Bombardier Announces Financial Results for the Third Quarter Ended September 30, 2013

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Bombardier Announces Financial Results for the Third Quarter Ended September 30, 2013

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— Revenues of $4.1 billion, compared to $4.2 billion last fiscal year
— EBIT of $210 million, or 5.2% of revenues, compared to $240 million, or
5.7%, last fiscal year
— Adjusted net income(1) of $165 million (adjusted EPS(1) of $0.09),
compared to $173 million (adjusted EPS of $0.09) for the same period
last fiscal year
— Net income of $147 million (diluted EPS of $0.08), compared to $172
million (diluted EPS of $0.09) for the same period last fiscal year
— Free cash flow usage(1) of $522 million, compared to a usage of $187
million last fiscal year
— Available short-term capital resources of $4.0 billion, including cash
and cash equivalents of $2.6 billion as at September 30, 2013, the same
levels as compared to December 31, 2012
— Backlog of $65.5 billion as at September 30, 2013, compared to $64.9
billion as at December 31, 2012

(1) See Caution regarding non-GAAP measures at the end of this press release.

Bombardier today reported its financial results for the third quarter ended September 30, 2013. Revenues totalled $4.1 billion for the quarter, compared to $4.2 billion for the same period last fiscal year.

For the third quarter ended September 30, 2013, earnings before financing expense, financing income and income taxes (EBIT) totalled $210 million, or 5.2% of revenues, compared to $240 million, or 5.7%, for the same period last year.

On an adjusted basis, net income amounted to $165 million, or earnings per share (EPS) of $0.09, for the third quarter ended September 30, 2013, compared to $173 million, or EPS of $0.09, for the same period the previous year.

For the three-month period ended September 30, 2013, free cash flow usage (cash flows from operating activities less net additions to property, plant and equipment and intangible assets) amounted to $522 million, compared to a usage of $187 million for the same period last year. As at September 30, 2013, available short-term capital resources of $4.0 billion included cash and cash equivalents of $2.6 billion, the same levels as compared to December 31, 2012. The overall backlog reached $65.5 billion as at September 30, 2013, compared to $64.9 billion as at December 31, 2012.

“In Aerospace, results were in line with our guidance, but the low order intake and overall market conditions were a disappointment,” said Pierre Beaudoin, President and Chief Executive Officer, Bombardier Inc. “And in September, the CSeries had its first flight thus starting the extensive flight test program.”

“Our revenues in Transportation have increased and free cash flow has also slightly improved. The overall market remains resilient and as illustrated by some order wins during the quarter, our penetration of new regions continues to be strong.”

“Our significant ongoing investments in the development of new products, combined with our $65.5 billion backlog, represent the core elements for our strong growth story to take shape,” concluded Mr. Beaudoin.

Bombardier Inc. also announced the appointment of Mr. Patrick Pichette to its Board of Directors. Mr. Pichette is Chief Financial Officer at Google Inc. He was at Bell Canada from 2001 to 2008, during which time he held various executive positions including Chief Financial Officer. Prior to joining Bell Canada, Mr. Pichette was a partner at McKinsey & Company. He earned a bachelor’s degree in business administration from Universite du Quebec a Montreal. He also holds a master’s degree in philosophy, politics and economics from Oxford University, where he attended as a Rhodes Scholar.

Bombardier Aerospace

Bombardier Aerospace’s revenues amounted to $2.0 billion for the three-month period ended September 30, 2013, compared to $2.3 billion for the same period last fiscal year. EBIT totalled $86 million or 4.3% of revenues for the third quarter ended September 30, 2013, compared to $118 million, or 5.2%, last fiscal year.

Free cash flow usage amounted to $406 million (including net additions to property, plant and equipment (PP&E) and intangible assets of $585 million) for the third quarter ended September 30, 2013, compared to a usage of $68 million (including net additions to PP&E and intangible assets of $543 million) for the same period last fiscal year.

Bombardier Aerospace delivered a total of 45 aircraft during the third quarter ended September 30, 2013, compared to 57 for the same period last fiscal year, and received 26 net orders during the third quarter, compared to 83 for the same period last fiscal year.

