Bombardier Reports Second Quarter 2020 Financial Results, Progress on Near-Term Priorities

Thunder Bay Bombardier Team manufacturing ventilators
Thunder Bay Bombardier Team manufacturing ventilators

  • Pro-forma(1) liquidity(2) of approximately $3.5 billion, including approximately $1.7 billion of consolidated cash on hand, $738 million of available revolver capacity at Transportation as of June 30, 2020, and up to $1.0 billion of new liquidity from recently announced senior secured credit facility
  • Free cash flow usage(3) and cash flow usage from operating activities better than expected at $1.0 billion, including an estimated $700-$900 million of Coronavirus impact
  • Consolidated revenues were $2.7 billion, down 37% year-over-year due to pandemic related disruptions
  • Consolidated adjusted EBIT(3) loss of $427 million reflecting charge at Transportation related to legacy projects and COVID-19 impact at both Aviation and Transportation; Reported EBIT of $26 million reflecting an accounting gain on the CRJ divestiture
  • All 51 manufacturing sites and other operations successfully resumed, full-year production and delivery rates reset with current market conditions and customer requirements  
  • European Commission regulatory approval of Bombardier Transportation sale to Alstom obtained in July; Sale of aerostructures business to Spirit AeroSystems is expected to close this fall
All amounts are in U.S. dollars unless otherwise indicated. Amounts in tables are in millions except per share amounts, unless otherwise indicated.

MONTRÉAL – BUSINESS – Bombardier (TSX: BBD.B) announced today its financial results for the second quarter of 2020 and provided an update on the actions the company is taking to manage the business through the COVID-19 pandemic. Bombardier also provided an update on the status of the previously announced divestitures undertaken to reshape the company’s capital structure.

“Bombardier continues to take the right actions to manage the impact of the ongoing public health crisis while protecting the business for the long-term,” said Éric Martel, President and Chief Executive Officer, Bombardier Inc. “We begin the second half of the year with our global operations safely and successfully resumed and our production rates and workforce realigned to current market conditions and customer requirements. We’ve also improved our liquidity position with solid cash management, cost reduction actions and a new secured credit facility, providing additional flexibility as we work to address our balance sheet challenges and close the sale of Bombardier Transportation and our aerostructure business.”

On July 31, 2020, the European Commission provided conditional approval of the sale of Bombardier Transportation to Alstom, a significant milestone in obtaining the necessary regulatory approvals to complete the transaction. Bombardier and Alstom continue to work together to obtain the remaining approvals and complete the Works Councils consultations required prior to executing the definitive sale and purchase agreement. Bombardier expects the sale of its aerostructure business to Spirit AeroSystems Holdings, Inc. to close this fall. (1)

Bombardier began the third quarter with pro-forma liquidity(2) of approximately $3.5 billion. This includes approximately $1.7 billion of cash on hand, access to the undrawn amount of $738 million on Transportation’s revolving credit facility as of June 30, 2020, and the new $1.0 billion senior secured credit facility announced on July 22, 2020 and expected to close in the third quarter. (1)

Revenues of $2.7 billion during the second quarter reflect a lower level of production activity and deliveries in the quarter as operations at key Aviation and Transportation sites across North America and Europe were temporarily suspended for several weeks due to the global COVID-19 pandemic.

Adjusted EBITDA(3) loss and adjusted EBIT loss were $319 million and $427 million, respectively, for the quarter. These results reflect an additional charge of $435 million at Transportation, largely related to incremental engineering, certification and retrofit costs associated with a number of late-stage projects mainly in the U.K. and Germany. At Aviation, earnings were lower year-over-year primarily as a result of disruptions from the global COVID-19 pandemic. Reported EBIT was $26 million for the quarter and reflects the 
$496 million accounting gain on the disposal of the CRJ program to Mitsubishi Heavy Industries, Ltd. closed on June 1, 2020.

Free cash flow usage and cash usage from operating activities were $1.0 billion for the quarter. This was better than anticipated as the company resumed operations faster than expected and took additional actions to mitigate the full COVID-19 impact. These actions resulted in higher than expected customer deliveries both at Aviation and Transportation, lower inventory intake as production rates were realigned with market conditions and reduced discretionary spending across the business. The impact on free cash flows of the COVID-19 pandemic during the quarter is estimated at $700 to $900 million.

