average exchange rate applicable to dividends declared for the period.

(4) Changes  in  non-cash  working  capital  are  excluded  from  the  calculation  of  Free  Cash  Flow  as  these  temporary  fluctuations  are 
managed  through  the  credit  facilities  which  are  available  to  fund  general  corporate  requirements,  including  working  capital 

27 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
requirements,  subject  to  borrowing  capacity  restrictions.  Changes  in  non-cash  working  capital  are  presented  on  the  consolidated 
statements of cash flows net of interest and incomes taxes paid.

(5) The cash effect of the difference between the defined benefit expense and funding is included in the determination of cash from 
operating activities. This cash effect is excluded in the determination of Free Cash Flow as management believes that the defined 
benefit expense amount provides a more appropriate measure, as the defined benefit funding can be impacted by special payments 
to reduce the unfunded pension liability. 

(6) Foreign exchange loss on cash held in foreign currency is excluded in the determination of cash from operating activities under IFRS; 

however, because it is a cash item, management believes it should be included in the calculation of Free Cash Flow.

(7) Per  Share  calculations  for  Free  Cash  Flow  (C$)  are  determined  by  dividing  Free  Cash  Flow  by  the  total  number  of  all  issued  and 
outstanding Shares using the weighted average over the period. The weighted average number of Shares outstanding for 2020 Q4 was 
62,524,842  and  62,434,520  for  2019  Q4.  The  weighted  average  number  of  Shares  outstanding  for  Fiscal  2020  and  Fiscal  2019  are 
62,510,544 and 61,809,479, respectively. Per Share calculations for declared dividends (C$) are determined by dividing the amount 
of declared dividends by the number of outstanding Shares at the respective period end date. 

(8) Normalized to exclude non-recurring expenses and recoveries related to the costs of assessing strategic and corporate initiatives.

(9) Normalized to exclude non-recurring restructuring costs. Free Cash Flow reconciling item is net of right-of-use asset and property, 
plant and equipment impairments. Fourth quarter costs relate to production reductions and the NFI Forward initiative and include 
severance  costs  of  $0.4  million  (Fiscal  2020  -  $19.8  million)  and  right-of-use  asset  impairments  of  $0.6  million  (Fiscal  2020  -  $3.6 
million). Fiscal 2020 costs also include severance expense of $19.8 million, right-of-use asset impairments of $3.6 million, inventory 
impairments  of  $1.8  million,  property,  plant  and  equipment  impairments  of  $1.7  million  and  other  miscellaneous  costs  of  $0.6 
million. 

(10) The revaluation of ADL's inventory included an adjustment of $31.0 million in Fiscal 2019.  These revaluation adjustments relate to 

purchase accounting as a result of the related acquisition.

(11) The fair value adjustment of the total return swap is a non-cash (gain) loss that is deducted from the definition of Adjusted EBITDA.

(12) A  portion  of  the  fair  value  adjustment  of  the  total  return  swap  is  added  to  Adjusted  EBITDA  and  Free  Cash  Flow  to  match  the 

equivalent portion of the related deferred compensation expense recognized.

(13) In 2019 Q3, the Company received $1.6 million recovery related to the closing of one of its pension plans. An additional amount of 

$0.4 million was received in 2020 Q1.

(14)  Recovery of prior period banking fees related to foreign exchange transactions.

(15)  Provision for sales taxes as a result of an ongoing state sales tax review.

(16)  Normalized  to  exclude  non-recurring  COVID-19  related  costs.  COVID-19  costs  include  asset  impairments  of  $4.6  million  in  2020  Q4 
(Fiscal 2020 - $43.6 million). Fourth quarter asset impairments included a parts inventory impairment of $1.9 million, an ADL private 
coach  impairment  of  $1.7  million  and  an  ADL  pre-owned  coach  impairment  of  $1.0  million.  Fiscal  2020  asset  impairments  include 
pre-owned coach write-downs of $36.6 million. Also included in COVID-19 costs are other operating costs of $0.8 million in 2020 Q4 
and $3.8 million in Fiscal 2020 that include but are not limited to the purchase of personal protective equipment and plant sanitation 
activities.  Management will continue to assess the costs for COVID-19 and will make an assessment of whether they are deemed in 
fact to be one time and non-recurring.  As more information becomes available, management may change its assessment.

(17)  Impairment charge with respect to MCI's goodwill.

28 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
RECONCILIATION OF NET EARNINGS (LOSS) TO ADJUSTED NET EARNINGS (LOSS)

Adjusted  Net  Earnings  (Loss)  and  Adjusted  Earnings  (Loss)  per  Share  are  not  recognized  measures  under  IFRS  and  do  not  have  a 
standardized  meaning  prescribed  by  IFRS.  Accordingly,  Adjusted  Net  Earnings  (Loss)  (Loss)  and  Adjusted  Earnings  (Loss)  (Loss)  per 
Share may not be comparable to similar measures presented by other issuers. Readers of this MD&A are cautioned that Adjusted Net 
Earnings (Loss) and Adjusted Earnings (Loss) per Share should not be construed as an alternative to Net Earnings, or Net Earnings per 
Share,  determined  in  accordance  with  IFRS  as  indicators  of  the  Company's  performance.  The  Company  defines  and  has  computed 
Adjusted Net Earnings and Adjusted Earnings per Share under “Definitions of Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net 
Earnings and Adjusted Earnings per Share” in Appendix A. The following tables reconcile net earnings (loss) to Adjusted Net Earnings 
(Loss) based on the historical Financial Statements of the Company for the periods indicated.

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

8,465   

34,127 

(157,736)   

57,698 

(U.S. dollars in thousands, except per Share figures)

Net earnings (loss)

Adjustments, net of tax (1) (8)

Fair value adjustments of total return swap(5)
Unrealized foreign exchange (gain) loss

Unrealized loss (gain) on interest rate swap
Impairment loss on goodwill(11)
Portion of the total return swap realized(6)

Costs (recovery) associated with  assessing strategic and 
corporate initiatives(2)

Fair value adjustment to acquired subsidiary company's 
inventory and deferred revenue(4)
Equity settled stock-based compensation

(1,093)   

(2,233)   

(2,277)   

—   

443   

165   

—   

419   

Gain (loss) on disposition of property, plant and equipment

(178)   

Past service costs(7) and other pension costs (recovery)
Recovery on currency transactions(9)
Prior year sales tax provision (10)
Extraordinary COVID-19 costs (12)
Non-recurring restructuring costs (3)

Adjusted Net Earnings (Loss)

Earnings (Loss) per Share (basic)

Earnings (Loss) per Share (fully diluted)

Adjusted Earnings (Loss) per Share (basic)

Adjusted Earnings (Loss) per Share (fully diluted)

4   

—   

26   

3,735   

700   

8,176   

0.14  $ 

0.14  $ 

0.13  $ 

0.13  $ 

$ 

$ 

$ 

$ 

$ 

145 

(981)   

(3,115)   

— 

(109)   

81   

(6,245)   

12,199   

50,790   

(362)   

549 

35 

12,721 

— 

(362) 

(616)   

1,396   

13,069 

707 

231 

32 

71 

80 

102 

— 

211 

—   

1,221   

17,943 

906 

(39)   

(27) 

(282)   

—   

127   

32,680   

19,003   

(927) 

(2,481) 

2,369 

— 

211 

30,885  $ 

(47,167)   

101,704 

0.55  $ 

0.55  $ 

0.49  $ 

0.49  $ 

(2.52)  $ 

(2.52)  $ 

(0.75)  $ 

(0.75)  $ 

0.93 

0.93 

1.65 

1.64 

1.

2.

3.

4.

5.

6.

Addback items are derived from the historical Financial Statements of the Company.

Normalized to exclude non-recurring expenses related to the costs of assessing strategic and corporate initiatives.

Normalized  to  exclude  non-recurring  restructuring  costs.  Fourth  quarter  costs  relate  to  production  reductions  and  the  NFI 
Forward initiative and include severance costs of $0.3 million and right-of-use asset impairments of $0.4 million.

The revaluation of ADL's inventory included an adjustment of $31.0 million in Fiscal 2019. The after-tax value of the adjustment 
was $17.9 million.  These revaluation adjustments relate to purchase accounting as a result of the related acquisition.

The fair value adjustment of the total return swap is a non-cash (gain) loss that is excluded from the definition of Adjusted Net 
Earnings (Loss).

A  portion  of  the  fair  value  adjustment  of  the  total  return  swap  is  excluded  from  Adjusted  Net  Earnings  (Loss)  to  match  the 
equivalent portion of the related deferred compensation expense recognized.

29 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7.

8.

9.

In 2019 Q3, the Company received $1.0 million recovery related to the closing of one of its pension plans. An additional amount 
of $0.3 million was received in 2020 Q1. 

For 2020 Q4 and Fiscal 2020, the Company has utilized a rate of 31% to tax effect the adjustments. 

Recovery of prior period banking fees related to foreign exchange transactions.

10. Provision for sales taxes as a result of an ongoing state tax review.

11.

Impairment charge with respect to MCI's goodwill.

12. Normalized to exclude non-recurring COVID-19 related costs. COVID-19 costs include asset impairments of $3.2 million in 2020 
Q4 (Fiscal 2020 - $30.1 million).  Fourth quarter asset impairments included a parts inventory impairment of $1.3 million, an 
ADL  private  coach  impairment  of  $1.2  million  and  an  ADL  pre-owned  coach  impairment  of  $0.7  million.  Fiscal  2020  asset 
impairments include pre-owned coach write-downs of $25.1 million. Also included in COVID-19 costs are other operating costs of 
$0.6 million in 2020 Q4 and $2.6 million in Fiscal 2020 that include but are not limited to the purchase of personal protective 
equipment  and  plant  sanitation  activities.    Management  will  continue  to  assess  the  costs  for  COVID-19  and  will  make  an 
assessment  of  whether  they  are  deemed  in  fact  to  be  one  time  and  non-recurring.    As  more  information  becomes  available, 
management may change its assessment.

30 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
Results of Operations

The  discussion  below  with  respect  to  revenue,  operating  costs  and  expenses  and  earnings  from  operations  has  been  divided  between  the 
Manufacturing and Aftermarket operations segments.

Revenue

(U.S. dollars in thousands)

Manufacturing Revenue

Aftermarket Revenue

Total Revenue

Earnings (loss) from Operations

Earnings (loss) before interest and income taxes

Earnings (loss) before income tax expense

Net earnings (loss)

$ 

$ 

2020 Q4

607,841   

103,682   

2019 Q4

800,575 

117,166 

Fiscal 2020

Fiscal 2019

2,017,729   

2,476,020 

401,446   

417,416 

711,523  $ 

917,741 

$ 

2,419,175  $ 

2,893,436 

32,531  $ 

69,958 

$ 

(81,329)  $ 

173,064 

36,023   

21,453   

8,465   

71,546 

60,245 

34,127 

(72,223)   

173,050 

(156,092)   

(157,736)   

99,695 

57,698 

Manufacturing  revenue  for  2020  Q4  decreased  by  $192.8  million,  or  24.1%,  compared  to  2019  Q4.  Manufacturing  revenue  for  Fiscal  2020 
decreased  by  $458.3  million,  or  18.5%,  compared  to  Fiscal  2019.  Fourth  quarter  figures  were  lower  in  2020  primarily  as  a  result  of  the 
Company  reducing  production  volumes  in  response  to  public  customer  order  delays  and  private  customer  order  deferrals,  which  were  both 
attributable  to  the  COVID-19  pandemic.  Fiscal  2020  figures  were  significantly  impacted  by  the  idling  of  production  facilities  in  the  second 
quarter of 2020. The comparative year decrease was partially offset by the May 2019 acquisition of ADL and higher Infrastructure Solutions 
revenue.

Revenue  from  aftermarket  operations  in  2020  Q4  decreased  by  $13.5  million,  or  11.5%,  compared  to  2019  Q4.  Revenue  from  aftermarket 
operations for Fiscal 2020 decreased by $16.0 million, or 3.8%, compared to Fiscal 2019. The decline in both periods were driven by lower 
private sector parts volumes within both the NFI parts and ADL parts businesses, partially offset by $1.1 million of Clean and Protect product 
line sales. The acquisition of ADL partially offset the COVID-19 related revenue decline in the fiscal-year comparative.

Cost of sales 

(U.S. dollars in thousands)

Manufacturing

Direct cost of sales

Depreciation and amortization

Other overhead

Manufacturing cost of sales

As percent of Manufacturing Sales

Aftermarket

Direct cost of sales

Depreciation and amortization

Aftermarket cost of sales

As percent of Aftermarket Sales

Total Cost of Sales

As percent of Sales

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

478,509 

$ 

602,508 

$ 

1,620,299 

$ 

1,868,917 

23,437 

46,952 

28,531 

67,157 

100,269 

208,100 

94,246 

221,317 

$ 

548,898 

$ 

698,196 

$ 

1,928,668 

$ 

2,184,480 

 90.3 %

 87.2 %

 95.6 %

 88.2 %

$ 

$ 

$ 

73,771 

$ 

2,688 

76,459 

$ 

78,965 

2,603 

81,568 

$ 

$ 

280,737 

$ 

285,151 

10,515 

10,323 

291,252 

$ 

295,474 

 73.7 %

 69.6 %

 72.6 %

 70.8 %

625,357 

$ 

779,764 

$ 

2,219,920 

$ 

2,479,954 

 87.9 %

 85.0 %

 91.8 %

 85.7 %

The consolidated cost of sales for 2020 Q4 decreased by $154.4 million, or 19.8%, compared to 2019 Q4. The consolidated cost of sales for 
Fiscal 2020 decreased by $260.0 million, or 10.5%, compared to Fiscal 2019.

Cost of sales from Manufacturing operations in 2020 Q4 was $548.9 (90.3% of Manufacturing operations revenue) compared to $698.2 million 
(87.2% of Manufacturing operations revenue) in 2019 Q4, a decrease of $149.3 million or 21.4%.  Cost of sales increased as a percentage of 
revenue mainly as a result of lower production volumes absorbing more fixed overhead on a per unit basis. Cost of sales also increased as a 
percentage of revenue as a result of the Company incurring extraordinary, COVID-19 related costs, including a $2.7 million lower of cost or 
net realizable value adjustment on ADL motor coach inventory. The cost of sales increase as a percentage of revenue was increased further 

31 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
by non-recurring restructuring costs of $1.0 million. The cost of sales increase as a percentage of revenue was partially offset by NFI Forward 
savings, and government grants of $10.5 million, which were netted against wages in the presentation of cost of sales.

Cost  of  sales  from  Manufacturing  operations  in  Fiscal  2020  was  $1,928.7  million  (95.6%  of  Manufacturing  operations  revenue)  compared  to 
$2,184.5 million (88.2% of Manufacturing operations revenue) in Fiscal 2019, a decrease of $255.8 million or 11.7%. Cost of sales increased as 
a percentage of revenue mainly due to lower production volumes absorbing more fixed overhead on a per unit basis, primarily as a result of 
the Company idling production facilities for the majority of Q2 2020. Cost of sales also increased as a percentage of revenue as a result of the 
Company  incurring  expenses  related  to  COVID-19  and  restructuring  activities.  The  cost  of  sales  increase  as  a  percentage  of  revenue  was 
partially  offset  by  NFI  Forward  savings  of  $8.4  million  and  government  grants  of  $46.7  million,  which  were  netted  against  wages  in  the 
presentation  of  cost  of  sales.  Cost  of  sales  as  a  percentage  of  revenue  also  improved  as  a  result  of  improvements  at  the  Company's  parts 
fabrication facility.

Cost of sales from Aftermarket operations in 2020 Q4 was $76.5 million (73.7% of Aftermarket revenue) compared to $81.6 million (69.6% of 
Aftermarket  revenue)  in  2019  Q4,  a  decrease  of  $5.1  million  or  6.3%.  Cost  of  sales  from  Aftermarket  operations  in  Fiscal  2020  was $291.3 
million (72.6% of Aftermarket revenue) compared to $295.5 million (70.8% of Aftermarket revenue) in Fiscal 2019, a decrease of $4.2 million 
or 1.4%. Cost of sales as a percentage of revenue was higher year-over-year as the Company had lower sales volumes to cover depreciation 
and amortization expense. Cost of sales was also impacted by a COVID-19 related impairment charge of $1.9 million in 2020 Q4. 

Gross Margins

(U.S. dollars in thousands)

Manufacturing

Aftermarket

Total Gross Margins

As a percentage of sales

Manufacturing

Aftermarket

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

$ 

58,943 

$ 

102,378 

27,223 

35,600 

86,166 

$ 

137,978 

$ 

$ 

89,060 

$ 

291,540 

110,195 

121,942 

199,255 

$ 

413,482 

 9.7 %

 26.3 %

 12.1 %

 12.8 %

 30.4 %

 15.0 %

 4.4 %

 27.4 %

 8.2 %

 11.8 %

 29.2 %

 14.3 %

Manufacturing gross margins for 2020 Q4 of $58.9 million (9.7% of revenue), decreased by $43.5 million, or 42.5%, compared to $102.4 million 
(12.8% of revenue) for 2019 Q4. Manufacturing gross margins for Fiscal 2020 of $89.1 million (4.4% of revenue), decreased by $202.5 million, 
or 69.5%, compared to Fiscal 2019.

The decrease in gross margins as a percentage of revenue for both periods is mainly due to lower production volumes absorbing more fixed 
overhead on a per unit basis. Gross margins also decreased as a percentage of revenue as a result of the Company incurring expenses related 
to COVID-19 and restructuring. Gross margin decline was partially offset by NFI Forward overhead savings and government grants, which were 
netted against direct labor wages in the presentation of cost of sales. NFI Forward achieved gross margin improvements through direct labour 
headcount  reductions  and  production  facility  rationalizations.  The  gross  margin  decline  was  also  partially  offset  by  improvements  at  the 
Company's parts fabrication facility, which achieved a relative gross margin improvement of 43.9% in 2020 Q4, compared to 2019 Q4.

Gross margins from Aftermarket operations in 2020 Q4 of $27.2 million (26.3% of revenue) decreased by $8.4 million, or 23.6%, compared to 
2019 Q4 gross margins of $35.6 million (30.4% of revenue). Gross margins from Aftermarket operations in Fiscal 2020 of $110.2 million (27.4% 
of revenue) decreased by $11.7 million, or 9.6%, compared to Fiscal 2019 gross margins of $121.9 million (29.2% of revenue). Margins were 
lower due to lower sales volumes and a COVID-19 related impairment charge of $1.9 million in 2020 Q4.

Selling, general and administrative costs and other operating expenses (“SG&A”)

(U.S. dollars in thousands)

Selling expenses

General and administrative expenses

Other costs

Total SG&A

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

$ 

12,327  $ 

7,052 

$ 

28,579  $ 

41,791   

1,434   

62,055 

(528) 

193,868   

8,856   

55,552  $ 

68,579 

$ 

231,303  $ 

23,739 

205,270 

12,445 

241,454 

32 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
The consolidated SG&A for 2020 Q4 of $55.6 million (7.8% of consolidated revenue) decreased by $13.0 million, or 19.0%, compared to $68.6 
million (7.5% of consolidated revenue) in 2019 Q4. The consolidated SG&A for Fiscal 2020 of $231.3 (9.6% of consolidated revenue) decreased 
by $10.2 million, or 4.2%, compared to $241.5 million (8.3% of consolidated revenue) in Fiscal 2019.

The decrease in 2020 Q4 is related to NFI Forward savings and government grants, which were netted against expenses in the presentation of 
SG&A.  The quarterly decline was  offset by extraordinary COVID-19 related costs and one-time, non-recurring restructuring costs  related to 
NFI Forward. The year-over-year decrease was due to NFI Forward savings of $8.6 million and government grants of $6.8 million. The year-
over-year decrease was partially offset by non-recurring restructuring costs, extraordinary COVID-19 costs, and the acquisition of ADL.

Realized foreign exchange loss/gain 

During 2020 Q4, the Company recorded a realized foreign exchange gain of $1.9 million compared to a gain of $0.6 million in 2019 Q4. 

During Fiscal 2020, the Company recorded a realized foreign exchange gain of $1.5 million compared to a gain of $1.0 million in Fiscal 2019.

The Company uses foreign exchange forward contracts to buy various currencies in which it operates with U.S. dollars, Canadian dollars and 
British  Pounds  Sterling  ("GBP").    The  purchase  of  these  currencies  using  foreign  exchange  forward  contracts  at  favorable  forward  rates 
compared to the spot rates at settlement were the primary reason for the gains. 

Earnings (loss) from operations

Consolidated earnings from operations in 2020 Q4 were $32.5 million (4.6% of consolidated revenue) compared to earnings of $70.0 million 
(7.6%  of  consolidated  revenue)  in  2019  Q4,  a  decrease  of  $37.5  million  or  53.6%.  Consolidated  losses  from  operations  in  Fiscal  2020  were 
$81.3  million  (-3.4%  of  consolidated  revenue)  compared  to  earnings  of  $173.1  million  (6.0%  of  consolidated  revenue)  in  Fiscal  2019,  a 
decrease of $254.4 million or 147.0%.

2020  Q4  Earnings  from  operations  related  to  Manufacturing  operations  were  $23.1  million  (3.8%  of  Manufacturing  revenue)  compared  to 
earnings of $56.5 million (7.1% of Manufacturing revenue) in 2019 Q4, a decrease of $33.4 million or 59.1%. Losses from operations related to 
Manufacturing operations in Fiscal 2020 were $125.1 million (-6.2% of Manufacturing revenue) compared to earnings of $112.7 million (4.6% of 
Manufacturing  revenue)  in  Fiscal  2019,  a  decrease  of  $237.8  million  or  211.0%.  The  decrease  in  2020  Q4  as  a  percentage  of  revenues  is 
primarily due to lower production volumes, exceptional COVID-19 costs of $3.5 million and non-recurring restructuring costs of $1.0 million, 
partially offset by government grants of $11.3 million. The decrease in Fiscal 2020 as a percentage of revenue is also due to lower volumes, 
exceptional  COVID-19  costs  of  $44.9  million,  non-recurring  restructuring  costs  of  $27.4  million  and  a  goodwill  impairment  charge  of  $50.8 
million.  The  year-over-year  decrease  was  offset  by  government  grants  of  $53.5  million,  NFI  Forward  savings  of  $17.0  million  and 
improvements at KMG.

Earnings from operations related to Aftermarket operations in 2020 Q4 were $12.4 million (12.0% of Aftermarket revenue) compared to $15.5 
million  (13.3%  of  Aftermarket  revenue)  in  2019  Q4,  a  decrease  of  $3.1  million  or  20.0%.  Earnings  from  operations  related  to  Aftermarket 
operations  in  Fiscal  2020  were  $53.6  million  (13.4%  of  Aftermarket  revenue)  compared  to  $64.0  million  (15.3%  of  Aftermarket  revenue)  in 
Fiscal 2019, a decrease of $10.4 million or 16.3%. The 2020 Q4 decrease as a percentage of revenue is a result of lower sales volumes and a 
COVID-19 related impairment charge of $1.9 million. The decrease as a percentage of revenue for Fiscal 2020 is also a result of lower sales 
volumes and COVID-19 related costs. 

Unrealized foreign exchange gain/loss

The Company has recognized a net unrealized foreign exchange (gain) loss consisting of the following:

(U.S. dollars in thousands)

Unrealized (gain) loss on forward foreign exchanges contracts

Unrealized (gain) loss on other long-term monetary assets/liabilities

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

$ 

(1,377)  $ 

(1,860)   

(3,237)  $ 

(1,475)  $ 

(8,272)  $ 

(1,797) 

(165) 

(778)   

(1,640)  $ 

(9,050)  $ 

1,857 

60 

At  December  27,  2020,  the  Company  had  $85.0  million  of  foreign  exchange  forward  contracts  to  buy  currencies  in  which  the  Company 
operates  (U.S.  dollars,  Canadian  dollars,  or  GBP).    The  related  asset  of  $4.5  million  (December  29,  2019:  $3.7  million)  is  recorded  on  the 
audited consolidated statements of financial position as a current derivative financial instruments asset and the corresponding change in the 
fair  value  of  the  foreign  exchange  forward  contracts  is  recorded  in  the  audited  consolidated  statements  of  net  earnings  (loss)  and  total 
comprehensive income (loss).

33 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
Earnings (loss) before interest and income taxes (“EBIT”)

In 2020 Q4, the Company recorded EBIT of $36.0 million compared to EBIT of $71.5 million in 2019 Q4. In Fiscal 2020, the Company recorded 
an EBIT loss of $72.2 million compared to EBIT of $173.1 million in Fiscal 2019. EBIT has been impacted by non-cash and non-recurring items 
as follows:

(U.S. dollars in thousands)

Non-cash and non-recurring charges:

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

Costs (recoveries) associated with assessing strategic and 
corporate initiatives

$ 

165  $ 

(616)  $ 

1,396  $ 

Unrealized foreign exchange (gain) loss

Equity settled stock-based compensation

Loss (gain) on disposition of property, plant and equipment

Fair value adjustment to acquired subsidiary company's inventory 
and deferred revenue

Fair value adjustment of total return swap

Past service costs recovery

Recovery on currency transactions

Extraordinary COVID-19

Prior year sales tax provision

Impairment loss on goodwill

Portion of the total return swap realized

Non-recurring restructuring costs

Amortization

(3,237)   

(1,640) 

608   

(257)   

—   

(1,584)   

7   

—   

5,413   

37   

—   

641   

1,014   

26,126   

437 

52 

2,156 

273 

— 

— 

— 

300 

— 

(203) 

— 

31,135 

(9,050)   

1,770   

(56)   

—   

118   

(408)   

—   

47,362   

184   

50,790   

(525)   

27,541   

110,784   

Total non-cash and non-recurring charges:

$ 

28,933  $ 

31,894 

$ 

229,906  $ 

13,069 

60 

1,566 

(46) 

31,004 

949 

— 

(4,287) 

— 

4,094 

— 

(626) 

— 

104,570 

150,353 

Interest and finance costs

The interest and finance costs for 2020 Q4 of $14.6 million increased by $3.3 million when compared 2019 Q4. The increase is primarily due 
to carrying costs associated with the Sidecar and interest costs incurred on the new UK Facility. The Sidecar was entered in April 2020, to 
provide additional liquidity, if required, during the temporary idling of production facilities due to COVID-19. The Sidecar was not used and 
was terminated in December 2020. The UK Facility was entered in May 2020, to support ADL's operations in the UK. Interest and finance costs 
were also higher due to a fair market value gain on interest rate swap of $3.3 million in 2020 Q4 compared to a gain of $4.5 million in 2019 
Q4. 