In Commercial Aircraft, a memorandum of understanding was signed with Rosteckhnologii (Rostec), a state corporation controlled by the Russian Federation, to validate the opportunity to set up a Q400 NextGen final assembly line in Russia. In parallel, a letter of intent (LOI) was signed with Rostec for the sale of 50 Q400 NextGen turboprop aircraft. A LOI has also been signed with Ilyushin Finance Co. for the sale of 50 Q400 NextGen turboprop aircraft. Based on list price, the LOIs for 100 Q400 NextGen turboprop aircraft are valued at $3.4 billion.

During the third quarter, Bombardier signed an agreement for the sale of Flexjet’s activities to a newly-created company, Flexjet, LLC, owned by a group led by Directional Aviation Capital. The purchase price is $185 million and the transaction, subject to regulatory approvals and the usual closing conditions, is expected to close before the end of the year.

In connection with this transaction, Flexjet, LLC placed conditional orders for 85 aircraft of the Learjet family and 30 aircraft of the Challenger family, with options for 150 additional business aircraft. Based on list prices, the value of the conditional orders is $2.4 billion, excluding the options.

Subsequent to the end of the quarter, Bombardier Aerospace announced that CDB Leasing Co., Ltd. of China, is the previously undisclosed customer that signed a conditional purchase agreement for 5 CS100 and 10 CS300 aircraft. This agreement also includes options for an additional 5 CS100 and 10 CS300 aircraft for a total of up to 30 CSeries aircraft. Based on list prices, the conditional order is valued at approximately $1 billion and could increase to $2.1 billion should all 15 options be exercised. This brings the total orders and commitments for the CSeries program to 403 aircraft with 15 customers and operators.

Bombardier Aerospace’s backlog totalled $32.9 billion as at September 30, 2013, the same level as at December 31, 2012.

Bombardier Transportation

Bombardier Transportation’s revenues amounted to $2.1 billion for the three-month period ended September 30, 2013, compared to $1.9 billion for the same period last year. EBIT totalled $124 million, or 6.0% of revenues, compared to $122 million, or 6.3%, for the same quarter the previous year. Free cash flow usage totalled $5 million for the quarter ended September 30, 2013, compared to a usage of $58 million for the same period last fiscal year.

New orders reached $1.7 billion (book-to-bill ratio of 0.8), compared to $2.2 billion for the same quarter last fiscal year. The order backlog totalled $32.6 billion as at September 30, 2013, compared to $32.0 billion as at December 31, 2012.

During the third quarter, Bombardier Transportation won several orders across all divisions and geographies, including, as a member of the ArRiyadh New Mobility Consortium, a contract to deliver technology for the new line 3 in Riyadh, Kingdom of Saudi Arabia. The contract includes system interface management, project management and design, as well as the delivery of 47 two-car driverless INNOVIA Metro 300 trains equipped with the MITRAC propulsion technology. Bombardier Transportation’s share of the contract is valued at approximately $383 million.

Bombardier Transportation also received orders from Deutsche Bahn AG, Germany, for 18 TWINDEXX electric double-deck trains, valued at $289 million as well as from Southern Railway, U.K., for 116 ELECTROSTAR cars, valued at $274 million, including a spares supply agreement.

