- Consolidated revenues of $4.3B, representing 9% organic growth(1), driven mainly by higher aircraft deliveries and aftermarket growth
- Adjusted EBITDA(2) and adjusted EBIT(2) of $312M and $206M respectively; reported EBIT of $371M, largely driven by gain on the sale of the Q Series program
- Free cash flow usage(2) of $429M during the quarter and $1.5B year-to-date, in line with target for the first half of 2019, supporting Global 7500 ramp-up and progress on Transportation legacy projects
- Full year guidance(3) updated to reflect new Aviation reporting segment, largely in line with previous guidance for aerospace segments
- Announcing $250-$300M of additional investments and costs in 2019 to address late-stage, legacy projects and ensure transformation at Transportation remains on track
- Consolidated adjusted EBIT for 2019 now expected to be $700-$800M, reflecting reduction of full-year Transportation adjusted EBIT margin(2) to ~ 5.0%
- Consolidated free cash flow usage for 2019 now expected to be approximately $500M, reflecting the additional investments, costs and timing of project delivery milestones at Transportation
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. 01, 2019 (GLOBE NEWSWIRE) -- Bombardier (TSX: BBD.B) today reported its second quarter 2019 results and provided updated guidance to reflect both the consolidation of the Company’s aerospace assets into a single reporting segment, Bombardier Aviation, and the additional investments and costs needed to complete late-stage, legacy projects and the transformation at Transportation by the end of 2020.
Organic revenue growth in the second quarter was strong at 9% year-over-year, driven mainly by increased aircraft deliveries, solid aftermarket performance fueled by past investments to expand Business Aircraft’s service network and capabilities, as well as progress across the rail portfolio. In the second quarter, Bombardier also completed the sale of the Q Series aircraft program and announced the sale of the CRJ program to Mitsubishi Heavy Industries. The quarter also marked the one-year anniversary of Bombardier’s partnership with Airbus, which has added close to 300 new orders and commitments to the backlog during this time period.
“We are very happy with our continued momentum in aerospace, where our transformation is progressing ahead of plan,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We have successfully addressed our underperforming commercial aircraft programs and are now fully focused on business aviation, where the ramp-up of Bombardier’s largest growth program, the Global 7500, is proceeding as planned, as are our aftermarket growth strategy and our product portfolio enhancements.”
In 2019, Bombardier will make additional investments and incur additional costs at Transportation, totaling $250 million to $300 million, to both complete the late-stage, legacy projects and protect the delivery schedule for other projects. The investments include adding manufacturing and engineering capacity.
“At Transportation, we have made significant progress and remain on track to complete the transformation by 2020,” Bellemare continued. “As we simultaneously address our legacy projects, complete Transportation’s reshaping to leverage its global scale, and ramp-up to deliver on our strong backlog, we are making the necessary investments to ensure we have the right resources and capacity to deliver stronger, sustainable financial performance in the years ahead.”
Second Quarter 2019 Results
Bombardier’s revenues for the quarter were $4.3 billion. Adjusted EBITDA and adjusted EBIT for the quarter were $312 million and $206 million respectively, mainly driven by a 7.0% adjusted EBIT margin at Business Aircraft while Transportation recorded a 5.1% adjusted EBIT margin. Transportation’s lower margin reflects additional cost pressure mainly on its large, complex legacy projects. On a reported basis, EBIT of $371 million is largely driven by the gain of $219 million on the sale of the Q Series program.
Free cash flow usage was $429 million for the quarter and $1.5 billion year to date, in line with the Company’s expectations for the first half of 2019. Free cash flow performance was solid across aerospace segments, offsetting a softer performance at Transportation. Bombardier also maintained a healthy liquidity position, closing the quarter with $3 billion of cash on hand.
