- Exit of commercial aerospace completed with sale of remaining interest in A220 partnership for ~$600M cash proceeds and the elimination of future investments of ~ $700M(1)
- Pro Forma(1) cash on-hand of more than $4B, including all previously announced transactions, enhancing financial position
- Company continuing to actively pursue strategic options to accelerate deleveraging
- Fourth quarter, and full-year results in line with preliminary results previously announced
- 2020 consolidated outlook: double-digit organic revenue growth(3) to more than $15B(1)
- 2020 consolidated adjusted EBITDA margin(2) expected at ~ 7.0%, adjusted EBIT margin(2) expected at ~3.5%(1)
- 2020 consolidated free cash flow(2) expected to be positive, excluding Residual Value Guarantee (RVG) payments(1)
MONTRÉAL, Feb. 13, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today reported its fourth quarter and full year 2019 results, in line with previously announced preliminary results. The company also confirmed it is still actively pursuing options to accelerate deleveraging, strengthen its balance sheet and enhance shareholder value.
Sale of A220 Partnership Interest
Bombardier has entered into an agreement with Airbus SE and the Government of Quebec, under which Bombardier transferred its shares in the Airbus Canada Limited Partnership (ACLP) to Airbus and the Government of Quebec, improving Bombardier’s cash position. This includes cash proceeds of ~$600 million from Airbus, of which $531 million was paid upon closing with the balance to be paid over 2020-21, and the elimination of all future capital requirements for the A220 program, estimated at ~ $700 million.(1)
Bombardier will also transfer aerostructures activities and employees supporting the A220 and A330 in St-Laurent, Québec to Airbus subsidiary Stelia Aerospace. Finally, the agreement provides for the cancelation of 100,000,000 Bombardier warrants owned by Airbus.
Bombardier’s decision to sell its stake in the A220 partnership completes its exit from commercial aerospace, a significant undertaking. In 2016, Bombardier’s commercial aerospace business lost approximately $400 million and was consuming approximately $1 billion in cash. Addressing this challenging portfolio was a fundamental step in the Company’s turnaround plan.
“We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We are equally proud of the responsible way in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Québec and Canada. And, we are confident that the A220 program will enjoy a long and successful run under Airbus’ and Québec’s stewardship.”
Acceleration of Deleveraging Phase of Turnaround
The sale of our interest in the ACLP, combined with the previously announced aerospace divestitures, will generate more than $1.6 billion in cash proceeds and eliminate close to $2 billion in liabilities and future commitments. Liquidity remains strong, with Pro Forma cash-on-hand of more than $4 billion and $5.5 billion in liquidity, providing the necessary flexibility to complete the turnaround. Both the CRJ program sale to Mitsubishi Heavy Industries, Inc. and sale of the aerostructures business to Spirit AeroSystems, Holding Inc. are expected to close in the first half of 2020.(1)
As previously announced, the Company is actively pursuing options that would allow it to accelerate deleveraging, paydown debt and position the business for long-term success with greater operating and financial flexibility. This process remains ongoing, however the company does not intent to provide any further updates at this time.
Overview Financial Performance
Bombardier’s consolidated revenues for the year were $15.8 billion, highlighted by an 8.5% growth in business aircraft activities. The growth in Aviation revenues were offset by the lower contribution from commercial aircraft businesses following their divestitures. Revenues at Transportation also decreased, mainly due to contract estimate revisions.
Consolidated adjusted EBITDA and adjusted EBIT for the year were $896 million and $470 million, respectively, reflecting (i) improvements at Aviation as it exits underperforming commercial programs and ramps-up production on the Global 7500 aircraft; and (ii) additional charges and investments at Transportation to complete challenging projects. Reported EBIT loss for the year of $498 million includes a $1.6B impairment charge related to the ACLP investment.
Fourth quarter cash generation reached $1.0 billion, reducing free cash flow usage to $1.2 billion for the year. Higher than anticipated cash usage was driven by additional investments made to address challenging rail projects, as well as, the deferral of deliveries, mainly at Transportation. Cash usage from operating activities amounted to $680 million for the full year.
Revenues from our sustaining business aircraft and Transportation activities in 2020 are expected to grow organically by double-digit percentage over the $13.7 billion revenues recorded from these businesses in 2019(1). This strong growth is driven mainly from the acceleration of Global 7500 deliveries contributing to a total of 160 aircraft or more for the year at Aviation. The consolidated revenue growth is also supported by the ongoing production ramp-up of Transportation, driven by the solid orders from the past few years.