While we are seeing some early encouraging trends in our end markets, including new interest in private air travel and the enhanced safety it provides, the continuing uncertainty surrounding the duration of the pandemic and the shape of the recovery continues to preclude us from providing financial guidance at this time.(4) However, based on our backlogs and the near-term production and delivery outlook, we currently expect business activity to gradually recover in the second half of the year with improving cash usage in the third quarter and with the seasonal release of working capital in the fourth quarter.(1)

Bombardier also announced that Mrs. Beatrice Weder di Mauro expressed her intention to resign from the Company’s Board of Directors for personal reasons. The Board accepted Mrs. Weder di Mauro’s resignation and thanked her for her four years of dedicated service and the insight and wisdom she brought to Bombardier during her tenure.

SELECTED RESULTS

RESULTS OF THE QUARTER
Three-month periods ended June 30 2020 2019 Variance
Revenues $ 2,702 $ 4,314 (37 ) %
Gross margin $ (223 ) $ 496 nmf
Adjusted EBITDA $ (319 ) $ 312 nmf
Adjusted EBITDA margin(3) (11.8 ) % 7.2 % (1900) bps
Adjusted EBIT $ (427 ) $ 206 nmf
Adjusted EBIT margin(3) (15.8 ) % 4.8 % (2060) bps
EBIT $ 26 $ 371 (93 ) %
EBIT margin 1.0 % 8.6 % (760) bps
Net loss $ (223 ) $ (36 ) (519 ) %
Diluted EPS (in dollars) $ (0.13 ) $ (0.04 ) $ (0.09 )
Adjusted net loss(3) $ (631 ) $ (47 ) (1,243 ) %
Adjusted EPS (in dollars)(3) $ (0.30 ) $ (0.04 ) $ (0.26 )
Net additions to PP&E and intangible assets $ 79 $ 140 (44 ) %
Cash flows from operating activities $ (957 ) $ (289 ) (231 ) %
Free cash flow usage $ (1,036 ) $ (429 ) (141 ) %
As at June 30, 2020
December 31, 2019 Variance
Cash and cash equivalents(5) $ 1,724 $ 2,629 (34 ) %
Available short-term capital resources(6) $ 2,462 $ 3,925 (37 ) %
Order backlog (in billions of dollars)
  Aviation
  Business aircraft $ 12.9 $ 14.4 (10 ) %
  Other aviation(7) $ 1.0 $ 1.9 (47 ) %
  Transportation $ 33.7 $ 35.8 (6 ) %
RESULTS OF THE SIX-MONTH PERIOD
Six-month periods ended June 30 2020 2019 Variance
Revenues $ 6,393 $ 7,830 (18 ) %
EBIT $ 182 $ 1,055 (83 ) %
EBIT margin 2.8 % 13.5 % (1070) bps
Adjusted EBIT $ (367 ) $ 377 nmf
Adjusted EBIT margin (5.7 ) % 4.8 % (1050) bps
Adjusted EBITDA $ (148 ) $ 578 nmf
Adjusted EBITDA margin (2.3 ) % 7.4 % (970) bps
Net income (loss) $ (423 ) $ 203 nmf
Diluted EPS (in dollars) $ (0.24 ) $ 0.04 $ (0.28 )
Adjusted net loss $ (800 ) $ (169 ) 373 %
Adjusted EPS (in dollars) $ (0.39 ) $ (0.12 ) $ (0.27 )
Net additions to PP&E and intangible assets $ 178 $ 277 (36 ) %
Cash flows from operating activities $ (2,500 ) $ (1,196 ) 109 %
Free cash flow usage $ (2,678 ) $ (1,473 ) 82 %