FINANCIAL HIGHLIGHTS
(In millions of U.S. dollars, except per share amounts)
—————————————————————————-
—————————————————————————-
For the three-month periods
ended September 30 2013 2012
—————————————————————————-
BA BT Total BA BT Total
—————————————————————————-
restated (1)
Results of
operations
Revenues $ 1,999 $ 2,059 $ 4,058 $ 2,267 $ 1,944 $ 4,211
Cost of sales 1,710 1,769 3,479 1,976 1,636 3,612
—————————————————————————-
Gross margin 289 290 579 291 308 599
SG&A 176 164 340 174 177 351
R&D 39 26 65 37 32 69
Share of income of
joint ventures and
associates – (24) (24) – (23) (23)
Other income (12) – (12) (38) – (38)
—————————————————————————-
EBIT $ 86 $ 124 210 $ 118 $ 122 240
Financing expense 58 67
Financing income (22) (52)
—————————————————————————-
EBT 174 225
Income taxes 27 53
—————————————————————————-
Net income $ 147 $ 172
—————————————————————————-
—————————————————————————-
EPS (basic and
diluted; in
dollars) $ 0.08 $ 0.09
—————————————————————————-
—————————————————————————-
Supplemental
information
—————————————————————————-
EBIT (2) $ 86 $ 124 $ 210 $ 118 $ 122 $ 240
Amortization 61 31 92 59 29 88
—————————————————————————-
EBITDA(2) $ 147 $ 155 $ 302 $ 177 $ 151 $ 328
—————————————————————————-
—————————————————————————-
On an adjusted
basis
—————————————————————————-
Adjusted net
income(2) $ 165 $ 173
Adjusted EPS (in
dollars)(2) $ 0.09 $ 0.09
—————————————————————————-
—————————————————————————-

Cash flows from
operating
activities $ 179 $ 6 $ 475 $ (39)
Net additions to
PP&E and
intangible assets (585) (11) (543) (19)
—————————————————————————-
Segmented free cash
flow usage(2) $ (406)$ (5)$ (411)$ (68)$ (58)$ (126)
Net income taxes
and net interest
paid (111) (61)
—————————————————————————-
Free cash flow
usage(2) $ (522) $ (187)
—————————————————————————-
—————————————————————————-

BA: Bombardier Aerospace; BT: Bombardier Transportation

(1) Certain comparative figures have been restated as a result of our
adoption of IFRS 11, Joint arrangements and the amended IAS 19,
Employee benefits. The joint arrangement restatements relate to the
requirement to account for our investments in joint ventures using the
equity method under IFRS 11, instead of proportionate consolidation.
The employee benefit restatements mainly relate to the requirement
under amended IAS 19 to calculate interest expense and interest income
components on a net basis using the post-employment benefit obligation
discount rate. Comparative figures have also been restated due to the
change in methods of measurement of certain financial assets, as
described in the Accounting and reporting developments section of the
Corporation’s MD&A.

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures
and Liquidity and capital resources sections of the Corporation’s MD&A
for definitions of these metrics and reconciliation to the most
comparable IFRS measures.

(In millions of U.S. dollars, except
per share amounts)
—————————————————————————-
—————————————————————————-
For the nine-month periods
ended September 30 2013 2012
—————————————————————————-
BA BT Total BA BT Total
—————————————————————————-
restated (1)
Results of
operations
Revenues $ 6,512 $ 6,315 $ 12,827 $ 6,031 $ 5,758 $ 11,789
Cost of sales 5,583 5,377 10,960 5,171 4,830 10,001
—————————————————————————-
Gross margin 929 938 1,867 860 928 1,788
SG&A 523 543 1,066 515 569 1,084
R&D 126 84 210 103 93 196
Share of income of
joint ventures and
associates – (102) (102) – (92) (92)
Other income (14) – (14) (41) (1) (42)
—————————————————————————-
EBIT before special
items(2) 294 413 707 283 359 642
Special items (31) – (31) (23) – (23)
—————————————————————————-
EBIT $ 325 $ 413 738 $ 306 $ 359 665
Financing expense 209 227
Financing income (102) (146)
—————————————————————————-
EBT 631 584
Income taxes 156 110
—————————————————————————-
Net income $ 475 $ 474
—————————————————————————-
—————————————————————————-
EPS (basic and
diluted; in
dollars) $ 0.26 $ 0.26
—————————————————————————-
—————————————————————————-
Supplemental
information
—————————————————————————-
—————————————————————————-
EBIT before special
items(2) $ 294 $ 413 $ 707 $ 283 $ 359 $ 642
Amortization 193 92 285 167 90 257
—————————————————————————-
EBITDA before
special items(2) $ 487 $ 505 $ 992 $ 450 $ 449 $ 899
—————————————————————————-
—————————————————————————-
On an adjusted
basis
—————————————————————————-
Adjusted net
income(2) $ 479 $ 490
Adjusted EPS (in
dollars)(2) $ 0.26 $ 0.26
—————————————————————————-
—————————————————————————-
Cash flows from
operating
activities $ 296 $ (61) $ 252 $ (137)
Net additions to
PP&E and
intangible assets (1,622) (38) (1,396) (50)
—————————————————————————-
Segmented free cash
flow usage(2) $ (1,326)$ (99)$ (1,425)$ (1,144)$ (187)$ (1,331)
Net income taxes
and net interest
paid (253) (159)
—————————————————————————-
Free cash flow
usage(2) $ (1,678) $ (1,490)
—————————————————————————-
—————————————————————————-