Guidance Update(3)
Starting in the third quarter of 2019, Bombardier’s three existing aerospace units will be consolidated into a single Bombardier Aviation business segment. As a result of this change, and to reflect the additional investments, costs and the timing of project delivery milestones at Transportation, the Company is updating its 2019 guidance as follows.
| | | Previous guidance(4) | 2019 guidance update(3) |
| Revenues | Business Aircraft | ~ $6.25 billion | } | Aviation(5)
~ $8.0 billion |
| Commercial Aircraft | ~ $1.15 billion |
| Aerostructures and Engineering Services | $2.25-$2.50 billion |
| Transportation | ~ $8.75 billion | | ~ $8.75 billion |
| Consolidated | ~ $17.0 billion(6) | | $16.5-$17.0 billion |
| Adjusted EBIT and adjusted EBIT margin | Business Aircraft | ~ 7.5% | } | Aviation(5)
~ 7.0% |
| Commercial Aircraft | ~ ($125 million)(7) |
| Aerostructures and Engineering Services | ~ 7.5% |
| Transportation | ~ 8.0% | ~ 5.0% |
| Consolidated | $1.00-$1.15 billion(6) | $700-$800 million |
| Adjusted EBITDA | Consolidated | $1.50-$1.65 billion(6) | $1.20-$1.30 billion |
| Free cash flow | Consolidated | Breakeven +/- $250 million | ~ ($500 million) |
Aircraft deliveries
(in units) | Business Aircraft | 150-155 | } | Aviation(5)
175-180 |
| Commercial Aircraft | ~ 30 CRJ and Q400 |
SELECTED RESULTS
| RESULTS OF THE QUARTER | |
| Three-month periods ended June 30 | | 2019 | | (8) | 2018 | | | Variance | |
| Revenues | | $ | 4,314 | | | $ | 4,262 | | | 1 | % | |
| EBIT | | $ | 371 | | | $ | 191 | | | 94 | % | |
| EBIT margin | | 8.6 | % | | 4.5 | % | | 410 | bps | |
| Adjusted EBIT | | $ | 206 | | | $ | 271 | | | (24 | )% | |
| Adjusted EBIT margin | | 4.8 | % | | 6.4 | % | | (160 | ) bps | |
| Adjusted EBITDA | | $ | 312 | | | $ | 336 | | | (7 | )% | |
| Adjusted EBITDA margin(2) | | 7.2 | % | | 7.9 | % | | (70 | ) bps | |
| Net income (loss) | | $ | (36 | ) | | $ | 70 | | | | nmf | | |
| Diluted EPS (in dollars) | | $ | (0.04 | ) | | $ | 0.02 | | | $ | (0.06 | ) | |
| Adjusted net income (loss)(2) | | $ | (47 | ) | | $ | 87 | | | | nmf | | |
| Adjusted EPS (in dollars)(2) | | $ | (0.04 | ) | | $ | 0.03 | | | $ | (0.07 | ) | |
| Net additions to (disposals of) PP&E and intangible assets | | $ | 140 | | | $ | (312 | ) | | | nmf | | |
| Cash flows from operating activities | | $ | (289 | ) | | $ | (80 | ) | | (261 | )% | |
| Free cash flow (usage) | | $ | (429 | ) | | $ | 232 | | | | nmf | | |
| As at | June 30, 2019 | December 31, 2018 | | Variance | |
| Available short-term capital resources(9) | | $ | 3,646 | | | $ | 4,373 | | | (17 | )% | |
| Order backlog (in billions of dollars) | | $ | 51.6 | | | $ | 53.1 | | | (3 | )% | |
| RESULTS OF THE SIX-MONTH PERIOD | |
| Six-month periods ended June 30 | | 2019 | | | 2018 | | | Variance | |
| Revenues | | $ | 7,830 | | | $ | 8,290 | | | (6 | ) % | |
| EBIT | | $ | 1,055 | | | $ | 392 | | | 169 | % | |
| EBIT margin | | 13.5 | % | | 4.7 | % | | 880 | bps | |
| Adjusted EBIT | | $ | 377 | | | $ | 472 | | | (20 | ) % | |
| Adjusted EBIT margin | | 4.8 | % | | 5.7 | % | | (90 | ) bps | |
| Adjusted EBITDA | | $ | 578 | | | $ | 601 | | | (4 | ) % | |
| Adjusted EBITDA margin | | 7.4 | % | | 7.2 | % | | 20 | bps | |
| Net income | | $ | 203 | | | $ | 114 | | | | nmf | | |
| Diluted EPS (in dollars) | | $ | 0.04 | | | $ | 0.04 | | | $ | — | | |
| Adjusted net income (loss) | | $ | (169 | ) | | $ | 122 | | | (239 | ) % | |
| Adjusted EPS (in dollars) | | $ | (0.12 | ) | | $ | 0.04 | | | $ | (0.16 | ) | |
| Net additions (proceeds) to PP&E and intangible assets | | $ | 277 | | | $ | (62 | ) | | | nmf | | |
