Bombardier Announces Financial Results for the Fourth Quarter and the Fiscal Year Ended December 31, 2012

The fourth quarter and fiscal year ended December 31, 2011 comprise two and 11 months of Bombardier Aerospace results, and three and 12 months of Bombardier Transportation results.

Revenues of $16.8 billion, compared to $18.3 billion last fiscal year
EBIT before special items(1) of $835 million, or 5.0% of revenues, compared to $1.2 billion, or 6.6%, last fiscal year
Adjusted net income(1) of $692 million, compared to $865 million last fiscal year
Adjusted earnings per share(1) of $0.38, compared to $0.48 last fiscal year
Free cash flow usage(1) of $741 million, compared to a usage of $1.2 billion last fiscal year
Available short-term capital resources of $4.3 billion including cash and cash equivalents of $2.9 billion as at December 31, 2012, compared to $4.1 billion and $3.4 billion respectively, as at December 31, 2011; $6.3 billion as at December 31, 2012 on a pro forma basis giving effect to the January 2013 debt issuance
Record backlog in both groups for a consolidated backlog of $66.6 billion, compared to $55.8 billion as at December 31, 2011

Bombardier today reported its financial results for the fourth quarter and the year ended December 31, 2012. Revenues totalled $4.8 billion for the fourth quarter ended December 31, 2012, compared to $4.3 billion for the corresponding period last fiscal year. For the year, revenues totalled $16.8 billion, compared to $18.3 billion for the last fiscal year.

For the fourth quarter ended December 31, 2012, earnings before financing expense, financing income and income taxes (EBIT) before special items totalled $175 million, or 3.7% of revenues, compared to $293 million, or 6.8%, for the corresponding period the previous year. For the year, EBIT before special items was $835 million, or 5.0% of revenues, compared to $1.2 billion, or 6.6%, last fiscal year. For the fourth quarter ended December 31, 2012, EBIT was $12 million, or 0.3% of revenues, compared to $293 million, or 6.8%, for the corresponding period the previous year. For the year, EBIT amounted to $695 million or 4.1% of revenues, versus $1.2 billion or 6.6% last fiscal year.

On an adjusted basis, net income amounted to $188 million, or adjusted earnings per share (EPS) of $0.10, for the fourth quarter ended December 31, 2012, compared to $227 million, or adjusted EPS of $0.13, for the corresponding period the previous year. Adjusted net income for the year ended December 31, 2012 amounted to $692 million, compared to $865 million for the last fiscal year, resulting in an adjusted EPS of $0.38, compared to an adjusted EPS of $0.48 last fiscal year. Net income amounted to $14 million, or diluted EPS of nil, for the fourth quarter ended December 31, 2012, compared to $214 million, or diluted EPS of $0.12, for the corresponding period the previous year. Net income for the year ended December 31, 2012 amounted to $598 million, compared to $837 million for the last fiscal year. For the year, diluted EPS was $0.32, compared to diluted EPS of $0.47 last fiscal year.

For the three-month period ended December 31, 2012, free cash flow (cash flows from operating activities less net additions to property, plant and equipment and intangible assets) totalled $850 million, compared to $590 million for the corresponding period the previous year. Free cash flow usage totalled $741 million for the year ended December 31, 2012, compared to a free cash flow usage of $1.2 billion last fiscal year. Available short-term capital resources of $4.3 billion include cash and cash equivalents of $2.9 billion as at December 31, 2012, compared to $4.1 billion and $3.4 billion respectively as at December 31, 2011 ($6.3 billion on a pro forma basis as at December 31, 2012, giving effect to the debt issuance of January 2013). The overall backlog increased by $10.8 billion since the beginning of the year, reaching a record level of $66.6 billion as at December 31, 2012.

“Our results for 2012 are not reflective of our potential,” said Pierre Beaudoin, President and Chief Executive Officer, Bombardier Inc. “After proving our resilience throughout the economic crisis, today, Bombardier is at a turning point. With our outstanding backlog of $66.6 billion, an increase of 19% over last year, we’re forging ahead with breakthrough products and expanding our reach in pivotal growth markets.”