BA: Bombardier Aerospace; BT: Bombardier Transportation

(1) Certain comparative figures have been restated as a result of our
adoption of IFRS 11, Joint arrangements and the amended IAS 19,
Employee benefits. The joint arrangement restatements relate to the
requirement to account for our investments in joint ventures using the
equity method under IFRS 11, instead of proportionate consolidation.
The employee benefit restatements mainly relate to the requirement
under amended IAS 19 to calculate interest expense and interest income
components on a net basis using the post-employment benefit obligation
discount rate. Comparative figures have also been restated due to the
change in methods of measurement of certain financial assets, as
described in the Accounting and reporting developments section of the
Corporation’s MD&A.

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures
and Liquidity and capital resources sections of the Corporation’s MD&A
for definitions of these metrics and reconciliation to the most
comparable IFRS measures.

SELECTED FINANCIAL INFORMATION

Bombardier Aerospace

Total aircraft deliveries
—————————————————————————-
—————————————————————————-
Three-month periods Nine-month periods
ended September 30 ended September 30
—————————————————————————-
(in units) 2013 2012 2013 2012
—————————————————————————-
Business aircraft
Excluding those of the
Flexjet fractional
ownership program 36 43 119 117
Flexjet fractional
ownership program(1) – 1 1 2
—————————————————————————-
36 44 120 119
Commercial aircraft 9 12 34 34
Amphibious aircraft – 1 1 3
—————————————————————————-
45 57 155 156
—————————————————————————-
—————————————————————————-
(1) An aircraft delivery is included in the above table when the
equivalent of 100% of the fractional shares of an aircraft model has
been sold to external customers through Flexjet, or when a whole
aircraft has been sold to external customers through the Flexjet One
program.

Total aircraft net orders
—————————————————————————-
—————————————————————————-
September 30, 2013 September 30, 2012
—————————————————————————-
(in units) Gross Net Gross Net
orders Cancellations orders orders Cancellations orders
—————————————————————————-
Three-month
periods ended
—————————————————————————-
Business
aircraft
(including
those of
the Flexjet
fractional
ownership
program) 37 (14) 23 55 (10) 45
Commercial
aircraft 3 – 3 38 – 38
—————————————————————————-
40 (14) 26 93 (10) 83
—————————————————————————-
—————————————————————————-
Nine-month
periods ended
—————————————————————————-
Business
aircraft
(including
those of
the Flexjet
fractional
ownership
program) 138 (41) 97 251 (32) 219
Commercial
aircraft 50 (11) 39 78 – 78
—————————————————————————-
188 (52) 136 329 (32) 297
—————————————————————————-
—————————————————————————-

Book-to-bill ratio(1)
—————————————————————————-
—————————————————————————-
Three-month periods Nine-month periods
ended September 30 ended September 30
—————————————————————————-
2013 2012 2013 2012
—————————————————————————-
Business aircraft 0.6 1.0 0.8 1.8
Commercial aircraft 0.3 3.2 1.1 2.3
—————————————————————————-
Total 0.6 1.5 0.9 1.9
—————————————————————————-
—————————————————————————-

(1) Defined as net orders received over aircraft deliveries, in units.

