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
- Company actively pursuing strategic options to accelerate deleveraging
- Bombardier
reassessing future participation in Airbus Canada Limited Partnership
All amounts in this press release are in U.S. dollars unless otherwise indicated.
MONTREAL, Jan. 16, 2020 (GLOBE NEWSWIRE) -- 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, totalling 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 are 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 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. Bombardier shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2018, Bombardier posted revenues of $16.2 billion US. The company is recognized on the 2019 Global 100 Most Sustainable Corporations in the World Index. News and information are available at bombardier.com or follow us on Twitter @Bombardier.
Bombardier, CRJ and Global 7500 are trademarks of Bombardier Inc. or its subsidiaries.
For
information
Jessica McDonald
Advisor, Media Relations
and Public Affairs
Bombardier Inc.
+514 861 9481
Patrick
Ghoche
Vice President, Corporate Strategy
and Investor
Relations
Bombardier Inc.
+514 861 5727
FORWARD-LOOKING STATEMENTS
This press release includes forward-looking statements, which may
involve, but are not limited to: statements with respect to the
Corporation’s objectives, anticipations and guidance in respect of
various financial and global metrics and sources of contribution thereto;
targets, goals, priorities, market and strategies, financial position,
market position, capabilities, competitive strengths, credit ratings,
beliefs, prospects, plans, expectations, anticipations, estimates and
intentions; general economic and business outlook, prospects and trends of
an industry; expected growth in demand for products and services; growth
strategy, including in the business aircraft aftermarket business; product
development, including projected design, characteristics, capacity or
performance; expected or scheduled entry-into-service of products and
services, orders, deliveries, testing, lead times, certifications and
project execution in general; competitive position; expectations regarding
working capital recovery across late-stage Transportation projects;
expectations regarding revenue and backlog mix; the expected impact of the
legislative and regulatory environment and legal proceedings on the
Corporation’s business and operations; strength of capital profile and
balance sheet, creditworthiness, available liquidities and capital
resources, expected financial requirements and ongoing review of strategic
and financial alternatives; the introduction of productivity enhancements,
operational efficiencies and restructuring initiatives and anticipated
costs, intended benefits and timing thereof; the expected objectives and
financial targets underlying our transformation plan and the timing and
progress in execution thereof, including the anticipated business
transition to growth cycle and cash generation; expectations and objectives
regarding debt repayments, expectations and timing regarding an
opportunistic redemption of CDPQ’s investment in BT Holdco; intentions
and objectives for the Corporation’s programs, assets and operations; the
funding and liquidity of Airbus Canada Limited Partnership (ACLP); the
pursuit of any strategic option to strengthen the Corporation’s
balance sheet and enhance shareholder value, the anticipated benefits of
any transaction resulting therefrom and the expected impact on the
Corporation’s operations, infrastructure, opportunities, financial
condition, business plan and overall strategy. As it relates to the sale of
the CRJ aircraft program (the Pending Transaction) and the disposition of
the Aerostructures operations, this press release also contains
forward-looking statements with respect to: the expected terms, conditions,
and timing for completion thereof; the respective anticipated proceeds and
use thereof and/or consideration therefor, related costs and expenses, as
well as the anticipated benefits of such actions and transactions and their
expected impact on the Corporation’s guidance and targets; and the fact
that closing of these transactions will be conditioned on certain events
occurring, including the receipt of necessary regulatory approval.
Forward-looking statements can generally be identified by
the use of forward-looking terminology such as “may”, “will”,
“shall”, “can”, “expect”, “estimate”, “intend”,
“anticipate”, “plan”, “foresee”, “believe”, “continue”,
“maintain” or “align”, the negative of these terms, variations of
them or similar terminology. Forward-looking statements are presented for
the purpose of assisting investors and others in understanding certain key
elements of the Corporation’s current objectives, strategic priorities,
expectations and plans, and in obtaining a better understanding of our
business and anticipated operating environment. Readers are cautioned that
such information may not be appropriate for other purposes.
By their nature, forward-looking statements require management to
make assumptions and are subject to important known and unknown risks and
uncertainties, which may cause our actual results in future periods to
differ materially from forecast results set forth in forward-looking
statements. While management considers these assumptions to be reasonable
and appropriate based on information currently available, there is risk
that they may not be accurate. For additional information with respect to
the assumptions underlying the forward-looking statements made in this
press release, refer to the Strategic Priorities and Guidance and
forward-looking statements sections in Overview, Business Aircraft,
Commercial Aircraft, Aerostructures and Engineering Services and
Transportation in the MD&A of the Corporation’s financial report for
the fiscal year ended December 31, 2018.