Adjusted EBITDA and adjusted EBIT are expected to increase to approximately 7.0% and 3.5% respectively, mainly from the acceleration of Global 7500 deliveries at Aviation and gradual margin normalization at Transportation. The adjusted EBIT margin expansion includes a higher amortization expense as Global 7500 deliveries increase. The full year outlook for earnings reflects the partial year contribution from ongoing divestitures of the CRJ program and Aerostructures businesses.(1)
Free cash flow is expected to be positive in 2020, excluding Credit and RVG payments. These residual liabilities related to the exit of commercial aircraft are estimated to be approximately $200 million for the year and are expected to be paid from the CRJ transaction proceeds.(1)
|For the fiscal years ended December 31||2019||(4)||2018||Variance|
|Adjusted EBITDA margin(5)||5.7||%||8.0||%||(230) bps|
|Adjusted EBIT margin(5)||3.0||%||6.3||%||(330) bps|
|EBIT margin||(3.2||)%||6.2||%||(940) bps|
|Net income (loss)||$||(1,607||)||$||318||nmf|
|Diluted EPS (in dollars)||$||(0.76||)||$||0.09||$||(0.85)|
|Adjusted net income (loss)(5)||$||(396||)||$||438||nmf|
|Adjusted EPS (in dollars)(5)||$||(0.25||)||$||0.14||$||(0.39)|
|Cash flows from operating activities||$||(680||)||$||597||nmf|
|Net additions to PP&E and intangible assets||$||523||$||415||(6)||26%|
|Free cash flow (usage)(5)||$||(1,203||)||$||182||(6)||nmf|
|As at December 31||2019||2018||Variance|
|Cash and cash equivalents(7)||$||2,629||$||3,187||(18)%|
|Available short-term capital resources(8)(9)||$||3,925||$||4,373||(10)%|
|Order backlog (in billions of dollars)|
|For the fourth quarters ended December 31||2019||2018||Variance|
|Adjusted EBIT margin||(1.6||)%||6.6||%||(820) bps|
|Adjusted EBITDA margin||1.5||%||8.6||%||(710) bps|
|EBIT margin||(40.3||)%||7.9||%||(4820) bps|
|Net income (loss)||$||(1,719||)||$||55||nmf|
|Diluted EPS (in dollars)||$||(0.74||)||$||0.02||$||(0.76)|
|Adjusted net income (loss)||$||(172||)||$||149||nmf|
|Adjusted EPS (in dollars)||$||(0.10||)||$||0.05||$||(0.15)|
|Cash flows from operating activities||$||1,073||$||1,289||(17)%|
|Net additions to PP&E and intangible assets||$||121||$||248||(51)%|
|Free cash flow||$||952||$||1,041||(9)%|
|All amounts in this press release are in U.S. dollars, unless otherwise indicated.|
|Amounts in tables are in millions except per share amounts, unless otherwise indicated.|
SEGMENTED RESULTS AND HIGHLIGHTS
|For the fiscal years ended December 31||2019||(4)||2018||Variance|
|Aircraft deliveries (in units)|
|Adjusted EBITDA margin||10.8||%||8.8||%||200 bps|
|Adjusted EBIT margin||7.1||%||6.4||%||70 bps|
|EBIT margin||15.9||%||5.8||%||1010 bps|
|Net additions to PP&E and intangible assets||$||373||$||303||(6)||23%|
|As at December 31||2019
|Order backlog (in billions of dollars)|
Stronger Financial Performance as Aviation Reshapes its Portfolio
- Revenues for Aviation totalled $7.5 billion for 2019. This reflects an 8.5% revenue growth from business aircraft activities and continued double-digit organic growth from aftermarket.
- The segment achieved 175 aircraft deliveries during the year, comprised of 54 Global, 76 Challenger, 12 Learjet, as well as 33 commercial aircraft.
° The fourth quarter’s activity level was high, with deliveries reaching 52 business aircraft as Global 7500 deliveries accelerated.
- Adjusted EBITDA margin was 10.8% for the year, up 200 bps driven by the exit of the Q400 and C Series programs. This profitability was nonetheless diluted in 2019 by CRJ activities, accounting for $1.2 billion in revenues for the year.
