Bombardier Reports First Quarter 2020 Financial Results and Measures Taken in Response to COVID-19 Pandemic

Announcement made at Bombardier Tuesday that another contract is coming

  • Consolidated revenues of $3.7 billion, increasing by 5% year-over-year; consolidated adjusted EBIT(1) of $60 million, down 65% year-over-year, $156 million of reported EBIT; free cash flow usage(1) of $1.6 billion; operating cash flow usage of $1.5 billion
  • Cash on hand of $2.1 billion, including a $386 million equity injection in Transportation in the quarter by Caisse de dépôt et placement du Québec
  • Pro forma(2) liquidity of ~ $3.5 billion, including ~ $550 million proceeds from CRJ program sale set to close on June 1, 2020, and ~ $860 million available on Transportation’s revolving credit facility
  • Previously announced divestitures of aerostructures business and Bombardier Transportation progressing as planned(2)

All amounts in this report are in U.S. dollars unless otherwise indicated. Amounts in tables are in millions except per share amounts, unless otherwise indicated.

MONTREAL – Bombardier (TSX: BBD.B) announced today its financial results for the first quarter of 2020 and provided an overview of the measures the company is taking to manage the business through the COVID-19 pandemic. The company also confirmed that all of the previously announced divestitures are continuing to progress towards closing.(2)

“Bombardier is taking the right actions to manage the impact of the COVID-19 pandemic,” said Éric Martel, President and Chief Executive Officer, Bombardier Inc. “As the crisis unfolded, we acted swiftly to protect the health and safety of our employees and support our customers to the best of our ability. We also managed our operations to reduce costs, preserve cash and ensure sufficient liquidity to operate our business as we complete the ongoing divestitures necessary to address our balance sheet.(3) This includes an ongoing dialogue with governments where we have major operations regarding additional support programs, should they be necessary, to navigate through an extended crisis.”

Bombardier has pro forma liquidity of approximately $3.5 billion, which includes $2.1 billion of cash on hand, access to the undrawn amount of approximately $860 million on Transportation’s revolving credit facility as at March 31, 2020, and approximately $550 million of proceeds from the sale of the CRJ program, which is set to close June 1, 2020 as all closing conditions have been met.

Notwithstanding the impact of reduced activity and travel restrictions in the second half of March due to the global COVID-19 pandemic, Bombardier reported consolidated revenues of $3.7 billion in the quarter, increasing by 8% and 5% year-over-year at Aviation and Transportation, respectively, and excluding currency translation impact. This growth was mainly driven by additional Global 7500 deliveries at Aviation and the ongoing ramp-up of large rolling stock projects in the U.K. and Germany at Transportation.

Adjusted EBITDA(1) and adjusted EBIT were $171 million and $60 million, respectively, for the quarter. These results reflect the impact of Transportation working through several low-margin, legacy rolling stock projects, as well as, lower share of income from joint ventures and associates. At Aviation, earnings were lower year-over-year due to an unfavourable aircraft mix, including lower margin early Global 7500 business jets and delayed deliveries related to the COVID-19 pandemic, combined with lower services revenues and higher dilution from commercial aircraft activities. Reported EBIT was $156 million for the quarter.

Cash usage from operations for the first quarter was $1.5 billion. Free cash flow usage totalled $1.6 billion, including an estimated $600-800 million COVID-19 impact reflecting our inability to deliver aircraft following government-imposed travel restrictions, temporary production shutdowns of several key sites, and lower than expected order intake at both Transportation and Aviation.

“Bombardier has begun the gradual resumption of manufacturing operations at both Aviation and Transportation necessary to deliver on our strong rail backlog and to continue the production ramp-up of the Global 7500,” stated Martel. “As we bring our operations back on-line, we remain focused on protecting our employees, supporting our customers during this difficult period and taking the actions necessary to preserve the Company’s long-term future.”

