Bombardier to acquire Global 7500 aircraft wing program from Triumph Group Inc.

• Bombardier enters into a definitive agreement to acquire Triumph’s Global 7500 wing manufacturing operations and assets
• Acquisition will secure the production ramp-up and long-term success of Bombardier’s Global 7500 program
• Bombardier will continue to operate the production line and integrate the employees currently supporting the program at Triumph’s Red Oak, Texas facility
• Transaction is expected to close in the first quarter of 2019 for a nominal cash consideration
• Acquisition will strengthen Bombardier’s position as a leading aerostructures manufacturer
• Transaction is not expected to impact Bombardier’s consolidated 2019 EBIT and free cash flow⁽¹⁾ guidance, and 2020 targets

Bombardier (TSX:BBD.B) today announced a definitive agreement to acquire the Global 7500 wing program from Triumph Group Inc. (NYSE: TGI). The acquisition will strengthen Bombardier’s position as a leading aerostructures manufacturer and secure the production ramp-up and long-term success of Bombardier’s flagship business jet.

The acquired operations will be incorporated into Bombardier’s Aerostructures and Engineering Services segment. To support a seamless transition of wing production and deliveries for the Global 7500 program, which successfully entered into service in December 2018, Bombardier will enter into a lease agreement for Triumph’s Red Oak, Texas, facility and continue to operate the production line with the employees currently supporting the program.

“This acquisition is a perfect strategic fit for Bombardier Aerostructures,” said Danny Di Perna, President, Bombardier Aerostructures and Engineering Services. “It will allow us to bring our extensive technical expertise to one of the industry’s biggest growth programs, while solidifying our position as a leading wing provider. We look forward to welcoming the Triumph employees to Bombardier and ensuring the success of the Global 7500 program.”

The acquisition of the program’s assets and obligations for a nominal cash consideration is expected to close in the first quarter of 2019, subject to certain closing conditions. Bombardier will assume ongoing working capital investments and usual costs associated with the program’s production ramp-up, which are expected to fall within Bombardier’s consolidated 2019 EBIT before special items and free cash flow guidance ranges, and 2020 objectives.

On a business segment level, Aerostructures revenue guidance for 2019 is adjusted upwards to between $2.25 billion to $2.50 billion, reflecting additional intersegment revenues. The segment’s 2019 EBIT margin before special items⁽¹⁾ guidance is also adjusted to approximately 7.5%, reflecting marginal earnings from these additional sales during the program ramp-up. For 2020, the EBIT margin before special items objective of 9% to 11% remains unchanged.

At Business Aircraft, the 2019 EBIT margin before special items guidance of approximately 7.5% remains unchanged. For 2020, Business Aircraft now targets 50 basis points of margin growth to approximately 8%, the low-end of the previously provided objective, reflecting the short-term impact of maturing the Global 7500 wing production process.

About the Global 7500 aircraft

The Global 7500 aircraft offers Bombardier’s signature smooth ride and a spaciousness that is unique among business jets. With its award-winning bespoke interior featuring a full-size kitchen and four true living spaces, the Global 7500 aircraft offers the ultimate in-flight experience. Setting the benchmark for the most exceptional cabin interior, the Global 7500 aircraft offers the most innovative features such as Bombardier’s patented Nuage seat, meticulously designed for maximum comfort and the revolutionary nice Touch cabin management system (CMS), a new way to connect with the Global 7500 aircraft cabin through the Bombardier Touch dial, featuring business aviation’s first application of an OLED display.

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.

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

Bombardier and Global 7500 are trademarks of Bombardier or its subsidiaries.

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 in respect of various financial metrics and sources of contribution thereto, targets, goals, priorities, market and strategies, financial position, market position, capabilities, competitive strengths, 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; 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 and restructuring initiatives and anticipated costs, intended benefits and timing thereof; the expected continued expansion of the business aircraft aftermarket; the objectives and financial targets underlying our transformation plan and the timing and progress in execution thereof, including the anticipated business transition to cash generation; the funding and liquidity of C Series Aircraft Limited Partnership (CSALP); the impact and expected benefits of the transaction with Airbus, on our operations, infrastructure, capabilities, development, growth and other opportunities and prospects, geographic reach, scale, assets and program value, footprint, financial condition, access to capital and overall strategy; and the impact of such transaction on our balance sheet and liquidity position. As it relates to the proposed acquisition of Triumph’s Global 7500 wing manufacturing operations and assets discussed herein, this press release also contains forward-looking statements with respect to: the expected terms, conditions, and timing for completion thereof; the respective anticipated consideration therefor, related costs and expenses, working capital investments and costs associated with the program’s production ramp-up, the transition of wing production and deliveries for the program, as well as the anticipated benefits of such transaction and expected impact on our guidance and targets; and the fact that closing of this transaction will be conditioned on certain events occurring.