| Cash flows from operating activities | | $ | (1,196 | ) | | $ | (551 | ) | | (117 | ) % | |
| Free cash flow (usage) | | $ | (1,473 | ) | | $ | (489 | ) | | (201 | ) % | |
SEGMENTED RESULTS AND HIGHLIGHTS
Business Aircraft
| Results of the quarter | | | | | | | |
| Three-month periods ended June 30 | | 2019 | | | 2018 | | | Variance | |
| Revenues | | $ | 1,382 | | | $ | 1,307 | | | 6 | % | |
| Aircraft deliveries (in units) | | 35 | | | 34 | | | 1 | | |
| EBIT | | $ | 84 | | | $ | 108 | | | (22 | )% | |
| EBIT margin | | 6.1 | % | | 8.3 | % | | (220 | ) bps | |
| Adjusted EBIT | | $ | 97 | | | $ | 111 | | | (13 | )% | |
| Adjusted EBIT margin | | 7.0 | % | | 8.5 | % | | (150 | ) bps | |
| Adjusted EBITDA | | $ | 146 | | | $ | 142 | | | 3 | % | |
| Adjusted EBITDA margin | | 10.6 | % | | 10.9 | % | | (30 | ) bps | |
| Net additions to PP&E and intangible assets | | $ | 97 | | | 232 | | | (58 | )% | |
| As at | June 30, 2019 | December 31, 2018 | | | |
| Order backlog (in billions of dollars) | | $ | 15.3 | | | $ | 14.3 | | | 7 | % | |
- Revenues increased by 6% year-over-year to $1.4 billion on 35 deliveries, including 2 Global 7500 aircraft.
- Aftermarket revenues grew 3.6% year-over-year or 11% on a year-to-date basis and reflect the disposal of the aircraft training services earlier in the year. Supporting the aftermarket growth strategy, a new Dubai line maintenance station was announced during the quarter to enhance service capabilities in the Middle East.
- Backlog increased by $0.4 billion in the quarter and $1.0 billion year-to-date, reaching an industry-leading $15.3 billion and reflecting broad market interest across all regions.
- Adjusted EBITDA for the quarter was stable year-over-year at $146 million, even as production ramps up on the Global 7500. The adjusted EBIT margin of 7.0% during the quarter is lower against the same quarter last year, mainly as a result of higher amortization associated with Global 7500 deliveries. EBIT margin for the quarter was 6.1%.
- As the Global 7500 ramp-up progresses on plan and with all 2019 deliveries now in completion stages, the aircraft continues to demonstrate unmatched short runway performance by completing the first ever non-stop flight from London City Airport to Los Angeles.
- Subsequent to the quarter, Bombardier unveiled the Learjet 75 Liberty. With improved economics, $9.9 million list price and operating cost comparable with its competitors’, the new member of this iconic brand is a step up for Light jet operators, while delivering better performance.
Commercial Aircraft
| Results of the quarter | | | | | | | |
| Three-month periods ended June 30 | | 2019 | | | 2018 | | | Variance | |
| Revenues(10) | | $ | 516 | | | $ | 616 | | | (16 | )% | |
| Aircraft deliveries (in units)(11) | | 17 | | | 10 | | | 7 | | |
| Net orders (in units) | | 1 | | | 45 | | | (44 | ) | |
| Book-to-bill ratio(12) | | | 0.1 | | | 4.5 | | | (4.4 | ) | |
| EBIT(13) | | $ | 226 | | | $ | (668 | ) | | 134 | % | |
| EBIT margin(13) | | 43.8 | % | | (108.4 | )% | | nmf | | |
| Adjusted EBIT(13) | | $ | 12 | | | $ | (66 | ) | | 118 | % | |
| Adjusted EBIT margin(13) | | 2.3 | % | | (10.7 | )% | | 1300 | bps | |
| Adjusted EBITDA(13) | | $ | 17 | | | $ | (61 | ) | | 128 | % | |
| Adjusted EBITDA margin(13) | | 3.3 | % | | (9.9 | )% | | 1320 | bps | |
| Net (disposals of) additions to PP&E and intangible assets | | $ | (2 | ) | | $ | 30 | | | nmf | | |
| As at | June 30, 2019 | December 31, 2018 | | | |
| Order backlog (in units)(14) | | 41 | | | 97 | | | (56 | ) | |
- 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), a wholly owned subsidiary of Longview Aviation Capital Corp., for gross proceeds of $298 million.
