Bombardier – Preliminary Fourth Quarter Update and 2019 Financial Results

Announcement made at Bombardier Tuesday that another contract is coming

Bombardier Provides Preliminary Fourth Quarter and Full Year 2019 Financial Results and Updates on Accelerating Deleveraging Phase of Turnaround Plan

  • Financial results expected to be below guidance, driven largely by actions at Transportation to resolve challenging projects
  • Aviation financial results largely on track
  • The company is actively pursuing strategic options to accelerate deleveraging
  • Bombardier reassessing future participation in Airbus Canada Limited Partnership

MONTREAL – Bombardier (TSX: BBD.B) today announced its preliminary results for the fourth quarter and full year 2019. The Company now expects lower than previously guided financial performance, mainly as a result of actions taken to resolve challenging rail projects, the timing of milestone payments and new orders at Transportation, and the delivery of four Global 7500 aircraft slipping into the first quarter of 2020.

Preliminary Results for the Fourth Quarter and Full Year 2019

Fourth Quarter 2019
Expected Results
Full Year 2019
Expected Results
Consolidated Revenues ~$4.2B ~$15.8B
Aviation ~$2.4B ~$7.5B
Transportation ~$1.8B ~$8.3B
Consolidated Adjusted EBIT1,2 ~$(130)M ~$400M
Aviation ~6% ~7%
Transportation ~(13)% ~1%
Consolidated Adjusted EBITDA1,2 ~$0M ~$830M
Free Cash Flow1 ~$1.0B ~$(1.2)B
Aircraft deliveries (in units) 58 175
Business Aircraft 52
Incl. 6 Global 7500
142
Incl. 11 Global 7500
Commercial Aircraft 6 33
Backlog as at December 31, 2019
Business aircraft ~$14.4B
Transportation ~$35.7B

1 Non-GAAP financial measures. Refer to the Caution regarding Non-GAAP financial measures below for definitions of these metrics.

2 Excludes Airbus Canada Limited Partnership (ACLP) equity pick-up.

Aviation deliveries were strong in the quarter, totaling 58 aircraft in the fourth quarter for a total of 175 aircraft for the full year. This included 11 Global 7500, six of which were delivered in the fourth quarter. The remaining Global 7500 aircraft originally scheduled for delivery in the final days of 2019 is now expected to be delivered in the first quarter of 2020. As Aviation made good progress ramping up the Global 7500, its full-year adjusted EBIT margin is still expected to be approximately 7.0%, in line with full-year guidance.

At Transportation, the fourth-quarter adjusted EBIT loss is anticipated to be approximately $230 million. This includes a charge of approximately $350 million related to certain projects in the UK (the Aventra platform), commercial negotiations with Swiss Federal Railways (SBB), and increased production and manufacturing costs for projects in Germany.

Delays in achieving technical milestones, including multi-unit software homologation for the London Overground’s LoTrain project (an Aventra project), and execution of production ramp-up required the Company to re-align certain delivery schedules with customers and absorb additional costs. Having achieved these milestones in the fourth quarter, Bombardier has entered into commercial negotiations with customers – to reset schedules, resolve late delivery penalties, and address related provisions and costs.

Consolidated free cash flow for the fourth quarter is estimated at approximately $1.0 billion, approximately $650 million lower than anticipated. This is largely due to the timing of cash inflows from milestone payments on large Transportation projects, and the later-than-anticipated closing of certain orders and call-offs. While the free cash flow shortfall is largely expected to be recovered in 2020, the recovery will be offset by the cash flow impact of the incremental costs recognized in the fourth quarter adjustments at Transportation.

While fourth-quarter financial performance at Transportation was lower than expected, the Company continues to make significant progress completing legacy projects and to take the right actions to position the business for long-term success.

Airbus Canada Limited Partnership Update (ACLP)
With its exit from Commercial Aerospace, Bombardier is reassessing its ongoing participation in ACLP.

While the A220 program continues to win in the marketplace and demonstrate its value to airlines, the latest indications of the financial plan from ACLP calls for additional cash investments to support production ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program. This may significantly impact the joint venture value. Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results.

Acceleration of Deleveraging Phase of Turnaround

Liquidity remains strong, with year-end cash on hand of approximately $2.6 billion. The CRJ program sale to Mitsubishi Heavy Industries, Ltd (MHI) and Aerostructures sale to Spirit AeroSystems Holding, Inc., both of which are still tracking to close by mid-year, will provide an additional $1.1 billion of cash subject to customary closing adjustments. The Company has received most of the regulatory approvals required for the closing of the CRJ sale.

Consistent with Bombardier’s five-year turnaround plan, and following a comprehensive review of strategic alternatives, the Company is actively pursuing options to strengthen its balance sheet and enhance shareholder value.

“Since launching our turnaround plan, we have addressed our underperforming aerospace assets, completed our heavy investment cycle, and put the Company on a solid path toward organic growth and margin expansion while prudently managing our liquidity and heavy debt load,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “The final step in our turnaround is to de-lever and solve our capital structure. We are actively pursuing alternatives that would allow us to accelerate our debt paydown. The objective is to position the business for long-term success with greater operating and financial flexibility.”

The Company will provide additional information when it reports its fourth-quarter and full-year 2019 financial results on February 13, 2020.

About Bombardier
With over 68,000 employees, Bombardier is a global leader in the transportation industry, creating innovative and game-changing planes and trains. Our products and services provide world-class transportation experiences that set new standards in passenger comfort, energy efficiency, reliability, and safety.

Headquartered in Montreal, Canada, Bombardier has production and engineering sites in 28 countries as well as a broad portfolio of products and services for the business aviation, commercial aviation and rail transportation markets.