Order backlog
—————————————————————————-
—————————————————————————-
As at
—————————————————————————-
(in billions of dollars) September 30, December 31,
2013 2012
—————————————————————————-
Aircraft programs $ 29.5 $ 29.5
Long-term maintenance and spares support
agreements 2.9 2.8
Military Aviation Training 0.5 0.6
—————————————————————————-
$ 32.9 $ 32.9
—————————————————————————-
—————————————————————————-

Bombardier Transportation

Upon the adoption of IFRS 11, Joint arrangements, effective January 1, 2013, the Corporation is using the equity method to account for its interests in joint ventures and presenting its pro rata share of net income arising from joint ventures as a net of tax one-line item in the results of operations. Prior to the adoption of IFRS 11, the Corporation’s share of revenues and expenses of joint ventures was consolidated line-by-line in its results of operations using the proportionate consolidation method. IFRS 11 was adopted retrospectively and comparative figures have been restated.

Revenues by geographic region
—————————————————————————-
—————————————————————————-
Three-month periods ended Nine-month periods ended
September 30 September 30
—————————————————————————-
2013 2012 2013 2012
—————————————————————————-
restated restated
Europe(1) $ 1,352 66% $ 1,251 64% $ 4,197 67% $ 3,814 66%
North America 387 19% 373 19% 1,152 18% 1,095 19%
Asia-Pacific(1) 173 8% 222 12% 581 9% 457 8%
Rest of
world(2) 147 7% 98 5% 385 6% 392 7%
—————————————————————————-
$ 2,059 100% $ 1,944 100% $ 6,315 100% $ 5,758 100%
—————————————————————————-
—————————————————————————-
(1) The increases in Europe reflect positive currency impacts of $47
million and $67 million, respectively, for the three- and nine-month
periods ended September 30, 2013, while the variances in Asia-Pacific
reflect negative currency impacts of $14 million and $17 million
respectively.

(2) The Rest of world region includes South America, Central America,
Africa, the Middle East and the CIS.

Order intake and book-to-bill ratio
—————————————————————————-
—————————————————————————-
Three-month periods Nine-month periods
ended September 30 ended September 30
—————————————————————————-
Order intake (in billions of
dollars)(1) 2013 2012 2013 2012
—————————————————————————-
restated restated
Rolling stock $ 0.7 $ 1.2 $ 4.0 $ 4.3
Services 0.2 0.4 1.5 1.0
System and signalling 0.8 0.6 1.4 1.0
—————————————————————————-
$ 1.7 $ 2.2 $ 6.9 $ 6.3
—————————————————————————-
—————————————————————————-
Book-to-bill ratio(2) 0.8 1.1 1.1 1.1
—————————————————————————-
—————————————————————————-
(1) Including any new orders between BT and its joint ventures, but
excluding the order intake of our joint ventures.

(2) Ratio of new orders over revenues.

Order backlog(1)
—————————————————————————-
—————————————————————————-
As at
—————————————————————————-
(in billions of dollars) September 30, December 31,
2013 2012
—————————————————————————-
restated
Rolling stock $ 20.9 $ 20.7
Services 7.3 7.0
System and signalling 4.4 4.3
—————————————————————————-
$ 32.6 $ 32.0
—————————————————————————-
—————————————————————————-
(1) Including the order backlog for contracts between BT and its joint
ventures, but excluding our share of joint ventures’ backlog, which
was $2.0 billion as at September 30, 2013 ($2.2 billion as at December
31, 2012).

DIVIDENDS ON COMMON SHARES

Class A and Class B Shares

A quarterly dividend of $0.025 Cdn per share on Class A Shares (Multiple Voting) and of $0.025 Cdn per share on Class B Shares (Subordinate Voting) is payable on December 31, 2013 to the shareholders of record at the close of business on December 13, 2013.

Holders of Class B Shares (Subordinate Voting) of record at the close of business on December 13, 2013 also have a right to a priority quarterly dividend of $0.000390625 Cdn per share.