“In Aerospace, we were in line with our delivery guidance and we’ve garnered an impressive 481 net orders bringing our backlog to a record level of $32.9 billion at the end of 2012. We’re the clear leader in business aviation both in terms of revenues and deliveries, and in commercial aircraft, we had some significant orders for both jets and turboprops. Our development programs are making solid progress and the CSeries’ first flight will take place by the end of June 2013.”

“In Transportation, we won many important orders around the world in 2012, which brought our backlog to $33.7 billion, its highest level ever. Meanwhile, we took various measures to improve our cost structure and competitiveness. These inititatives are aimed at securing our leadership and improving our profitability.”

“Our three main drivers will allow us to deliver long-term sustainable growth. The first driver is our portfolio of state-of-the-art products and services, which will be further fortified as several innovative platforms roll out of our facilities starting in 2014. The second is our expanding presence in key markets worldwide which brings us closer to our customer base, and finally, the strengthening of customer satisfaction through flawless execution on every order. These are exciting times at Bombardier and we’re on the cusp of seeing significant revenue growth,” concluded Mr. Beaudoin.

Bombardier Aerospace
Bombardier Aerospace’s revenues amounted to $2.6 billion for the three-month period ended December 31, 2012, compared to $2.0 billion for the corresponding period last fiscal year. For the year, revenues totalled $8.6 billion, the same level as last fiscal year.

EBIT before special items totalled $382 million, or 4.4% of revenues, for the year ended December 31, 2012, compared to $502 million, or 5.8%, last fiscal year. For the fourth quarter ended December 31, 2012, EBIT totalled $89 million, or 3.4% of revenues, compared to $127 million, or 6.3%, for the corresponding last fiscal year. For the year, EBIT was $405 million, or 4.7% of revenues, compared to $502 million, or 5.8%, last fiscal year.

Free cash flow totalled $277 million for the fourth quarter ended December 31, 2012, compared to $110 million for the corresponding period last fiscal year. For the year ended December 31, 2012, free cash flow usage totalled $867 million compared to a free cash flow usage of $453 million for the last fiscal year.

A total of 233 aircraft were delivered during the year ended December 31, 2012, compared to 245 for the last fiscal year.

Bombardier Business Aircraft saw a remarkable level of order intake with 343 net orders compared to 191 for the last fiscal year. The business unit obtained two of its biggest orders in its history with a firm order from VistaJet for 56 Global aircraft, valued at $3.1 billion and a firm order from NetJets Inc. for 100 Challenger aircraft, valued at $2.6 billion, based on list prices. Even excluding these two orders and a significant order from NetJets Inc. in 2011, the business aircraft order intake still increased by 43%.

Bombardier Commercial Aircraft received 138 firm orders during the year, compared to 54 for the last fiscal year. Some of the largest orders received are from WestJet Airlines Ltd., which placed a firm order for 20 Q400 NextGen aircraft valued at $683 million, Delta Air Lines Inc. which purchased 40 CRJ900 NextGen aircraft valued at $1.9 billion and finally, airBaltic which placed a firm order for 10 CS300 aircraft valued at $764 million.The value of these firm orders are all based on list prices.

Bombardier Aerospace’s backlog increased by 38% reaching $32.9 billion as at December 31, 2012, compared to $23.9 billion as at December 31, 2011.

The CSeries aircraft program development is progressing steadily: the assembly of the first Flight Test Vehicle (FTV1) in Mirabel, Québec, is in the advanced stages with all primary structures now assembled on the aircraft. Key components and systems are in place, namely the wing, landing gear, horizontal/vertical stabilizers, and most recently, the engines as we proceed with ongoing systems installations. In February 2013, the engine that will power the CSeries aircraft, Pratt and Whitney’s PW1500 geared-turbofan engine, was awarded Transport Canada certification. These are critical steps in supporting the progressive transfer of FTV1 to the flight test program in the coming weeks. Progress has also been made in the build of the subsequent flight test vehicles which will join FTV1 in the flight test program.