- During the quarter, 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 liabilities related to credit and residual value guarantees and lease subsidies amounting to approximately $200 million. The CRJ production facility in Mirabel, Québec will remain with Bombardier and will continue to supply components and spare parts and will assemble the current CRJ backlog on behalf of MHI, CRJ production is expected to conclude in the second half of 2020. The transaction is currently expected to close during the first half of 2020 and remains subject to regulatory approvals and customary closing conditions.
- Revenues reached $516 million during the quarter on increased deliveries, including 6 Q400 deliveries prior to completion of the Q Series aircraft program sale and 11 CRJ. Year-over-year revenues decrease is due to C Series deliveries included in the comparable for the first half of 2018.
- Adjusted EBIT of $12 million includes $21 million contribution from commercial aircraft programs, offset by $9 million share of net loss in ACLP. EBIT for the quarter of $226 million is largely driven by the $219 million gain on the sale of the Q Series aircraft program to Longview.
Aerostructures and Engineering Services
| Results of the quarter | | | | | | | |
| Three-month periods ended June 30 | | 2019 | | | 2018 | | | Variance | |
| Revenues | | $ | 565 | | | $ | 455 | | | 24 | % | |
| EBIT | | $ | 25 | | | $ | 65 | | | (62 | )% | |
| EBIT margin | | 4.4 | % | | 14.3 | % | | (990 | ) bps | |
| Adjusted EBIT | | $ | 37 | | | $ | 57 | | | (35 | )% | |
| Adjusted EBIT margin | | 6.5 | % | | 12.5 | % | | (600 | ) bps | |
| Adjusted EBITDA | | $ | 50 | | | $ | 69 | | | (28 | )% | |
| Adjusted EBITDA margin | | 8.8 | % | | 15.2 | % | | (640 | ) bps | |
| Net additions to (disposals of) PP&E and intangible assets | | $ | 4 | | | $ | (1 | ) | | nmf | | |
- Revenues at Aerostructures and Engineering Services grew 24% year-over-year to $565 million as a result of the ramp up of the Global 7500 and A220 programs.
- Adjusted EBIT margin for the quarter of 6.5% reflects the ongoing ramp-up of the Global 7500 and A220. EBIT margin for the quarter was 4.4%.
- The Corporation continues to pursue the divestiture of its Belfast and Morocco aerostructures businesses as it focuses its aerostructures activities around the core capabilities in Montréal, Mexico and the newly acquired Global 7500 wing operations in Texas.
Transportation
| Results of the quarter | | | | | | | |
| Three-month periods ended June 30 | | 2019 | | | 2018 | | | Variance | |
| Revenues | | $ | 2,194 | | | $ | 2,259 | | | (3 | )% | |
| Order intake (in billions of dollars) | | $ | 2.0 | | | $ | 2.4 | | | (17 | )% | |
| Book-to-bill ratio(15) | | 0.9 | | | 1.1 | | | (0.2 | ) | |
| EBIT(16) | | $ | 87 | | | $ | 163 | | | (47 | )% | |
| EBIT margin(16) | | 4.0 | % | | 7.2 | % | | (320 | ) bps | |
| Adjusted EBIT(16) | | $ | 111 | | | $ | 207 | | | (46 | )% | |
| Adjusted EBIT margin(16) | | 5.1 | % | | 9.2 | % | | (410 | ) bps | |
| Adjusted EBITDA(16) | | $ | 146 | | | $ | 232 | | | (37 | )% | |
| Adjusted EBITDA margin(16) | | 6.7 | % | | 10.3 | % | | (360 | ) bps | |
| Net additions to PP&E and intangible assets | | $ | 36 | | | $ | 46 | | | (22 | )% | |
| As at | June 30, 2019 | December 31, 2018 | | | |
| Order backlog (in billions of dollars) | | $ | 33.6 | | | $ | 34.5 | | | (3 | )% | |
- Revenues during the quarter totalled $2.2 billion, delivering 2% growth year-over-year, excluding the unfavourable currency impacts. Revenues year-to-date are in line with the revised production schedule announced earlier in the year and consistent with full year guidance of $8.75 billion.(3)
- Adjusted EBIT margin for the second quarter of 5.1% was below expectations, reflecting additional cost pressure on large, late-stage projects, mainly in the U.K., Germany and Switzerland. EBIT margin for the quarter was 4.0%.