- The adjusted EBIT margin of 7.1% is up 70 bps year-over-year, reflecting the early production ramp up and higher amortization associated with Global 7500 deliveries, as well as the dilution from commercial aircraft activities.
- Business aircraft backlog increased slightly for the second consecutive year, reaching $14.4 billion at year end, while the CRJ backlog declined as production winds down.
Concentrating on Business Aircraft while Addressing Underperforming Programs
- In February 2019, the Corporation acquired the Global 7500 aircraft wing program operations and assets from Triumph Group Inc. This transaction enabled the company to leverage its extensive technical expertise to support the ramp-up of the Global 7500 aircraft and secure its long-term success.
- In March 2019, we concluded the sale of Business Aircraft’s flight and technical training activities to CAE Inc. for net proceeds of $532 million.
- In May 2019, we completed the previously announced sale of the Q Series program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada for net proceeds of $285 million.
- In June 2019, the Corporation entered into a definitive agreement with Mitsubishi Heavy Industries, Ltd (MHI) for the sale of its regional jet program for a cash consideration of $550 million payable upon closing, and the assumption by MHI of approximately $200 million of liabilities related to credit and residual value guarantees and lease subsidies. The transaction is currently expected to close by mid-year 2020 and remains subject to regulatory approvals and customary closing conditions.
- In October 2019, the Corporation and Spirit AeroSystems Holding, Inc. (Spirit) announced that they have entered into a definitive agreement, whereby Spirit will acquire Bombardier’s aerostructures activities and aftermarket services operations in Belfast, U.K. and Casablanca, Morocco, and its aerostructures maintenance, repair and overhaul facility in Dallas, U.S. for a cash consideration of $500 million and the assumption of approximately $700 million of liabilities, including government refundable advances and pension obligations. The transaction is expected to close by mid-year 2020 and remains subject to regulatory approvals and customary closing conditions.
Positioned for Growth through certification and ramp up of New Programs and Service Network Expansion
- Reaching full-scale production of the class-defining Global 7500 aircraft. With increased deliveries, the Global 7500 aircraft is expected to contribute significantly to revenues growth in 2020. As the aircraft progresses on the learning curve, it will also contribute to margin expansion.
- Certified the new Global 5500 and Global 6500 aircraft, followed by the entry into service of the Global 6500 aircraft in 2019, offering customers the perfect combination of range, speed, field performance and smooth ride.
- Continued and consistent growth of the aftermarket business, with further expansion of the service network in Singapore planned for 2020.
|For the fiscal years ended December 31||2019
|Order intake (in billions of dollars)||$||10.0||$||9.9||1%|
|Adjusted EBITDA margin||2.6||%||9.5||%||(690) bps|
|Adjusted EBIT margin||0.8||%||8.4||%||(760) bps|
|EBIT margin||0.3||%||8.7||%||(840) bps|
|Net additions to PP&E and intangible assets||$||157||$||108||45%|
|As at December 31||2019
|Order backlog (in billions of dollars)||$||35.8||$||34.5||4%|
Full-year financial results reflect actions and initiatives undertaken to move forward and complete challenging projects
- During the past year, Transportation continued to progress through its turnaround, by re-synchronizing production and resetting certain project delivery schedules, while also investing to support in-service reliability improvements and funding additional manufacturing and engineering capacity. The higher than anticipated cost to implement these initiatives and to address late-stage legacy projects, mainly concentrated in the U.K., Switzerland and Germany, led to lower earnings and free cash flow for the segment.
° Over $500 million in cost estimate changes embedded in 2019 earnings.
- Completed delivery of several large legacy projects, including Metropolitan Transportation Authority (MTA) in New York City, Crossrail in the U.K. and Toronto Transit Commission (TTC) in Toronto.
- As Transportation exited the year, progress was also made in achieving key milestones on other major projects, including significant in-service reliability improvement on Swiss Federal Railways (SBB) in Switzerland and the homologation of the multi-unit software for LoTrain in the U.K., paving the way for the delivery of trains on this project and subsequent AVENTRA contracts in the U.K.
Backlog Improvement Positions for Stronger Financial Results
- Transportation continued to grow and improve the quality of its backlog with $10.0 billion in new orders, and a book-to-bill ratio of 1.2 for the year. Backlog reached $35.8 billion at year end.