Additionally, the build for the Complete Airframe Static Test (CAST) article, our aircraft destined for ground testing, was completed in December 2012 followed by the start of the first certification and Safety of Flight tests in February 2013. As well, the Complete Integrated Aircraft Systems Test Area (CIASTA/Aircraft 0) rig was recently upgraded to first flight configuration to allow for formal Safety of Flight testing. The validation process from all the on-the-ground integrated systems tests is progressing as expected.

The Learjet 85 aircraft program is making solid progress having achieved several key milestones. The first flight test aircraft is significantly advanced: the complete pressure fuselage, including the nose, aft fuselage and empennage have been joined, the landing gear has been installed and the wing is attached to the fuselage. However, while we have successfully dealt with several new technology challenges, the program’s timeline has been impacted. Entry-into-service is now scheduled for summer 2014.

In 2013, the EBIT margin should be at a similar level as 2012. However, in 2014, Bombardier Aerospace expects to achieve an EBIT margin of approximately 6%, after an anticipated 2% dilutive impact from the entry-into-service of the CSeries aircraft.

The group expects cash flows from operating activities of approximately $1.4 billion in 2013, while the net additions to property, plant and equipment (PP&E) and intangible assets are expected to be approximately $2 billion. The level of net additions to PP&E and intangible assets is expected to decrease in 2014 by approximately $500 million and in 2015 by approximately another $500 million.

In 2013, Bombardier Aerospace expects to deliver approximately 190 business and 55 commercial aircraft.

Bombardier Transportation
Bombardier Transportation’s revenues amounted to $2.2 billion for the three-month period ended December 31, 2012, compared to $2.3 billion for the same period last year. Revenues totalled $8.1 billion for the year ended December 31, 2012, compared to $9.8 billion for the last fiscal year.

For the fourth quarter ended December 31, 2012, EBIT before special items totalled $86 million, or 4.0% of revenues, compared to $166 million, or 7.2%, for the same quarter the previous year. For the year, EBIT before special items was $453 million, compared to $700 million last fiscal year, translating into an EBIT margin of 5.6% of revenues versus 7.2% last fiscal year. For the three-month period ended December 31, 2012, the loss before financing expenses, financing income and income taxes totalled $77 million, or 3.6% of revenues, compared to an EBIT of $166 million, or 7.2%, for the same quarter the previous year. EBIT for the year was $290 million, compared to $700 million last fiscal year, translating into an EBIT margin of 3.6% versus 7.2% last fiscal year.

Free cash flow totalled $673 million for the quarter ended December 31, 2012, compared to $564 million for the same period last fiscal year. Free cash flow amounted to $386 million for the year ended December 31, 2012, compared to a free cash flow usage of $424 million for the last fiscal year.

New orders reached $9.4 billion (book-to-bill ratio of 1.2), compared to $9.7 billion (book-to-bill ratio of 1.0) for the last fiscal year. The order backlog totalled a record $33.7 billion as at December 31, 2012, compared to $31.9 billion as at December 31, 2011.

The group continued to secure orders around the world and across all its product segments, as illustrated by the orders from Metrolinx/GO Transit in Toronto, for 10 years of operation and maintenance services, valued at $937 million and from San Francisco Bay Area Rapid Transit District (BART) for 410 metro cars, valued at $897 million. The City of Basel’s Transport Authority, Switzerland, signed an agreement for 60 FLEXITY trams valued at $241 million, Abellio Rail NRW GmbH of Germany ordered 35 TALENT 2 Electrical Multiple Units (EMU) valued at $226 million, and Public Transport Victoria (PTV) of Australia placed an order for 40 VLocity Diesel Multiple Unit (DMU) cars valued at $216 million.

The group also announced measures to improve its competitiveness and cost structure. These include the closure of a plant in Aachen, Germany, and the reduction of direct and indirect personnel by approximately 1,200 employees worldwide, including Aachen. A restructuring charge of $119 million in connection with these planned measures was recorded in the fourth quarter of fiscal year 2012.

In 2013, revenues are expected to be higher than in 2012, with a percentage growth in the high single digits, excluding currency impacts, and the group should maintain its free cash flow generally in line with EBIT, although it may vary significantly from quarter to quarter. Bombardier Transportation extended its target date, to achieve an EBIT margin of 8% by 2014.