- Full-year adjusted EBIT margin guidance is now approximately 5%, mainly as the Corporation makes additional investments and incurs additional costs, totalling $250 million to $300 million, to both complete the legacy projects and to protect the delivery schedule for other projects. These investments include adding engineering and production capacity.(3)
- Transportation’s backlog of $33.6 billion reflects book-to-bill of 0.9 during the quarter. The positive market outlook for the rail industry remains unchanged.
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, Global 7500 and Learjet 75 Liberty are trademarks of Bombardier Inc. or its subsidiaries.
For information
Simon Letendre
Manager, Media Relations and Public Affairs
Bombardier Inc.
+514 861 9481 | Patrick Ghoche
Vice President, Investor Relations
Bombardier Inc.
+514 861 5727 |
The Management’s Discussion and Analysis and the Interim Consolidated Financial Statements are available at ir.bombardier.com.
| bps: | basis points |
| nmf: | information not meaningful |
| (1) | Excluding currency translation and divestitures. |
| (2) | Non-GAAP financial measures. See Caution regarding non-GAAP financial measures below. |
| (3) | See the forward-looking statements disclaimer at the end of this press release as well as the forward-looking statements section in Overview and the Guidance and forward-looking statements section in each reportable segment in the Corporation’s 2018 Financial Report for details regarding the assumptions on which the guidance is based. |
| (4) | Refer to the Corporation’s 2018 Financial Report, to its First Quarterly Report for the period ended March 31, 2019, and to the Segment Reporting section of the Corporation’s MD&A for the period ended June 30, 2019 for further details. |
| (5) | Refer to the Segment Reporting section of the Corporation’s MD&A for the period ended June 30, 2019 for further details. The assumptions on which the guidance for the aerospace segments was based continue to apply to the guidance for the Aviation segment. |
| (6) | The previous 2019 consolidated revenue guidance included eliminations in the range of $1.40 billion to $1.65 billion related to Aerostructures and Engineering Services intersegment sales to Business aircraft and Commercial Aircraft. This amount has been included in the new Aviation guidance. The previous 2019 guidance for adjusted EBIT and adjusted EBITDA included eliminations in the range of approximately $20 million to $40 million related to Aerostructures and Engineering Services intersegment sales to Business aircraft and Commercial Aircraft. This amount has also been included in the new Aviation guidance. |
| (7) | The previous 2019 adjusted EBIT guidance for Commercial aircraft included estimated losses of approximately $100 million related to the Corporation’s equity pick-up of ACLP results. Under the new structure, the Corporation’s interest in ACLP will be treated as a corporately held investment and therefore the respective equity pick-up is excluded from the new Aviation guidance. |
| (8) | Refer to Note 2, Changes in accounting policies, in the Corporation’s interim consolidated financial statements for the quarter ended March 31, 2019 for the impact of the adoption of IFRS 16, Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated. |
| (9) | Defined as cash and cash equivalents plus the amount available under our revolving credit facilities. |
| (10) | Including revenues from ACLP for the three-month period ended June 30, 2018. |
| (11) | Excluding 8 CS300 aircraft deliveries from the comparative period of 2018. |
| (12) | Ratio of new orders received over aircraft deliveries, in units, excluding C Series aircraft orders and deliveries for the comparative period of 2018. |
| (13) | Including share of net loss from ACLP for the three-month period ended June 30, 2019 amounting to $9 million. |
| (14) | Excluding 115 and 250 firm orders of CS100 and CS300 aircraft respectively for the comparative period of 2018. Subsequent to the C Series Partnership closing, Airbus rebranded CS100 and CS300 as A220-100 and A220-300, respectively. |
| (15) | Ratio of new orders over revenues. |
| (16) | Including share of income from joint ventures and associates amounting to $32 million for the three-month period ended June 30, 2019 ($32 million for the three-month period ended June 30, 2018). |
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, 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. |
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 the Corporation’s industry may define the above measures differently than the Corporation does. In those cases, it may be difficult to compare the performance of those entities to the Corporation’s 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 readers of the Corporation’s press releases with enhanced understanding of the Corporation’s results and related trends and increase the transparency and clarity of the core results of its business. Adjusted EBIT, adjusted EBITDA, adjusted net income (loss) and adjusted EPS exclude items that do not reflect the Corporation’s core performance or where their exclusion will assist users in understanding its results for the period. For these reasons, a significant number of readers analyze the Corporation’s results based on these financial measures. Management believes these measures help readers to better analyze results, enabling better comparability of the Corportation’s 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.