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 forward-looking statements made in relation to the transaction with Airbus include the following material assumptions: the accuracy of our analyses and business case including estimated cash flows and revenues over the expected life of the program and thereafter; aircraft prices, unit costs and deliveries gradually improving during the acceleration phase; assumptions regarding the strength and quality of Airbus’ scale, reach, sales, marketing and support networks, supply chain and operational expertise, and customer relationships; the fulfilment and performance by each party of its obligations pursuant to the transaction agreement and future commercial agreements and absence of significant inefficiencies or 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 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. The assumptions underlying the forward-looking statements made in this press release in relation to the proposed acquisition of Triumph’s Global 7500 wing manufacturing operations and assets discussed herein include the following material assumptions: the satisfaction of all conditions of closing and the successful completion of such transaction within the anticipated timeframe. For additional information with respect to the assumptions underlying the forward-looking statements relating to 2019 guidance and 2020 objectives made in this press release, refer to our disclosure regarding such assumptions further in this press release.

With respect to the transaction with Airbus 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: reliance on our analyses and business case including estimated cash flows and revenues over the expected life of the program and thereafter; the occurrence of an event, change or other development having an adverse effect on Airbus’ scale and reach, sales, marketing or support networks, supply chain, operations, or customer relationships; the failure by either party to satisfy and perform its obligations pursuant to the transaction agreement and future commercial agreements and/or significant inefficiencies or other issues arising in connection therewith; the failure to realize, in the timeframe anticipated or at all, the anticipated benefits and synergies of the transaction; risks associated with our ability to continue with our funding plan of CSALP and to fund, if required, the cash shortfalls; inadequacy of cash planning and management and project funding; and reliance on our assessment of anticipated growth drivers and sector trends. 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; 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, transformation plan, productivity enhancements and restructuring initiatives; 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 Management’s Discussion and Analysis (MD&A) of our financial report for the fiscal year ended December 31, 2017. With respect to the proposed acquisition of Triumph’s Global 7500 wing manufacturing operations and assets 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 satisfy the conditions to the completion of such transaction or delay in completing and uncertainty regarding the length of time required to complete such transaction and the benefits thereof not being available to Bombardier in the time frame anticipated or at all. Accordingly, there can be no assurance that the proposed acquisition of Triumph’s Global 7500 wing manufacturing operations and assets will occur or that the anticipated benefits will be realized in their entirety, in part or at all.

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 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.

The Global 5500, Global 6500, Global 7500 and Global 8000 aircraft are currently under development, and as such are subject to changes in family strategy, branding, capacity, performance, design and/or systems. All specifications and data are approximate, may change without notice and are subject to certain operating rules, assumptions and other conditions. This press release does not constitute an offer, commitment, representation, guarantee or warranty of any kind.

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 EBIT before special items, EBIT margin before special items and free cash flow.

Management believes that providing certain non-GAAP performance measures, in addition to IFRS measures, provides readers with enhanced understanding of Bombardier’s results and related trends and increases the transparency and clarity of the core results of Bombardier’s business.

EBIT before special items is defined as EBIT excluding the impact of restructuring charges, significant impairment charges and reversals, as well as other significant unusual items.

Free cash flow (usage) is defined as cash flows from operating activities less net additions to PP&E and intangible assets.

Refer to the Non-GAAP financial measures and Liquidity and capital resources sections in Overview and each reporting segments’ Analysis of results sections in Bombardier’s 2018 Third Quarterly Report for reconciliations of these metrics to the most comparable IFRS measures.