The  interest  and  finance  costs  for  Fiscal  2020  of  $83.9  million  increased  by  $10.5  million  when  compared  to  Fiscal  2019.  The  increase  is 
primarily due to increased interest on long-term debt of $9.6 million due to higher average Credit Facility draws for the acquisition of ADL 
and  to  finance  fixed  operating  expenses  during  the  temporary  idling  of  production  facilities  due  to  COVID-19.  The  increase  is  also  due  to 
carrying costs associated with the Sidecar and interest on the new UK Facility. The increase was partially offset by a fair market value loss on 
interest rate swap of $17.7 million in Fiscal 2020, compared to a loss of $22.0 million in Fiscal 2019. 

The losses on the interest rate swap relate to risk management activities management has undertaken to reduce the uncertainty related to 
the Company's cost of borrowing.  The interest rate swap fixes the interest rate which the Company will pay on $600.0 million of its long-term 
debt at 2.27% plus an applicable margin. The fixed portion amortizes $20 million annually and matures in October 2023. The Company has a 
second interest rate swap on $200 million of its long-term debt on which the Company will pay 0.243% plus an applicable margin and matures 
in July 2025. The Company's accounting policy is to not designate these types of instruments as accounting hedges.  As a result, interest rate 
increases will result in mark-to-market gains, while interest rate decreases will result in mark-to-market losses.  

Earnings (loss) before income taxes (“EBT”)

EBT  for  2020  Q4  of  $21.5  million  decreased  by  $38.7  million  compared  to  EBT  of  $60.2  million  in  2019  Q4.  EBT  for  Fiscal  2020  of  $156.1 
million loss decreased by $255.8 compared to EBT of $99.7 million in Fiscal 2019. The primary drivers of the changes to EBT are addressed in 
the Earnings from Operations, EBIT, and Interest and finance costs sections above.

Income tax expense 

The income tax expense for 2020 Q4 was $13.0 million, compared to $26.1 million expense in 2019 Q4.  The ETR for 2020 Q4 was 60.5% and 
the ETR for 2019 Q4 was 43.4%. The reduction in the overall income tax expense is primarily due to lower earnings before taxes. The ETR is 
negatively impacted by the base erosion and anti-abuse tax ("BEAT") and a write-off of unapplied foreign tax credits. 

34 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The income tax for Fiscal 2020 was $1.6 million compared to $42.0 million expense in Fiscal 2019.  The ETR for Fiscal 2020 was negative 1.1% 
and the ETR for Fiscal 2019 was 42.1%. The reduction in the overall income tax expense is primarily due to lower earnings before taxes.  The 
ETR is negatively impacted by the Company incurring non-deductible interest, revaluing UK deferred tax liabilities as a result of a reversal of 
a previously enacted rate reduction, the non-deductible goodwill impairment charge in 2020 Q1, BEAT and a write-off of unapplied foreign 
tax credits.

Net earnings (loss)

The Company reported net earnings of $8.5 million in 2020 Q4, a decrease of 75.1% compared to net earnings of $34.1 million in 2019 Q4. The 
Company reported a net loss of $157.7 million in Fiscal 2020, a decrease of 373.3% compared to net earnings of $57.7 million in Fiscal 2019.  
The decrease in net earnings is due to lower production volumes, exceptional COVID-19 costs and non-recurring restructuring costs associated 
with production reductions and the NFI Forward initiative. The decrease was partially offset by government grants and NFI Forward savings. 
The Fiscal 2020 results were also lower as a result of a $50.8 million goodwill impairment charge related to private motor coach operations, 
incurred in the first quarter.

Net earnings (loss)
(U.S. dollars in millions, except per Share figures)

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

Earnings (loss) from operations

$ 

32.5  $ 

70.0 

$ 

(81.3)  $ 

Non-cash gain

Interest expense

Income tax expense

Net earnings (loss)

Net earnings (loss) per Share (basic)

Net earnings (loss) per Share (fully diluted)

3.6   

(14.6)   

(13.0)   

1.5 

(11.3) 

(26.1) 

9.1   

(83.9)   

(1.6)   

8.5  $ 

34.1 

$ 

(157.7)  $ 

0.14  $ 

0.14  $ 

0.55 

0.55 

$ 

$ 

(2.52)  $ 

(2.52)  $ 

$ 

$ 

$ 

173.1 

— 

(73.4) 

(42.0) 

57.7 

0.93 

0.93 

The Company’s net earnings per Share in 2020 Q4 of $0.14 decreased from net earnings per Share of $0.55 in 2019 Q4. The Company's net loss 
per Share in Fiscal 2020 of $2.52 decreased from net earnings per Share of $0.93 generated in Fiscal 2019. Net earnings per Share were lower 
in  2020  Q4  and  Fiscal  2020  due  to  lower  production  volumes,  exceptional  COVID-19  related  costs,  non-recurring  restructuring  costs  and 
goodwill impairment charges. The decrease was partially offset by government grants and NFI Forward savings.

Cash Flow

The cash flows of the Company are summarized as follows:

(U.S. dollars in thousands)

Cash generated by operating activities before non-cash working 
capital items and interest and income taxes paid

$ 

57,951  $ 

101,054 

$ 

87,299  $ 

277,775 

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

Interest paid

Income taxes paid

Net cash earnings (loss)

Cash flow generated by (used in) changes in working capital

Cash flow generated by operating activities

Cash flow from (used in) financing activities

Cash flow used in investing activities

Cash flows from operating activities

(15,913)   

(4,124)   

37,914   

50,191   

88,105   

(27,997)

(15,447) 

(7,228) 

78,379 

70,891 

149,270 

(145,175)

(63,307)   

(26,693)   

(2,701)   

68,762   

66,061   

(37)

(47,676) 

(40,167) 

189,932 

(91,324) 

98,608 

298,011

(7,217)   

(6,979) 

(38,477)   

(379,289) 

The 2020 Q4 net operating cash flow of $88.1 million is comprised of $37.9 million of net cash earnings and $50.2 million of cash generated by 
changes in working capital. The 2019 Q4 net operating cash flow of $149.3 million is comprised of $78.4 million of net cash earnings and $70.9 
million of cash generated by changes in working capital.

The  Fiscal  2020  net  operating  cash  flow  of  $66.1  million  is  comprised  of  $2.7  million  of  net  cash  losses,  offset  by  $68.8  million  of  cash 
generated by changes in working capital. The Fiscal 2019 net operating cash flow of $98.6 million is comprised of $189.9 million of net cash 
earnings, offset by working capital investment of $91.3 million.

35 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow from financing activities 

The cash outflow of $28.0 million during 2020 Q4 is comprised mainly of short-term debt repayments of $10.0 million, dividend payments of 
$9.9  million,  and  lease  obligation  payments  of  $7.8  million,  offset  by  proceeds  from  long-term  debt  of  $3.7  million.  Lease  obligation 
payments  were  higher  as  the  Company  made  payments,  related  to  previous  quarters,  that  had  been  deferred  to  preserve  cash  during  the 
idling of production facilities.

The  cash  inflow  of  $0.0  million  during  Fiscal  2020  is  comprised  mainly  of  proceeds  from  long-term  debt  of  $72.1  million,  offset  by  lease 
obligation payments of $18.9 million, dividends paid on shares of $49.4 million and debt issue costs of $3.9 million.

Cash flow from investing activities

(U.S. dollars in thousands)

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

Acquisition of intangible assets

$ 

(29)  $ 

(11)  $ 

Proceeds from disposition of property, plant and equipment

Long-term restricted deposits

Net cash used in acquisitions

Acquisition of property, plant and equipment

Cash from investing activities

$ 

2,259   
—   

—   

(9,447)   

(7,217)  $ 

— 

— 

— 

(29)  $ 

2,765   

(38) 

174 

(15,510)   

(14,490) 

—   

(327,360) 

(6,968) 

(25,703)   

(37,575) 

(6,979)  $ 

(38,477)  $ 

(379,289) 

Investing activities were higher in 2020 Q4, as the Company increased maintenance capital expenditures, after reducing expenditures during 
the second and third quarters to preserve cash during the pandemic. Yearly outflows from investing activities were lower as a result of the 
acquisition of ADL in 2019 Q2, as well as lower maintenance capital expenditures to preserve cash during the pandemic.

On January 20, 2016, the Company entered into a $482.0 million interest rate swap designed to hedge floating rate exposure on the $482.0 
million  Term  Credit  Facility  under  the  Company's  then  current  fifth  amended  and  restated  prior  credit  agreement.  The  interest  rate  swap 
fixed the interest rate at 1.154% plus the applicable interest margin.  On February 13, 2019, the Company blended the unrealized gain from 
the then current swap into a $600.0 million notional interest rate swap designed to hedge floating rate exposure on the Company's current 
Credit Facility.  The interest rate swap fixes the interest rate at 2.27% plus applicable margin until October 2023 and amortizes at a rate of 
$20 million per annum.

On July 9, 2020 the Company entered into $200 million amortizing notional interest rate swap designed to hedge floating rate exposure on its 
Credit Facility. The interest rate swap fixes the interest rate at 0.243% plus applicable margin until July 2025. The swap begins amortizing on 
December 9, 2022 at a rate of $20 million per annum. 

The  fair  value  of  the  interest  rate  swap  liability  of  $33.1  million  at  December  27,  2020  (2019:  $15.4  million  liability)  was  recorded  on  the 
audited  consolidated  statements  of  financial  position  as  a  derivative  financial  instruments  liability  and  the  change  in  fair  value  has  been 
recorded as finance costs for the reported period.  The unrealized losses recorded on the instrument are a result of interest rate reductions 
subsequent to entering into the transaction.

Credit risk

Financial  instruments  which  potentially  subject  the  Company  to  credit  risk  and  concentrations  of  credit  risk  consist  principally  of  cash, 
accounts  receivable  and  derivatives.  Management  believes  that  the  credit  risk  associated  with  accounts  receivable  is  mitigated  by  the 
significant proportion of counterparties that are well established public transit authorities. Additionally, the U.S. federal government funds a 
substantial portion of U.S. public sector customer payments - up to 80% of the capital cost of new transit buses, coaches or cutaways, while 
the remaining 20% comes from state and municipal sources. There are a few U.S. public sector customers that obtain 100% of their funding 
from  state  and  municipal  sources.  The  maximum  exposure  to  the  risk  of  credit  for  accounts  receivables  corresponds  to  their  book  value. 
Historically, the Company has experienced nominal bad debts as a result of the customer base being principally comprised of municipal and 
other local transit authorities.   Management does not anticipate significant credit risk due to the COVID-19 pandemic.

The purchase of new coaches, transit buses or cutaways by private fleet operators is paid from the operators' own capital budgets and funded 
by their own cash flow. A significant portion of private fleet operators choose to finance new coach purchases with lending organizations. In 
some  cases,  MCI  assists  in  arranging  this  financing,  and  in  some  cases,  it  provides  financing  through  its  ultimate  net  loss  program.    The 
Company has experienced a nominal amount of bad debts with its private sales customers as most transactions require payment on delivery. 
Management does not anticipate significant credit risk due to the COVID-19 pandemic.

The carrying amount of accounts receivable is reduced through the use of an allowance account and the amount of the loss is recognized in 
the  earnings  statement  within  SG&A.  When  a  receivable  balance  is  considered  uncollectible,  it  is  written  off  against  the  allowance  for 
doubtful accounts. Subsequent recoveries of amounts previously written off are credited against SG&A in the consolidated statements of net 
earnings (loss) and total comprehensive income (loss). 

36 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
The following table details the aging of the Company’s receivables and related allowance for doubtful accounts:

U.S. dollars in thousands

Current, including holdbacks

Past due amounts but not impaired

1 – 60 days

Greater than 60 days

Less: allowance for doubtful accounts

Total accounts receivables, net

December 27, 2020

December 29, 2019

$ 

380,328  $ 

482,476 

39,988 

7,081 

(989)   

426,408  $ 

37,413 

6,800 

(284) 

526,405 

$ 

The counterparties to the Company's derivatives are chartered Canadian banks and international financial institutions. The Company could be 
exposed  to  loss  in  the  event  of  non-performance  by  the  counterparty.  However,  credit  ratings  and  concentration  of  risk  of  the  financial 
institutions are monitored on a regular basis.

Commitments and Contractual Obligations

The following table describes the Company’s maturity analysis of the undiscounted cash flows of leases and accrued benefit liabilities as at 
December 27, 2020:

U.S. dollars in thousands

Leases

Accrued benefit liability

Total

2021

2022

203

2024

2025

Post 2025

194,376   

22,204   

21,040   

18,498   

13,571   

10,083   

108,980 

2,911   

2,911   

—   

—   

—   

—   

— 

$  197,287  $ 

25,115  $ 

21,040  $ 

18,498  $ 

13,571  $ 

10,083  $  108,980 

As  at  December  27,  2020,  outstanding  surety  bonds  guaranteed  by  the  Company  amounted  to  $357.2  million,  representing  a  decrease 
compared  to  $384.5  million  at  December  29,  2019.    The  estimated  maturity  dates  of  the  surety  bonds  outstanding  at  December  27,  2020 
range from January 2021 to December 2026.. Management believes that adequate facilities exist to meet projected surety requirements.

The Company has not recorded a liability under these guarantees as management believes that no material events of default exist under any 
applicable contracts with customers.

Under the Credit Facility, the Company had established a letter of credit sub-facility of $100.0 million. As at December 27, 2020, letters of 
credit amounting to $11.8 million (December 29, 2019: $12.8 million) remained outstanding as security for the contractual obligations of the 
Company under the Credit Facility.

The Company has an additional bi-lateral credit facility of £50.0 million. As at December 27, 2020, letters of credit totaling $22.1 million 
were  outstanding  under  the  bi-lateral  credit  facility.  Additionally,  there  are  $30.0  million  of  letters  of  credit  outstanding  outside  of  the 
Credit Facility and the bi-lateral credit facility.

The Company does not have any off-balance sheet arrangement or any material capital asset commitments at December 27, 2020.

Share Option Plan

The Board adopted a Share Option Plan (the “2013 Option Plan”) for NFI on March 21, 2013, under which employees of NFI and certain of its 
affiliates may receive grants of options for Shares. The 2013 Option Plan was amended and restated on December 8, 2015, December 31, 2018 
and August 5, 2020. Directors who are not employed with NFI are not eligible to participate in the 2013 Option Plan. A maximum of 3,600,000 
Shares are reserved for issuance under the 2013 Option Plan. The options become vested as to one-quarter on the first grant date anniversary 
and an additional one-quarter on the second, third and fourth anniversary of the grant date.

37 

NFI GROUP INC. 2020 REPORT 

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Option Grant dates

March 26, 2013

Number
490,356

Exercised
(483,030)  

Expired
— 

Vested Unvested
— 
(7,326)  

Expiry date
March 26, 2021

Exercise 
price
C$10.20

Fair Value at 
grant date
C$1.55

December 30, 2013

612,050

(573,668)

(9,631)

(28,751)  

December 28, 2014

499,984

(252,233)

(11,368)

(236,383)  

December 28, 2015

221,888

(19,532)  

— 

(202,356)  

September 8, 2016

2,171  

—   

(2,171)   

—   

— 

— 

— 

— 

December 30, 2021

C$10.57

December 28, 2022

C$13.45

December 28, 2023

C$26.75

September 8, 2024

C$42.83

January 3, 2017

January 2, 2018

January 2, 2019

July 15, 2019

December 31, 2019

151,419

(1,610)

(12,534)

(102,557)

34,718

January 3, 2025

C$40.84

152,883  

284,674  

2,835  

519,916  

—   

(10,750)   

(71,071) 

71,062

—   

(25,314)   

(64,844) 

194,516

—   

—   

(709) 

2,126

January 2, 2026

January 2, 2027

July 15, 2027

—   

(33,218)   

— 

486,698

December 31, 2027

2,938,176 (1,330,073)

(104,986)

(713,997)

789,120

C$54.00

C$33.43

C$35.98

C$26.81

C$29.32

C$1.44

C$1.83

C$4.21

C$8.06

C$7.74

C$9.53

C$5.01

C$4.90

C$3.36

The Board adopted a new share option plan on March 12, 2020 (the "2020 Option Plan"), which was approved by shareholders on May 7, 2020, 
and amended on August 5, 2020,  under which employees of NFI and certain of its affiliates may receive grants of options for Shares. Directors 
who  are  not  employed  with  NFI  are  not  eligible  to  participate  in  the  2020  Option  Plan.  A  maximum  of  3,200,000  Shares  are  reserved  for 
issuance under the 2020 Option Plan. The options become vested as to one-quarter on the first grant date anniversary and an additional one-
quarter on the second, third and fourth anniversary of the grant date. No options have been issued under the 2020 Option Plan.

The following reconciles the Share options outstanding:

Balance at beginning of period

Granted during the period

Expired during the period

Exercised during the period
Balance at end of period

Fiscal 2020

Fiscal 2019

Number
1,068,906

519,916 

(77,059) 

(8,646)

1,503,117

Weighted average 
exercise price
C$30.77

C$26.81  

C$34.26  

C$13.45

C$29.32

Number
946,306

287,559 

(6,928) 

(158,031)

1,068,906

Weighted average 
exercise price
C$27.02

C$33.46

C$40.75

C$12.77

C$30.77

Restricted Share Unit Plan for Non-Employee Directors 

Pursuant to the Company’s Restricted Share Unit Plan for Non-Employee Directors, a maximum of 500,000 Shares are reserved for issuance to 
non-employee directors.  The Company did not issue any director restricted Share units (“Director RSUs”) in 2020 Q4. 

Critical accounting estimates and judgments

The Company's critical accounting estimates and judgments can be found within note 2 to the 2020 Annual Financial Statements.

New and amended standards adopted by the Company

IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20")

The Company recognizes government grants when there is reasonable assurance that it will comply with the conditions attached to them and 
that  the  grants  will  be  received.  Government  grants  are  recognized  in  the  consolidated  statement  of  net  earnings  (loss)  and  total 
comprehensive  income  (loss)  over  the  periods  in  which  the  Company  recognizes  and  expenses  the  related  costs  for  which  the  grants  are 
intended to compensate. Grants related to income are deducted in reporting the related expense.

Capital Allocation Policy

The  Company  has  established  a  capital  allocation  policy  based  on  an  operating  model  intended  to  provide  consistent  and  predictable  cash 
flow  and  maintain  a  strong  balance  sheet.  This  policy  has  established  guidelines  that  are  reviewed  by  the  Board  on  a  quarterly  basis  and 
provides targets for maintaining financial flexibility, business investment, and return of capital to shareholders.

Maintaining Financial Flexibility

The Company plans to prudently use leverage to manage liquidity risk. Liquidity risk arises from the Company’s financial obligations and from 
the management of its assets, liabilities and capital structure. This risk is managed by regularly evaluating the liquid financial resources to 
fund current and long-term obligations, and to meet the Company’s capital commitments in a cost-effective manner.

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NFI GROUP INC. 2020 REPORT 

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The  main  factors  that  affect  liquidity  include  sales  mix,  production  levels,  cash  production  costs,  working  capital  requirements,  capital 
expenditure  requirements,  scheduled  repayments  of  long-term  debt  obligations,  funding  requirements  of  the  Company’s  pension  plans, 
income taxes, credit capacity, expected future debt and equity capital market conditions.

The  Company’s  liquidity  requirements  are  met  through  a  variety  of  sources,  including  cash  on  hand,  cash  generated  from  operations,  the 
credit facilities, leases, and debt and equity capital markets.

On December 23, 2020, the Company amended its credit facilities, including the Company’s existing $1.25 billion Credit Facility and its £50 
million UK Facility. The amended facilities provide NFI with relaxed covenants as it recovers from the impacts of the COVID-19 pandemic. In 
addition  to  amending  the  facilities,  NFI  terminated  the  unused  $250  million  Sidecar  facility,  which  was  intended  to  provide  additional 
liquidity in 2020, which the Company believes it no longer requires.

Under the terms of the amended facilities, the total leverage and interest coverage ratios for 2021 and 2022 have been relaxed. During 2021, 
the Company has received a waiver of the total net leverage covenant and will instead need to comply with a total net leverage ratio that is 
based on a conservative financial projection for the Company’s 2021 fiscal year. 

Beginning in 2022, the Company will be required to maintain a total net leverage ratio at follows:  

January 3, 2022 - April 3, 2022

April 4, 2022 - July 3, 2022

July 4, 2022 - October 2, 2022

October 3, 2022 and thereafter

<5.00

<4.50

<4.25

<3.75

The Company will also have to comply with a $50 million minimum liquidity covenant at all times until the total net leverage covenant is less 
than 3.75x, a total net debt to capitalization ratio of less than 0.70:1.00 during 2021, and an interest coverage ratio of at least 2.25x during 
2021 and 3.00x beginning in the first quarter 2022. The amended facilities require the dividend payment not exceed the current level.

Adjusted EBITDA is calculated on a rolling last twelve-month basis, provided that for those calculations required on April 4, 2021, the rolling 
period  is  calculated  as  Adjusted  EBITDA  for  the  three  Fiscal  Quarters  ending  April  4,  2021,  December  27,  2020  and  September  27,  2020 
multiplied by 4/3.

Management believes the Company’s cash position, anticipated future revenues, liquidity from credit facilities together with access to equity 
markets and other borrowings capacity are sufficient to support current operations, dividends and strategic initiatives.

Subsequent to quarter- and year-end, on March 1, 2021 NFI announced that it had closed a bought-deal equity offering ( the "Offering") with a 
syndicate  of  underwriters  (the  "Underwriters")  pursuant  to  which  NFI  issued  8,446,000  common  shares  at  a  price  of  C$29.60  per  share  for 
gross  proceeds  to  the  Company  of  C$250  million.  The  Company  intends  to  use  the  net  proceeds  of  the  Offering  to  reduce  the  outstanding 
balances  under  its  credit  facilities,  which  is  expected  to  strengthen  NFI’s  balance  sheet,  reduce  leverage  and  interest  expense  and 
significantly increase liquidity.

NFI believes that its existing liquidity combined with the additional financial flexibility provided from the Offering will allow it to pursue its 
operational and strategic goals, such as investments in NFI’s zero-emission products and electric propulsion technology, investments required 
under  the  previously  disclosed  NFI  Forward  cost-reduction  initiative  and  other  potential  growth  opportunities,  in  addition  to  continuing  to 
return capital to shareholders through dividends. 

The calculation of the financial covenants for Fiscal 2020 are provided for information purposes below:

Total Leverage Ratio (must be less than 6.25 [2019: 4.25])

Interest Coverage Ratio (must be greater than 3.00 [2019: 3.00])

December 27, 2020

December 29, 2019

4.90

4.11

3.24

7.73

US dollars in thousands

Liquidity Position (must be greater than $50 million)

December 27, 2020

$ 

233,459 

The  Company  remains  focused  on  deleveraging  its  balance  sheet  and  returning  to  its  target  leverage  of  2.0x  to  2.5x  total  debt  to  EBITDA. 
Management had originally expected the Company to return to those levels 18 to 24 months following the acquisition of ADL in May 2019, but 
the impact of COVID-19 has extended the expected timing of deleveraging. The Company has executed upon a variety of initiatives focused 
on lowering cash outflows to help mitigate the impacts of COVID-19 including:

•

Permanent workforce reductions across NFI Group, generating savings of $17 million in fiscal 2020;

39 

NFI GROUP INC. 2020 REPORT 

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•
•
•

A reduction in planned 2020 cash capital expenditures from $45 million to $25 million;
The 50% reduction in the Company's quarterly dividend in 2020 Q1; and
Reducing working capital

Management expects to reduce the Company's total leverage over time as the recovery from COVID-19 continues, and the Company achieves 
the benefits of the NFI Forward strategic cost reduction initiatives. 

Compliance  with  financial  covenants  is  reviewed  monthly  by  the  Executive  team  and  reported  quarterly  to  the  Board.  Other  than  the 
requirements  imposed  by  borrowing  agreements,  the  Company  is  not  subject  to  any  externally  imposed  capital  requirements.  Capital 
management objectives are reviewed on an annual basis or when strategic capital transactions arise.

Business Investment

The Company plans to invest in the current business for future growth and will continue to invest in common systems and lean manufacturing 
operations  to  improve  quality  and  cost  effectiveness,  and  to  continue  to  invest  in  ZEB,  Infrastructure  Solutions  and  Advanced  Driver 
Assistance Systems ("ADAS") and automated vehicles. The Company has made significant investments in its ZEB production capabilities to be 
prepared for the expected longer-term transition to a more electrified fleet. New Flyer now has the capability to manufacture ZEBs at all of 
its North American facilities. ADL is the market leader in ZEBs with production capabilities at all of its UK facilities, MCI has invested in model 
upgrades to generate its first electric coach offering, which has been well received by the market and ARBOC is commencing production of its 
medium-duty  Equess  CHARGE  electric  bus  in  the  second  quarter  of  2021,  subject  to  completion  of  Altoona  testing.  To  support  customers 
making  the  transition  to  zero-emission  fleets,  New  Flyer  launched  an    Infrastructure  Solutions  business  in  2019  that  has  helped  numerous 
agencies develop and launch infrastructure installation projects. 

The Company has a number of autonomous bus projects in development with specialized partners who have a deep understanding of artificial 
intelligence  and  ADAS.  As  part  of  this  program  to  advance  automated  and  ADAS,  subsequent  to  quarter-end,  on  January  29,  2021,  NFI 
announced the launch of the New Flyer Xcelsior AV, North America's first automated transit bus. ARBOC’s zero-emission battery electric bus, 
the Equess CHARGETM, will begin production in the second half of 2021, following completion of Altoona testing. The Company has also made 
numerous investments into telematics solutions to ensure customers can track detailed performance and maintenance metrics associated with 
their vehicles.

In addition to internal investments, business acquisitions will be considered to further grow and diversify the business and to contribute to 
the long-term competitiveness and stability of the Company.  Investment decisions are based on several criteria, including but not limited to: 
investment required to maintain or enhance operations; enhancement of cost effectiveness through vertical integration of critical supply and 
sub-assembly in-sourcing; and acquisitions in current or adjacent markets that are considered accretive to the business. 

Return of Capital to Shareholders

The Company intends to have a Share dividend policy that is consistent with the Company`s financial performance and the desire to retain 
certain  cash  flows  to  support  the  ongoing  requirements  of  the  business  and  to  provide  the  financial  flexibility  to  pursue  revenue 
diversification and growth opportunities.

The Company's 2020 Q4 Free Cash Flow was C$39.6 million compared to declared dividends of C$13.3 million during this period. For 2019 Q4 
Free  Cash  Flow  was  C$64.1  million  compared  to  declared  dividends  of  C$26.6  million.    This  resulted  in  a  payout  ratio  of 33.6%  in  2020  Q4 
compared to 41.5% in 2019 Q4.