Reconciliations of non-GAAP financial measures to the most comparable IFRS financial measures are provided in the tables hereafter, except for the following reconciliation:
- Adjusted EBIT to EBIT – see the Results of operations tables in the reporting segments and Consolidated results of operations section of the Corporation’s MD&A for the quarter ended June 30, 2019.
| Reconciliation of segment to consolidated results | |
| | Three-month periods ended June 30 | | | Six-month periods ended June 30
| | |
| | 2019 | | (1) | 2018 | | | 2019 | | | 2018 | | |
| Revenues | | | | | | | | |
| Business Aircraft | $ | 1,382 | | | $ | 1,307 | | | $ | 2,352 | | | $ | 2,417 | | |
| Commercial Aircraft | 516 | | | 616 | | | 757 | | | 1,079 | | |
| Aerostructures and Engineering Services | 565 | | | 455 | | | 1,035 | | | 901 | | |
| Transportation | 2,194 | | | 2,259 | | | 4,301 | | | 4,614 | | |
| Corporate and Elimination | (343 | ) | | (375 | ) | | (615 | ) | | (721 | ) | |
| | $ | 4,314 | | | $ | 4,262 | | | $ | 7,830 | | | $ | 8,290 | | |
| Adjusted EBIT | | | | | | | | |
| Business Aircraft | $ | 97 | | | $ | 111 | | | $ | 171 | | | $ | 209 | | |
| Commercial Aircraft | 12 | | | (66 | ) | | 34 | | | (139 | ) | |
| Aerostructures and Engineering Services | 37 | | | 57 | | | 103 | | | 104 | | |
| Transportation | 111 | | | 207 | | | 194 | | | 396 | | |
| Corporate and Elimination | (51 | ) | | (38 | ) | | (125 | ) | | (98 | ) | |
| | $ | 206 | | | $ | 271 | | | $ | 377 | | | $ | 472 | | |
| Special Items | | | | | | | | |
| Business Aircraft | $ | 13 | | | $ | 3 | | | $ | (507 | ) | | $ | 4 | | |
| Commercial Aircraft | (214 | ) | | 602 | | | (214 | ) | | 602 | | |
| Aerostructures and Engineering Services | 12 | | | (8 | ) | | 12 | | | (7 | ) | |
| Transportation | 24 | | | 44 | | | 24 | | | 42 | | |
| Corporate and Elimination | — | | | (561 | ) | | 7 | | | (561 | ) | |
| | $ | (165 | ) | | $ | 80 | | | $ | (678 | ) | | $ | 80 | | |
| EBIT | | | | | | | | |
| Business Aircraft | $ | 84 | | | $ | 108 | | | $ | 678 | | | $ | 205 | | |
| Commercial Aircraft | 226 | | | (668 | ) | | 248 | | | (741 | ) | |
| Aerostructures and Engineering Services | 25 | | | 65 | | | 91 | | | 111 | | |
| Transportation | 87 | | | 163 | | | 170 | | | 354 | | |
| Corporate and Elimination | (51 | ) | | 523 | | | (132 | ) | | 463 | | |
| | $ | 371 | | | $ | 191 | | | $ | 1,055 | | | $ | 392 | | |
| Reconciliation of adjusted EBITDA to EBIT | |
| | Three-month periods ended June 30 | | | Six-month periods ended June 30 | | |
| | 2019
| | | 2018 | | | 2019
| | | 2018 | | |
| EBIT | $ | 371 | | | $ | 191 | | | $ | 1,055 | | | $ | 392 | | |
| Amortization | 106 | | | 64 | | | 197 | | | 126 | | |
| Impairment charges on PP&E and intangible assets(2) | (4 | ) | | 9 | | | (4 | ) | | 11 | | |
| Special items excluding impairment charges on PP&E and intangible assets(2) | (161 | ) | | 72 | | | (670 | ) | | 72 | | |
| Adjusted EBITDA | $ | 312 | | | $ | 336 | | | $ | 578 | | | $ | 601 | | |
| (1) | Refer to Note 2, Changes in accounting policies, in the Corporation’s interim consolidated financial statements for the quarter ended June 30, 2019 for the impact of the adoption of IFRS 16, Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated. |
| (2) | Refer to the Consolidated results of operations section in the Corporation’s MD&A for the quarter ended June 30, 2019 for details regarding special items. |
Reconciliation of adjusted net income to net income (loss) and computation of adjusted EPS
| |
| | Three-month periods ended June 30
| | |
| | 2019 | | 2018 | | |
| | (per share) | | (per share) | | |
| Net income (loss) | $ | (36 | ) | | | | $ | 70 | | | | |