- Approximately 70% of 2019 orders coming from service contracts, signalling projects and options on rolling stock projects, carrying lower execution risk. Backlog share of services and signalling contracts increased to 48% (42% a year ago).
Focused on Stronger Project Execution to Drive Sustainable Financial Performance
- Appointment of Danny Di Perna as President, Bombardier Transportation, in February 2019 strengthened focus on customer relationships and disciplined project execution.
° Strengthened Transportation’s leadership team with appointments of new Head of Engineering and new Regional Presidents to better deliver on customer commitments.
- Clear management priorities – focus on significant production ramp-up in the U.K. and France, reliability in Germany, settlement of claims and acceptance of trains on the SBB project in Switzerland, and continuing to drive efficiency across the organization.
CDPQ Investments in Transportation
- Transportation’s results for 2019 did not reach the performance targets underlying CDPQ’s investment in BT Holdco. Accordingly, for the 12-month period starting on February 12, 2020, Bombardier’s percentage of ownership on conversion of CDPQ’s shares will decrease by 2.5%, to 67.5%; and the preference return entitlement rate on liquidation of its shares will increase from 9.5% to 12.0% for this period. Any dividends paid by BT Holdco to its shareholders during this period will be distributed on the basis of each shareholder’s percentage of ownership upon conversion, being 67.5% for Bombardier and 32.5% for CDPQ. These adjustments will become effective once the audited consolidated financial statements of BT Holdco are duly approved by its board of directors.
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 Business Aviation and Transportation. Bombardier shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2019, Bombardier posted revenues of $15.8 billion. News and information are available at bombardier.com or follow us on Twitter @Bombardier.
Bombardier Inc. uses its website as a channel of distribution for material company information. Financial and other material information regarding Bombardier Inc. is routinely posted on its website and accessible at bombardier.com. Investors are hereby notified information about regular dividends declared and paid by Bombardier is only made available through its website, unless otherwise required by applicable securities laws.
AVENTRA, Bombardier, Challenger, Challenger 350, Challenger 650, CRJ, CRJ200, CRJ900, Global, Global 5500, Global 6500, Global 7500, Global 8000, Learjet, Learjet 75, Learjet 75 Liberty, are trademarks of Bombardier Inc. or its subsidiaries.
Advisor, Media Relations and Public Affairs
+1 514 861 9481
Vice President, Corporate Strategy and Investor Relations, Bombardier Inc.
+1 514 861 5727
Readers are strongly advised to view a more detailed discussion of our results by segment in our Management’s Discussion and Analysis and Consolidated financial statements which are posted on our website at ir.bombardier.com.
bps: basis points
nmf: information not meaningful
(1) See the forward-looking statements assumptions on which the guidance is based and forward-looking statements disclaimer in Overview.
(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and the Analysis of results section hereafter for reconciliations to the most comparable IFRS measures.
(3) Excluding divestitures and currency translation impact.
(4) Refer to Note 3 – Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16, Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.
(5) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the Analysis of results section and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures. Prior to the first quarter of fiscal year 2019, the Corporation reported non-GAAP measures labelled “EBIT before special items” and “EBITDA before special items”. Beginning in the first quarter of fiscal year 2019, the Corporation changed the label of these non-GAAP measures to “adjusted EBIT” and “adjusted EBITDA”, respectively, without making any change to the composition of these non-GAAP measures. The Corporation believes that this new label aligns better with broad market practice in its industry and better distinguishes these measures from the IFRS measurement “EBIT”.
(6) Included the proceeds from the sale of the Downsview property for approximately $600 million in 2018.
(7) Includes cash and cash equivalents of the aerostructures businesses presented under Assets held for sale totalling $51 million as of December 31, 2019. Refer to Reshaping the portfolio section in Aviation, Note 15 – Cash and cash equivalents and Note 30 – Assets held for sale in the Consolidated financial statements for more details on the transactions as well as the accounting treatments.
(8) Defined as cash and cash equivalents plus the amount available under our revolving credit facilities.
(9) Including 20 firm orders for CRJ900 as of December 31, 2019 and 45 firm orders for CRJ900 as of December 31, 2018. CRJ production is expected to conclude in the second half of 2020, following the delivery of the current backlog of the aircraft.
(10) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting section in Overview for further details.