SEGMENTED RESULTS AND HIGHLIGHTS

Aviation

Results of the quarter
Three-month periods ended June 30 2020 2019 (8) Variance
Revenues
  Business aircraft $ 998 $ 1,383 (28 ) %
  Other aviation $ 225 $ 737 (69 ) %
Total Revenues $ 1,223 $ 2,120 (42 ) %
Aircraft deliveries (in units)
  Business aircraft 20 35 (15 )
  Commercial aircraft(9) 17 (17 )
Adjusted EBITDA $ 55 $ 222 (75 ) %
Adjusted EBITDA margin 4.5 % 10.5 % (600) bps
Adjusted EBIT $ (20 ) $ 151 nmf
Adjusted EBIT margin (1.6 ) % 7.1 % (870) bps
EBIT $ 442 $ 340 30 %
EBIT margin 36.1 % 16.0 % 2010 bps
Net additions to PP&E and intangible assets $ 58 $ 103 (44 ) %
As at June 30, 2020
December 31, 2019 Variance
Order backlog (in billions of dollars)
  Business aircraft $ 12.9 $ 14.4 (10 ) %
  Other aviation $ 1.0 $ 1.9 (47 ) %
  • Revenues reached $1.2 billion during the second quarter, reflecting a lower level of production activity and deliveries as the Corporation suspended business aircraft operations in Canada and key aerostructures operations in Mexico and Belfast due to the COVID-19 pandemic.
  • Starting in the last weeks of April and through the month of May, operations gradually resumed with new safety measures in place, allowing Aviation to deliver 20 business aircraft during the quarter, including five Global 7500.
  • Bombardier’s worldwide customer service operations have continued to operate largely uninterrupted throughout the pandemic. Service centres have shown resilience maintaining a high level of activity at maintenance facilities, partially offset by lower revenues related to the decrease in customer flight utilization.
  • Adjusted EBITDA and adjusted EBIT margins of 4.5% and (1.6)%, respectively, reflect lower volumes during the quarter as result of disruptions from the global COVID-19 pandemic, combined with low contribution of early Global 7500 units. Reported EBIT of $442 million during the quarter reflects the $496 million accounting gain on the disposal of the CRJ Series aircraft program to Mitsubishi Heavy Industries, Ltd.
    • On June 5, 2020, Aviation announced the reduction of its workforce by approximately 2,500 employees to align production with current market conditions, forecasted to be down approximately 30% year-over-year(1). The reduction resulted in a special charge of $41 million in the second quarter.
  • A significant share of the Corporation’s free cash flow usage during the first two quarters of 2020 is related to the impact of the COVID-19 pandemic on Aviation, mainly driven by a shortfall in deliveries and lower than anticipated advances associated with the low order intake environment.
  • As operations recover in the second half of the year, aircraft deliveries are set to accelerate relative to the first half of the year, towards a seasonal peak in the fourth quarter supported by Aviation’s $12.9 billion backlog.(1)

Transportation

Results of the quarter
Three-month periods ended June 30 2019 2018 Variance
Revenues $ 1,479 $ 2,194 (33 ) %
Order intake (in billions of dollars) $ 1.6 $ 2.0 (20 ) %
Book-to-bill ratio(10) 1.1 0.9 0.2
Adjusted EBITDA(11) $ (350 ) $ 146 nmf
Adjusted EBITDA margin(11) (23.7 ) % 6.7 % (3040) bps
Adjusted EBIT(11) $ (383 ) $ 111 nmf
Adjusted EBIT margin(11) (25.9 ) % 5.1 % (3100) bps
EBIT $ (377 ) $ 87 nmf
EBIT margin (25.5 ) % 4.0 % (2950) bps
Net additions to PP&E and intangible assets $ 21 $ 36 (42 ) %
As at June 30, 2020
December 31, 2019
Order backlog (in billions of dollars) $ 33.7 $ 35.8 (6 ) %
  • Revenues for the quarter of $1.5 billion reflect a lower level of production activity as operations at key sites across Europe and the Americas were temporarily suspended due to the global COVID-19 pandemic and the impact of revised estimates on a number of late-stage projects mainly in the U.K. and Germany.
  • Starting in the last weeks of April and through the month of May, operations gradually resumed with new safety measures in place. With operations returning to normal, production is expected to accelerate in the second half, peaking seasonally in the fourth quarter generally in line with 2019 levels. The engineering and production delays tied to the COVID-19 pandemic is expected to be recovered in 2021 and beyond, supporting future free cash flow generation.(1)
  • Adjusted EBIT loss for the second quarter of $383 million was significantly below expectations, reflecting an additional charge of $435 million at Transportation, largely related to incremental engineering, certification and retrofit costs associated with a number of late-stage projects mainly in the U.K. and Germany. Over two thirds of this charge is expected to impact 2020 free cash flows as Transportation reaches key engineering and entry-into-service milestones. Reported EBIT loss for the quarter was $377 million.
    • During the quarter, a new, dedicated project team was mandated to conduct deep dives into challenging legacy projects, evaluating both project management processes and talent resources with a goal to fully understand the causes of excessive costs, and take the right corrective actions.
  • The outlook for transportation remains positive and is supported by its $33.7 billion backlog and strong industry fundamentals.(1) 
    • Order intake of $1.6 billion for the quarter reflects project wins across geographies, with notable contract awards with SNCF’s repeat order in France and India’s flagship Delhi–Meerut regional rapid transit system project in Asia.

About Bombardier
With nearly 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