To support cash management efforts while the Company's operations are impacted by COVID-19, in 2020 Q1 the Board reduced the Company’s 
quarterly dividend to C$0.2125 per Share. While the dividend payment was reduced, the continued payment reflects the Board’s confidence 
in the Company’s business while maintaining the financial flexibility required to operate during a period of significant economic uncertainty.

On  June  11,  2018,  the  Company  announced  that  the  TSX  had  accepted  a  notice  filed  by  the  Company  of  its  intention  to  implement  the 
previous  Normal Course Issuer Bid (the "Former NCIB") to repurchase its Shares through the facilities of the TSX and any alternative Canadian 
trading  systems  on  which  the  Shares  are  traded.  On  January  17,  2019  the  Company  amended  the  Former  NCIB.    Pursuant  to  the  amended 
Former  NCIB,  the  Company  was  permitted  to  repurchase  for  cancellation  up  to  5,549,465  Shares,  representing  approximately  10%  of  the 
outstanding public float of Shares on June 4, 2018.  The Company was permitted to repurchase Shares commencing on June 14, 2018 up to 
June 13, 2019, or earlier should the Company have completed its repurchases prior to such date. The Former NCIB expired June 13, 2019.

On June 12, 2019 the Company announced that the TSX had accepted a notice filed by the Company of its intention to implement a Normal 
Course  Issuer  Bid  to  replace  the  Former  NCIB  to  repurchase  its  Shares  (the  "Second  NCIB").  The  Company  was  permitted  to  repurchase  for 
cancellation up to 5,357,914 Shares, representing approximately 10% of the outstanding public float of Shares on June 4, 2019.  The Company 
was  permitted  to  repurchase  Shares  commencing  on  June  17,  2019  up  to  June  16,  2020,  or  earlier  should  the  Company  complete  its 
repurchases prior to such date. 

During  2019  Q1,  the  Company  repurchased  232,100  Shares  under  the  Former  NCIB  at  an  average  price  of  C$31.82  per  Share  for  a  total 
repurchase  of  C$7.4  million.  The  Company  canceled  986,075  Shares  during  2019  Q1,  including  232,100  Shares  purchased  in  2019  Q1  and 
753,975  Shares  that  were  purchased  in  2018  Q4.    There  were  no  shares  purchased  or  canceled  under  the  Former  NCIB  or  the  Second  NCIB 

40 

NFI GROUP INC. 2020 REPORT 

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subsequent to 2019 Q2. The Second NCIB expired on June 16, 2020. The Company did not file for another normal course issuer bid to replace 
the expired Second NCIB.

Total Capital Distributions to Shareholders
(U.S. dollars in millions)

Dividends paid

NCIB Share repurchase

Total

Controls and Procedures

Internal Controls over Financial Reporting

2020 Q4

2019 Q4

Fiscal 2020

Fiscal 2019

$ 

$ 

9.9  $ 

—   

9.9  $ 

20.0  $ 

49.4 

— 

—   

20.0  $ 

49.4  $ 

$76.4

5.7 

82.1 

Management is responsible for establishing and maintaining internal controls over financial reporting (“ICFR”), as defined under rules adopted 
by  the  Canadian  Securities  Administrators.  ICFR  were  designed  under  the  supervision  of,  and  with  the  participation  of,  the  President  and 
Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”). The Company’s ICFR are designed to provide reasonable assurance 
regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes in accordance with IFRS. 

On  December  15,  2014,  management  adopted  the  “Internal  Control  –  Integrated  Framework  2013”  (“COSO  2013”)  from  the  Committee  of 
Sponsoring  Organizations  of  the  Treadway  Commission,  which  replaces  the  previously  issued  COSO  framework,  COSO  1992.  This  new 
framework  necessitated  a  re-evaluation  of  the  controls  that  management  relies  upon  to  support  its  conclusions,  as  well  as  changes  to  the 
Company’s testing programs. 

Management,  under  the  supervision  of  the  CEO  and  CFO,  evaluated  the  design  and  operational  effectiveness  of  the  Company’s  ICFR  as  of 
December 27, 2020 in accordance with the criteria established in COSO 2013, and concluded that the Company’s ICFR are effective. 

ICFR,  no  matter  how  well  designed,  have  inherent  limitations.  Therefore,  ICFR  can  provide  only  reasonable  assurance  with  respect  to 
financial statement preparation and may not prevent or detect all misstatements. 

There have been no changes in our internal control over financial reporting during the quarter ended December 27, 2020 that have materially 
affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Disclosure Controls

Management is responsible for establishing and maintaining disclosure controls and procedures in order to provide reasonable assurance that 
material  information  relating  to  the  Company  is  made  known  to  them  in  a  timely  manner  and  that  information  required  to  be  disclosed  is 
reported within time periods prescribed by applicable securities legislation. There are inherent limitations to the effectiveness of any system 
of  disclosure  controls  and  procedures,  including  the  possibility  of  human  error  and  the  circumvention  or  overriding  of  the  controls  and 
procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control 
objectives. The Company’s CEO and CFO have concluded that disclosure controls and procedures as at December 27, 2020 were effective. 

41 

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Appendix A - Meaning of Certain References 

References  in  this  MD&A  to  the  “Company”  are  to  NFI  and  all  of  its  direct  or  indirect  subsidiaries,  including  New  Flyer  Industries 
Canada ULC (“NFI ULC”), New Flyer of America Inc. (“NFAI”), The Aftermarket Parts Company, LLC (“TAPC”), TCB Enterprises, LLC 
("TCB"), KMG Fabrication, Inc. ("KMG"), Carfair Composites Inc. (“CCI”) and Carfair Composites USA, Inc. (“CCUI”, and together with 
"CCI", "Carfair"), The Reliable Insurance Company Limited, ARBOC Specialty Vehicles, LLC ("ARBOC"), New MCI Holdings, Inc. and its 
affiliated  entities  (collectively,  "MCI”),  NFI  Holdings  Luxembourg  s.a.r.l.,  and  Alexander  Dennis  Limited  and  its  affiliated  entities 
(collectively, "ADL") References to “New Flyer” generally refer to NFI ULC, NFAI, TAPC, KMG, CCI, CCUI and TCB.  References in this 
MD&A to “management” are to senior management of NFI and the Company.

The common shares of NFI (“Shares”) are traded on the Toronto Stock Exchange ("TSX") under the symbol “NFI”.  As at December 27, 
2020,  62,524,842  Shares  were  issued  and  outstanding.  Additional  information  about  NFI  and  the  Company,  including  NFI’s  annual 
information form, is available on SEDAR at www.sedar.com.

Buses manufactured by New Flyer and ADL's single and double deck buses are classified as "transit buses". ARBOC manufactures body-
on-chassis  or  “cutaway”  and  "medium-duty"  buses  that  service  transit,  paratransit,  and  shuttle  applications.  Collectively,  transit 
buses, medium-duty buses and cutaways, are referred to as "buses".

A “motor coach” or “coach” is a 35-foot to 45-foot over-the-highway bus typically used for intercity transportation and travel over 
longer  distances  than  heavy-duty  transit  buses,  and  is  typically  characterized  by  (i)  one  or  two  axles  in  the  rear  (related  to  the 
weight  of  the  vehicle),  (ii)  high  deck  floor,  (iii)  baggage  compartment  under  the  floor,  (iv)  high-backed  seats  with  a  coach-style 
interior (often including a lavatory and underfloor baggage compartments), and (v) no room for standing passengers. 

All of the data presented in this MD&A with respect to the number of transit buses, medium-duty buses, cutaways and motor coaches 
in service and delivered, is measured in, or based on, “equivalent units”. One equivalent unit (or “EU”) represents one production 
slot, being one 30-foot, 35-foot, 40-foot, 45-foot heavy-duty transit bus, one double deck bus, one medium-duty bus, one cutaway 
bus or one motor coach, whereas one articulated transit bus represents two equivalent units. An articulated transit bus is an extra-
long transit bus (approximately 60-feet in length), composed of two passenger compartments connected by a joint mechanism. The 
joint mechanism allows the vehicle to bend when the bus turns a corner, yet have a continuous interior. 

Forward‑Looking Statements

This  MD&A  contains  “forward-looking  information”  and  “forward-looking  statements”,  within  the  meaning  of  applicable  Canadian 
securities laws, which reflect the expectations of management regarding the Company’s future growth, financial performance and 
financial position and the Company’s strategic initiatives, plans, business prospects and opportunities, including the duration, impact 
of  and  recovery  from  the  COVID-19  pandemic.  The  words  “believes”,  “views”,  “anticipates”,  “plans”,  “expects”,  “intends”, 
“projects”,  “forecasts”,  “estimates”,  “guidance”  and  “targets”,  “may”,  “will”  and  similar  expressions  are  intended  to  identify 
forward  looking  statements.  These  forward-looking  statements  reflect  management’s  current  expectations  regarding  future  events 
(including the recovery of the Company’s markets and the expected benefits to be obtained through its “NFI Forward” initiative) and 
the Company’s financial and operating performance and speak only as of the date of this MD&A. Forward-looking statements involve 
significant  risks  and  uncertainties,  should  not  be  read  as  guarantees  of  future  events,  performance  or  results,  and  will  not 
necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved.

A number of factors that may cause actual results to differ materially from the results discussed in the forward-looking statements 
include:  the  anticipated  use  of  proceeds  of  the  Offering;  the  Company  may  not  be  able  to  achieve  its  targets  for  sales  growth; 
funding may not continue to be available to the Company’s customers at current levels or at all; the Company’s business is affected 
by  economic  factors  and  adverse  developments  in  economic  conditions  could  have  an  adverse  effect  on  the  for  the  Company’s 
products  and  the  results  of  its  operations;  currency  fluctuations  could  adversely  affect  the  Company’s  financial  results  or 
competitive  position;  interest  rates  could  change  substantially,  materially  impacting  the  Company’s  revenue  and  profitability;  an 
active,  liquid  trading  market  for  the  Shares  may  cease  to  exist,  which  may  limit  the  ability  of  shareholders  to  trade  Shares;  the 
market price for the Shares may be volatile; if securities or industry analysts do not publish research or reports about the Company 
and its business, if they adversely change their recommendations regarding the Shares or if the Company’s results of operations do 
not meet their expectations, the Share price and trading volume could decline; in addition, if securities or industry analysts publish 
inaccurate  or  unfavorable  research  about  the  Company  or  its  business,  the  Share  price  and  trading  volume  of  the  Shares  could 
decline;  competition  in  the  industry  and  entrance  of  new  competitors;  current  requirements  under  "Buy  America"  regulations  may 
change and/or become more onerous or suppliers’ “Buy America” content may change; failure of the Company to comply with the 
U.S.  Disadvantaged  Business  Enterprise  (“DBE”)  program  requirements  or  the  failure  to  have  its  DBE  goals  approved  by  the  U.S. 
Federal  Transit  Administration;  absence  of  fixed  term  customer  contracts,  exercise  of  options  and  customer  suspension  or 
termination  for  convenience;  local  content  bidding  preferences  in  the  United  States  may  create  a  competitive  disadvantage; 
uncertainty resulting from the exit of the UK from the European Union; requirements under Canadian content policies may change 
and/or become more onerous; operational risk resulting from inadequate or failed internal processes, people and/or systems or from 

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NFI GROUP INC. 2020 REPORT 

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external events, including fiduciary breaches, regulatory compliance failures, legal disputes, business disruption, pandemics, floods, 
technology  failures,  processing  errors,  business  integration,  damage  to  physical  assets,  employee  safety  and  insurance  coverage; 
international operations subject the Company to additional risks and costs and may cause profitability to decline; compliance with 
international  trade  regulations,  tariffs  and  duties;  dependence  on  limited  sources  or  unique  sources  of  supply;  a  disruption  of  the 
supply of components containing microprocessors and other computer chips could materially adversely affect the production and sale 
of  the  Company's  vehicles  and  certain  other  products;  dependence  on  supply  of  engines  that  comply  with  emission  regulations;  a 
disruption,  termination  or  alteration  of  the  supply  of  vehicle  chassis  or  other  critical  components  from  third-party  suppliers  could 
materially adversely affect the sales of certain of the Company’s products; the Company's profitability can be adversely affected by 
increases  in  raw  material  and  component  costs;  the  Company  may  incur  material  losses  and  costs  as  a  result  of  product  warranty 
costs,  recalls  and  remediation  of  transit  buses  and  motor  coaches;  production  delays  may  result  in  liquidated  damages  under  the 
Company's contracts with its customers; catastrophic events may lead to production curtailments or shutdowns; the Company may 
not be able to successfully renegotiate collective bargaining agreements when they expire and may be adversely affected by labour 
disruptions and shortages of labour; the Company's operations are subject to risks and hazards that may result in monetary losses and 
liabilities  not  covered  by  insurance  or  which  exceed  its  insurance  coverage;  the  Company  may  be  adversely  affected  by  rising 
insurance costs; the Company may not be able to maintain performance bonds or letters of credit required by its contracts or obtain 
performance bonds and letters of credit required for new contracts; the Company is subject to litigation in the ordinary course of 
business and may incur material losses and costs as a result of product liability claims; the Company may have difficulty selling pre-
owned  coaches  and  realizing  expected  resale  values;  the  Company  may  incur  costs  in  connection  with  regulations  relating  to  axle 
weight restrictions and vehicle lengths; the Company may be subject to claims and liabilities under environmental, health and safety 
laws;  dependence  on  management  information  systems  and  cyber  security  risks;  the  Company's  ability  to  execute  its  strategy  and 
conduct operations is dependent upon its ability to attract, train and retain qualified personnel, including its ability to retain and 
attract  executives,  senior  management  and  key  employees;  the  Company  may  be  exposed  to  liabilities  under  applicable  anti-
corruption laws and any determination that it violated these laws could have a material adverse effect on its business; the Company's 
risk  management  policies  and  procedures  may  not  be  fully  effective  in  achieving  their  intended  purposes;  internal  controls  over 
financial  reporting,  no  matter  how  well  designed,  have  inherent  limitations;  there  are  inherent  limitations  to  the  effectiveness  of 
any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the 
controls  and  procedures;  ability  to  successfully  execute  strategic  plans  and  maintain  profitability;  development  of  competitive  or 
disruptive products, services or technology; development and testing of new products or model variants; acquisition risk; reliance on 
third party manufacturers; third-party distribution/dealer agreements; availability to the Company of future financing; the Company 
may not be able to generate the necessary amount of cash to service its existing debt, which may require the Company to refinance 
its  debt;  the  restrictive  covenants  in  the  credit  facilities  could  impact  the  Company's  business  and  affect  its  ability  to  pursue  its 
business strategies; payment of dividends is not guaranteed; a significant amount of the Company's cash is distributed, which may 
restrict  potential  growth;  the  Company  is  dependent  on  its  subsidiaries  for  all  cash  available  for  distributions;  future  sales  or  the 
possibility of future sales of a substantial number of Shares may impact the price of the Shares and could result in dilution; if the 
Company  is  required  to  write  down  goodwill  or  other  intangible  assets,  its  financial  condition  and  operating  results  would  be 
negatively affected; income tax risk due to the Company's operations being complex and income tax interpretations, regulations and 
legislation that pertain to its activities are subject to continual change; investment eligibility and Canadian federal income tax risks; 
certain U.S. tax rules may limit the ability of New Flyer Holdings, Inc. and its U.S. subsidiaries (the "NF Group") to deduct interest 
expense for U.S. federal income tax purposes and may increase the NF Group's tax liability and certain financing transactions could 
be characterized as "hybrid transactions" for U.S. tax purposes, which could increase the NF Group's tax liability.

Factors relating to the global COVID-19 pandemic include: the magnitude and duration of the global, national and regional economic 
and  social  disruption  being  caused  as  a  result  of  the  pandemic;  the  impact  of  national,  regional  and  local  governmental  laws, 
regulations and “shelter in place” or similar orders relating to the pandemic which may materially adversely impact the Company’s 
ability to continue operations; partial or complete closures of one, more or all of the Company’s facilities and work locations or the 
reduction  of  production  rates  (including  due  to  government  mandates  and  to  protect  the  health  and  safety  of  the  Company’s 
employees or as a result of employees being unable to come to work due to COVID-19 infections with respect to them or their family 
members);  production  rates  may  be  further  decreased  as  a  result  of  the  pandemic;  supply  delays  and  shortages  of  parts  and 
components  and  disruption  to  labour  supply  as  a  result  of  the  pandemic;  the  pandemic  will  likely  adversely  affect  operations  of 
customers and reduce and delay, for an unknown period, customers’ purchases of the Company’s products; the anticipated recovery 
of  the  Company’s  markets  in  the  future  may  be  delayed  or  increase  in  demand  may  be  lower  than  expected  as  a  result  of  the 
continuing  effects  of  the  pandemic;  the  Company’s  ability  to  obtain  access  to  additional  capital  if  required;  and  the  Company’s 
financial performance and condition, obligations, cash flow and liquidity and its ability to maintain compliance with the covenants 
under its credit facilities, which may also negatively impact the ability of the Company to pay dividends. There can be no assurance 
that  the  Company  will  be  able  to  maintain  sufficient  liquidity  for  an  extended  period,  obtain  future  satisfactory  covenant  relief 
under  its  credit  facilities,  if  required,  or  access  to  additional  capital  or  access  to  government  financial  support  or  as  to  when 
production operations will return to previous production rates. There is also no assurance that governments will provide continued or 
adequate  stimulus  funding  during  or  after  the  pandemic  for  public  transit  agencies  to  purchase  transit  vehicles  or  that  public  or 
private  demand  for  the  Company’s  vehicles  will  return  to  pre-pandemic  levels  in  the  anticipated  period  of  time.  The  Company 
cautions  that  due  to  the  dynamic,  fluid  and  highly  unpredictable  nature  of  the  pandemic  and  its  impact  on  global  and  local 

43 

NFI GROUP INC. 2020 REPORT 

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economies, businesses and individuals, it is impossible to predict the severity of the impact on the Company’s business, operating 
performance,  financial  condition  and  ability  to  generate  sufficient  cash  flow  and  maintain  adequate  liquidity  and  any  material 
adverse effects could very well be rapid, unexpected and may continue for an extended and unknown period of time. 

Factors relating to the Company's “NFI Forward” initiative include: the Company's ability to successfully execute the initiative and to 
generate the planned savings in the expected time frame or at all; management may have overestimated the amount of savings and 
production efficiencies that can be generated or may have underestimated the amount of costs to be expended; the implementation 
of  the  initiative  may  take  longer  than  planned  to  achieve  the  expected  savings;  further  restructuring  and  cost-cutting  may  be 
required in order to achieve the objectives of the initiative; the estimated amount of savings generated under the initiative may not 
be sufficient to achieve the planned benefits; combining business units and/or reducing the number of production or parts facilities 
may  not  achieve  the  efficiencies  anticipated;  and  the  impact  of  the  continuing  global  COVID-19  pandemic.  There  can  be  no 
assurance that the Company will be able to achieve the anticipated financial and operational benefits, cost savings or other benefits 
of the initiative.

Factors  relating  to  the  Company’s  January  11,  2021  financial  guidance  (the  "Guidance")  include  the  degree  to  which  actual  future 
events accord with, or vary from, the expectations of, and assumptions used by, NFI’s management in preparing the Guidance and 
the Company’s ability to successfully execute the “NFI Forward” initiative and to generate the planned savings in the expected time 
frame or at all. Although the Company has attempted to identify important factors that could cause actual actions, events or results 
to differ materially from those described in the Guidance, there may be other factors that could cause actions, events or results not 
to be as anticipated, estimated or intended. Specific reference is made to “Risk Factors” in the Annual Information Form ("AIF") for a 
discussion  of  the  factors  that  may  affect  forward-looking  statements  and  information.  Should  one  or  more  of  these  risks  or 
uncertainties materialize, or should any of the underlying assumptions used by the Company in preparing any of the forward-looking 
statements  and  information  contained  in  the  Guidance  prove  incorrect,  NFI’s  actual  results  may  vary  from  those  described  in  the 
Guidance and any such variations may be material. The forward-looking statements and information contained in the Guidance were 
made as of January 11, 2021 and the Company disclaims any intent or obligation to update any such forward-looking statements or 
information  except  as  required  by  law.  The  Company  provides  no  assurance  that  forward-looking  statements  and  information 
contained  in  the  Guidance  will  prove  to  be  accurate,  as  actual  results  and  future  events  could  differ  materially  from  those 
anticipated  in  such  statements.  Accordingly,  readers  should  not  place  undue  reliance  on  such  forward-looking  statements  and 
information.

Although  the  Company  has  attempted  to  identify  important  factors  that  could  cause  actual  actions,  events  or  results  to  differ 
materially  from  those  described  in  forward-looking  statements,  there  may  be  other  factors  that  could  cause  actions,  events  or 
results not to be as anticipated, estimated or intended. Specific reference is made to “Risk Factors” in the AIF for a discussion of the 
factors that may affect forward-looking statements and information. Should one or more of these risks or uncertainties materialize, 
or  should  underlying  assumptions  prove  incorrect,  actual  results  may  vary  materially  from  those  described  in  forward-looking 
statements and information. The forward-looking statements and information contained herein are made as of the date of this MD&A 
(or as otherwise indicated) and the Company disclaims any intent or obligation to update forward-looking statements or information 
except  as  required  by  law.  The  Company  provides  no  assurance  that  forward-looking  statements  and  information  will  prove  to  be 
accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers 
should not place undue reliance on forward-looking statements and information.

DEFINITIONS OF ADJUSTED EBITDA, ROIC, FREE CASH FLOW, ADJUSTED NET EARNINGS (LOSS), ADJUSTED EARNINGS (LOSS) PER 
SHARE, REGIONS INCLUDING: NORTH AMERICA, UK AND EUROPE, ASIA PACIFIC, AND OTHER

References  to  “Adjusted  EBITDA”  are  to  earnings  before  interest,  income  taxes,  depreciation  and  amortization  after  adjusting  for 
the effects of certain non-recurring and/or non-operations related items that do not reflect the current ongoing cash operations of 
the  Company.  These  adjustments  include  gains  or  losses  on  disposal  of  property,  plant  and  equipment,  fair  value  adjustment  for 
total  return  swap,  unrealized  foreign  exchange  losses  or  gains  on  non-current  monetary  items  and  forward  foreign  exchange 
contracts, costs associated with assessing strategic and corporate initiatives, past service costs and other pension costs or recovery, 
non-recurring  costs  or  recoveries  related  to  business  acquisition,  fair  value  adjustment  to  acquired  subsidiary  company's  inventory 
and deferred revenue, proportion of the total return swap realized, equity settled stock-based compensation, recovery of currency 
transactions, prior year sales tax provision, , COVID-19 costs and impairment loss on goodwill and non-recurring restructuring costs.

“Free  Cash  Flow”  means  net  cash  generated  by  or  used  in  operating  activities  adjusted  for  changes  in  non-cash  working  capital 
items, interest paid, interest expense, income taxes paid, current income tax expense, principal portion of finance lease payments, 
cash capital expenditures, proceeds from disposition of property, plant and equipment, costs associated with assessing strategic and 
corporate  initiatives,  fair  value  adjustment  to  acquired  subsidiary  company's  inventory  and  deferred  revenue,  defined  benefit 
funding, defined benefit expense, past service costs and other pension costs or recovery, proportion of total return swap, recovery 
on currency transactions, prior year sales tax provision, non-recurring restructuring costs, COVID-19 costs, foreign exchange gain or 
loss on cash held in foreign currency.  

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References to "ROIC" are to net operating profit after taxes (calculated as Adjusted EBITDA less depreciation of plant and equipment, 
depreciation  of  right-of-use  assets  and  income  taxes  at  a  rate  of  31%)  divided  by  average  invested  capital  for  the  last  12-month 
period (calculated as to shareholders’ equity plus long-term debt, obligations under leases, other long-term liabilities and derivative 
financial instrument liabilities less cash). 

References  to  "Adjusted  Net  Earnings  (Loss)"  are  to  net  earnings  (loss)  after  adjusting  for  the  after  tax  effects  of  certain  non-
recurring  and/or  non-operational  related  items  that  do  not  reflect  the  current  ongoing  cash  operations  of  the  Company  including: 
fair  value  adjustments  of  total  return  swap,  unrealized  foreign  exchange  loss  or  gain,  unrealized  gain  or  loss  on  the  interest  rate 
swap, impairment loss on goodwill, portion of the total return swap realized, costs associated with assessing strategic and corporate 
initiatives,  fair  value  adjustment  to  acquired  subsidiary  company's  inventory  and  deferred  revenue,  equity  settled  stock-based 
compensation,  gain  or  loss  on  disposal  of  property,  plant  and  equipment,  past  service  costs  and  other  pension  costs  or  recovery,  
recovery on currency transactions, prior year sales tax provision, COVID-19 costs and non-recurring restructuring costs . 

References  to  "Adjusted  Earnings  (Loss)  per  Share"  are  to  Adjusted  Net  Earnings  (Loss)  divided  by  the  average  number  of  Shares 
outstanding.

Management believes Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net Earnings (Loss) and Adjusted Earnings (Loss) per Share 
are useful measures in evaluating the performance of the Company. However, Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net 
Earnings (Loss) and Adjusted Earnings (Loss) per Share are not recognized earnings measures under IFRS and do not have standardized 
meanings  prescribed  by  IFRS.  Readers  of  this  MD&A  are  cautioned  that  ROIC,  Adjusted  Net  Earnings  (Loss)  and  Adjusted  EBITDA 
should not be construed as an alternative to net earnings or loss or cash flows from operating activities determined in accordance 
with  IFRS  as  an  indicator  of  NFI’s  performance,  and  Free  Cash  Flow  should  not  be  construed  as  an  alternative  to  cash  flows  from 
operating,  investing  and  financing  activities  determined  in  accordance  with  IFRS  as  a  measure  of  liquidity  and  cash  flows.  A 
reconciliation  of  net  earnings  to  Adjusted  EBITDA,  based  on  the  Financial  Statements,  has  been  provided  under  the  headings 
“Reconciliation  of  Net  Earnings  (Loss)  to  Adjusted  EBITDA”.  A  reconciliation  of  Free  Cash  Flow  to  cash  flows  from  operations  is 
provided  under  the  heading  “Summary  of  Free  Cash  Flow”.  A  reconciliation  of  net  earnings  to  Adjusted  Net  Earnings  (Loss)  is 
provided under the heading “Reconciliation of Net Earnings (Loss) to Adjusted Net Earnings (Loss)”.