(11) On May 31, 2019, the Corporation completed the previously announced sale of the Q Series aircraft program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada Limited (formerly Longview Aircraft Company of Canada Limited). Hence, the 7 Q Series aircraft deliveries for the fiscal year ended December 31, 2019 are for the first five months only; the deliveries for the fiscal year ended December 31, 2018 included 15 Q Series aircraft.
(12) Ratio of new orders over revenues.
CAUTION REGARDING NON-GAAP MEASURES
This press release is based on reported earnings in accordance with IFRS and on the following non-GAAP financial measures:
|Non-GAAP financial measures|
|Adjusted EBIT(1)||EBIT excluding special items. Special items comprise items which do not reflect the Corporation’s core performance or where their separate presentation will assist users of the consolidated financial statements in understanding the Corporation’s results for the period. Such items include, among others, the impact of restructuring charges and significant impairment charges and reversals.|
|Adjusted EBITDA(1)||Adjusted EBIT plus amortization and impairment charges on PP&E and intangible assets.|
|Adjusted net income (loss)||Net income (loss) excluding special items, accretion on net retirement benefit obligations, certain net gains and losses arising from changes in measurement of provisions and of financial instruments carried at FVTP&L and the related tax impacts of these items.|
|Adjusted EPS||EPS calculated based on adjusted net income attributable to equity holders of Bombardier Inc., using the treasury stock method, giving effect to the exercise of all dilutive elements.|
|Free cash flow (usage)||Cash flows from operating activities less net additions to PP&E and intangible assets.|
|Adjusted debt||Long-term debt as presented in the consolidated statements of financial position adjusted for the fair value of derivatives (or settled derivatives) designated in related hedge relationships plus short-term borrowings and lease liabilities.|
(1) Starting January 1, 2019, EBIT before special items and EBITDA before special items are replaced with adjusted EBIT and adjusted EBITDA, respectively. The definitions of both measures remain unchanged.
Non-GAAP financial measures are mainly derived from the consolidated financial statements but do not have standardized meanings prescribed by IFRS. The exclusion of certain items from non-GAAP performance measures does not imply that these items are necessarily non-recurring. Other entities in our industry may define the above measures differently than we do. In those cases, it may be difficult to compare the performance of those entities to ours based on these similarly-named non-GAAP measures.
Prior to the first quarter of fiscal year 2019, the Corporation reported non-GAAP measures labelled “EBIT before special items” and “EBITDA before special items”. Beginning in the first quarter of fiscal year 2019, the Corporation changed the label of these non-GAAP measures to “adjusted EBIT” and “adjusted EBITDA”, respectively, without making any change to the composition of these non-GAAP measures. The Corporation believes that this new label aligns better with broad market practice in its industry and better distinguishes these measures from the IFRS measurement “EBIT”.
Adjusted EBIT, adjusted EBITDA, adjusted net income (loss) and adjusted EPS
Management uses adjusted EBIT, adjusted EBITDA, adjusted net income (loss) and adjusted EPS for purposes of evaluating underlying business performance. Management believes these non-GAAP earnings measures in addition to IFRS measures provide users of our Financial Report with enhanced understanding of our results and related trends and increases the transparency and clarity of the core results of our business. Adjusted EBIT, adjusted EBITDA, adjusted net income (loss) and adjusted EPS exclude items that do not reflect our core performance or where their exclusion will assist users in understanding our results for the period. For these reasons, a significant number of users of the MD&A analyze our results based on these financial measures. Management believes these measures help users of MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers.
Free cash flow (usage)
Free cash flow is defined as cash flows from operating activities less net additions to PP&E and intangible assets. Management believes that this non-GAAP cash flow measure provides investors with an important perspective on the Corporation’s generation of cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long-term value creation. This non-GAAP cash flow measure does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity generation.
We analyze our capital structure using global metrics, based on adjusted debt, adjusted EBIT, adjusted EBITDA and adjusted interest(1). Refer to the Capital structure section for more detail.
Reconciliations of non-GAAP financial measures to the most comparable IFRS financial measures are provided in the tables hereafter, except for the following reconciliations:
- adjusted EBIT to EBIT – see the Results of operations tables in the reporting segments and Consolidated results of operations section; and
- free cash flow usage to cash flows from operating activities – see the Free cash flow usage table in the Liquidity and