DIVIDENDS ON PREFERRED SHARES

Series 2 Preferred Shares

A monthly dividend of $0.0625 Cdn per share on Series 2 Preferred Shares has been paid on August 15, September 15 and October 15, 2013.

Series 3 Preferred Shares

A quarterly dividend of $0.195875 Cdn per share on Series 3 Preferred Shares is payable on January 31, 2014 to the shareholders of record at the close of business on January 17, 2014.

Series 4 Preferred Shares

A quarterly dividend of $0.390625 Cdn per share on Series 4 Preferred Shares is payable on January 31, 2014 to the shareholders of record at the close of business on January 17, 2014.

About Bombardier

Bombardier is the world’s only manufacturer of both planes and trains. Looking far ahead while delivering today, Bombardier is evolving mobility worldwide by answering the call for more efficient, sustainable and enjoyable transportation everywhere. Our vehicles, services and, most of all, our employees are what make us a global leader in transportation.

Bombardier is headquartered in Montreal, Canada. Our shares are traded on the Toronto Stock Exchange (BBD) and we are listed on the Dow Jones Sustainability World and North America indexes. In the fiscal year ended December 31, 2012, we posted revenues of $16.8 billion. News and information are available at bombardier.com or follow us on Twitter @Bombardier.

Bombardier, Challenger, CS100, CS300, CSeries, ELECTROSTAR, Flexjet, INNOVIA, Learjet, MITRAC, NextGen, Q400, The Evolution of Mobility and TWINDEXX are trademarks of Bombardier Inc. or its subsidiaries.

The Management’s Discussion and Analysis and the interim consolidated financial statements are available at ir.bombardier.com.

FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives, guidance, targets, goals, priorities, our market and strategies, financial position, 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; 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; our competitive position; and the expected impact of the legislative and regulatory environment and legal proceedings on our business and operations. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “anticipate”, “plan”, “foresee”, “believe”, “continue”, “maintain” or “align”, the negative of these terms, variations of them or similar terminology. By their nature, forward-looking statements require us 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 forecasted results. While we consider our assumptions to be reasonable and appropriate based on information currently available, there is a 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 respective Guidance and forward-looking statements sections in Overview, Bombardier Aerospace and Bombardier Transportation sections in the Management’s Discussion and Analysis (“MD&A”) in the Corporation’s annual report for the fiscal year ended December 31, 2012.

Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include risks associated with general economic conditions, risks associated with our business environment (such as risks associated with the financial condition of the airline industry and major rail operators), operational risks (such as risks related to developing new products and services; doing business with partners; product performance warranty and casualty claim losses; regulatory and legal proceedings; the environment; dependence on certain customers and suppliers; human resources; fixed-price commitments and production and project execution), financing risks (such as risks related to liquidity and access to capital markets, exposure to credit risk, certain restrictive debt covenants, financing support provided for the benefit of certain customers and reliance on government support) and market risks (such as risks related to foreign currency fluctuations, changing interest rates, decreases in residual values and increases in commodity prices). For more details, see the Risks and uncertainties section in Other in the MD&A of the Corporation’s annual report for the fiscal year ended December 31, 2012. 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. The forward-looking statements set forth herein reflect our expectations as at the date of this press release and are subject to change after such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume 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 MEASURES

This press release is based on reported earnings in accordance with International Financial Reporting Standards (IFRS). Reference to generally accepted accounting principles (GAAP) means IFRS, unless indicated otherwise. This press release is also based on non-GAAP financial measures including EBITDA, EBIT before special items, EBIT margin before special items, adjusted net income, adjusted earnings per share and free cash flow. These non-GAAP measures are mainly derived from the interim consolidated financial statements, but do not have a standardized meaning prescribed by IFRS; therefore, others using these terms may calculate them differently. Management believes that providing certain non-GAAP performance measures, in addition to IFRS measures, provides users of our interim consolidated financial statements with enhanced understanding of our results and related trends and increases transparency and clarity into the core results of our business. Refer to the Non-GAAP financial measures and Liquidity and capital resources sections in the Corporation’s MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures.

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