NFI's method of calculating Adjusted EBITDA, ROIC, Free Cash Flow, Adjusted Net Earnings (Loss) and Adjusted Earnings (Loss) per 
Share  may  differ  materially  from  the  methods  used  by  other  issuers  and,  accordingly,  may  not  be  comparable  to  similarly  titled 
measures used by other issuers. Dividends paid from Free Cash Flow are not assured, and the actual amount of dividends received by 
holders of Shares will depend on, among other things, the Company's financial performance, debt covenants and obligations, working 
capital requirements and future capital requirements, all of which are susceptible to a number of risks, as described in NFI’s public 
filings available on SEDAR at www.sedar.com.

References to NFI's geographic regions for the purpose of reporting global revenues are as follows: "North America" refers to Canada, 
United States, and Mexico; United Kingdom and Europe refer to the United Kingdom and Europe; "Asia Pacific" or "APAC" refers to 
Hong Kong, Malaysia, Singapore, Australia, and New Zealand; and the "Other" category includes any sales that do not fall  into the 
categories above.

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2020 Appendix B - 2020 Fourth Quarter Order Activity 

Demand for Transit Buses and Motor Coaches

The Company’s "Bid Universe" metric estimates active public competitions in Canada and the United States and attempts to provide 
an  overall  indication  of  anticipated  heavy-duty  transit  bus  and  motor  coach  public  sector  market  demand.    It  is  a  point-in-time 
snapshot of: (i) EUs in active competitions, defined as all requests for proposals received by the Company and in process of review 
plus  bids  submitted  by  the  Company  and  awaiting  customer  action,  and  (ii)  management’s  forecast,  based  on  data  provided  by 
operators for their fleet replacement plans, of expected EUs to be placed out for competition over the next five years. 

The  fourth  quarter  of  2020  saw  further  decline  in  the  Company's  Bid  Universe,  similar  to  the  decline  experienced  in  the  third 
quarter, after reaching record highs in the first half of 2020. The decrease in Active Bids, which were down by 35.2%, or 2,189 EUs, 
from 2020 Q3 reflects the release of awards that had been delayed during the first and second quarters of 2020 due to the ongoing 
COVID-19  pandemic.    Compared  to  the  same  period  in  2019,  Active  Bids  are  down  by  14.1%,  or  662  EUs,  primarily  driven  by  the 
release of significant awards during the fourth quarter and the delay of certain procurements into the first half of 2021.

The  forecasted  five-year  industry  procurement  was  up  5.5%,  or  1,066  EUs,  quarter-over-quarter,  providing  early  signs  of  recovery, 
but still down from record highs in the first half of 2020. These decreases in expected transit procurements are the direct result of 
pressures  facing  operators  and  agencies  due  to  the  COVID-19  pandemic.  Most  of  the  decline  was  seen  in  public  motor  coach. 
Management anticipates that forecasted five-year industry procurement will increase as transit agencies and operators learn more 
about and all are able to access the multi-billion funding programs being launched by governments in Canada and the US. 

The  Bid  Universe  EUs  fluctuate  significantly  from  quarter-to-quarter  based  on  public  tender  activity  procurement  and  award 
processes. 

2019 Q4

2020 Q1

2020 Q2

2020 Q3

2020 Q4

Bids in Process (EUs) Bids Submitted (EUs)

Active EUs

1,760

2,005

2,975

1,927

297

2,934

3,461

4,374

4,294

3,735

4,694

5,466

7,349

6,221

4,032

Forecasted Industry  
Procurement over 5 
Years (EUs)(1) 
22,954

23,770

22,089

19,280

20,346

Total Bid Universe 
(EUs)

27,648

29,236

29,438

25,501

24,378

(1) Management’s estimate of anticipated future industry procurement over the next five years is based on direct discussions with 
select U.S. and Canadian transit authorities. This estimate includes potential public customers activity for New Flyer and MCI 
vehicles, but excludes potential ARBOC and ADL U.S. and Canadian sales. 

Procurement of heavy-duty transit buses and motor coaches by the U.S. and Canadian public sector is typically accomplished through 
formal multi-year contracts and stock schedules, while procurement by the private sector, in North America, the UK and Europe and 
Asia Pacific is typically made on a transactional basis.  As a result, the Company does not maintain a Bid Universe for private sector 
buses and coaches. 

The sale of cutaway and medium-duty buses manufactured by ARBOC is accomplished on a transactional purchase order basis through 
non-exclusive third-party dealers who hold contracts directly with the customers.  Bids are submitted by and agreements are held 
with a network of dealers. Cutaway and medium-duty bus activity therefore is not included in the Bid Universe metric.

ADL does not currently have a Bid Universe metric for the UK and European or Asia Pacific markets similar to New Flyer and MCI's 
North American Bid Universe. Management does not believe a similar Bid Universe metric for those markets is suitable given that the 
majority of customers in those regions are private operators who make annual purchase decisions. The overall UK market declined 
from 2015 to 2019, and was expected to remain relatively flat in 2020 prior to the occurrence of the pandemic. The UK market was 
hit disproportionately hard by the COVID-19 pandemic, with bus patronage down by nearly 80% at its worst point in 2020, and overall 
deliveries down by 24%. We expect to see a slow recovery in 2021 due to customers' fleet recovery plans, a government focus on the 
green recovery, and an aging vehicle fleet. In Asia Pacific, the Hong Kong market is highly cyclical, and, following busier periods in 
2015  through  2018,  the  market  has  declined  as  expected.  As  in  other  regions,  Hong  Kong  was  also  impacted  by  the  COVID-19 
pandemic,  but  ADL  remains  the  leader  in  double-deck  buses  and  retains  deep  customer  relationships  in  Hong  Kong.  Management 
expects  the  market  to  see  stable  annual  deliveries  and  a  slow  recovery  through  2021.  New  Zealand  and  Singapore  remain  cyclical 
markets;  both  markets  saw  increased  activity  in  2017,  2018  and  2019,  but  were  also  impacted  by  the  COVID-19  pandemic,  with 
expectations for recovery in 2021. 

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Order activity

New orders (firm and options) during 2020 Q4 totaled 998 EUs, a decrease of 13.9% from 2019 Q4 and an increase of 45.9% from 2020 
Q3. The new firm and option orders awarded to the Company for Fiscal 2020 were 3,519 EUs, a decrease of 1.6% from Fiscal 2019. 
The Company was also successful at converting 171 EUs of options during 2020 Q4 to firm orders, a decrease of 79.0% from 2019 Q4 
and a decrease of 29.3% from 2020 Q3. These conversions contributed to the 953 EUs of options converted to firm orders during 2020 
Q4, a decline of 37.2% from 2019 Q4.  

New Orders 
in Quarter 
(Firm and  

Option EUs)

1,159   
1,346   
491   
684   
998   

LTM New Orders  
(Firm and  

Option EUs)

Option  
Conversions in  
Quarter (EUs)

3,577   
4,014   
4,031   
3,680   
3,519   

813   
139   
401   
242   
171   

LTM Option  

Conversions (EUs)
1,518 
1,531 
1,582 
1,595 
953 

2019 Q4
2020 Q1
2020 Q2
2020 Q3
2020 Q4

Options

In 2020 Q4, 120 option EUs expired, compared to 159 option EUs that expired during 2019 Q4 and 427 EUs that expired in 2020 Q3. 

A significant number of public transit contracts in the U.S. and Canada have a term of five years. In addition, some contracts in the 
UK and APAC also have multi-year terms. The table below shows the number of option EUs that have either expired or have been 
exercised annually over the past five years, as well as the current backlog of options that will expire each year if not exercised.

2014 2015 2016 2017 2018

2019 2020 2021 2022 2023 2024

Total 

A) Options Expired (EUs)

965

504

550

331

741

512 1,202

B) Options Exercised (EUs)

1,149 1,339 2,064 1,404

1,795 1,518

953

4,805

10,222

C) Current Options by year of expiry 
(EUs)

1,497 2,038

614

222

4,371

D) Conversion rate % = B / (A+B)

 54 %  73 %  79 %  81 %

 71 %  75 %  44 %

The Company's conversion rate can vary significantly from quarter-to-quarter and should be looked at on an annual or LTM basis. 

In addition to contracts for identified public customers, the Company has focused on state procurements and cooperative purchasing 
agreements,  with  the  objective  of  having  available  schedules  from  which  customers  within  a  prescribed  region  or  defined  list  can 
purchase. The Company has successfully bid and been named on several state contracts. These contracts, however, are not recorded 
in backlog as they do not have defined quantities allocated to the Company or any other original equipment manufacturer. Once a 
customer purchases a bus under one of these agreements, the purchase is recorded as a firm order. 

The Company's Fiscal 2020 Book-to-Bill ratio (defined as new firm orders and exercised options divided by new deliveries) was 81.7%, 
a decrease of 3.5% from 85.2% for Fiscal 2019.   

In addition, 247 EUs of new firm and option orders were pending from customers at the end of 2020 Q4, where approval of the award 
to the Company had been made by the customer’s board, council, or commission, as applicable, but purchase documentation had not 
yet been received by the Company and therefore not yet included in the backlog.

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Backlog

The Company's total backlog consists of buses sold primarily to U.S. and Canadian public customers and private operators in the UK 
and Europe.  The majority of the backlog relates to New Flyer transit buses for public clients with some of the backlog consisting of 
units from MCI, ADL and ARBOC.  Options for ARBOC vehicles are held by dealers, rather than the operator, and are not included as 
options are in the NFI backlog, but are converted to firm backlog when vehicles are ordered by the dealer.  

Transit  buses  and  motor  coaches  incorporating  clean  propulsion  systems,  including  compressed  natural  gas,  diesel-electric  hybrid, 
and ZEBs, which consist of trolley-electric, fuel cell-electric, and battery-electric buses represent approximately 34.5% of the total 
backlog. ZEBs represent approximately 5.8% of total backlog.

2020 Q4

2020 Q3

2019 Q4

Firm 

Firm 

Firm 

Orders Options

Total

Orders Options

Total

Orders Options

Total

Beginning of period

3,662   

5,220    8,882 

4,400   

5,604    10,004 

4,313   

7,281    11,594 

New orders

Options exercised

Shipments(1)

Cancelled/expired

End of period

Consisting of:

663   

335   

998 

399   

285   

684 

950   

209   

1,159 

171   

(171)   

— 

242   

(242)   

— 

813   

(813)   

— 

(1,230)   

—    (1,230)   

(1,317)   

—   

(1,317)   

(1,844)   

—   

(1,844) 

(26)   

(120)   

(146)   

(62)   

(427)   

(489)   

(8)   

(159)   

(167) 

  3,240    5,264    8,504 

  3,662    5,220    8,882 

  4,224    6,518    10,742 

Heavy-duty transit buses

2,271   

4,730    7,001 

2,519   

4,640   

7,159 

3,236   

5,722   

8,958 

Motor coaches

621   

534    1,155 

805   

580   

1,385 

615   

796   

1,411 

Cutaway and medium-duty buses

348   

—   

348 

338   

—   

338 

373   

—   

373 

Total Backlog

  3,240    5,264    8,504 

  3,662    5,220    8,882 

  4,224    6,518    10,742 

(1) Shipments do not include delivery of pre-owned coaches as these coaches are not included in the backlog.

At the end of 2020 Q4, the Company's total backlog (firm and options) of 8,504 EUs (valued at $4.3 billion) has decreased compared 
to 8,882 EUs (valued at $4.5 billion) at the end of 2020 Q3. The decrease was driven by deliveries in the quarter, cancellations and 
delays in new awards within North American and UK transit operations. The summary of the values is provided below.

2020 Q4

2020 Q3

2019 Q4

Equivalent 
Units

Equivalent 
Units

Total firm orders

Total options

$ 

1,631.5   

3,240  $ 

1,788.5   

3,662  $ 

1,928.8   

2,706.3   

5,264 

2,703.1   

5,220 

3,245.1   

Equivalent 
Units

4,224 

6,518 

Total backlog

$ 

4,337.8   

8,504  $ 

4,491.6   

8,882  $ 

5,173.9   

10,742 

48 

NFI GROUP INC. 2020 REPORT 

www.nfigroup.com

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Financial Statements of
NFI GROUP INC. 

December 27, 2020 

TABLE OF CONTENTS

Consolidated Statements of Net Earnings (Loss) and Total Comprehensive Income (Loss)

Consolidated Statements of Financial Position

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Page

5

6

7

8

9 - 39

Deloitte LLP 
360 Main Street 
Suite 2300 
Winnipeg MB  R3C 3Z3 
Canada 

Tel: 204-942-0051 
Fax: 204-947-9390 
www.deloitte.ca 

Independent Auditor’s Report 

To the Shareholders of NFI Group Inc. 

Opinion 
We have audited the consolidated financial statements of NFI Group Inc. (the “Company”), which comprise 
the consolidated statements of financial position as at December 27, 2020 and December 29, 2019, and 
the consolidated statements of net earnings (loss) and total comprehensive income (loss), changes in 
equity and cash flows for the years then ended, and notes to the consolidated financial statements, 
including a summary of significant accounting policies (collectively referred to as the “financial 
statements”). 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial 
position of the Company as at December 27, 2020 and December 29, 2019, and its financial performance 
and its cash flows for the years then ended in accordance with International Financial Reporting Standards 
(“IFRS”). 

Basis for Opinion 
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian 
GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities 
for the Audit of the Financial Statements section of our report. We are independent of the Company in 
accordance with the ethical requirements that are relevant to our audit of the financial statements in 
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We 
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 
opinion. 

Key Audit Matters 
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of 
the consolidated financial statements for the year ended December 27, 2020. This matter was addressed 
in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion 
thereon, and we do not provide a separate opinion on this matter. 

Goodwill – Motor Coach Manufacturing CGU (pre-restructuring), ADL Aftermarket Parts CGU, 
ADL Manufacturing CGU — Refer to Notes 2.14, 2.15, 2.22 and 7 of the financial statements 

Key Audit Matter Description 

The Company’s evaluation of goodwill for impairment involves the comparison of the recoverable amount 
of each cash generating units (“CGU”) to their carrying value. The Company used the discounted cash flow 
model to estimate the value-in-use of each CGU. This requires management to make significant estimates 
and assumptions including those with respect to future cash inflows and outflows, growth rates and 
discount rates. Changes in these assumptions could have a significant impact on either the recoverable 
amount, the amount of any goodwill impairment charge, or both. During the first quarter of 2020, the 
carrying amount of the motor coach manufacturing CGU exceeded its recoverable amount which resulted 
in an impairment charge of $50.8 million to goodwill.  At the evaluation date, the recoverable amounts of 
the CGUs exceeded their carrying amounts and no other impairments 

1 

 
 
 
 
 
 
Specifically, due to the impact of COVID-19 on the motor coach manufacturing CGU operations and the 
resulting change in short term demand in the private coach market, and the sensitivity of the ADL 
manufacturing and ADL aftermarket parts operations due to short term changes in demand, we have 
identified the goodwill impairment analysis as a key audit matter for the following CGUs (collectively 
“identified CGUs”): 

We have identified the goodwill impairment analysis as a key audit matter for the following CGUs:  

•  Motor coach manufacturing, prior to the Company's restructuring and combination with the bus 

manufacturing CGU in the third quarter of 2020  
ADL Manufacturing 
ADL Manufacturing Parts 

• 
• 

While there are several key assumptions that are required to estimate the recoverable amount of the 
identified CGUs, the assumptions with the highest degree of subjectivity and impact on the recoverable 
amounts are related to the determination of the discount rates, forecasts of future revenues, revenue 
growth rates, and operating margins. This required a high degree of significant auditor attention as these 
estimates are subject to estimation uncertainty. Auditing these estimates and assumptions required a high 
degree of subjectivity in applying audit procedures and in evaluating the results of those procedures.  This 
resulted in an increased extent of audit effort including the involvement of fair value specialists.  

How the Key Audit Matter Was Addressed in the Audit  

Our audit procedures related to the determination of the discount rates, forecasts of future revenues, 
revenue growth rates and operating margins used to estimate the recoverable amount of the identified 
CGU’s included the following, among others: 

• 

• 

Evaluated management’s ability to accurately forecast future revenues, revenue growth rates and 
operating margins by comparing actual results to management’s historical forecasts.  
Evaluated the reasonableness of the forecast of future revenues, revenue growth rates and 
operating margins by comparing the forecasts to: 

o  Historical revenues and operating margins. 
o  Known changes in the Company’s operations and its industry, including the impact of the 

COVID-19 pandemic, which are expected to impact future operating performance; 
Internal reports including production and backlog; 
Internal communications to management and the Board of Directors; and  

o 
o 
o  Forecasted information included in the Company’s press releases as well as in analyst and 

industry reports for the Company and peer companies.  

•  With the assistance of fair value specialists, evaluated the reasonableness of the discount rates by 
testing the source information underlying the determination of the discount rates, developing a 
range of independent estimates and comparing those to the discount rates selected by 
management. 

Other Information 
Management is responsible for the other information. The other information comprises:  

●  Management’s Discussion and Analysis  

Our opinion on the financial statements does not cover the other information and we do not and will not 
express any form of assurance conclusion thereon. In connection with our audit of the financial 
statements, our responsibility is to read the other information identified above and, in doing so, consider 
whether the other information is materially inconsistent with the financial statements or our knowledge 
obtained in the audit, or otherwise appears to be materially misstated.

2 

 
 
 
 
 
 
 
 
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on 
the work we have performed on this other information, we conclude that there is a material misstatement 
of this other information, we are required to report that fact in this auditor’s report. We have nothing to 
report in this regard. 

Responsibilities of Management and Those Charged with Governance for the Financial 
Statements 
Management is responsible for the preparation and fair presentation of the financial statements in 
accordance with IFRS, and for such internal control as management determines is necessary to enable the 
preparation of financial statements that are free from material misstatement, whether due to fraud or 
error. 

In preparing the financial statements, management is responsible for assessing the Company’s ability to 
continue as a going concern, disclosing, as applicable, matters related to going concern and using the 
going concern basis of accounting unless management either intends to liquidate the Company or to cease 
operations, or has no realistic alternative but to do so. 

Those charged with governance are responsible for overseeing the Company’s financial reporting process. 

Auditor’s Responsibilities for the Audit of the Financial Statements 
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are 
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that 
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an 
audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it 
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the 
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the 
basis of these financial statements. 

As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain 
professional skepticism throughout the audit. We also: 

● 

Identify and assess the risks of material misstatement of the financial statements, whether due to 
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit 
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting 
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may 
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal 
control. 

●  Obtain an understanding of internal control relevant to the audit in order to design audit procedures 

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the 
effectiveness of the Company’s internal control.  

●  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting 

estimates and related disclosures made by management. 

●  Conclude on the appropriateness of management’s use of the going concern basis of accounting and, 
based on the audit evidence obtained, whether a material uncertainty exists related to events or 
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If 
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to 
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our 
auditor’s report. However, future events or conditions may cause the Company to cease to continue as 
a going concern.

3 

 
●  Evaluate the overall presentation, structure and content of the financial statements, including the 

disclosures, and whether the financial statements represent the underlying transactions and events in 
a manner that achieves fair presentation. 

●  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or 

business activities within the Company to express an opinion on the financial statements. We are 
responsible for the direction, supervision and performance of the group audit. We remain solely 
responsible for our audit opinion. 

We communicate with those charged with governance regarding, among other matters, the planned scope 
and timing of the audit and significant audit findings, including any significant deficiencies in internal 
control that we identify during our audit. 

We also provide those charged with governance with a statement that we have complied with relevant 
ethical requirements regarding independence, and to communicate with them all relationships and other 
matters that may reasonably be thought to bear on our independence, and where applicable, related 
safeguards. 

From the matters communicated with those charged with governance, we determine those matters that 
were of most significance in the audit of the consolidated financial statements of the current period and 
are therefore the key audit matters. We describe these matters in our auditor's report unless law or 
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we 
determine that a matter should not be communicated in our report because the adverse consequences of 
doing so would reasonably be expected to outweigh the public interest benefits of such communication. 

The engagement partner on the audit resulting in this independent auditor’s report is Michael Boucher. 

/s/ Deloitte LLP  

Chartered Professional Accountants 
Winnipeg, Manitoba 
March 3, 2021 

4 

 
NFI GROUP INC. 
CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) AND TOTAL COMPREHENSIVE INCOME (LOSS)  
52-Weeks ended December 27, 2020 ("Fiscal 2020") and 52-Weeks ended December 29, 2019 ("Fiscal 2019")
(in thousands of U.S. dollars except per share figures)

Fiscal 2020

Fiscal 2019

$ 

2,419,175  $ 

2,893,436 

2,219,920   

2,479,954 

199,255   

231,303   

(1,509)   

50,790   

413,482 

241,454 

(1,036) 

— 

(81,329)   

173,064 

56   

9,050   

46 

(60) 

(72,223) 

173,050

48,717   

39,127 

4,354   

7,352   

5,766   

17,680   

83,869

(156,092) 

26,580   

(24,936)   

1,644  

829 

7,211 

4,208 

21,980 

73,355

99,695

61,339 

(19,342) 

41,997 

57,698 

(4,390)

11,865 

65,173 

0.93 

0.93 

Revenue (note 22)

Cost of sales (note 4)

Gross profit

Sales, general and administration costs and other operating expenses

Foreign exchange gain

Impairment loss on goodwill (note 7)

(Loss) earnings from operations

Gain on disposition of property, plant and equipment

Unrealized foreign exchange gain (loss) on non-current monetary items

(Loss) earnings before interest and income taxes

Interest and finance costs

Interest on long-term debt

Accretion in carrying value of long-term debt (note 16)

Interest expense on lease liability

Other interest and bank charges

Fair market value loss on interest rate swap

(Loss) earnings before income tax expense

Income tax expense (note 15)

Current income taxes 

Deferred income taxes recovered

Net (loss) earnings for the period

$ 

(157,736)  $ 

Other comprehensive income (loss)

Actuarial loss on defined benefit pension plan - this item will not be reclassified subsequently to 
profit or loss

Unrealized foreign exchange gain on translation of foreign operations

Total comprehensive (loss) income for the period

Net (loss) earnings per share (basic) (note 18)

Net (loss) earnings per share (diluted) (note 18)

The accompanying notes are an integral part of the audited consolidated financial statements.

(9,206) 

7,324   

(159,618)   

(2.52)  $ 

(2.52)  $ 

$ 

$ 

$ 

5 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  
As at December 27, 2020 
(in thousands of U.S. dollars)

Assets

Current

Cash

Accounts receivable (note 3, 21c)

Inventories (note 4)

Income tax receivable

Derivative financial instruments (note 21 b,c)

Prepaid expenses and deposits

Property, plant and equipment (note 5, 22)

Right-of-use asset (note 6)

Goodwill and intangible assets  (note 7)

Accrued benefit asset (note 10)

Other long-term assets (note 8)

Liabilities

Current

Accounts payable and accrued liabilities

Derivative financial instruments (note 21 b,c)

Current portion of long-term liabilities (note 9)

Accrued benefit liability (note 10)

Obligations under leases (note 6)

Deferred compensation obligation (note 11)

Deferred revenue (note 13)

Provisions (note 14)

Deferred tax liabilities (note 15)

Derivative financial instruments (note 21 b,c)

Long-term debt (note 16)

Commitments and contingencies (note 24)

Shareholders' equity

Share capital (note 17)

Stock option and restricted share unit reserve (note 12)

Accumulated other comprehensive (loss) income

Retained (deficit) earnings

December 27, 2020

December 29, 2019

$ 

55,769  $ 

426,408   

657,036   

18,759   

4,490   

13,308   

1,175,770   

232,150   

133,373   

1,177,381   

319   

36,922   

28,233 

531,736 

672,243 

17,375 

— 

10,094 

1,259,681 

268,748 

153,323 

1,250,518 

3,879 

19,612 

$ 

$ 

$ 

$ 

$ 

2,755,915  $ 

2,955,761 

523,461  $ 

1,078   

148,610   

673,149   

21,061   

130,674   

3,234   

15,608   

56,605   

76,689   

33,069   

581,612 

4,651 

144,524 

730,787 

11,916 

143,999 

2,790 

13,354 

62,180 

105,023 

15,388 

1,125,685   

2,135,774  $ 

1,053,126 

2,138,563 

681,405   

8,400   

(1,113)   

(68,551)   

620,141  $ 

680,962 

6,828 

769 

128,639 

817,198 

2,755,915  $ 

2,955,761 

The accompanying notes are an integral part of the audited consolidated financial statements. 

6 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 
For the period ended December 27, 2020 
(in thousands of U.S. dollars)

Stock Option 
and Restricted 
Share Unit 
Reserve

Share Capital

Accumulated 
Other 
Comprehensive 

(Loss) Income Treasury shares

Retained 
(Deficit) 
Earnings 

Total 
Shareholders’ 
Equity

Balance, December 30, 2018

$ 

654,307  $ 

5,796  $ 

(6,706)  $ 

(8,835)  $ 

152,925  $ 

797,487 

Net earnings

Other comprehensive income

Dividends declared on common shares

—   

—   

—   

Repurchase and cancellation of common shares 

(10,451)   

Change in share purchase commitment

Share-based compensation, net of deferred 
income taxes

Shares issued

—   

—   

37,106   

—   

—   

—   

—   

—   

1,515   

(483)   

—   

7,475   

—   

—   

—   

—   

—   

—   

—   

—   

—   

8,835   

—   

—   

57,698   

—   

(79,950)   

(2,034)   

—   

—   

—   

57,698 

7,475 

(79,950) 

(12,485) 

8,835 

1,515 

36,623 

Balance, December 29, 2019

$ 

680,962  $ 

6,828  $ 

769  $ 

—  $ 

128,639  $ 

817,198 

Net loss

Other comprehensive loss

Dividends declared on common shares

Share-based compensation, net of deferred 
income taxes

Shares issued

—   

—   

—   

—   

443   

—   

—   

—   

1,931   

(359)   

—   

(1,882)   

—   

—   

—   

—  $ 

(157,736)   

(157,736) 

—   

—   

—   

—   

—   

(1,882) 

(39,454)   

(39,454) 

—   

—   

1,931 

84 

Balance, December 27, 2020

$ 

681,405  $ 

8,400  $ 

(1,113)  $ 

—  $ 

(68,551)  $ 

620,141 

The accompanying notes are an integral part of the audited consolidated financial statements.