| Adjustments to EBIT related to special items(1) | (165 | ) | | $ | (0.07 | ) | | 80 | | | $ | 0.03 | | |
| Adjustments to net financing expense related to: | | | | | | | | |
| Net change in provisions arising from changes in interest rates and net loss (gain) on certain financial instruments | 29 | | | 0.01 | | | (10 | ) | | 0.00 | | |
| Accretion on net retirement benefit obligations | 15 | | | 0.01 | | | 15 | | | 0.01 | | |
| Loss on repurchase of long-term debt(1) | 4 | | | 0.00 | | | — | | | — | | |
| Tax impact of special(1) and other adjusting items | 106 | | | 0.05 | | | (68 | ) | | (0.03 | ) | |
| Adjusted net income (loss) | (47 | ) | | | | 87 | | | | |
| Net income attributable to NCI | (47 | ) | | | | (2 | ) | | | |
| Preferred share dividends, including taxes | (7 | ) | | | | (7 | ) | | | |
| Adjusted net income (loss) attributable to equity holders of Bombardier Inc. | $ | (101 | ) | | | | $ | 78 | | | | |
| Weighted-average diluted number of common shares (in thousands) | 2,375,581 | | | | | 2,552,892 | | | | |
| Adjusted EPS (in dollars) | $ | (0.04 | ) | | | | $ | 0.03 | | | | |
| Reconciliation of adjusted net income to net income (loss) and computation of adjusted EPS | | | |
| | Six-month periods ended June 30 | | |
| | 2019 | | | 2018 | | |
| | (per share) | | | (per share) | | |
| Net income | $ | 203 | | | | | $ | 114 | | | | |
| Adjustments to EBIT related to special items(1) | (678 | ) | | $ | (0.29 | ) | | 80 | | | $ | 0.03 | | |
| Adjustments to net financing expense related to: | | | | | | | | |
| Net change in provisions arising from changes in interest rates and net gain on certain financial instruments | (50 | ) | | (0.02 | ) | | (36 | ) | | (0.01 | ) | |
| Accretion on net retirement benefit obligations | 33 | | | 0.01 | | | 34 | | | 0.01 | | |
| Loss on repurchase of long-term debt(1) | 84 | | | 0.04 | | | — | | | — | | |
| Tax impact of special(1) and other adjusting items | 239 | | | 0.10 | | | (70 | ) | | (0.03 | ) | |
| Adjusted net income (loss) | (169 | ) | | | | 122 | | | | |
| Net income attributable to NCI | (91 | ) | | | | (8 | ) | | | |
| Preferred share dividends, including taxes | (14 | ) | | | | (14 | ) | | | |
| Adjusted net income (loss) attributable to equity holders of Bombardier Inc. | $ | (274 | ) | | | | $ | 100 | | | | |
| Weighted-average diluted number of common shares (in thousands) | 2,375,223 | | | | | 2,475,425 | | | | |
| Adjusted EPS (in dollars) | $ | (0.12 | ) | | | | $ | 0.04 | | | | |
| Reconciliation of adjusted EPS to diluted EPS (in dollars) | |
| | Three-month periods ended June 30 | | |
| | 2019
| | | 2018 | | |
| Diluted EPS | $ | (0.04 | ) | | $ | 0.02 | | |
| Impact of special(1) and other adjusting items | — | | | 0.01 | | |
| Adjusted EPS | $ | (0.04 | ) | | $ | 0.03 | | |
| Reconciliation of adjusted EPS to diluted EPS (in dollars) | | | | |
| | Six-month periods ended June 30 | | |
| | 2019
| | | 2018 | | |
| Diluted EPS | $ | 0.04 | | | $ | 0.04 | | |
| Impact of special(1) and other adjusting items | (0.16 | ) | | — | | |
| Adjusted EPS | $ | (0.12 | ) | | $ | 0.04 | | |
| (1) | Refer to the Consolidated results of operations section in the Corporation’s MD&A for the quarter ended June 30, 2019 for details regarding special items. |
| Reconciliation of free cash flow usage to cash flows from operating activities | | | | |
| | Three-month periods ended
June 30
| | | Six-month periods ended
June 30
| | |
| | 2019
| | | 2018 | | | 2019
| | | 2018 | | |
| Cash flows from operating activities | $ | (289 | ) | | $ | (80 | ) | | $ | (1,196 | ) | | $ | (551 | ) | |
