Bombardier updates guidance following the C Series Partnership closing effective July 1, 2018

Bombardier (TSX:BBD.B) and Airbus have agreed to close the C Series partnership on July 1, 2018 after having received all required regulatory approvals.

“Closing the Airbus partnership ahead of the original schedule positions us to accelerate value creation for our shareholders as we combine the innovative C Series aircraft with the global scale and reach of Airbus,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “With this milestone achieved, we are focused on capturing growth opportunities across the portfolio and delivering our remaining turnaround plan objectives.”

The partnership with Airbus will close and be effective July 1, 2018. Consequently, Bombardier will de-consolidate C Series financial results starting July 1, 2018. As a result of closing earlier than originally expected, Bombardier is withdrawing its full year guidance for its Commercial Aircraft segment. However, the company reaffirms its regional aircraft delivery guidance of approximately 35 aircraft for 2018 and expects to provide updated 2018 segment guidance for revenue and EBIT when it announces second quarter results on August 2, 2018.

Closing ahead of schedule will result in expected revenues for 2018 in a range of $16.5 billion to $17 billion, as C Series revenues from and after July 1, 2018 will no longer be consolidated in Bombardier’s financial results and sales from Aerostructures and Engineering Services to CSALP will no longer be inter-segment. Full year consolidated EBIT for Bombardier Inc. is expected to increase to a range of $900 million to $1.0 billion as C Series program results will no longer be fully recognized after closing. Further adjustments to the equity pick-up of CSALP’s results included in our EBIT guidance may be required based on CSALP’s future results.

Free cash flow expectations for the year remain unchanged at breakeven plus or minus $150 million, excluding the proceeds of the sale of the Downsview property. Further, Bombardier’s cash commitments towards the C Series program under the Airbus partnership will be recognized as investing activities, reflecting the receipt of non-voting participating units of CSALP, if any.

As previously announced, Bombardier will continue with its current funding plan of CSALP. Due to the early closing of the partnership, the terms of this plan are updated according to the following schedule: Bombardier will fund the cash shortfalls of CSALP, if required, during the second half of 2018, up to a maximum of $225 million; during 2019, up to a maximum of $350 million; and up to a maximum aggregate amount of $350 million over the following two years, in consideration for non-voting participating shares of CSALP with cumulative annual dividends of 2%. Any excess shortfall during such periods will be shared proportionately amongst CSALP’s Class A shareholders.

The Company remains on track to achieve its 2020 turnaround plan objectives, which already reflect the de-consolidation of the C Series results. The transaction will be accounted for as a disposal of CSALP in exchange for an equity interest in the new partnership measured at fair market value. In addition, the transaction is expected to result in a net accounting charge of approximately $500 million. The net charge is largely triggered by the fair market value of warrants to be issued by Bombardier to Airbus on July 1, 2018, and a derivative liability associated with the expected off-market return on non-voting participating units to be issued to Bombardier by CSALP under Bombardier’s funding commitments. The net charge will be treated as a special item in the second quarter.

About Bombardier

With over 69,500 employees across four business segments, 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 across the segments of Transportation, Business Aircraft, Commercial Aircraft and Aerostructures and Engineering Services. Bombardier shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2017, Bombardier posted revenues of $16.2 billion US. News and information are available at bombardier.com or follow us on Twitter @Bombardier.

Notes to Editors

⁽¹⁾     EBIT guidance refers to EBIT before special items as explained in the Guidance and forward-looking statements section in Overview of the Corporation’s 2017 Financial Report. EBIT before special items and free cash flow are non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview of the Corporation’s 2017 Financial Report for further information on these metrics.

Bombardier is a trademark of Bombardier Inc.

For Information

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, 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; competitive position; the expected impact of the legislative and regulatory environment and legal proceedings on our business and operations; available liquidities and ongoing review of strategic and financial alternatives the impact and expected benefits of the transaction with Airbus described herein, on our operations, infrastructure, capabilities, development, growth and other opportunities, geographic reach, scale, footprint, financial condition, access to capital and overall strategy; and the impact of such transaction on our balance sheet and liquidity position.

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 our 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 transaction with Airbus discussed herein include the following material assumptions; the fulfillment and performance by each party of its obligations pursuant to the transaction agreement and future commercial agreements and absence of significant inefficiencies and other issues in connection therewith; the realization of the anticipated benefits and  synergies of the transaction in the timeframe anticipated; our ability to continue with our current funding plan of CSALP and to fund, if required, any cash shortfalls; adequacy of cash planning and management and project funding; and the accuracy of our assessment of anticipated growth drivers and sector trends. 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 our financial report for the fiscal year ended December 31, 2017.

With respect to the transaction with Airbus 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 by either party to satisfy and perform its obligations pursuant to the transaction agreement and future commercial agreements and/or significant inefficiencies and other issues arising in connection therewith; the impact of the announcement of the transaction on our relationships with third parties, including commercial counterparties, employees and competitors, strategic relationships, operating results and businesses generally; the failure to realize, in the timeframe anticipated or at all, the anticipated benefits and synergies of the transaction; our ability to continue with  our current funding plan of CSALP and to fund, if required, the cash shortfalls; inadequacy of cash planning and management and project funding. Certain other 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 (including potential changes to or the termination of the existing North American Free Trade Agreement between Canada, the U.S. and Mexico currently in discussion); increased competition; political instability and force majeure events or natural disasters), operational risks (such as risks related to developing new products and services; development of new business; the certification and homologation of products and services; fixed-price and fixed-term commitments and production and project execution; pressures on cash flows and capital expenditures based on project-cycle fluctuations and seasonality; our ability to successfully implement and execute our strategy and transformation plan; doing business with partners; product performance warranty and casualty claim losses; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers and suppliers; human resources; reliance on information systems; reliance on and protection of intellectual property rights; 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 our financial report for the fiscal year ended December 31, 2017.

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 our forward-looking statements. In addition, there can be no assurance that the anticipated strategic benefits and operational, competitive and cost synergies of the transaction with Airbus will be realized in their entirety, in part or at all. The forward-looking statements set forth herein reflect management’s expectations as at the date of this report 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.