7 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
For the period ended December 27, 2020
(in thousands of U.S. dollars)

Operating activities

Net (loss) earnings for the period

Income tax expense

Depreciation of plant and equipment

Amortization of intangible assets

Share-based compensation

Interest and finance costs recognized in profit or loss

Fair value adjustment for total return swap

Unrealized foreign exchange (gain) loss on non-current monetary items

Foreign exchange (gain) loss on cash held in foreign currency

Impairment loss on goodwill

Gain on disposition of property, plant and equipment

Impairment loss on property, plant and equipment

Impairment loss on right-of-use asset

Defined benefit expense 

Defined benefit funding 

Cash generated by operating activities before non-cash working capital items and interest and income 

taxes paid

Changes in non-cash working capital items (note 19)

Cash generated from operating activities before interest and income taxes paid

Interest paid

Income taxes paid

Net cash generated by operating activities

Financing activities

Debt issue costs

Repayment of obligations under lease

Proceeds from long-term debt

Share issuance

Repurchase of shares

Dividends paid

Net cash (used by) generated from financing activities

Investing activities

Acquisition of intangible assets

Proceeds from disposition of property, plant and equipment

Investment in long-term restricted deposits

Net cash used in acquisitions 

Acquisition of property, plant and equipment

Net cash used in investing activities

Effect of foreign exchange rate on cash

Increase in cash
Cash —  beginning of period
Cash —  end of period

The accompanying notes are an integral part of the audited consolidated financial statements.

8 

NFI GROUP INC 2020 ANNUAL REPORT

Fiscal 2020

Fiscal 2019

$ 

(157,736)  $ 

57,698 

1,644 

70,333

40,451

1,770   

83,869 

118   

(9,050)   

11   

50,790   

(56)   

1,758   

3,597   

5,307

(5,507)   

41,997

61,985

42,585

1,566 

73,355

949 

60 

(83) 

— 

(46) 

— 

— 

5,849

(8,140) 

87,299  

277,775 

68,762   

(91,324) 

156,061

186,451

(63,307)   

(26,693)   

66,061   

(3,931)   

(18,887)   

72,136   

84   

—   

(49,439)   

(37)

(47,676) 

(40,167) 

98,608 

(1,636) 

(12,456) 

357,516 

36,690 

(5,682) 

(76,421) 

298,011

(29)   

2,765   

(38) 

174 

(15,510)   

(14,490) 

—   

(327,360) 

(25,703)   

(37,575) 

(38,477)   

(379,289) 

(11)   

27,536   

28,233   

$ 

55,769  $ 

83 

17,413 

10,820 

28,233 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

1.  CORPORATE INFORMATION

NFI Group Inc. (“NFI” or the “Company”) was incorporated on June 16, 2005 as New Flyer Industries Inc. under the laws of the Province 
of Ontario.  The name of the Company was changed to "NFI Group Inc." on May 14, 2018 to better reflect the multi-platform nature of 
the Company's business.  NFI is a leading independent global bus manufacturer providing a comprehensive suite of mass transportation 
solutions under brands: New Flyer® (heavy-duty transit buses), Alexander Dennis Limited (single and double-deck buses), Plaxton (motor 
coaches),  MCI®  (motor  coaches),  ARBOC®  (low-floor  cutaway  and  medium-duty  buses)  and  NFI  Parts™  (aftermarket  parts  sales).  The 
Company’s common shares (the “Shares”) are listed on the Toronto Stock Exchange (“TSX”) under the symbol “NFI”.  

These audited consolidated financial statements (the "Statements") were approved by the Company's board of directors (the "Board") on 
March 3, 2021.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  principal  accounting  policies  applied  in  the  preparation  of  these  Statements  are  set  out  below.    These  policies  have  been 
consistently applied to all periods presented, unless otherwise stated.

2.1 Basis of preparation

The Statements were prepared on a going concern basis in accordance with International Financial Reporting Standards (“IFRS”) which 
require management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported 
amounts of assets and liabilities, revenue and expenses. Actual results may differ from these estimates. 

2.2 Principles of consolidation

The Statements include the accounts of the Company's subsidiaries. 

Subsidiaries

Subsidiaries  are  entities  over  which  the  Company  has  control,  where  control  is  achieved  when  the  Company:  has  power  over  the 
investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to 
affect its returns. The Company holds 100% of the voting rights in, and therefore controls, its subsidiaries.

The effects of potential voting rights that are currently exercisable are considered when assessing whether control exists. Subsidiaries 
are fully consolidated from the date control is transferred to the Company, and are de-consolidated from the date control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries as follows:

• 

• 

• 

• 

cost is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of 
exchange, and business acquisition related expenses are expensed as incurred;

identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date;

the excess of acquisition cost over the fair value of the identifiable net assets acquired is recorded as goodwill; and

if the acquisition cost is less than the fair value of the net assets acquired, the fair value of the net assets is reassessed and any 
remaining difference is recognized directly in the consolidated statements of net earnings and comprehensive income.

Inter-company transactions between subsidiaries are eliminated on consolidation.

2.3  New and amended standards adopted by the Company

IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20")

The  Company  recognizes  government  grants  when  there  is  reasonable  assurance  that  it  will  comply  with  the  conditions  attached  to 
them and that the grants will be received. Government grants are recognized in the consolidated statement of net earnings (loss) and 
total comprehensive income (loss) over the periods in which the Company recognizes as expenses the related costs for which the grants 
are intended to compensate. Grants related to income are deducted in reporting the related expense.

2.4  Reportable Segments

The  Company’s  reportable  segments  are  organized  around  the  markets  it  serves  and  are  reported  in  a  manner  consistent  with  the 
internal reporting provided to the chief operating decision-maker (“CODM”). The President and Chief Executive Officer of the Company 
has authority for resource allocation and assessment of the Company’s performance and therefore acts as the CODM.

9 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.5 Foreign currency

The  Company  operates  with  multiple  functional  currencies.  The  Company’s  consolidated  financial  statements  are  presented  in  U.S. 
dollars as this presentation is most meaningful to financial statement users. References to “$” are to U.S. dollars, references to “C$” 
are  to  Canadian  dollars,  references  to  "£"  are  to  British  pounds  sterling.  For  those  subsidiaries  with  different  functional  currencies, 
exchange  rate  differences  arising  from  the  translation  of  items  that  form  part  of  the  net  investment  in  the  foreign  operation  are 
recorded in unrealized foreign exchange gains (losses) on translation of foreign operations in other comprehensive income.

Monetary  balances  denominated  in  a  currency  other  than  U.S.  dollars  are  translated  at  the  period  end  rates  of  exchange,  and  the 
results  of  the  operations  are  translated  at  average  rates  of  exchange  for  the  period.  Non-monetary  balances  are  translated  at  the 
exchange rate prevailing at the date of the transaction.

Foreign  exchange  gains  and  losses  that  relate  to  borrowings,  non-current  monetary  items  and  non-current  forward  foreign  exchange 
contracts  are  presented  in  the  consolidated  statements  of  net  earning  (loss)  and  comprehensive  income  (loss)  within  “unrealized 
foreign exchange loss (gain) on non-current monetary items”.

All  other  foreign  exchange  gains  and  losses  are  presented  in  the  consolidated  statements  of  net  earnings  (loss)  and  comprehensive 
income (loss) within “foreign exchange gain”.

2.6 Revenue recognition

Manufacturing Operations

Persuasive  evidence  of  an  arrangement  exists  in  the  form  of  a  written  contract.    A  process  is  in  place  that  initiates  a  pre-shipment 
acceptance  by  the  customer  at  the  Company’s  plant.    This  acceptance  prior  to  shipment  mitigates  the  likelihood  of  customer’s 
dissatisfaction with the final product upon delivery to the customer. Revenue is recorded when the vehicle is delivered or shipped.  The 
customer does not have a legal right to return the delivered products after the acceptance period, or deviate from the agreed upon 
price. The Company’s contract clearly identifies a fixed and determinable price.

In connection with its sales of new coaches, the Company at times agrees to accept a pre-owned coach in exchange and gives the buyer 
a credit equal to the pre-owned coach's then-current fair value. Any credit provided to the customer in excess of the fair value of the 
pre-owned coach is deducted from the selling price of the new coach. 

Operating  lease  revenue  is  recorded  on  a  straight-line  basis  in  the  period  earned  over  the  life  of  the  contract  and  is  recognized  in 
revenue in the consolidated statements of net earnings (loss) and comprehensive income (loss) due to its operating nature. 

When  a  single  sale  transaction  requires  the  delivery  of  more  than  one  product  or  service  (multiple  performance  obligations),  the 
revenue recognition criteria are applied to the separately identifiable performance obligations. A performance obligation is considered 
to be separately identifiable if the product or service delivered has stand-alone value to that customer and the fair value associated 
with  the  product  or  service  can  be  measured  reliably.  The  amount  recognized  as  revenue  for  each  performance  obligation  is  its  fair 
value in relation to the fair value of the contract as a whole.  Management has determined that the standard base warranty included in 
the bus or coach purchase is not a separate performance obligation and therefore recognized upon delivery of the vehicle. 

The  Company  sells  extended  warranty  contracts  that  provide  coverage  in  addition  to  the  basic  coverage.  Proceeds  from  the  sale  of 
these  contracts  are  deferred  and  amortized  into  revenue  over  the  extended  warranty  period  commencing  at  the  end  of  the  basic 
warranty  period.    The  Company  also  receives  proceeds  from  the  sale  of  extended  warranties  relating  to  major  subsystems  such  as 
engines,  transmissions,  axles  and  air  conditioning  that  are  purchased  for  the  customer  from  the  original  equipment  manufacturer 
(“OEM”). The related cost to purchase the OEM warranty contracts have been recorded as a reduction of revenue as the Company is an 
agent to the transaction.

The Company, from time-to-time, may enter into arrangements with customers where the customer has requested that the Company 
defer  shipping  a  vehicle  and  instead  hold  it  for  a  specified  period  until  the  customer  is  able  to  take  possession.  The  Company 
recognizes  revenue  for  bill  and  hold  arrangements  when  the  arrangement  is  substantive,  the  product  is  identified  separately  as 
belonging to the customer and ready for physical transfer to the customer, and the Company cannot use the product or allocate it to 
another customer.

The Company does not recognize revenue on any bus or coach firm or option orders that have not yet been delivered except on bill and 
hold arrangements.  

10 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Infrastructure SolutionsTM division supplies, installs and commissions electric vehicle chargers, and constructs the related charging 
infrastructure.  Revenues  related  to  the  supply,  installation  and  commissioning  of  electric  vehicle  chargers  are  recognized  once  the 
chargers pass final customer acceptance testing. Revenues related to construction of charging infrastructure are recognized over time 
using the cost-to-cost input method. The cost-to-cost method measures the Company's progress toward completion based on the total 
costs incurred relative to the total estimated contract costs.

Aftermarket Operations

Persuasive  evidence  of  an  arrangement  exists  in  the  form  of  an  authorized  sales  order.    The  customer  is  invoiced,  and  revenue  is 
recorded  at  the  time  the  part  is  delivered  using  a  commercial  shipper.  The  price  list  for  parts  clearly  identifies  a  fixed  and 
determinable  price,  while  also  describing  that  the  Company  has  no  legal  obligation  to  accept  the  return  of  goods  other  than  on 
defective  and/or  warrantable  parts  product.  Aftermarket  parts  revenue  does  not  contain  any  revenue  related  to  the  bus  or  coach 
warranty.

2.7  Employee benefits

For defined benefit pension plans and other post-employment benefits, the net periodic pension expense is actuarially determined by 
independent actuaries using the projected unit credit method. Actuarial remeasurement is comprised of actuarial gains and losses, the 
effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), and is reflected immediately 
in the statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they 
occur. Remeasurement recognized in other comprehensive income is reflected immediately in accumulated other comprehensive loss 
and will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net 
interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined 
benefit  costs  are  comprised  of  service  costs  (including  current  service  cost,  past  service  cost  and  gain  or  losses  on  curtailments  and 
settlements), net interest expense or income and remeasurement.

The  asset  or  liability  recognized  in  the  consolidated  statements  of  financial  position  is  the  present  value  of  the  defined  benefit 
obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for past service costs. The 
present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of 
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity 
approximating the terms of the related pension liability. For funded plans, surpluses are recognized only to the extent that the surplus 
is  considered  recoverable.  Recoverability  is  primarily  based  on  the  extent  to  which  the  Company  can  unilaterally  reduce  future 
contributions to the plan.

Payments to defined contribution plans are expensed as incurred, which is as the related employee service is rendered. 

2.8  Share-based compensation plans 

The  Company  operates  cash-settled  and  equity-settled  share-based  compensation  plans  under  which  it  receives  services  from  senior 
management and non-employee members of the Board.

For  the  cash-settled  plans  (note  11),  the  expense  is  determined  based  on  the  fair  value  of  the  liability  at  the  end  of  the  reporting 
period  until  the  awards  are  settled.  Certain  share-based  compensation  plans  include  non-market  performance  conditions.  The 
Company`s accounting policy is to recognize the impact of non-market performance conditions by adjusting the number of awards that 
are  expected  to  vest.  At  the  end  of  each  reporting  period,  the  Company  re-assesses  its  estimates  of  the  number  of  awards  that  are 
expected to vest and recognizes the impact of the revisions on compensation expense (note 23) in the consolidated statements of net 
earnings (loss) and comprehensive income (loss). 

For  the  equity-settled  plans  (note  12),  share-based  payments  to  senior  management  are  measured  at  the  fair  value  of  the  equity 
instruments at the grant date. The fair value is measured at grant date and each tranche is recognized on a graded-vesting basis over 
the  period  in  which  the  options  vest.  The  offset  to  the  recorded  cost  is  the  stock  option  reserve.    Consideration  received  on  the 
exercise of stock options is recorded as share capital and the related stock option reserve is transferred to share capital. Upon expiry, 
the recorded value is transferred to retained earnings. At the end of each reporting period, the Company revises its estimate of the 
number  of  equity  instruments  expected  to  vest.  The  impact  of  the  revision  of  the  original  estimates,  if  any,  is  recognized  in  the 
consolidated statements of net earnings (loss) and comprehensive income (loss) such that the cumulative expense reflects the revised 
estimate, with a corresponding adjustment to the stock option reserve.  Where the terms and conditions of options are modified, the 
increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated 
statements of net earnings (loss) and comprehensive income (loss).

2.9  Cash 

Cash and cash equivalents comprise cash on hand, demand deposits and investments with an original maturity at the date of purchase 
of three months or less.

11 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.10  Accounts receivables

Accounts  receivables  are  amounts  due  from  customers  from  the  rendering  of  services  or  sale  of  goods  in  the  ordinary  course  of 
business.  Accounts  receivables  are  classified  as  current  assets  if  payment  is  due  within  one  year  or  less.  Accounts  receivables  are 
recognized initially at fair value and subsequently measured at amortized cost, less impairment, if any.

The Company maintains an allowance for doubtful accounts and sales adjustments to provide for impairment of trade receivables. The 
expense relating to doubtful accounts is included within “Sales, general and administration costs and other operating expenses” in the 
consolidated statements of net earnings (loss) and comprehensive income (loss). 

2.11 

 Inventories

Inventories  are  measured  at  the  lower  of  cost  and  net  realizable  value.  The  cost  of  inventories  is  based  on  the  first-in  first-out 
principle, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in 
bringing them to their existing location and condition. In the case of finished goods inventories and work in progress, cost includes an 
appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in 
the ordinary course of business, less the estimated costs of completion and selling expenses.

2.12 Property, plant and equipment

Property,  plant  and  equipment  are  recorded  at  cost  reduced  by  applicable  investment  tax  credits,  less  accumulated  depreciation. 
Depreciation is calculated at the following annual rates:

Building and building improvements

Machinery and equipment

Demo buses and coaches

Computer hardware and software

Office equipment

Buses and coaches available for lease

4% declining‑balance basis
25% declining‑balance basis
20% - 50% straight-line basis

30% declining‑balance basis
20% declining‑balance basis
20% - 50% straight-line basis

Property, plant and equipment are tested for impairment as described under “Impairment of non-financial assets” in note 2.15.

2.13 Intangible assets

Identifiable  intangible  assets  are  initially  recorded  at  fair  value.  Based  on  management’s  forecasts  and  business  plans  and  the  going 
concern of the Company, the trade names intangible asset (note 7) has been deemed to have an indefinite life, except for the "NABI 
Parts" tradename which is amortized over its useful life of 12 years. For purposes of impairment testing, the fair value of trade names 
is determined using an income approach. 

Intangible  assets  that  have  a  finite  life  are  amortized  using  the  straight-line  method  over  the  estimated  useful  lives  of  the  assets  as 
follows:

Patents and Licenses

Backlog of sales orders

Customer relationships

5-12 years

1-2 years

21 years

Identifiable intangible assets with finite and indefinite lives are tested for impairment as described under “Impairment of non-financial 
assets” in note 2.15.

2.14 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of 
the  acquired  business  at  the  date  of  acquisition.  Separately  recognized  goodwill  is  tested  at  the  end  of  every  reporting  period  for 
possible  impairment  when  there  are  events  or  changes  in  circumstances  that  indicate  that  their  carrying  amounts  may  not  be 
recoverable and also tested annually for impairment.  Goodwill is carried at cost less accumulated impairment losses. Gains and losses 
on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. 

12 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.15 Impairment of non-financial assets 

Non-financial assets with finite lives are tested at the end of every reporting period for possible impairment when there are events or 
changes in circumstances that indicate that their carrying amounts may not be recoverable. In addition, non-financial assets that are 
not  amortized  are  subject  to  an  annual  impairment  assessment.  The  carrying  values  of  identifiable  intangible  assets  with  indefinite 
lives  are  tested  annually  for  impairment  because  they  are  not  amortized.  Impairment  is  determined  by  comparing  the  recoverable 
amount  of  such  assets  with  their  carrying  amounts.  Any  impairment  loss  is  recognized  for  the  amount  by  which  the  asset’s  carrying 
amount exceeds its recoverable amount within earnings of continuing or discontinued operations, as appropriate. 

The  recoverable  amount  is  the  higher  of  an  asset’s  fair  value  less  cost  to  sell  or  its  value  in  use.  For  the  purpose  of  assessing 
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows or cash generating units 
(“CGUs”). The Company evaluates impairment losses for potential reversals, other than goodwill impairment, when events or changes 
in circumstances warrant such consideration. 

2.16 Provisions

Provisions  represent  liabilities  to  the  Company  for  which  the  amount  or  timing  is  uncertain.  Provisions  are  recognized  when  the 
Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be 
required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses, 
unless  the  losses  relate  to  an  onerous  contract.    Provisions  are  measured  at  the  present  value  of  the  expenditures  expected  to  be 
required  to  settle  the  obligation  using  a  discount  rate  that  reflects  current  market  assessments  of  the  time  value  of  money  and  the 
risks specific to the obligation. Provisions are re-measured at each consolidated statements of financial position date using the current 
discount rate. The increase in the provision due to passage of time is recognized as interest expense.

At  the  time  of  sale,  a  provision  for  warranty  claims  relating  to  the  base  warranty  on  the  entire  bus  or  motor  coach  and  a  corrosion 
warranty  on  the  related  structure,  is  recorded  and  charged  against  operations.  This  warranty  provision  is  based  upon  management's 
best estimate of expected future warranty costs utilizing past claims experience. Actual warranty expenditures are charged against the 
provision as incurred. 

A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower 
than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of 
the  expected  cost  of  terminating  the  contract  and  the  expected  net  cost  of  continuing  with  the  contract.  Before  a  provision  is 
established, the Company recognizes any impairment loss on the assets associated with that contract.

2.17 Long-term debt

Long-term  debt  is  recognized  initially  at  fair  value,  net  of  transaction  costs  incurred.  Debt  is  subsequently  stated  at  amortized  cost 
with any difference between the proceeds and the amortized cost recognized in the consolidated statements of net earnings (loss) and 
comprehensive income (loss) over the term of the debt using the effective interest method.

Debt is classified as a current liability unless the Company has an unconditional right to defer settlement for at least 12 months after 
the date of the consolidated statements of financial position.

2.18 Financial instruments

Financial assets

Purchases and sales of financial assets are recognized on the settlement date, which is the date on which the asset is delivered to or by 
the  Company.  Financial  assets  are  derecognized  when  the  rights  to  receive  cash  flows  from  the  investments  have  expired  or  were 
transferred  and  the  Company  has  transferred  substantially  all  risks  and  rewards  of  ownership.  Financial  assets  are  classified  in  the 
following categories at the time of initial recognition based on the purpose for which the financial assets were acquired:

Financial assets at fair value through profit or loss

Classification

Financial assets at fair value through profit or loss are financial assets held for trading or designated as fair value through profit or loss. 
A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by 
management.  Assets  in  this  category  include  derivative  financial  instruments  and  are  classified  as  short  or  long  term  assets  in  the 
consolidated statements of financial position.

13 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recognition and measurement

Financial  assets  are  initially  recognized  at  fair  value  and  subsequently  carried  at  fair  value  through  profit  and  loss,  with  changes 
recognized in the consolidated statements of net earnings (loss) and comprehensive income (loss). Transaction costs are expensed as 
incurred.

Financial assets carried at amortized cost

Classification

Financial assets classified as amortized cost are non-derivative financial assets that the Company intends to hold in order to collect the 
contractual cash flows and have fixed or determinable payments that are not quoted in an active market. They are included in current 
assets, except for those with maturities greater than 12 months after the consolidated statements of financial position date, which are 
classified  as  non-current  assets.  Assets  in  this  category  include  accounts  receivables,  deposits  and  cash  and  are  classified  as  current 
assets in the consolidated statements of financial position.

Recognition and measurement

Financial  assets  carried  at  amortized  cost  are  initially  recognized  at  fair  value  plus  transaction  costs  and  subsequently  carried  at 
amortized cost using the effective interest method.

Financial liabilities carried at amortized cost

Financial  liabilities  primarily  consist  of  accounts  payable  and  accrued  liabilities,  derivative  financial  instruments,  other  long-term 
liabilities  and  long-term  debt.  Financial  liabilities  are  initially  measured  at  fair  value  and  subsequently  measured  at  amortized  cost 
unless classified as fair value through profit or loss. 

Derivative instruments

Derivatives are initially recognized at fair value on the date a contract is entered into and are subsequently re-measured at their fair 
value. The Company’s derivative instruments, while providing effective economic hedges, are not designated as hedges for accounting 
purposes. Changes in the fair value of any derivatives that are not designated as hedges for accounting purposes are recognized within 
“Fair market value gain (loss) on interest rate swap” or “unrealized foreign exchange (loss) gain on non-current monetary items” in the 
consolidated  statements  of  net  earnings  (loss)  and  comprehensive  income  (loss)consistent  with  the  underlying  nature  and  purpose  of 
the derivative instruments.

2.19 Taxation

Tax  expense  comprises  current  and  deferred  tax.  Tax  is  recognized  in  the  consolidated  statements  of  net  earnings  (loss)  and  total 
comprehensive  income  (loss)  except  to  the  extent  it  relates  to  items  recognized  directly  in  equity,  in  which  case  the  related  tax  is 
recognized in equity.

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is 
calculated using the tax rates under the laws that were enacted or substantively enacted at the date of the consolidated statements of 
financial position.

Deferred  tax  is  accounted  for  using  the  liability  approach  and  is  the  tax  expected  to  be  payable  or  recoverable  on  temporary 
differences  between  the  carrying  amount  of  assets  and  liabilities  in  the  consolidated  statements  of  financial  position  and  the 
corresponding  tax  base  used  in  the  computation  of  taxable  profit.  Deferred  tax  is  calculated  based  on  the  expected  manner  of 
realization  or  settlement  of  the  carrying  amount  of  assets  and  liabilities,  using  tax  rates  that  are  expected  to  apply  to  the  year  of 
realization or settlement based on tax rates and laws enacted or substantively enacted at the date of the consolidated statements of 
financial position.

Deferred  tax  assets  are  recognized  to  the  extent  it  is  probable  that  taxable  profits  will  be  available  against  which  the  deductible 
temporary  differences  can  be  utilized,  unless  the  deferred  tax  asset  arises  from  the  initial  recognition  of  an  asset  or  liability  in  a 
transaction that is not a business combination, and at the time of the transaction, affects neither accounting profit nor taxable profit 
(tax  loss).  The  carrying  amount  of  deferred  tax  assets  is  reviewed  at  each  consolidated  statements  of  financial  position  date  and 
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be 
recovered. 

14 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Deferred  tax  liabilities  are  generally  recognized  for  all  taxable  temporary  differences  except  to  the  extent  that  the  deferred  tax 
liability arises from: the initial recognition of goodwill; or the initial recognition of an asset or liability in a transaction which is not a 
business  combination  and,  at  the  time  of  the  transaction,  affects  neither  accounting  profit  nor  taxable  profit  (tax  loss).  As  well, 
deferred  tax  liabilities  are  recognized  for  taxable  temporary  differences  arising  on  investments  in  subsidiaries  except  where  the 
reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future. 

2.20 Investment tax credits

The  Company  has  earned  investment  tax  credits  (“ITCs”)  relating  to  a  percentage  of  eligible  current  and  capital  research  and 
development expenditures incurred in each taxation year.  Investment tax credits are recognized when there is reasonable assurance 
that the Company will comply with the associated conditions and the grants will be received. The investment tax credits are recognized 
either as a reduction in cost of sales on the consolidated statements of net earnings (loss) and comprehensive income (loss), or as a 
reduction in property, plant and equipment, depending on where the original costs which gave rise to the credits were recorded.

2.21 Vendor Rebates

The Company records certain consideration received from a vendor, which is probable and can be reasonably estimated, as a reduction 
of the cost of purchases during the period.

2.22 Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of 
future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

Management  makes  estimates  and  assumptions  concerning  the  future.  The  resulting  accounting  estimates  will,  by  definition,  seldom 
equal  the  actual  results.  Estimates  are  reviewed  on  a  regular  basis  and,  as  adjustments  become  necessary,  they  are  reported  in  the 
consolidated  statements  of  net  earnings  and  comprehensive  income  in  the  periods  in  which  they  become  known.  The  assets  and 
liabilities  which  require  management  to  make  significant  estimates  and  assumptions  in  determining  carrying  values  include, 
inventories,  derivative  financial  instruments,  property,  plant  and  equipment,  intangible  assets,  goodwill,  provisions,  accrued  benefit 
liability, deferred compensation obligation, government grants and deferred income taxes.

Information  about  assumptions  and  estimation  uncertainties  that  have  a  significant  risk  of  resulting  in  a  material  adjustment  are 
addressed below.

Intangible assets and goodwill

The  values  associated  with  the  initial  recognition  and  impairment  tests  of  the  intangible  assets  and  goodwill  involve  significant 
estimates and assumptions, including those with respect to future cash inflows and outflows, discount rates and asset lives.

These significant estimates are subject to the Company’s future results. These determinations will affect the amount of amortization 
expense on intangible assets recognized in future periods.

Management assesses impairment by comparing the recoverable amount of an intangible asset or goodwill with its carrying value. The 
determination of the recoverable amount involves significant estimation by management.