| Net (additions to) proceeds from PP&E and intangible assets | (140 | ) | | 312 | | | (277 | ) | | 62 | | |
| Free cash flow (usage) | $ | (429 | ) | | $ | 232 | | | $ | (1,473 | ) | | $ | (489 | ) | |
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, 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, legacy 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 anticipated benefits of the formation of Bombardier Aviation and the expected timing of completion thereof and estimated costs associated therewith; the pursuit of a divestiture of the Corporation’s operations in Belfast and Morocco, the anticipated benefits of any divestiture or other transaction resulting therefrom and their expected impact on the Corporation’s operations, infrastructure, opportunities, financial condition, business plan and overall strategy; the funding and liquidity of Airbus Canada Limited Partnership (ACLP); and the expected impact and intended benefits of the Corporation’s partnership with Airbus and investment in ACLP and the realization of intended benefits of the Corporation’s acquisition of Triumph Group Inc. (Triumph)’s Global 7500 wing manufacturing operations and assets. As it relates to the sale of the CRJ aircraft program (the Pending Transaction), 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. The assumptions underlying the forward-looking statements made in this press release in relation to the pursuit of a divestiture of the Corporation’s operations in Belfast and Morocco include the following material assumptions: the identification and successful completion of one or more divestiture(s) or other transactions resulting therefrom on commercially satisfactory terms and the realization of the intended benefits therefrom within the anticipated timeframe. The assumptions underlying the forward-looking statements made in this press release in relation to the Pending Transaction discussed herein include the following material assumptions: the satisfaction of all conditions of closing and the successful completion of such strategic actions and transaction within the anticipated timeframe, including receipt of regulatory approvals. 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 late-stage, 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, including the formation of Bombardier Aviation; 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; risks associated with our ability to successfully integrate our acquisition of Triumph’s Global 7500 wing manufacturing operations and assets; 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 formation of Bombardier Aviation 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 expected benefits, costs and timing of the formation of Bombardier Aviation, and the risk it will not be completed within the expected time frame, on the expected parameters, or at all; the realization of synergies and opportunities for growth and innovation and incurrence of related costs and expenses; the Corporation’s ability to ensure it has the skills, technologies and capabilities to realize the anticipated benefits of organizational changes; and negative effects of the announcement or pendency of the formation of Bombardier Aviation on the market price of the Corporation’s shares and on the financial performance of Bombardier. With respect to the pursuit of a divestiture of the Corporation’s operations in Belfast and Morocco 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 identify and 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 operations in Belfast and Morocco, 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. 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.