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 financial measures does not imply that these items are necessarily non-recurring. From time to time, Bombardier may exclude additional items if it believes doing so would result in a more transparent and comparable disclosure. Other entities in Bombardier’s industry may define the above measures differently than Bombardier does. In those cases, it may be difficult to compare the performance of those entities to that of Bombardier based on these similarly-named non-GAAP measures.

ASSUMPTIONS

The following are the material assumptions underlying the 2019 guidance and 2020 objectives included in this press release:

All segments

• normal execution and delivery of current firm orders and projects in the backlog;
• the ability to understand customer needs and portfolio of products and services to drive increasing market demand and secure key strategic orders;
• continued deployment and execution of leading initiatives according to plan to improve revenue conversion into higher earnings and free cash flows⁽¹⁾, through improved procurement cost, controlled spending and labor efficiency;
• delivering on the transformation plan targets, through restructurings and other initiatives addressing the direct and indirect cost structure, focusing on sustained cost reductions and operational improvements, while reducing working capital consumption;
• the ability to leverage the global manufacturing footprint and transfer best practices and technology across production sites, and by leveraging lower cost geographies and emerging economies;
• the ability of the supply base to support product development and planned production rates;
• the ability to identify and enter into further risk sharing partnerships and initiatives;
• the effectiveness of disciplined capital deployment measures in new programs and products to drive revenue growth;
• the ability to recruit and retain highly skilled resources to deploy the product development strategy;
• competitive global environment and global economic conditions to remain similar;
• the stability of foreign exchange rates at current levels;
• the ability to have sufficient liquidity to execute the strategic plan, to meet financial covenants and to pay down long term debt or refinance bank facilities and maturities starting in 2020.
• financials reflect IFRS 16 lease accounting starting January 1, 2019;

Aerospace segments

• closing of Q Series Aircraft program assets & Business Aircraft flight and training activities transactions by the second half of 2019;
• the alignment of production rates to market demand;
• the ability to ramp up production and deliveries of new programs, and meet scheduled entry-into-service date for the Global 7500 and Global 5500, Global 6500 and Global 8000 aircraft program;
• continued ability to capture and win campaigns and projects based on market forecasts⁽²⁾, leading to estimated future order intake;
• continued deployment and execution of growth strategies, including the aftermarket business;
• the reduction of investments and development spend to normalized levels by 2019-2020;
• the realization of the anticipated benefits and synergies of the transaction with Airbus in the timeframe anticipated;
• our ability to continue with our current funding plan of CSALP and to fund, if required, any cash shortfalls and adequacy of cash planning and management and project funding.

Transportation

• our ability to execute and deliver business model enhancement initiatives;
• revenue conversion and phase out of our legacy contracts;
• a sustained level of public sector spending;
• the realization of upcoming tenders and our ability to capture them based on market forecasts⁽³⁾, leading to estimated future order intake;
• successful deployment and execution of growth strategies, including the value chain approach and the creation of ecosystems, site specialization and the creation of engineering centers of excellence, and the evolution of the revenue mix towards more signaling and systems and operations and maintenance contracts.

For a discussion of the material risk factors associated with the forward-looking information, refer to the Caution regarding forward-looking statements above in this press release and to the Risks and uncertainties section in Other in the MD&A of our Financial Report for the fiscal year ended December 31, 2017.

⁽¹⁾        Non-GAAP measure. For further information on non-GAAP measures used in this press release refer to our disclosure regarding non-GAAP measures above in this press release.

⁽²⁾        Demand forecast for aerospace segments is based on the analysis of main market indicators, including real GDP growth, industry confidence, wealth creation, corporate profitability within the aerospace customer base, aircraft utilization, pre-owned business jet inventory levels, aircraft shipments and billings, passenger traffic levels, fuel prices, airline profitability, pilot scope clauses, environmental regulations, globalization of trade, installed base and average age of the fleet, replacement demand, new aircraft programs and non-traditional markets and their accessibility. For more details, refer to the market indicators in the Industry and Economic Environment sections in the respective aerospace reportable segments in our 2017 Financial Report.

⁽³⁾        Demand forecast in the Transportation segment is based on sustained level of public sector spending and the continuation of favourable megatrends, including urbanization and environmental awareness trends, the densification of cities and demand for mobility and digitalization solutions. For more details, refer to the market indicators in the Industry and Economic Environment section of the Transportation segment in our 2017 Financial Report.