Management  has  determined  that  for  purposes  of  this  evaluation  the  Company  has  five  CGUs:  North  American  bus/coach 
manufacturing, ARBOC, ADL manufacturing, ADL aftermarket parts operations, and aftermarket parts operations.

Goodwill  is  allocated  to  the  Company’s  five  CGUs  for  the  purpose  of  impairment  testing.    The  Company  performs  its  annual  test  for 
impairment of goodwill in the fourth quarter of each year and also when indicators of impairment exist. 

Accrued benefit liability

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates 
of  high-quality  corporate  bonds  that  are  denominated  in  the  currency  in  which  the  benefits  will  be  paid  and  that  have  terms  to 
maturity approximating the terms of the related pension liability. Determination of benefit expense requires assumptions such as the 
discount rate to measure obligations and return on assets, the projected age of employees upon retirement, life expectancy and the 
expected rate of future compensation changes. 

Actual  results  will  differ  from  results  which  are  estimated  based  on  assumptions.  See  note  2.7  for  certain  assumptions  made  with 
respect to employee benefits.

15 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

Estimation  of  income  taxes  includes  evaluating  the  recoverability  of  deferred  tax  assets  based  on  an  assessment  of  the  Company’s 
ability to utilize the underlying future tax deductions against future taxable income before they expire. Management’s assessment is 
based  upon  existing  tax  laws  and  estimates  of  future  taxable  income.  If  the  assessment  of  the  Company’s  ability  to  utilize  the 
underlying future tax deductions changes, the Company would be required to recognize more or fewer of the tax deductions as assets, 
which would decrease or increase the income tax expense in the period in which this is determined.

The Company is subject to taxation in multiple jurisdictions. Significant judgment is required in determining the worldwide provision 
for taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary 
course  of  business.  The  Company  maintains  provisions  for  uncertain  tax  positions  that  it  believes  appropriately  reflect  its  risk  with 
respect  to  tax  matters  under  active  discussion,  audit,  dispute  or  appeal  with  tax  authorities,  or  which  are  otherwise  considered  to 
involve uncertainty. These provisions for uncertain tax positions are made using management’s best estimate of the amount expected 
to be paid based on a qualitative assessment of all relevant factors. Management reviews the adequacy of these provisions at the date 
of  each  consolidated  statements  of  financial  position.  However,  it  is  possible  that  at  some  future  date  an  additional  liability  could 
result from audits by taxing authorities. Where the final tax outcome of these matters is different from the amounts that were initially 
recorded, such differences will affect the tax provisions in the period in which such determination is made.

Provision for Warranty Costs

The  Company  offers  warranties  on  the  buses  and  coaches  it  sells.  Management  estimates  the  related  provision  for  future  warranty 
claims based on historical warranty claim information, as well as recent trends that might suggest that past cost information may differ 
from future claims. Factors that could impact the estimated claim information include quality initiatives, as well as parts and labour 
costs.

Critical judgments in applying accounting policies

The following critical judgments that were made by management have the most significant effect on the amounts recognized  in  the 
financial statements.

Revenue recognition

As described in note 2.6, management assessed the criteria for the recognition of revenue related to arrangements that have multiple 
components as set out in IFRS 15. Also, judgment is necessary to determine when components can be recognized separately and the 
allocation of the related consideration allocated to each component.

Also described in note 2.6, management assessed the criteria for the recognition of revenue in an agency relationship related to the 
sale of extended warranties that are purchased for the customer from the OEM as set out in  IFRS 15.  

Functional currency

Management assessed the criteria for the determination of functional currency as set out in IAS 21. An entity is required to place the 
greatest weight on the currency that influences the pricing of the transactions that it undertakes rather than focusing on the currency 
in which the transactions are denominated in. The functional currency of the Company is the United States dollar as it is the currency 
of  the  primary  economic  environment  in  which  the  Company  operates.  In  addition,  it  is  the  competitive  forces  of  the  United  States 
marketplace that determines the sales prices of its goods and services. Predominantly, the costs for labour, material and overhead that 
address  the  needs  and  support  the  Company’s  customers  are  incurred  in  United  States  dollars,  and  hence  the  pricing  of  goods  and 
services to the customer is more greatly influenced from operations and the competitive forces in the United States.

Goodwill

Judgment is required in the selection of CGUs and the allocation of assets and liabilities to these CGUs, which is necessary to assess the 
impairment of long-term assets, goodwill and intangible assets. 

16 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

3.  ACCOUNTS RECEIVABLE

Trade, net of allowance for doubtful accounts

Other

December 27, 2020

December 29, 2019

$ 

$ 

383,086  $ 

43,322   

426,408  $ 

471,552 

60,184 

531,736 

4. 

INVENTORIES

Raw materials

Work in process

Finished goods

Cost of inventories recognized as expense and included in cost of sales

Write-down of inventory to net realizable value in cost of sales

Reversals of a previous write-down in inventory

December 27, 2020

December 29, 2019

$ 

$ 

$ 

299,476  $ 

216,311

141,249

657,036  $ 

300,447 

263,343

108,453

672,243 

Fiscal 2020

Fiscal 2019

2,107,143  $ 

2,452,170 

47,274   

403   

4,538 

471 

The  write-down  of  inventory  for  Manufacturing  is  $44.7  million  (2019:  $2.6  million),  of  which  $38.6  million  pertains  to  pre-owned 
coach, $2.9 million for bus and $1.7 million for new coach impairment. Aftermarket write-down of inventory is $2.6 million (2019: $1.9 
million). 

5.  PROPERTY, PLANT AND EQUIPMENT

Land, building 
and building 
improvements

Machinery 
and 
equipment

Computer 
hardware 
and 
software

Demo 
buses 
and 
coaches

Buses and 
coaches 
available 
for lease

Office 
equipment

Total

Cost

$ 

102,202  $  192,983  $  54,002  $ 

7,615  $ 26,421  $ 

24,615  $ 407,838 

Accumulated depreciation

11,875   

92,410   

33,654   

3,571    12,705   

5,680    159,895 

December 30, 2018 net book value

90,327   

100,573   

20,348   

4,044    13,716   

18,935    247,943 

Transition to IFRS 16

(3,013)   

(22,734)   

(1,572)   

—   

—   

—    (27,319) 

Adjusted December 31, 2018 net book value

87,314   

77,839   

18,776   

4,044    13,716   

18,935    220,624 

Assumed as a result of business acquisitions

15,490   

19,166   

2,587   

—    6,405   

—   

43,648 

Additions

Transfers from inventory

Disposals

Depreciation charge

4,151   

18,792   

6,728   

254    4,759   

2,892   

37,576 

—   

(27)   

—   

(117)   

—   

(33)   

—    6,646   

3,931   

10,577 

(44)   

(159)   

—   

(380) 

(3,387)   

(21,369)   

(5,797)   

(746)    (7,252)   

(6,119)    (44,670) 

Cumulative translation adjustment

500   

558   

86   

—   

229   

—   

1,373 

December 29, 2019 net book value

104,041   

94,869   

22,347   

3,508    24,344   

19,639    268,748 

Additions

Transfer from inventory

Disposals

Depreciation charge

Impairment

Cumulative translation adjustment

1,434   

12,862   

3,608   

13    7,328   

458   

25,703 

(1,827)   

(22)   

(137)   

(659)   

(8)   

(136)   

(14)    (3,744)   

(6,265)    (11,995) 

(13)    (1,878)   

—   

(2,708) 

(3,551)   

(23,411)   

(5,346)   

(700)    (9,219)   

(5,199)    (47,426) 

—   

278   

(782)   

864   

(976)   

93   

—   

—   

—   

351   

—   

—   

(1,758) 

1,586 

December 27, 2020 net book value

$ 

100,353  $ 

83,606  $  19,582  $ 

2,794  $ 17,182  $ 

8,633  $ 232,150 

17 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

5.  PROPERTY, PLANT AND EQUIPMENT (Continued)

Land, building 
and building 
improvements

Machinery 
and 
equipment

Computer 
hardware 
and 
software

Office 
equipment

Demo 
buses 
and 
coaches

Buses and 
coaches 
available 
for lease

Total

$ 

$ 

$ 

$ 

118,390  $  190,215  $ 

50,582  $ 

7,825  $  44,301  $ 

31,438  $ 442,751 

14,349

95,346

28,235

4,317

19,957

11,799

174,003

104,041  $ 

94,869  $ 

22,347  $ 

3,508  $  24,344  $ 

19,639  $ 268,748 

118,253  $  202,225  $ 

53,163  $ 

7,812  $  46,358  $ 

25,631  $ 453,442 

17,900

118,619

33,581

5,018

29,176

16,998

221,292

100,353  $ 

83,606  $ 

19,582  $ 

2,794  $  17,182  $ 

8,633  $ 232,150 

Recorded as:

Cost

Accumulated depreciation

December 29, 2019 net book value

Cost

Accumulated depreciation

December 27, 2020 net book value

6.  RIGHT-OF-USE ASSETS

Opening balance at December 30, 2018

$ 

103,794  $ 

443  $ 

39  $ 

104,276 

Land, building 
and building 
improvements

Machinery 
and 
equipment

Computer 
hardware 
and software

Total

Transition to IFRS 16

Adjusted December 31, 2018 net book value

Assumed as a result of business acquisitions

Additions

Disposals

Depreciation charge

Cumulative translation adjustment

December 29, 2019 net book value

Additions

Disposals

Impairment

Depreciation charge

Cumulative translation adjustment

3,013   

106,807   

15,353   

17,369   

—   

(12,363)   

1,269   

22,734   

23,177   

1,845   

4,475   

—   

(6,113)   

87   

1,572   

1,611   

—   

680   

—   

(874)   

—   

$ 

128,435  $ 

23,471  $ 

1,417  $ 

2,699   

(257)   

(3,597)   

(14,654)   

213   

3,890   

(267)   

—   

(7,492)   

92   

184   

—   

—   

(761)   

—   

27,319 

131,595 

17,198 

22,524 

— 

(19,350) 

1,356 

153,323 

6,773 

(524) 

(3,597) 

(22,907) 

305 

December 27, 2020 net book value

$ 

112,839  $ 

19,694  $ 

840  $ 

133,373 

Recorded as:

Cost

Accumulated Depreciation

December 29, 2019 net book value

Cost

Accumulated Depreciation

Land, building 
and building 
improvements

Machinery 
and 
equipment

Computer 
hardware 
and software

$ 

141,711  $ 

48,016  $ 

13,506  $ 

13,276   

128,435   

140,250   

27,411   

24,545   

23,471   

49,708   

30,014   

12,089   

1,417   

13,690   

12,850   

December 27, 2020 net book value

$ 

112,839  $ 

19,694  $ 

840  $ 

Total

203,233 

49,910 

153,323 

203,648 

70,275 

133,373 

Total cash outflows for payments on lease liabilities was $26.2 million for the period ended December 27, 2020, (2019: $15.6 million) of 
which $18.9 million (2019: $9.9 million) was for principal repayments.

During the period, the Company expensed $0.5 million (2019: $1.0 million) in leases that did not meet the requirements for recognition 
under IFRS 16.  These leases were either low value, or had a term of less than twelve months. 

18 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

6.  RIGHT-OF-USE ASSET (Continued)

Right-of-use asset impairments are associated with a service center location and production facility location that will not be used by 
the  Company  for  the  remaining  duration  of  the  lease  as  a  result  of  the  NFI  Forward  restructuring  program  (see  note  28).  The 
impairments total of $3.6 million are reflected in the Manufacturing reportable segment. 

The Company assessed the extension periods embedded within each lease for inclusion in the lease liabilities on a lease by lease basis. 
When  it  determined  it  was  reasonably  certain  to  exercise  the  extension  option  within  the  lease,  the  Company  has  included  those 
extension periods in the initial recognition of the right-of-use asset and lease liability. Significant leases where assumptions have been 
made are long-term building leases.

7.  GOODWILL AND INTANGIBLE ASSETS

Goodwill

Trade 
names

Patents 
and 
Licenses

Customer 
relationships

Backlog of 
sales 
orders

Total

Cost

$  436,278  $  224,300  $  130,917  $ 

398,321  $ 

6,400  $  1,196,216 

Accumulated amortization

—   

1,238   

114,094   

123,474   

6,400   

245,206 

December 30, 2018 net book value

436,278   

223,062   

16,823   

274,847   

Additions

—   

—   

61   

—   

—   

—   

951,010 

61 

Assumed as a result of business acquisitions

124,462   

43,181   

22,287   

123,338   

14,562   

327,830 

Amortization charge

—   

(275)   

(10,842)   

(23,054)   

(8,414)   

(42,585) 

Cumulative translation adjustment

8,168   

1,408   

630   

3,879   

117   

14,202 

December 29, 2019 net book value

568,908   

267,376   

28,959   

379,010   

6,265    1,250,518 

Additions

Adjustment to purchase equation for business 
combinations 

—   

9,748   

—   

—   

29   

—   

—   

—   

29 

511   

125   

10,384 

Amortization charge

Impairment loss

—   

(275)   

(8,324)   

(25,662)   

(6,190)   

(40,451) 

(50,790)   

—   

—   

—   

—   

(50,790) 

Cumulative translation adjustment

1,621   

1,610   

481   

4,179   

(200)   

7,691 

December 27, 2020 net book value

$  529,487  $  268,711  $ 

21,145  $ 

358,038  $ 

—  $  1,177,381 

Recorded as:

Cost

$  568,908  $  268,889  $  153,895  $ 

525,538  $ 

21,079  $  1,538,309 

Accumulated amortization

—   

1,513   

124,936   

146,528   

14,814   

287,791 

December 29, 2019 net book value

568,908   

267,376   

28,959   

379,010   

6,265    1,250,518 

Cost

529,487   

270,499   

154,852   

530,823   

22,118    1,507,779 

Accumulated amortization

—   

1,788   

133,707   

172,785   

22,118   

330,398 

December 27, 2020 net book value

$  529,487  $  268,711  $ 

21,145  $ 

358,038  $ 

—  $  1,177,381 

The  recoverable  amount  of  the  Company’s  cash  generating  units  ("CGUs")  is  determined  based  on  value-in-use  calculations.  These 
calculations  use  estimated  cash  flow  projections  based  on  financial  plans  approved  by  the  Board  covering  three  to  five-year  periods 
and  discount  rates  based  on  weighted  average  cost  of  capital  of  like  businesses  that  range  between  7%  and  14%  per  annum  for  the 
Alexander Dennis Limited ("ADL") and North American bus/coach manufacturing CGUs, between 11% and 17% for the ARBOC CGU, and 
between 7% and 12% per annum for the aftermarket parts and ADL parts CGU. Cash flows beyond this period are extrapolated using a 
steady estimated growth rate based on the long-term average annual growth rate of 3% for each industry in which the CGUs operate. 
Management  has  determined  planned  cash  flows  based  on  a  projected  production  schedule,  past  performance  and  expectations  of 
market development. The discount rates used reflect specific risks relating to the relevant CGUs.

Sensitivity  testing  is  conducted  as  part  of  the  annual  impairment  tests.  Management  believes  that  any  reasonable  change  in  the  key 
assumptions  used  to  determine  the  recoverable  amounts  would  not  cause  the  carrying  amounts  of  any  of  the  CGUs  to  exceed  its 
recoverable amount.

During the first quarter of 2020, the Company idled production facilities to manage the adverse impacts of the COVID-19 pandemic on 
the  Company's  business  and  operations  and  that  of  its  customers  and  suppliers  and  to  address  the  health  and  safety  concerns  of  its 
employees.  The  idling  of  production  facilities  resulted  in  significant  downward  revisions  to  the  budgeted  net  cash  flows  of  all 
manufacturing CGUs. The expected impact of government lock-downs on demand for aftermarket parts and services also resulted in 

19 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

7.  GOODWILL AND INTANGIBLE ASSETS (Continued)

significant  downward  revisions  to  the  budgeted  net  cash  flows  of  all  aftermarket  CGUs.  The  COVID-19  pandemic  also  caused  a 
significant decline in private markets, resulting in the cancellation or deferral of many private customer orders for coaches in North 
America  and  coaches  and  buses  in  the  UK,  further  reducing  budgeted  net  cash  flows  at  the  motor  coach  manufacturing  and  ADL 
manufacturing CGUs. Public market order delays and decline also reduced budgeted net cash flows at the bus manufacturing CGU. The 
uncertainty  surrounding  the  COVID-19  pandemic  also  caused  significant  volatility  in  the  equity  markets,  resulting  in  a  systematic 
increase in the cost of equity capital. Based on these factors, management concluded that impairment indicators existed at all CGUs 
and,  accordingly,  an  interim  quantitative  impairment  test  was  performed  for  all  CGUs  as  at  the  end  of  the  first,  second  and  third 
quarters of 2020.

Based upon the results of the interim quantitative impairment test performed during the first quarter of 2020, management determined 
that the estimated recoverable amount of the motor coach manufacturing CGU was $295 million and, as the carrying amount exceeded 
the recoverable amount, a goodwill impairment charge of $50.8 million was recorded. No other impairments were identified in any of 
the first, second or third quarters tests.

During  the  third  quarter  of  2020,  the  Company  announced  its  commitment  to  a  significant  restructuring  program  called  “NFI 
Forward” (see Note 28). Prior to this restructuring, management monitored goodwill for impairment separately at each of its six CGUs: 
bus manufacturing, motor coach manufacturing, ARBOC, ADL manufacturing, ADL aftermarket parts operations and aftermarket parts 
operations.  As  a  result  of  the  restructuring,  management  had  determined  that  it  was  appropriate  to  combine  the  goodwill  and 
intangible assets of the bus manufacturing and motor coach manufacturing CGUs for impairment testing purposes. This determination is 
based  on  the  Company  combining  the  business  operations  of  the  two  CGUs  as  part  of  NFI  Forward.  While  both  CGUs  still  generate 
separately identifiable cash inflows, management is no longer able to separately identify the cash outflows of each CGU. Both CGUs are 
expected to benefit from the synergies of the combination, which further supports management’s decision to monitor for impairment 
at the combined level. The NFI Forward restructuring program also combined the North American aftermarket parts operations of ADL 
and NFI parts. As a result of this combination, the Company reallocated $6.2 million of goodwill and $10.5 million of intangible assets 
from the ADL aftermarket parts operations CGU to the aftermarket parts operations CGU for impairment testing purposes.

Based  upon  historical  operating  results,  management’s  forecasts  and  business  plans,  the  Company’s  trade  names  were  assigned  an 
indefinite  life,  except  for  the  "NABI  Parts"  tradename  (net  book  value  of  $1,513  at  December  27,  2020)  which  is  amortized  over  its 
useful life, which ends in 2025. 

8.  OTHER LONG-TERM ASSETS

Long-term restricted deposit (note 24c) 

Long-term accounts receivable

Non-current asset held for sale

December 27, 2020

December 29, 2019

$ 

$ 

30,000  $ 

5,113   

1,809   

36,922  $ 

14,490 

5,122 

— 

19,612 

Long-term restricted deposit is collateral for certain of the Company's letters of credit.

The  non-current  asset  held  for  sale  represents  a  service  facility  that  is  being  sold  to  a  third  party.  The  sale  of  the  property  was 
finalized in January 2021. The service facility is part of the manufacturing segment operations.

9.  CURRENT PORTION OF LONG TERM LIABILITIES 

Deferred revenue (note 13)

Provisions (note 14)

Deferred compensation obligation (note 11)

Obligations under leases (note 6)

December 27, 2020

December 29, 2019

$ 

$ 

99,454  $ 

28,208   

1,045   

19,903   
148,610  $ 

94,372 

29,314 

1,678 

19,160 
144,524 

20 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

10.  ACCRUED BENEFIT LIABILITY 

Defined benefit plan 

The Company's subsidiaries have defined benefit plans which cover employees in Canada and the United States. Actuarial valuations for 
the Company's subsidiaries were last performed as at December 31, 2019 and December 31, 2017. 

Information in respect of the Company's defined benefit plan is as follows:

Change in plan assets
Plan assets at fair value — beginning of period
Interest income

Remeasurement gains - return on plan assets (excluding amounts in net interest)

Administrative expenses

Employer’s contributions

Benefits paid

Plan settlement

Foreign exchange (loss) gain
Plan assets at fair value — end of period

Change in defined benefit obligation
Defined benefit obligation — beginning of period
Current service cost

Interest cost

Benefits paid

Plan settlement

Foreign exchange loss

Actuarial loss arising from changes in financial assumptions

Actuarial loss (gain) arising from experience adjustments assumptions
Defined benefit obligation — end of period
Accrued benefit liability - present value of unfunded obligations

December 
27, 2020

December 
29, 2019

$ 

101,436  $ 

125,684 

3,106   

4,911   

(159)   

5,678   

4,503 

13,617 

(1,440) 

7,803 

(4,078)   

(52,341) 

—   

(2,144)   

(108) 

3,718 

108,750   

101,436 

109,473   

130,949 

5,279   

3,317   

4,625 

4,685 

(7,921)   

(52,341) 

(683)   

1,997   

14,749   

3,281   

(1,779) 

3,847 

19,636 

(149) 

129,492   

109,473 

$ 

(20,742)  $ 

(8,037) 

The actual gain on the plan assets for Fiscal 2020 was $8,017 (Fiscal 2019: loss of $18,120).

The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligation and net pension plan expenses 
are as follows:

Country

Canada

Canada

Country

Canada

Canada

Mortality Table

CPM2014 Private sector with Scale MI-2017 with size adjustment

CPM2014 Private sector with Scale MI-2017 with no size adjustment

Fiscal 2020

Fiscal 2019

Discount Rate

 3.10 %

 2.60 %

 3.80 %

 3.10 %

Discount rate - sensitivity

Life expectancy - sensitivity

Last valuation date

Next valuation 
date

Then obligation 
would decrease 
by:

Then obligation 
would increase 
by:

Then obligation 
would increase 
by:

Then obligation 
would decrease 
by:

1% increase

1% decrease one year increase one year decrease

Dec. 31, 2017

Dec. 31, 2020

Dec. 31, 2019

Dec. 31, 2022

 17.7 %

 21.1 %

 22.8 %

 27.4 %

 1.5 %

 3.4 %

 1.5 %

 3.5 %

The defined benefit plan typically exposes the Company to actuarial risks such as: investment risk, interest rate risk and longevity risk.

21 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

10.  ACCRUED BENEFIT LIABILITY (Continued)

Investment risk

The  present  value  of  the  defined  benefit  plan  liability  is  calculated  using  a  discount  rate  determined  by  reference  to  high  quality 
corporate  bond  yields;  if  the  return  on  plan  assets  is  below  this  rate,  it  will  create  a  plan  deficit.  Management  believes  the  plan 
currently  has  a  relatively  balanced  investment  in  equity  securities  and  debt  instruments.  Due  to  the  long-term  nature  of  the  plan 
liabilities, the Company's pension committee considers it appropriate that a reasonable portion of the plan assets should be invested in 
equity securities to leverage the return generated by the fund.

Interest rate risk

A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on 
the plan’s debt investments.

Longevity risk

The  present  value  of  the  defined  benefit  plan  liability  is  calculated  by  reference  to  the  best  estimate  of  the  mortality  of  plan 
participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s 
liability.

The  Company’s  defined  benefit  plan  is  a  fixed  benefit  plan  and,  as  a  result,  the  rate  of  compensation  increases  does  not  have  any 
impact  on  the  actuarially  determined  accrued  benefit  liability.  Expected  contributions  to  the  defined  benefit  plan  for  the  52-week 
period ending December 27, 2020 are $2,309.

The Company's defined benefit pension plan expense, included in cost of sales and sales, general and administration costs and other 
operating expenses is as follows:

Fiscal 2020

Fiscal 2019

Current service costs

Net interest expense

Administrative expenses

Plan settlement

Foreign exchange loss

$ 

5,279  $ 

211

159 

(683)   

341   

Components of defined benefit costs recognized in net earnings

$ 

5,307  $ 

4,625 

183

1,440

(1,671) 

1,272 

5,849 

Fiscal 2020

Fiscal 2019

Remeasurement gains - return on plan assets (excluding amounts in net interest)

$ 

4,911  $ 

13,617 

Actuarial losses arising from changes in financial assumptions

Actuarial (losses) gains arising from experience adjustments assumptions

Foreign exchange gain

Deferred income taxes recorded through other comprehensive (loss) income

(14,749)   

(19,636) 

(3,281)   

825   

(12,294)   

3,088   

149 

1,836 

(4,034) 

(356) 

Net actuarial losses recognized in other comprehensive (loss) income

$ 

(9,206)  $ 

(4,390) 

An analysis of the assets of the plans by investment category is provided as follows:

Asset category

Cash and cash equivalents

Canadian equities

Foreign equities

Real estate

Bonds

22 

NFI GROUP INC 2020 ANNUAL REPORT

December 27, 2020

December 29, 2019

 0.6 %

 11.8 %

 24.1 %

 16.2 %

 47.3 %

 100.0 %

 0.4 %

 17.7 %

 32.8 %

 3.6 %

 45.5 %

 100.0 %

 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

11.  DEFERRED COMPENSATION OBLIGATION

Performance share units under PRSU Plan (officers and senior management)

Restricted share units under PRSU Plan (officers and senior management)

Deferred share units under DSU Plan (non-employee board of directors)

Less: current portion

December 27, 2020

December 29, 2019

$ 

$ 

473  $ 

1,045

2,761

4,279

1,045

3,234  $ 

2,088 

50

2,330

4,468

1,678

2,790 

Effective  December  17,  2012,  the  Board  approved  the  Performance  and  Restricted  Share  Unit  Plan  (the  “PRSU  Plan”)  and  it  was 
amended on December 16, 2013, December 18, 2018 and August 5, 2020. The terms of the amended PRSU Plan govern awards made on 
or after the 2014 plan year, 2018 plan year and August 2020, respectively.

The purposes of the PRSU Plan are to attract, retain and motivate key personnel, reward officers and senior management and to align 
their  interests  with  those  of  shareholders  by  making  a  significant  portion  of  their  incentive  compensation  directly  dependent  on 
achieving key strategic, financial and operational objectives that are crucial to the ongoing growth and profitability of the Company.  
Under the terms of the PRSU Plan, the human resources, compensation and corporate governance committee of the Board may grant 
eligible  participants  performance  share  units  (“PSUs”)  or  restricted  share  units  (“RSUs”),  which  give  the  holders  thereof  the  right  to 
receive, upon vesting and redemption of a unit, a cash payment equal to the fair market value of a Share at the time of redemption.  
When dividends are paid on a Share, additional units equivalent to the amount of the dividends multiplied by the number of PSUs and 
RSUs held (and determined based on the then fair market value of the Shares) are credited to a participant’s account. The actual value 
of  a  PSU  on  the  settlement  date  is  contingent  on  the  Share  price  and  the  Company’s  actual  performance  over  a  three-year  period 
relative to the established objectives. The actual value of an RSU on the settlement date is contingent on the Share price only and RSUs 
generally  vest  and  settle  as  to  one-third  on  each  of  the  first,  second  and  third  anniversaries  of  the  grant  date.  PSUs  and  RSUs  also 
immediately  vest  upon  a  participant's  termination  without  cause  or  resignation  for  good  reason  within  a  specified  period  of  time 
following the closing of a transaction resulting in certain change of control events and upon certain terminations of employment and, 
with respect to PSUs and RSUs granted prior to 2019, upon the closing of a transaction resulting in certain change of control events. 