The Company suspended its previously issued 2020 financial outlook on March 24, 2020 as it evaluated the impact of the COVID-19 pandemic. The continuing uncertainty surrounding the duration of the pandemic precludes us from providing financial guidance with any reasonable confidence at this time. However, based on our current assessment of the COVID-19 situation, and the continuing gradual resumption and stabilization of our operations, we expect business activity to hit a low point in the second quarter, with similar cash usage relative to the first quarter, before gradually recovering in the second half of the year. Bombardier will look to provide updated projections when it has greater visibility into the total impact of the pandemic on our businesses and markets.(3)

 

SELECTED RESULTS

RESULTS OF THE QUARTER
Three-month periods ended March 31 2020 2019 Variance
Revenues $ 3,691 $ 3,516 5  %
Adjusted EBITDA(1)
$ 171 $ 266 (36 )%
Adjusted EBITDA margin(1) 4.6 % 7.6 % (300) bps
Adjusted EBIT(1) $ 60 $ 171 (65 )%
Adjusted EBIT margin(1) 1.6 % 4.9 % (330) bps
EBIT $ 156 $ 684 (77 )%
EBIT margin 4.2 % 19.5 % (1530) bps
Net income (loss) $ (200 ) $ 239 nmf
Diluted EPS (in dollars) $ (0.11 ) $ 0.08 $ (0.19 )
Adjusted net loss(1) $ (169 ) $ (122 ) (39 )%
Adjusted EPS (in dollars)(1) $ (0.10 ) $ (0.07 ) $ (0.03 )
Cash flows from operating activities $ (1,543 ) $ (907 ) (70 )%
Net additions to PP&E and intangible assets $ 99 $ 137 (28 )%
Free cash flow usage(1) $ (1,642 ) $ (1,044 ) (57 )%
As at March 31, 2020
December 31, 2019 Variance
Cash and cash equivalents(4) $ 2,069 $ 2,629 (21 )%
Available short-term capital resources(5) $ 2,928 $ 3,925 (25 )%
Order backlog (in billions of dollars)
  Aviation
  Business aircraft $ 13.6 $ 14.4 (6 )%
  Other aviation(6) $ 1.5 $ 1.9 (21 )%
  Transportation $ 33.1 $ 35.8 (8 )%

SEGMENTED RESULTS AND HIGHLIGHTS

Aviation

Results of the quarter
Three-month periods ended March 31 2020 2019 (7) Variance
Revenues $ 1,523 $ 1,410 8  %
Aircraft deliveries (in units)
  Business aircraft 26 24 2
  Commercial aircraft(8) 5 4 1
Adjusted EBITDA $ 102 $ 202 (50 )%
Adjusted EBITDA margin 6.7 % 14.3 % (760) bps
Adjusted EBIT $ 25 $ 144 (83 )%
Adjusted EBIT margin 1.6 % 10.2 % (860) bps
EBIT $ 7 $ 664 (99 )%
EBIT margin 0.5 % 47.1 % (4660) bps
Net additions to PP&E and intangible assets $ 76 $ 108 (30 )%
As at March 31, 2020
December 31, 2019 Variance
Order backlog (in billions of dollars)
  Business aircraft $ 13.6 $ 14.4 (6 )%
  Other aviation $ 1.5 $ 1.9 (21 )%

 

Key highlights and events

  • Revenues during the quarter increased to $1.5 billion, 8% higher year-over-year, reflecting 16% growth from business aircraft activities driven by six Global 7500 deliveries. This growth was offset mainly by the wind-down of commercial aircraft activities. Overall, 26 business aircraft and five commercial aircraft were delivered during the period.
  • Adjusted EBITDA and adjusted EBIT margins were 6.7% and 1.6%, respectively, for the quarter, lower year-over-year, reflecting an unfavourable aircraft mix due in part to delayed deliveries caused by the global COVID-19 pandemic, combined with low contribution of early Global 7500 units. Reported EBIT margin was 0.5%.
  • In the last week of March 2020, Canadian operations, where Global and Challenger aircraft are assembled and delivered, were temporarily suspended due to the global COVID-19 pandemic. Key aerostructures operations in Mexico and Belfast were similarly suspended, impacting a total of approximately 15,000 employees globally.
    º  Free cash flow for the quarter was negatively impacted by delayed aircraft deliveries caused by travel restrictions and production shutdowns, as well as a slowdown in order intake tied to the economic uncertainty. This resulted in an estimated $400 million to $500 million free cash flow shortfall for the quarter.
    º  The revenues and earnings impact of the production slowdown, supply chain shortages and other disruptions is expected to increase as the situation extended into April and May 2020.(2)
    º  As production gradually resumes, Aviation is working with customers and suppliers to reestablish new delivery schedules.
  • Aviation experienced a significant slowdown in order intake during the month of March, leading to a $13.6 billion business aircraft backlog at the end of the quarter. This low order environment is driving production rate adjustments across the industry.
    º  Aviation’s production rates are being aligned to market demand, which is expected to be down by 30 to 35% year-over-year.(2)
    º  The solid order book on the Global 7500 is largely intact, and the business continues to focus on ramping up production and driving down the learning curve.
    º  In parallel, the Company is managing costs through aggressive company-wide actions, including cutting non-essential spending and deferring discretionary capital expenditures to make Aviation more profitable and a steadier cash-flow generating business even at lower production volumes.

