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

• 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 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.

MONTRÉAL, Aug. 06, 2020 (GLOBE NEWSWIRE) — 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 thanks her for her four years of dedicated service and the insight and wisdom she brought to Bombardier during her tenure.

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SEGMENTED RESULTS AND HIGHLIGHTS

Aviation

• 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

• 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.

Forward-looking statements in this press release are based on and subject to the following material assumptions:

Overall business

• retention of key employees and management;
• the time frames for the ramp-down of current COVID-19 social distancing guidelines and other mitigation-related requirements;
• our ability to orderly restart production and progressively resume work on suspended projects as soon as the travel restrictions to applicable locations have been lifted and temporary foreigner visa suspensions are lifted;
• the effectiveness of COVID-19 containment efforts and gradual recovery of global environment and global economic conditions beginning in the second quarter of 2020;
• the effectiveness of government support programs, including wage subsidies, tax payment deferrals, pension contribution holidays and other measures addressing liquidity needs of corporations during the crisis and our ability to qualify for same;
• the expected impact of emergency measures implemented by governments;
• the ability to have sufficient liquidity to execute the strategic plan, to meet financial covenants and to pay down long-term debt or refinance bank facilities and maturities;
• the accuracy of our estimates and judgments regarding the duration, scope and impacts of the ongoing COVID-19 pandemic on our business, operations, liquidity, financial condition, margins, cash flows, prospects and results in future periods;
• our ability to execute and deliver additional effective mitigation initiatives in response to future developments;
• the effectiveness of our mitigation measures taken in response to the COVID-19 pandemic to minimize the resulting downward pressure on cash flow and manage liquidity;
• the ability of our supply base and third-party service providers to gradually resume support to product development and planned production rates on commercially acceptable terms in a timely manner;
• general economic conditions, which include the impact on the economy and financial markets of the COVID-19 pandemic and other health risks;
• our ability to successfully defend ourselves against litigation matters arising in the context of the COVID-19 pandemic;
• our ability to access the capital markets as needed; and
• the availability of working capital financing initiatives and ongoing provision of credit by financial institutions to subject parties.

Aviation

• closing of the sale of Belfast and Morocco aerostructures businesses and Dallas MRO in coming months in accordance with negotiated terms;
• alignment of adjusted production rates to reduced market demand and significant slowdown in order intake; and
• our ability to make required production rate adjustments as business aircraft operations gradually resume.

Transportation

• closing of the sale of the Transportation division to Alstom in the first half of 2021 in accordance with negotiated terms; and
• our ability to reestablish new contract schedules with customers and suppliers to optimize cash generation as production gradually resumes.

The assumptions underlying the forward-looking statements made in this press release in relation to each of the Pending Transactions specifically include the following material assumptions: the satisfaction of all closing conditions (including regulatory approvals, and, as regards to the sale of the Transportation division, the execution of definitive documentation, Alstom shareholder approval in respect of the required capital increase, completion of works council consultations and absence of a material adverse change) and receipt of expected proceeds within the anticipated timeframe; and fulfillment by the parties of their obligations and agreements in principle.

For additional information, including with respect to other assumptions underlying the forward looking statements made in this press release, refer to the Strategic Priorities and Guidance and forward-looking statements sections in applicable reportable segment in the MD&A of our financial report for the fiscal year ended December 31, 2019. Given the impact of the changing circumstances surrounding the COVID-19 pandemic and the related response from the Corporation, governments (federal, provincial and municipal), regulatory authorities, businesses and customers, there is inherently more uncertainty associated with the Corporation’s assumptions as compared to prior periods.

For a discussion of the material risk factors associated with the forward-looking information, refer to the Risks and uncertainties section in the MD&A of the Corporation’s financial report for the three-and six-month periods ended June 30, 2020.

(1)	Also refer to the forward-looking statements section for the forward-looking statements disclaimer located at https://www.bombardier.com/en/media/newsList/details.binc-20200806-bombardier-reports-second-quarter-2020-financial-r.bombardiercom.html?filter-bu=bombardier