RSUs and PSUs granted in Fiscal 2020 were determined based on the volume weighted average trading price of a Share for the last five 
trading days of 2019 and the desired compensation value.

As well, the Board adopted NFI’s Deferred Share Unit Plan for Non-Employee Directors (the "DSU Plan") on November 7, 2011 and it was 
amended and restated on December 8, 2015, December 18, 2015, March 14, 2019 and September 14, 2020. Pursuant to the plan, non-
employee directors may elect once each calendar year to receive all or a portion of their annual retainer and meeting fees in the form 
of deferred share units (“DSUs”) instead of cash. A DSU is the right to receive a cash payment based on the value of a Share credited by 
means of a bookkeeping entry to an account in the name of the non-employee director. DSUs are credited to the director’s account on 
the  first  day  of  each  calendar  quarter,  the  number  of  which  is  determined  by  dividing  the  amount  of  the  applicable  portion  of  the 
director’s elected amount by the volume weighted average trading price of a Share for the last five trading days.  

When dividends are paid on a Share, additional DSUs equivalent to the amount of the dividend multiplied by the number of DSUs held 
(and  determined  based  on  the  then  fair  market  value  of  the  Shares)  will  be  credited  to  the  director’s  account.  At  the  end  of  the 
director’s  tenure  as  a  member  of  the  Board,  the  director  will  be  entitled  to  receive  a  cash  redemption  payment  equal  to  the  fair 
market value of a Share multiplied by the number of DSUs held.

23 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

11.  DEFERRED COMPENSATION OBLIGATION (Continued)

Units outstanding at December 30, 2018

Units granted

Distribution units granted

Units Expired

Units Redeemed

PSUs

RSUs

DSUs

Total

115,841

96,523

10,460

—

—

28,627

44,373

3,729

(910)

93,595

18,082

5,082

— 

238,063

158,978

19,271

(910)

—

(10,411)

(10,411)

Vested and reclassified as current liability

(71,347)

(35,470)

— 

(106,817)

Units outstanding at December 29, 2019

Units granted

Distribution units granted

Units Expired

Units Redeemed

Vested and reclassified as current liability

Units outstanding at December 27, 2020

Vested units

Unvested units

151,477

126,381

15,574

40,349

63,191

5,802

(70,876) 

(6,744) 

— 

— 

(4,665)

217,891

(25,580)

77,018

— 

— 

106,348

32,271

6,969
— 

— 

— 

145,588

145,588

217,891

77,018

— 

298,174

221,843

28,345

(77,620) 

— 

(30,245)

440,497

145,588

294,909

12.  SHARE-BASED COMPENSATION - EQUITY SETTLED

The Board adopted a Share Option Plan (the “2013 Option Plan”) for NFI on March 21, 2013, under which employees of NFI and certain 
of its affiliates may receive grants of share options. The 2013 Option Plan was amended and restated on December 8, 2015, December 
31,  2018  and  August  5,  2020.  Directors  who  are  not  employed  with  NFI  are  not  eligible  to  participate  in  the  2013  Option  Plan.  A 
maximum of 3,600,000 Shares are reserved for issuance under the 2013 Option Plan. One quarter of the share options become vested 
on the first grant date anniversary and an additional one-quarter on the second, third and fourth anniversary of such date.

The Board adopted a new share option plan on March 12, 2020 (the "2020 Option Plan"), which was approved by shareholders on May 7, 
2020  and  amended  on  August  5,  2020,  under  which  employees  of  NFI  and  certain  of  its  affiliates  may  receive  grants  of  options  for 
Shares.  Directors  who  are  not  employed  with  NFI  are  not  eligible  to  participate  in  the  2020  Option  Plan.  A  maximum  of  3,200,000 
Shares  are  reserved  for  issuance  under  the  2020  Option  Plan.  The  options  become  vested  as  to  one-quarter  on  the  first  grant  date 
anniversary and an additional one-quarter on the second, third and fourth anniversary of the grant date.No options have been granted 
under the 2020 Option Plan.

Option Grant 
dates

Number

Exercised

Expired

Vested

Unvested

Expiry date

Exercise 
price

Fair Value 
at grant 
date

March 26, 2013

490,356

(483,030)  

— 

(7,326)  

— 

March 26, 2021

December 30, 2013

612,050

(573,668)

(9,631)

(28,751)  

—  December 30, 2021

December 28, 2014

499,984

(252,233)

(11,368)

(236,383)  

—  December 28, 2022

December 28, 2015

221,888

(19,532)  

— 

(202,356)  

—  December 28, 2023

September 8, 2016

2,171  

—   

(2171) 

—  

— 

September 8, 2024

151,419

(1,610)

(12,534)

(102,557)

January 3, 2017

January 2, 2018

January 2, 2019

July 15, 2019

152,883  

284,674  

2,835  

December 31, 2019

519,916  

— 

— 

—   

—   

(10,750)

(71,071)

(25,314)  

(64,844) 

194,516

—   

(709) 

(33,218)   

— 

34,718

71,062

January 3, 2025

January 2, 2026

January 2, 2027

2,126

July 15, 2027
486,698 December 31, 2027
789,120

2,938,176 (1,330,073)

(104,986)

(713,997)

24 

NFI GROUP INC 2020 ANNUAL REPORT

C$10.20

C$10.57

C$13.45

C$26.75

C$42.83

C$40.84

C$54.00

C$33.43

C$35.98

C$26.81

C$29.32

C$1.55

C$1.44

C$1.83

C$4.21

C$8.06

C$7.74

C$9.53

C$5.01

C$4.90

C$3.36

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

12.  SHARE-BASED COMPENSATION - EQUITY SETTLED (Continued)

The following reconciles the share options outstanding:

Balance at beginning of period

Granted during the period

Expired during the period

Exercised during the period
Balance at end of period

Fiscal 2020

Fiscal 2019

Number
1,068,906

519,916 

(77,059) 

(8,646)

1,503,117

Weighted average 
exercise price
C$30.77

C$26.81  

C$34.26  

C$13.45

C$29.32

Number
946,306

287,559 

(6,928) 

(158,031)

1,068,906

Weighted average 
exercise price
C$27.02

C$33.46

C$40.75

C$12.77

C$30.77

Fair values were measured based on the Black-Scholes formula. Expected volatility is estimated by considering historic average share 
price  volatility.  The  inputs  used  in  the  measurement  of  the  fair  values  of  the  share-based  payment  plans  granted  in  Fiscal  2020  and 
Fiscal 2019 are the following:

Options grant date

Fair value at grant date (C$)

Share price (C$)

Exercise price (C$)

Expected volatility

Option life (expected weighted average life)

Expected dividends

Risk-free interest rate (based on government bonds)

December 
31, 2019

January 2, 
2019

$3.36

$26.81

$26.81

 28.4 %

$5.01

$33.43

$33.43

 24.4 %

5.5 years

5.5 years

 6.16 %

 1.64 %

 3.71 %

 1.89 %

On  May  8,  2014,  shareholders’  approved  the  Company’s  Restricted  Share  Unit  Plan  for  Non-Employee  Directors  (the  “Director  RSU 
Plan”). The Director RSU Plan was amended and restated on December 8, 2015, December 31, 2017, March 14, 2019 and September 14, 
2020.  A maximum of 500,000 Shares are reserved for issuance under the Director RSU Plan. Pursuant to the Director RSU Plan, non-
employee directors are permitted to elect, once each calendar year, to receive all or a portion of their annual retainer in the form of 
restricted share units ("Director RSUs") and/or DSUs instead of cash.  A Director RSU is a right to acquire a fully-paid and non-assessable 
Share credited by means of a bookkeeping entry to an account in the name of the non-employee director.  

A director generally must make the election prior to the end of the calendar year preceding the year to which such election is to apply. 
The Board, in its sole discretion, may award additional Director RSUs, subject to an annual aggregate value of $150 per director. The 
number of Director RSUs to be awarded to a director is determined by dividing the amount of the applicable portion of the director’s 
annual retainer by the applicable fair market value of a Share on that date. When dividends are paid on a Share, additional Director 
RSUs equivalent to the aggregate number of Director RSUs held by a director on the dividend record date multiplied by the amount of 
dividend  paid  by  NFI  on  each  Share,  and  then  divided  by  the  fair  market  value  of  the  Shares  on  the  dividend  payment  date,  will 
automatically be credited to the director’s account. Under the Director RSU Plan, Director RSUs vest immediately as at each applicable 
award date. A director (other than a U.S. director) will be permitted to exercise the Director RSUs credited to his or her account at any 
time prior to December 15 of the year following the year in which the director ceases to be a non-employee director of NFI or one of its 
affiliates. A U.S. director will be required to specify the exercise date in the annual election form in accordance with Section 409A of 
the U.S. Internal Revenue Code. 

Balance – December 30, 2018

Director RSUs issued 

Director RSUs exercised

Balance – December 29, 2019

Director RSUs issued 

Director RSUs exercised

Balance – December 27, 2020

25 

NFI GROUP INC 2020 ANNUAL REPORT

Number of Director RSUs

22,743 

25,686 

(17,754) 

30,675 

40,344 

(25,549) 

45,470 

 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

13.  DEFERRED REVENUE

Extended warranties

Progress payments

Less: current portion of deferred revenue

December 27, 2020

December 29, 2019

$ 

$ 

29,327  $ 

85,735

115,062

(99,454)

15,608  $ 

21,220 

86,506

107,726

(94,372)

13,354 

Deferred  revenue  is  comprised  of  progress  payments  that  have  not  yet  qualified  for  recognition  as  revenue  under  the  Company’s 
revenue  recognition  policies  and  also  deferred  revenue  from  the  sale  of  extended  warranty  contracts  which  are  amortized  over  the 
extended warranty period commencing at the end of the one-year basic warranty period

14.  PROVISIONS 

The Company's insurance risk retention meets the IFRS definition of provisions, a liability with uncertain timing or amount. 

The restructuring provision consists of employee termination benefits associated with the NFI Forward restructuring initiative that was 
announced on July 27, 2020 (note 28).

The Company generally provides its customers with a base warranty on the entire transit bus or motor coach and a corrosion warranty 
on the related structure. The movements in the provisions are as follows:

December 30, 2018

Assumed as a result of business acquisition

Additions

Amounts used/realized

Unused provision

Unwinding of discount and effect of changes in the discount rate

Exchange rate differences

December 29, 2019

Additions

Amounts used/realized

Unused provision

Unwinding of discount and effect of changes in the discount rate

Exchange rate differences

Less current portion

December 27, 2020

Insurance Risk 
Retention

$ 

24,504   

—   

8,880   

(5,383)   

(504)   

—   

—   

Restructuring 

Warranty

Total

—   

—   

—   

—   

—   

—   

—   

76,280   

100,784 

7,434   

7,434 

44,226   

53,106 

(47,693)   

(53,076) 

(16,642)   

(17,146) 

225   

167   

225 

167 

$ 

27,497  $ 

—  $ 

63,997  $ 

91,494 

6,352   

(8,137)   

(2,533)   

—   

—   

23,179   

3,000   

20,102   

(15,184)   

(1,401)   

—   

189   

3,706   

3,706   

39,889   

66,343 

(41,045)   

(64,366) 

(5,163)   

(9,097) 

60   

190   

57,928   

21,502   

60 

379 

84,813 

28,208 

$ 

20,179  $ 

—  $ 

36,426  $ 

56,605 

26 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

15.  DEFERRED TAXES AND INCOME TAX EXPENSE

Deferred  income  tax  assets  and  liabilities  are  offset  when  there  is  a  legally  enforceable  right  to  offset  current  tax  assets  against 
current  tax  liabilities  and  when  the  deferred  income  tax  assets  and  liabilities  relate  to  income  taxes  levied  by  the  same  taxation 
authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The 
offset amounts by tax jurisdiction presented on the statements of financial position are as follows:

As presented on statements of financial position:

Deferred tax liabilities

The gross movement on the deferred income tax account is as follows:

Beginning of period

Assumed as a result of business acquisitions

Exchange rate differences

Tax recorded through net earnings (loss)

Tax recorded through other comprehensive loss

Tax recorded through equity

End of period

December 27, 2020

December 29, 2019

$ 

76,689   

76,689  $ 

105,023 

105,023 

Fiscal 2020

Fiscal 2019

$ 

(105,023)  $ 

259   

535   

24,936   

3,335   

(731)   

$ 

(76,689)  $ 

(83,121) 

(41,850) 

64 

19,342 

1,530 

(988) 

(105,023) 

The  movement  in  deferred  income  tax  assets  and  liabilities  during  the  period,  without  taking  into  consideration  the  offsetting  of 
balances within the same tax jurisdiction, is as follows:

Deferred tax liabilities

December 30, 2018

Tax recorded through net earnings (loss)

Assumed as a result of business acquisition

Cumulative translation adjustment 

Property 
Plant and 
Equipment

Goodwill and 
Intangibles

Right of Use 
Assets

Other

Total

(11,799)   

(127,311)   

—   

(1,079)  $ 

(140,189) 

7,639   

(28,565)   

(1,586)   

(2,724)   

(36,269)   

—   

(935)   

—   

—   

3,854   

(5,643)   

—   

(18,658) 

(44,636) 

(935) 

December 29, 2019

(16,109)   

(156,876)   

(28,565)   

(2,868)   

(204,418) 

Tax recorded through net earnings (loss)

Assumed as a result of business acquisition

Cumulative translation adjustment 

(4,272)   

—   

—   

5,237   

400   

(892)   

2,415   

(360)   

—   

—   

—   

—   

3,020 

400 

(892) 

December 27, 2020

$ 

(20,381)  $ 

(152,131)  $ 

(26,150)  $ 

(3,228)  $ 

(201,890) 

27 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

15.  DEFERRED TAXES AND INCOME TAX EXPENSE (Continued)

Reserves 
and 
accruals  
not 
currently 
deductible

Deferred tax assets

Tax 

Credits Provisions

Property 
Plant and 
Equipment

Right of 
Use 
Assets

Loss carry 
forward

Pension

Deferred   
Financing 
Costs and 
Interest

Other

Total

December 30, 2018  

14,576   

1,086   

30,471   

—   

—   

2,613   

1,762   

2,059    4,501  $  57,068 

Tax recorded 
through net earnings

Tax recorded 
through other 
comprehensive 
income

Tax recorded 
through equity
Assumed as a result 
of business 
acquisition

Exchange rate 
differences

11,457   

(1,086)   

(8,066)   

—    29,831   

8,930   

185   

(645)    (2,606)    38,000 

—   

—   

—   

17   

—   

—   

—   

—   

—   

—   

—   

35   

—   

—   

—   

—   

—   

—   

—   

—   

—   

1,530   

—   

—   

1,530 

—   

—   

—   

(53)   

(53) 

—   

—   

—    2,786   

2,786 

3   

2   

2   

5   

64 

December 29, 2019 $  26,050  $ 
Tax recorded 
through net earnings 
(loss)

1,612   

—  $  22,440  $ 

—  $  29,831  $  11,546  $  3,479  $ 

1,416  $ 4,633  $  99,395 

—   

880   

61   

(1,884)   

16,723   

(22)   

(155)    4,701  $  21,916 

Tax recorded 
through other 
comprehensive 
income (loss)

Tax recorded 
through equity

Assumed as a result 
of business 
acquisition

Exchange rate 
differences

—   

—   

—   

—   

—   

—   

—   

—   

—   

—   

—   

3,335   

—   

—  $  3,335 

—   

—   

—   

161  $ 

161 

—   

—   

—   

—   

—   

—   

—   

—   

(146)  $ 

(146) 

141   

—   

122   

—   

162   

63   

19   

8   

25  $ 

540 

December 27, 2020 $  27,803  $ 

—  $  23,442  $ 

61  $  28,109  $  28,332  $  6,811  $ 

1,269  $ 9,374  $ 125,201 

Deferred  income  tax  assets  are  recognized  for  income  tax  loss  carry-forwards  to  the  extent  that  the  realization  of  the  related  tax 
benefit through future taxable profits is probable.  At December 27, 2020, the Company has recognized all of its deferred income tax 
assets with the exception of $6.8 million of net operating losses in the U.S, which were acquired through the acquisition of ADL, and 
$23.2 million of tax credits shown below.  These losses are restricted to a maximum utilization of $0.2 million per year. At December 
27, 2020 the Company has the following tax credits and loss pools expiring as follows: 

2021-2026

2027

2028

2029

2030

2031-2037

2038

2039

2040

2041-2063

No expiry

28 

NFI GROUP INC 2020 ANNUAL REPORT

United States

Canada

Other

Tax Credits

Tax Losses

Tax Losses

Tax Losses

—   

1,501 

5,049   

1,146   

2,349   

14,620   

—   

—   

—   

—   

—   

—   

250 

250 

250 

222 

1,078 

154 

154 

154 

3,676 

— 

— 

— 

— 

— 

— 

320 

11,673 

25,532 

20,207 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

65,321 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

15.  DEFERRED TAXES AND INCOME TAX EXPENSE (Continued)

The reconciliation of income tax computed at the U.S. statutory rate, to income tax expense is as follows:

Earnings before income tax expense

Tax calculated using a 21% U.S. tax rate 

Tax effect of:

Withholding and other taxes

Non-taxable income

Non-deductible impairment loss on goodwill

Revision of tax estimates

Foreign exchange impact

State taxes

Impact of rate change on deferred income taxes

Foreign tax credit pools and base erosion and anti-abuse tax

Rate differential on income taxed at other than U.S. statutory rate

Other

Income tax expense

Current income taxes

Deferred income taxes recovered

Income tax expense for the period

16.  LONG-TERM DEBT

Fiscal 2020

Fiscal 2019

$ 

(156,092)  $ 

99,695 

(32,779)

20,936

2,869

(1,231)

10,746

2,278

(138)

(406)

3,695

20,356

(3,869)

123

3,747

(6,007)

—

3,974

(1,896)

11,873

(528)

10,482

(728)

144

$ 

$ 

$ 

1,644  $ 

41,997 

26,580  $ 

61,339 

(24,936)

(19,342)

1,644  $ 

41,997 

Revolving Credit Facility, Secured (“Credit Facility”)

Revolving Credit Facility, Secured ("UK Facility")

Face Value Unamortized 
Transaction 
Costs

Net Book Value
December 27, 
2020

Net Book Value
December 29, 
2019

1,063,100  

65,136  

1,128,236  

2,253 

298 

2,551 

1,060,847

1,053,126

64,838  

— 

1,125,685

1,053,126

The Credit Facility has a total borrowing limit of $1.250 billion, which includes a $100 million letter-of-credit facility and a $250 million 
accordion  feature.    $11.8  million  of  outstanding  letters-of-credit  were  drawn  against  the  Credit  Facility  at  December  27,  2020.  The 
Credit Facility bears interest at a rate equal to LIBOR or a U.S. base rate for loans denominated in U.S. dollars and a Canadian prime 
rate or bankers' acceptance rate for loans denominated in Canadian dollars, plus an applicable margin to those rates and matures on 
August 2, 2024.

On April 23, 2020 NFI entered into the $250 million unsecured, one-year Sidecar facility that could be utilized for general  corporate 
purposes. Amounts drawn under the Sidecar were to bear interest at a rate equal to LIBOR or a U.S. base rate for loans denominated in 
U.S.  dollars  and  a  Canadian  prime  rate  or  bankers'  acceptance  rate  for  loans  denominated  in  Canadian  dollars,  plus  an  applicable 
margin to those rates. No amounts were drawn under the Sidecar and it was terminated on December 23, 2020.

On May 4, 2020 NFI entered into the £50 million unsecured, revolving UK Facility to support ADL's operations in the UK. The facility has 
a two year term with options to extend. Amounts drawn under the UK Facility bear interest at a rate equal to LIBOR plus an applicable 
margin. The UK Facility matures on May 4, 2022. 

17.  SHARE CAPITAL

Authorized - Unlimited

December 27, 2020

December 29, 2019

Issued - 62,524,842 Common Shares (December 29, 2019: 62,493,880)

$ 

681,405  $ 

680,962 

29 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

17. SHARE CAPITAL( Continued)

Share repurchase

On June 12, 2019, the Company announced the TSX had accepted a notice filed by the Company of its intention to implement a new 
Normal Course Issuer Bid (the "NCIB") to replace the previous Normal Course Issuer Bid to repurchase its Shares through the facilities of 
the TSX and any alternative Canadian trading systems on which the Shares are traded. The Company was permitted to repurchase for 
cancellation  up  to  5,357,914  Shares,  representing  approximately  10%  of  the  outstanding  public  float  of  Shares  on  June  4,  2019.  The 
Company  was  permitted  to  repurchase  Shares  under  the  NCIB  commencing  June  17,  2019  up  to  June  16,  2020,  or  earlier  should  the 
Company complete its repurchases prior to such date.

There were no shares purchased or canceled under the NCIB in 2020. The NCIB expired on June 16, 2020. The Company did not file for 
another normal course issuer bid to replace the expired NCIB.

The following is a summary of changes to the issued and outstanding capital stock during the period:

Shares

Balance – December 29, 2019

Stock options exercised

Restricted share units exercised

Balance – December 27, 2020

18.  EARNINGS PER SHARE

Number 
(000s)

Net Book Value

62,494 $ 

680,962 

9

22 

96

347

62,525 $ 

681,405 

Net (loss) earnings attributable to equity holders

Fiscal 2020

Fiscal 2019

$ 

(157,736)  $ 

57,698 

Weighted average number of Shares in issue

62,510,544

61,809,479

Add: net incremental Shares from assumed conversion of stock options and exercise of restricted 

share units

Weighted average number of Shares for diluted earnings per Share

Net (loss) earnings per Share (basic)

Net (loss) earnings per Share (diluted)

— 

188,398

62,510,544

61,997,877

$ 

$ 

(2.5234)  $ 

(2.5234)  $ 

0.9335 

0.9306 

Basic earnings per Share is calculated by dividing the net earnings (loss) attributable to equity holders of the Company by the weighted 
average number of Shares outstanding during the period.

Diluted earnings per Share is calculated using the same method as basic earnings per Share except that the average number of Shares 
outstanding includes the potential dilutive effect of outstanding stock options and restricted share units granted by the Company, as 
determined by the treasury stock method.

30 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

19.  SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash working capital items

Cash inflow (outflow)

Accounts receivable

Income tax receivable

Inventories

Prepaid expenses and deposits

Accounts payable and accrued liabilities

Deferred revenue

Provisions

Other

Fiscal 2020

Fiscal 2019

$ 

105,328  $ 

—   

22,483   

(3,214)   

(64,001)   

7,336   

(11,764)   

12,594   

$ 

68,762  $ 

(63,592) 

15,111 

(40,147) 

5,627 

42,474 

(4,786) 

(16,724) 

(29,287) 

(91,324) 

20. DEFINED CONTRIBUTION PENSION PLANS

The  Company  maintains  a  defined  contribution  plan  for  salaried  employees.  The  net  pension  expense  for  the  Company's  defined 
contribution plans is as follows:

Defined contribution pension expense

Fiscal 2020

$ 

12,783  $ 

Fiscal 2019
9,767 

Cash payments contributed by the Company during Fiscal 2020 for its defined benefit and defined contribution pension plans amounted 
to $18.5 million (2019: $17.6 million).

21.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a)  Financial Instruments

The Company has made the following classifications:

Cash

Long-term deposit

Receivables

Deposits

Accounts payables and accrued liabilities

Other long-term liabilities

Long-term debt

Derivative financial instruments

Fair value through profit or loss

Fair value through profit or loss

Amortized cost

Amortized cost

Amortized cost

Amortized cost

Amortized cost

Fair value through profit or loss

(b)  Fair value measurement of financial instruments

The  Company  categorizes  its  fair  value  measurements  of  financial  instruments  recorded  at  fair  value  according  to  a  three-level 
hierarchy.  The  hierarchy  prioritizes  the  inputs  used  by  the  Company’s  valuation  techniques.  A  level  is  assigned  to  each  fair  value 
measurement  based  on  the  lowest  level  input  significant  to  the  fair  value  measurement  in  its  entirety.  The  three  levels  of  the  fair 
value hierarchy are defined as follows:

Level 1 - fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the 
Company has the ability to access at the measurement date.

31 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

21.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

Level 2 - fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or 
liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for 
identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates and 
credit risks) and inputs that are derived from or corroborated by observable market data.

Level 3 - fair value measurements using significant non-market observable inputs. These include valuations for assets and liabilities that 
are derived using data, some or all of which is not market observable data, including assumptions about risk.

The following table presents the carrying amounts and fair values of financial liabilities and financial assets, including their levels in 
the  fair  value  hierarchy.    The  table  excludes  fair  value  information  for  financial  assets  and  financial  liabilities  not  measured  at  fair 
value if the carrying amount is a reasonable approximation of fair value.

Financial assets recorded at fair value

Cash

Long-term restricted deposit

Foreign exchange forward contracts

Derivative financial instrument assets - current

Financial liabilities recorded at fair value

Total return swap contracts

Derivative financial instrument liabilities - current

Interest rate swap

Derivative financial instrument liabilities - long term

Financial assets recorded at fair value

Cash

Long-term restricted deposit

Financial liabilities recorded at fair value

Total return swap contracts

Foreign exchange forward contracts

Derivative financial instrument liabilities - current

Interest rate swap

Derivative financial instrument liabilities - long term

(c)  Risk Management 

December 27, 2020

Fair value 
level

Carrying 
amount

Fair value

Level 1 $ 

Level 1 $ 

55,769  $ 

30,000  $ 

55,769 

30,000 

Level 2 $ 

$ 

4,490  $ 

4,490  $ 

4,490 

4,490 

Level 2 $ 

$ 

1,078  $ 

1,078  $ 

1,078 

1,078 

Level 2 $ 

$ 

33,069  $ 

33,069  $ 

33,069 

33,069 

December 29, 2019

Fair value 
level

Carrying 
amount

Fair value

Level 1 $ 

Level 1 $ 

28,233  $ 

14,490  $ 

28,233 

14,490 

Level 2 $ 

Level 2 $ 

$ 

944  $ 

3,707  $ 

4,651  $ 

944 

3,707 

4,651 

Level 2 $ 

$ 

15,388  $ 

15,388  $ 

15,388 

15,388 

The  Company  uses  derivative  financial  instruments  including  interest  rate  swaps,  total  return  swaps  and  forward  foreign  exchange 
contracts.  These instruments are financial contracts whose value depends on interest rates, share price and foreign currency prices.