Certain
factors that could cause actual results to differ materially from those
anticipated in the forward-looking statements include, but are not limited
to, risks associated with general economic conditions, risks associated
with our business environment (such as risks associated with “Brexit”);
the financial condition of the airline industry, business aircraft
customers, and the rail industry; trade policy; increased competition;
political instability and force majeure events or global climate change),
operational risks (such as risks related to developing new products and
services; development of new business and awarding of new contracts;
book-to-bill ratio and order backlog; the certification and homologation of
products and services; fixed-price and fixed-term commitments and
production and project execution, including challenges associated with
certain Transportation’s legacy projects and the release of working
capital therefrom; pressures on cash flows and capital expenditures based
on project-cycle fluctuations and seasonality; risks associated with our
ability to successfully implement and execute our strategy, transformation
plan, productivity enhancements, operational efficiencies and restructuring
initiatives; doing business with partners; risks associated with the
Corporation’s partnership with Airbus and investment in ACLP; risks
associated with the Corporation’s ability to continue with its funding
plan of ACLP and to fund, if required, the cash shortfalls; inadequacy of
cash planning and management and project funding; product performance
warranty and casualty claim losses; regulatory and legal proceedings;
environmental, health and safety risks; dependence on certain customers,
contracts and suppliers; supply chain risks; human resources; reliance on
information systems; reliance on and protection of intellectual property
rights; reputation risks; risk management; tax matters; and adequacy of
insurance coverage), financing risks (such as risks related to liquidity
and access to capital markets; retirement benefit plan risk; exposure to
credit risk; substantial existing debt and interest payment requirements;
certain restrictive debt covenants and minimum cash levels; financing
support provided for the benefit of certain customers; and reliance on
government support), market risks (such as risks related to foreign
currency fluctuations; changing interest rates; decreases in residual
values; increases in commodity prices; and inflation rate fluctuations).
For more details, see the Risks and uncertainties section in Other in the
MD&A of the Corporation’s financial report for the fiscal year ended
December 31, 2018.
With respect to the divestiture of
the Corporation’s Aerostructures operations discussed herein
specifically, certain factors that could cause actual results to differ
materially from those anticipated in the forward-looking statements
include, but are not limited to: the failure to complete any divestiture or
other transaction resulting therefrom within the expected time frame, on
commercially satisfactory terms or at all; all or part of the intended
benefits therefrom not being realized within the anticipated timeframe, or
at all; and the incurrence of related costs and expenses; and negative
effects of the announcement or pendency of any such divestiture or other
transaction. With respect to the Pending Transaction discussed herein
specifically, certain factors that could cause actual results to differ
materially from those anticipated in the forward-looking statements
include, but are not limited to: the failure to receive or delay in
receiving regulatory approvals, or otherwise satisfy the conditions to the
completion of the transaction or delay in completing and uncertainty
regarding the length of time required to complete such transactions, and
the funds and benefits thereof not being available to Bombardier in the
time frame anticipated or at all; alternate sources of funding that would
be used to replace the anticipated proceeds and savings from such strategic
actions and transactions, as the case may be, may not be available when
needed, or on desirable terms. Accordingly, there can be no assurance that
any divestiture relating to the Corporation’s Aerostructures operations,
or the Pending Transaction will be undertaken or occur, or of the timing or
successful completion thereof, or the amount and use of proceeds therefrom,
or that the anticipated benefits will be realized in their entirety, in
part or at all. There can also be no assurance as to the completion, the
form, or the timing of any BT Holdco buy-back or any other transaction in
connection with the pursuit of any strategic option to strengthen the
Corporation’s balance sheet and enhance shareholder value. For more
details, see the Risks and uncertainties section in Other in the MD&A
of the Corporation’s financial report for the fiscal year ended December
31, 2018.
Readers are cautioned that the foregoing list
of factors that may affect future growth, results and performance is not
exhaustive and undue reliance should not be placed on forward-looking
statements. Other risks and uncertainties not presently known to us or that
we presently believe are not material could also cause actual results or
events to differ materially from those expressed or implied in the
Corporation’s forward-looking statements. The forward-looking statements
set forth herein reflect management’s expectations as at the date of this
press release and are subject to change after such date. Unless otherwise
required by applicable securities laws, the Corporation expressly disclaims
any intention, and assumes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The forward-looking statements contained in this press
release are expressly qualified by this cautionary statement.
CAUTION REGARDING NON-GAAP FINANCIAL
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 | 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 | Adjusted EBIT plus amortization and impairment charges on PP&E and intangible assets. |
Free cash flow (usage) | Cash flows from operating activities less net additions to PP&E and intangible assets. |
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
and adjusted EBITDA
Management uses
adjusted EBIT and adjusted EBITDA for purposes of evaluating underlying
business performance. Management believes these non-GAAP earnings measures
in addition to IFRS measures provide readers with enhanced understanding of
our results and related trends and increases the transparency and clarity
of the core results of our business. Adjusted EBIT and adjusted EBITDA
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 readers analyze our results based
on these financial measures. Management believes these measures help
readers 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.