Transportation

Results of the quarter
Three-month periods ended March 31 2020
2019
Variance
Revenues $ 2,169 $ 2,107 3  %
Order intake (in billions of dollars) $ 0.8 $ 1.7 (53 )%
Book-to-bill ratio(9) 0.4 0.8 (0.4 )
Adjusted EBITDA(10) $ 85 $ 118 (28 )%
Adjusted EBITDA margin(10) 3.9 % 5.6 % (170) bps
Adjusted EBIT(10) $ 51 $ 83 (39 )%
Adjusted EBIT margin(10) 2.4 % 3.9 % (150) bps
EBIT(10) $ 51 $ 83 (39 )%
EBIT margin(10) 2.4 % 3.9 % (150) bps
Net additions to PP&E and intangible assets $ 23 $ 28 (18 )%
As at March 31, 2020
December 31, 2019 Variance
Order backlog (in billions of dollars) $ 33.1 $ 35.8 (8 )%

Key highlights and events

  • Revenues during the quarter grew 5% organically to $2.2 billion, excluding currency translation year-over-year, mainly from rolling stock and systems and signalling activities. This growth mainly reflects the ongoing production ramp-up in the U.K. and Germany, notwithstanding impacts of reduced activity in the second half of March 2020 due to the global COVID-19 pandemic.
  • EBIT margin of 2.4% for the first quarter was generally in line with expectations, and reflects an unfavourable rolling stock contract mix. The margin dilution from mix is expected to continue as Transportation executes on low-margin contracts in the backlog expected to be realized in 2020.(2)
  • Cash on hand was increased through a $386 million equity injection in Transportation by Caisse de dépôt et placement du Québec to support working capital as part of our measures to deal with the COVID-19 pandemic. In connection with this contribution, the Corporation secured amendments to Transportation’s revolving and letter of credit facilities. These amendments provide for, among other things, temporary adjustments to certain financial covenants.
  • In the second half of March 2020, production at several locations, including key sites across Transportation’s largest markets in Europe and the Americas, was temporarily suspended due to the global COVID-19 pandemic.
    º  Approximately 10,000 employees were affected by shutdowns. The cost of these measures and other disruption costs are being expensed as incurred, as opposed to being charged to projects.
    º  Additionally, certain Transportation suppliers have delayed, reduced or altogether stopped the manufacture, shipping and delivery of critical parts, further disrupting production.
    º  The revenues and earnings impact of the production slowdown and disruptions is expected to increase as the situation extended into April and May 2020.(2)
    º  Free cash flow has been negatively impacted in the first quarter by the engineering, production and supply chain disruptions resulting in an estimated $200 million to $300 million of cash inflows delays mainly from the postponement of key production and homologation milestones. The future impact on cash flows is being mitigated through various initiatives.
    º  As production gradually resumes, Transportation is working with customers and suppliers to reestablish new contract schedules.
  • The outlook for Transportation continues to be positive given its strong backlog, which stood at $33.1 billion at the end of the quarter.(2)
    º  Book-to-bill ratio for the first quarter was lower than expected at 0.4, due in part to the COVID-19 pandemic effect on the timing of order awards. Approximately 80% of orders in the first quarter came from services contracts, signalling projects and options exercised on rolling stock contracts, carrying lower execution risks.
  • During the quarter, Bombardier and its customer, Swiss Federal Railways (SBB), reached a commercial agreement leading to the title transfer and take-over by SBB of 32 trains in revenue service. This agreement reflects the significant in-service reliability improvement achieved since entry-into-service and significantly reduced the inventory balance and associated customer payment financing outstanding.

About Bombardier
With over 60,000 employees across two business segments, 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 Montréal, Canada, Bombardier has production and engineering sites in over 25 countries across the segments of Aviation and Transportation.