The  use  of  derivatives  allows  the  transfer,  modification  and  reduction  of  current  and  expected  risks,  including  interest  rate,  share 
price, foreign exchange and other market risks. The Company uses derivative financial instruments to manage interest rate, share price 
and foreign exchange risks in accordance with its risk management policies. Certain derivative instruments, while providing effective 
economic  hedges,  are  not  designated  as  hedges  for  accounting  purposes.  Changes  in  the  fair  value  of  any  derivatives  that  are  not 
designated as hedges for accounting purposes are recognized within “interest and finance costs” or “unrealized foreign exchange loss 
(gain)  on  non-current  monetary  items”  in  the  consolidated  statements  of  net  earnings  (loss)  and  total  comprehensive  income  (loss) 
consistent with the underlying nature and purpose of the derivative instruments.

32 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

21.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

Market risk (interest rate risk and foreign currency risk)

Market risk incorporates a range of risks. Movements in risk factors, such as interest rate risk, equity price risk and foreign currency 
risk, affect the fair values of financial assets and liabilities. The Company uses derivative financial instruments including interest rate 
swaps,  foreign  exchange  options  and  forwards  foreign  exchange  contracts  to  manage  its  risks  associated  with  potentially  adverse 
changes in interest rates and foreign exchange rates. These instruments are financial contracts whose values depends on interest rates 
and  foreign  currency  prices.  The  use  of  derivatives  allows  the  transfer,  modification  and  reduction  of  current  and  expected  risks, 
including interest rate, foreign exchange and other market risks. The Company uses derivative financial instruments to manage interest 
rate and foreign exchange risks in accordance with its risk management policies. 

The  Company  does  not  hold  financial  instruments  for  speculative  or  trading  purposes.  The  Company  elected  not  to  apply  hedge 
accounting to its derivative financial instruments. 

Interest rate risk

The Company's borrowing under the Credit Facility are at variable rates of interest and expose the Company to interest rate risk. The 
Company  attempts  to  mitigate  this  risk  through  interest  rate  swaps  that  could  become  materially  more  expensive  if  interest  rates 
increase  or  become  more  volatile.  If  the  cost  of  mitigating  interest  rate  increases,  the  Company's  debt  service  obligations  on  its 
variable rate indebtedness would increase even though the amount borrowed remained the same, and the Company's net earnings and 
cash available for servicing its other indebtedness would decrease. 

The  interest  rate  swap  is  subject  to  interest  rate  risk.  As  an  illustration,  if  the  interest  rates  at  the  Consolidated  Statements  of 
Financial Position date had been 100 basis points lower, with all other variable held constant, net loss and comprehensive loss for Fiscal 
2020  would  have  been  higher  by  $17.9  million  (Fiscal  2019:  $15.3  million),  arising  mainly  as  a  result  of  the  related  fair  value 
adjustment  recorded  due  to  lower  interest  rate.  If  interest  rates  had  been  100  basis  points  higher,  with  all  other  variables  held 
constant, net loss and comprehensive loss for Fiscal 2020 would have been lower by $17.9 million (Fiscal 2019: $14.8 million), arising 
mainly as a result of the related fair value adjustment recorded due to higher interest rate. 

On February 13, 2019, the Company blended the unrealized gain from the existing swap into a $600 million amortizing notional interest 
rate swap designed to hedge floating rate exposure on the Credit Facility.  The interest rate swap fixes the interest rate at 2.27% plus 
applicable margin until October 2023.

On  July  9,  2020,  the  Company  entered  into  a  $200  million  amortizing  notional  interest  rate  swap  designed  to  hedge  floating  rate 
exposure on its Credit Facility. The interest rate swap fixes the interest rate at 0.243% plus applicable margin until July 2025. The swap 
begins amortizing on December 9, 2022 at a rate of $20 million per annum. 

Equity price risk

The  Company  entered  into  a  total  return  swap  transaction  to  hedge  the  exposure  associated  with  increases  in  its  share  value  on  a 
portion of the outstanding performance share units, restricted share units, and deferred share units. The total return swap has a re-
investment feature which increases the number of Shares in the swap when dividends are paid by the Company. As at December 27, 
2020  the  Company  held  a  position  of  246,136  Shares  at  a  weighted  average  price  of  C$30.28.  The  Company  does  not  apply  hedge 
accounting  to  these  derivative  instruments  and  as  such,  gains  and  losses  arising  from  marking  these  derivatives  to  market  are 
recognized in net earnings in the period in which they arise.

Foreign currency risk

The  United  States  dollar  is  the  Company's  functional  currency.  Fluctuations  in  the  exchange  rate  between  the  United  States  dollar, 
Canadian dollar and GBP will affect the Company's reported results. However, the impact of changes in foreign exchange rates on the 
Company's reported results differ over time depending on whether the Company is generating a net cash inflow or outflow of Canadian 
dollars  and  GBP.  This  is  largely  dependent  on  the  Company's  revenue  mix  by  currency  as  operating  costs  denominated  in  Canadian 
dollars and GBP have been historically relatively stable.

During Fiscal 2020, the Company generated a net outflow of Canadian dollars. As a matter of policy, the Company enters into foreign 
exchange forward contracts to protect the expected net Canadian dollar exposure from exchange fluctuation. The Company recorded a 
net realized foreign exchange gain of $1.5 million during Fiscal 2020 (Fiscal 2019: gain of $1.0 million). This was comprised of a $3.6 
million  gain  on  settlement  of  foreign  exchange  contracts  and  a  $2.1  million  foreign  currency  loss  on  translation  of  Canadian  dollar 
denominated working capital and dividends. 

At December 27, 2020, the Company had $85 million of foreign exchange forward contracts to buy currencies in which the Company 
operates with U.S. dollars, Canadian dollars, or GBP. These foreign exchange contracts range in expiry dates from December 2020 to 
May 2021. The related asset of $4.5 million (December 29, 2019: $3.7 million liability) is recorded on the consolidated statements of 

33 

NFI GROUP INC 2020 ANNUAL REPORT

NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

21.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

financial  position  as  a  current  derivative  financial  instruments  asset  and  the  corresponding  change  in  the  fair  value  of  the  foreign 
exchange forward contracts is recorded in the consolidated statements of net earnings (loss) and total comprehensive income (loss). 

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign 
exchange rates. The Company is exposed to currency risk, primarily Canadian dollar balances. As an illustration, at December 27, 2020 
if the Canadian dollar had weakened 10 percent against the U.S. dollar, with all variable held constant, net loss for Fiscal 2020 would 
have been higher by $0.6 million (Fiscal 2019: $3.2 million). Conversely, if the Canadian dollar had strengthened 10 percent against the 
U.S.  dollar,  with  all  other  variables  held  constant,  net  loss  would  have  been  lower  by  $0.7  million  for  Fiscal  2020  (Fiscal  2019:  $3.9 
million). 

(d)  Liquidity Management 

The Company’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet 
liabilities when due. At December 27, 2020, the Company had a cash balance of $55.8 million (December 29, 2019: $28.2 million), the 
$1.063  billion  under  the  Credit  Facility  due  in  2024  (December  29,  2019:  $1.056  billion),  $65.1  million  under  the  UK  Facility  due  in 
2022, and $11.8 million of outstanding letters of credit (December 29, 2019: $12.8 million). In addition, there are $52.1 million of the 
letters  of  credit  outstanding  outside  of  the  Credit  Facility.  The  Credit  Facility  has  a  total  borrowing  limit  of  $1.250  billion,  which 
includes  a  $100  million  letter-of-credit  facility  and  a  $250  million  accordion  feature.  The  UK  Facility  has  a  total  borrowing  limit  of 
£50.0 million. The liquidity position as at December 27, 2020 is $233.5 million.

The  Company’s  principal  sources  of  funds  are  cash  generated  from  its  operating  activities,  share  issuances  and  borrowing  capacity 
remaining  under  the  credit  facilities.  Management  believes  these  sources  of  funds  together  with  access  to  equity  markets  and  other 
borrowings will provide NFI with sufficient liquidity and capital resources to meet its current and future financial obligations as they 
come due, as well as to provide funds for its financing requirements, capital expenditures and other needs for the foreseeable future.

The following table outlines the maturity analysis of the undiscounted cash flows of certain non-financial liability and committed leases 
as at December 27, 2020:

US dollars in thousands

Leases

Accrued benefit liability

Credit risk

Total

2021

2022

2023

2024

2025

Post 
2025

  194,376   

22,204   

21,040   

18,498   

13,571   

10,083    108,980 

2,911   

2,911   

—   

—   

—   

—   

— 

$ 197,287  $  25,115  $  21,040  $  18,498  $  13,571  $  10,083  $  108,980 

Financial instruments which potentially subject the Company to credit risk and concentrations of credit risk consist principally of cash, 
accounts  receivable  and  derivative  financial  instruments.  Management  has  assessed  that  the  credit  risk  associated  with  accounts 
receivable is mitigated by the significant proportion for which the counterparties are well-established transit authorities.

Additionally, up to 80% of the capital cost of new transit buses and coaches sold to public transit authorities and municipalities in the 
United  States  typically  come  from  the  U.S.  Federal  Transit  Administration,  while  the  remaining  20%  comes  from  state  and  municipal 
sources. The maximum exposure to the risk of credit for accounts receivable corresponds to their book value. Historically, the Company 
has experienced nominal bad debts as a result of the customer base being principally comprised of municipal and other local transit 
authorities.  During  Fiscal  2020,  the  Company  recorded  a  bad  debt  expense  of  $574  as  compared  to  $177  bad  debt  expense  in  Fiscal 
2019.

The  carrying  amount  of  accounts  receivable  is  reduced  through  the  use  of  an  allowance  account  and  the  amount  of  the  loss  is 
recognized  in  the  consolidated  statements  of  net  earnings  (loss)  and  total  comprehensive  income  (loss)  within  “sales,  general  and 
administration costs and other operating expenses”. When a receivable balance is considered uncollectible, it is written off against the 
allowance  for  doubtful  accounts.  Subsequent  recoveries  of  amounts  previously  written  off  are  credited  against  “sales,  general  and 
administration costs and other operating expenses”:

34 

NFI GROUP INC 2020 ANNUAL REPORT

 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

21.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

Current, including holdbacks

Past due amounts but not impaired

1 – 60 days

Greater than 60 days

Less: Allowance for doubtful accounts

Total accounts receivables, net

December 27, 2020

December 29, 2019

$ 

380,328  $ 

482,476 

39,988   

7,081   

(989)   

$ 

426,408  $ 

37,413 

6,800 

(284) 

526,405 

As at December 27, 2020, there was no amount that would otherwise be past due or impaired whose terms have been renegotiated.

The  counterparties  to  the  Company's  derivatives  are  significant  financial  institutions.  The  Company  could  be  exposed  to  loss  in  the 
event  of  non-performance  by  the  counterparty;  however,  credit  ratings  and  concentration  of  risk  of  the  financial  institutions  are 
monitored on a regular basis.

On December 23, 2020, the Company amended its $1.250 billion Credit Facility and its UK Facility (together the "amended facilities").  
The  amended  facilities  provide  the  Company  with  relaxed  covenants  as  it  recovers  from  the  impacts  of  the  COVID-19  pandemic.  In 
addition to amending the facilities, the Company terminated the unused Sidecar facility.

Under the terms of the amended facilities, the total leverage and interest coverage ratios for 2021 and 2022 have been relaxed. During 
2021, the Company has received a waiver of the total net leverage covenant and will instead need to comply with a total net leverage 
ratio that is based on a financial projection for the Company’s 2021 fiscal period. 

Beginning in 2022, the Company will be required to maintain a total net leverage ratio of less than 5.00 to 1 from January 3, 2022 until 
April 3, 2022; of less than 4.50 to 1 from April 4, 2022 to July 3, 2022; of less than 4.25 to 1 from July 4, 2022 until October 2, 2022; 
and of less than 3.75 to 1 at all times thereafter. 

The Company will also have to comply with a $50 million minimum liquidity covenant at all times until the total net leverage covenant 
is less than 3.75x, a total net debt to capitalization ratio of less than 0.70:1.00 during 2021, and an interest coverage ratio of at least 
2.25x during 2021 and 3.00x beginning in the first quarter 2022. The amended facilities require the dividend payment not exceed the 
current level.

Adjusted EBITDA is calculated on a rolling last twelve-month basis, provided that for those calculations required on April 4, 2021, the 
rolling period is calculated as Adjusted EBITDA for the three Fiscal Quarters ending April 4, 2021, December 27, 2020 and September 
27, 2020 multiplied by 4/3.

Under the amended facilities the Company has until February 23, 2021 to provide the lenders security on certain of its assets, including 
a general security agreement on NFI's personal property, but excluding security on real property. The financing security arrangements 
were put in place on February 19, 2021. The general security agreement is in place until the later of April 3, 2023 or the date on which 
NFI has delivered two consecutive fiscal quarters with a total leverage ratio at less than 3.75 to 1. 

Management believes the Company’s cash position, anticipated future revenues, liquidity from credit facilities together with access to 
equity markets and other borrowings are sufficient to support current operations, dividends and strategic initiatives.

The calculation of the financial covenants at December 27, 2020  are provided below. As at December 27, 2020, the Company was in 
compliance with the requirements.

Total Leverage Ratio (must be less than 6.25 [2019: 4.25])

Interest Coverage Ratio (must be greater than 3.00 [2019: 3.00])

4.90

4.11

3.24

7.73

December 27, 2020

December 29, 2019

US dollars in thousands

Liquidity Position (must be greater than $50 million)

December 27, 2020

$ 

233,459 

Compliance  with  financial  covenants  is  reported  quarterly  to  the  Board.  Other  than  the  requirements  imposed  by  borrowing 
agreements, the Company is not subject to any externally imposed capital requirements. Capital management objectives are reviewed 
on an annual basis or when strategic capital transactions arise. 

35 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

21.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

(e) Capital management

The Company's objectives in managing capital are to deploy capital to provide an appropriate return to shareholders and to maintain a 
capital  structure  that  provides  the  flexibility  to  take  advantage  of  growth  and  development  opportunities,  maintain  existing  assets, 
meet financial obligations and enhance the value of the Shares. The capital structure of the Company consists of cash, long-term debt, 
other long-term liabilities and shareholders’ equity. The Company manages capital to ensure an appropriate balance between debt and 
equity.  In  order  to  maintain  or  adjust  its  capital  structure,  the  Company  may  issue  additional  Shares,  repurchase  Shares,  borrow 
additional funds or refinance debt at different terms and conditions.

22.  SEGMENT INFORMATION

The  Company  has  two  reportable  segments  which  are  the  Company’s  strategic  business  units:  bus/coach  manufacturing  operations, 
medium-duty/cutaway manufacturing operations ("Manufacturing Operations") and Aftermarket Operations. The strategic business units 
offer different products and services, and are managed separately because they require different technology and marketing strategies. 
For each of the strategic business units, the Company’s President and CEO reviews internal management reports on a monthly basis. 

The Manufacturing Operations segment derives its revenue from the manufacture, service and support of new transit buses, coaches, 
medium-duty and cutaway buses. Based on management’s judgment and applying the aggregation criteria in IFRS 8.12, the Company’s 
bus/coach  manufacturing  operations  and  medium-duty/cutaway  manufacturing  operations  fall  under  a  single  reportable  segment. 
Aggregation  of  these  operating  segments  is  based  on  the  segments  having  similar  economic  characteristics  with  similar  long-term 
average returns, products and services, production methods, distribution, geographic market and regulatory environment.

The Manufacturing Operations segment has recorded vendor rebates of $278 (2019: $413), which have been recognized into earnings 
during 2020, but for which the full requirements for entitlement to these rebates have not yet been met.

The Aftermarket Operations segment derives its revenue from the sale of aftermarket parts for transit buses and motor coaches and 
medium-duty and cutaway buses. 

There  is  no  inter‑segment  revenue.  Unallocated  items  in  the  consolidated  earnings  before  income  taxes  primarily  include  unrealized 
foreign exchange gains or losses, interest and finance costs and corporate overhead costs. 

The  unallocated  total  assets  of  the  Company  primarily  include  cash,  certain  goodwill  and  intangible  assets,  derivative  financial 
instruments  and  deferred  income  tax  assets.  Corporate  assets  that  are  shared  by  both  operating  segments  are  allocated  fully  to  the 
Manufacturing Operations segment.

Segment information about profits and assets is as follows:

Revenue from external customers

Operating costs and expenses

Fiscal 2020

Manufacturing 
Operations

Aftermarket 
Operations

Unallocated

Total

$ 

2,017,729  $ 

401,446   

—  $ 

2,419,175 

2,133,872   

349,342   

92,053   

2,575,267 

Earnings (loss) before income tax expense

(116,143)   

52,104   

(92,053)   

(156,092) 

Total assets

1,966,973   

487,580   

301,362   

2,755,915 

Addition of capital expenditures

Addition of goodwill and intangibles assets

Impairment loss on goodwill

Indefinite-life intangible assets

Goodwill

24,989   

10,413   

(50,790)   

248,231   

340,389   

714   

—   

—   

18,968   

189,098   

—   

—   

—   

—   

—   

25,703 

10,413 

(50,790) 

267,199 

529,487 

36 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

22.  SEGMENT INFORMATION (Continued)

Revenue from external customers

Operating costs and expenses

Fiscal 2019

Manufacturing 
Operations

Aftermarket 
Operations

Unallocated

Total

$ 

2,476,020  $ 

417,416   

— 

2,893,436

2,350,710   

353,805   

89,226 

2,793,741

Earnings (loss) before income tax expense

125,310   

63,611   

(89,226) 

99,695

Total assets

Addition of capital expenditures

Addition of goodwill and intangibles assets

Indefinite-life intangible assets

Goodwill

2,272,684   

421,693   

261,384 

2,955,761

36,195   

1,380   

250,174   

246,843   

25,674   

18,746   

416,934   

151,974   

— 

— 

—   

—   

37,575

275,848

265,589 

568,908 

Goodwill and intangible assets related to the acquisition of ADL had been provisionally allocated as at December 29, 2019. Comparative 
figures have not been restated to reflect final segment purchase price allocation.

The Company's revenue by geography is summarized below:

North America

UK and Europe

Asia Pacific

Other

Total

$ 

$ 

Fiscal 2020

1,966,558  $ 

332,512   

117,745   

2,360   

Fiscal 2019

2,508,199 

320,116 

63,703 

1,418 

2,419,175  $ 

2,893,436 

The Company's disaggregated manufacturing revenue by major product type is provided below.  The Aftermarket operations revenue 
does not have similarly disaggregated categories.

Transit buses

Motor coaches

Medium-duty and cutaway buses

Pre-owned coach

Infrastructure solutions

Fiberglass reinforced polymer components

Manufacturing revenue

The allocation of property, plant and equipment to geographic area is as follows:

North America

UK and Europe

Asia Pacific

Other

Total

37 

NFI GROUP INC 2020 ANNUAL REPORT

Fiscal 2020

$ 

1,593,390  $ 

334,421   

41,712   

18,424   

24,714   

5,068   

Fiscal 2019

1,841,055 

526,539 

49,816 

45,951 

6,071 

6,588 

$ 

2,017,729  $ 

2,476,020 

December 27, 2020

December 29, 2019

$ 

$ 

190,372  $ 

40,829   

949   

—   

232,150  $ 

224,085 

43,623 

1,040 

— 

268,748 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

23.  RELATED PARTY TRANSACTIONS

Compensation of key management

Key  management  includes  the  roles  of  the  Board,  President  and  CEO,  the  CFO,  Presidents  of  each  business  unit,  executive  vice 
presidents and vice presidents. The compensation expense for key management for employee services is shown below:

Salaries and short-term employee benefits
Post-employment benefits
Share-based payment benefits

Fiscal 2020

$ 

$ 

9,692  $ 
455
3,821
13,968  $ 

Fiscal 2019
8,333 
414
1,433
10,180 

Share-based payment benefits shown above represent the PSU, RSU, Director RSU, DSU and stock option expense that was recorded in 
the period. 

24.  COMMITMENTS AND CONTINGENCIES

(a) 

In the normal course of business, the Company receives notice of potential legal proceedings or is named as a defendant in legal 
proceedings,  including  those  that  may  be  related  to  product  liability,  wrongful  dismissal  or  personal  injury.  Many  claims  are 
covered  by  the  Company's  insurance  policies  and  management  does  not  expect  any  of  the  current  claims  to  have  a  material 
adverse effect on the Company’s financial position, results of operations or cash flows.

(b)  Through  the  normal  course  of  operations,  the  Company  has  indemnified  the  surety  companies  providing  surety  bonds  required 
under various contracts with customers. In the event that the Company fails to perform under a contract and the surety companies 
incur a cost on a surety bond, the Company is obligated to repay the costs incurred in relation to the claim up to the value of the 
bond. 

The  Company's  guarantee  under  each  bond  issued  by  the  surety  companies  expires  on  completion  of  obligations  under  the 
customer contract to which the bond relates. The estimated maturity dates of the surety bonds outstanding at December 27, 2020 
range from January 2021 to December 2026.

At December 27, 2020, outstanding surety bonds guaranteed by the Company totaled $357.2 million (December 29, 2019: $384.5 
million). The Company has not recorded any liability under these guarantees, as management believes that no material events of 
default exist under any contracts with customers.

  (c)  The  Company  has  a  letter  of  credit  sub-facility  of  $100.0  million  as  part  of  the  Credit  Facility  (December  29,  2019:  $100.0 
million). As at December 27, 2020, letters of credit totaling $11.8 million (December 29, 2019: $12.8 million) remain outstanding 
as security for contractual obligations of the Company under the Credit Facility.

The Company has an additional bi-lateral credit facility of £50.0 million.  As at December 27, 2020, letters of credit totaling $22.1 
million were outstanding under the bi-lateral credit facility.  Additionally, there are $30.0 million of letters of credit outstanding 
outside of the Credit Facility and the bi-lateral credit facility.

As at  December  27, 2020, management believes that the Company was in compliance in all material respects with all applicable 
contractual obligations and the Company has not provided for any costs associated with these letters of credit.

25.  GUARANTEES

The  Company  indemnifies  its  directors  and  officers  against  claims  and  damages  that  may  be  incurred  in  the  performance  of  their 
services to the Company.  Liability insurance has been purchased with respect to the Company’s directors and officers.

26.  SUPPLEMENTARY EXPENSE INFORMATION

Employee benefit expense
Depreciation of plant and equipment
Amortization of intangible assets

$ 

Fiscal 2020

317,451  $ 
70,333 
40,451 

Fiscal 2019
445,167 
61,985
42,585

The expenses listed above are included in cost of sales and sales, general and administration costs and other operating expenses.

38 

NFI GROUP INC 2020 ANNUAL REPORT

 
 
 
NFI GROUP INC. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
As at December 27, 2020
(in thousands of U.S. dollars except per share figures)

27.  GOVERNMENT GRANTS

On March 27, 2020, the Canada Emergency Wage Subsidy ("CEWS") program was introduced by the Government of Canada, reimbursing 
eligible  employers  who  have  experienced  the  required  reduction  in  revenue  for  a  portion  of  wages  paid  to  employees  during  the 
COVID-19 pandemic.

The  claims  submitted  or  expected  to  be  submitted  under  the  CEWS  program  are  $31.9  million  for  the  fiscal  period,  $9.7  million  of 
which is included in 'Accounts Receivable' on the Company's audited consolidated statement of financial position at December 27, 2020. 
In accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, the CEWS has been recognized 
as an offset to wage expense ($25.9 million against 'Cost of Sales' and $4.6 million against 'Selling, General and Administration Costs and 
Other  Operating  Expenses')  on  the  Company's  audited  consolidated  statement  of  net  earnings  (loss)  and  total  comprehensive  income 
(loss). An additional $1.4 million was used to reimburse employee vacation credits. The Company will continue to evaluate its eligibility 
under the CEWS program in subsequent periods.

On March 26, 2020, the Coronavirus Job Retention Scheme ("CJRS") program was introduced by the Government of the United Kingdom, 
reimbursing employers who have been unable to maintain their workforce as a result of COVID-19's impact on operations for a portion 
of wages paid to furloughed employees. 

The  claims  submitted  under  the  CJRS  program  are  $23.0  million  for  the  fiscal  period,  $1.0  million  of  which  is  included  in  'Accounts 
Receivable'  on  the  Company's  audited  consolidated  statement  of  financial  position  at  December  27,  2020.  In  accordance  with  IAS  20 
Accounting  for  Government  Grants  and  Disclosure  of  Government  Assistance,  the  CJRS  has  been  recognized  as  an  offset  to  wage 
expense  ($20.8  million  against  'Cost  of  Sales'  and  $2.2  million  against  'Selling,  General  and  Administration  Costs  and  Other  Operating 
Expenses') on the Company's audited consolidated statement of net earnings (loss) and total comprehensive income (loss). The Company 
will continue to evaluate its eligibility under the CJRS program in subsequent periods.

28.  RESTRUCTURING

On July 27, 2020, the Company announced the NFI Forward restructuring initiative ("NFI Forward").  NFI Forward is a transformational 
initiative  expected  to  generate  cost  savings  by  the  end  of  fiscal  2022.  These  cost  reduction  initiatives  are  expected  to  come  from  a 
reduced number of business units, facility rationalization, reduced overhead and a more efficient and integrated company. The items 
included in net income (loss) for NFI Forward are as follows:

Employee termination benefits (note 14)

Right-of-use asset impairments (note 6)

Write-down of inventory to net realizable value (note 4)

Write-down of property, plant and equipment (note 5)

Other

Total restructuring costs

Fiscal 2020

$ 

18,701 

3,597 

1,849 

1,728 

568 

$ 

26,443 

29.  SUBSEQUENT EVENT

On February 3, 2021, the Company entered into an agreement with a syndicate of underwriters (the "Underwriters"), pursuant to which 
the Company will issue from treasury, and the Underwriters will purchase on a bought deal basis, 8,446,000 common shares at a price 
of C$29.60 per share for gross proceeds to the Company of C$250.0 million. The Offering was completed on March 1, 2021. 

30.  COMPARATIVE FIGURES

Certain comparative figures have been restated where necessary to conform with current period presentation.

39 

NFI GROUP INC 2020 ANNUAL REPORT