Bombardier Announces Full-Year Financial Results

Provided by Bombardier Inc/CNW

  • 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.

2020 Outlook

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)

Aviation

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.

Link to full press release