ENGLISH – C1 C4 – ENGLISHFINANCIAL REPORT FISCAL YEAR ENDED DECEMBER 31, 2014FISCAL YEAR ENDED DECEMBER 31, 2014FINANCIAL REPORT2014BOMBARDIER.COM Message to shareholders ........................................................................................................................ 1
Management’s discussion and analysis ............................................................................................. 4
Overview................................................................................................................................................... 6
Aerospace ................................................................................................................................................ 39
Transportation ........................................................................................................................................ 66
Other .......................................................................................................................................................... 81
Consolidated financial statements ...................................................................................................... 105
Notes to consolidated financial statements ............................................................................... 114
Investor information .................................................................................................................................. 180
The CSeries family of aircraft, Global 7000 and Global 8000 aircraft, and Challenger 650 aircraft programs are currently
All amounts in this financial report are in U.S. dollars unless otherwise indicated.
in 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 document does not constitute an offer, commitment, representation, guarantee or
warranty of any kind. On January 15, 2015, the Corporation announced the pause of the Learjet 85 aircraft program.
AVENTRA, Bombardier, Challenger, Challenger 300, Challenger 350, Challenger 605, Challenger 650, Challenger 800, CRJ,
CRJ700, CRJ900, CRJ1000, CSeries, CS100, CS300, Dash 8, ELECTROSTAR, Global, Global 5000, Global 6000, Global 7000,
Global 8000, INNOVIA, Learjet, Learjet 40, Learjet 45, Learjet 60, Learjet 70, Learjet 75, Learjet 85, NextGen, Q400, TALENT,
The Evolution of Mobility, TRAXX, XR and ZEFIRO are trademarks of Bombardier Inc. or its subsidiaries.
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In 2014, Bombardier continued to drive The Evolution of Mobility with new products,
orders, deliveries and geographic markets. It was a year of change coupled with
a sharper focus on customers and profitable execution. This led to a restructuring
of both our aerospace and rail transportation businesses. Today as our new products
approach entry-into-service, momentum is building. So is our determination and
our focus on delivering as promised.
Pierre Beaudoin answers questions about the year gone by and the one to come.
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equivalent to the area
of 4 tennis courts
2,713 kg
of waste, or the
contents of
55 garbage cans
24,847 kg
of CO2, equivalent to
221,322 litres
of water, equal to one
the annual emissions
person’s consumption
of 8 cars
of water in 632 days
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C2 – ENGLISH
ENGLISH – C3
In 2014, unanticipated world events, namely the
Russia-Ukraine situation and turmoil in the Middle East,
impacted our strategies. At the same time, we saw
positive shifts such as the U.S. economy which posted
good growth last year. These events also influence
our plans. In today’s ever-changing global context,
we must have the capability to share information
more efficiently and make decisions faster. As this starts
to happen at Bombardier, we’ll be able to adjust more
quickly to our environment and take full advantage
of new growth opportunities.
In each business segment, we’ve also laid the ground-
work for greater employee accountability and a realigned
cost base that will support our long-term competitive-
ness. Over time, we’re going to see less waste and,
I’m certain, improved profitability.
Q. How does this transformation, if that’s not too
strong a word, support Bombardier’s three growth
strategies: invest in leading mobility solutions,
achieve flawless execution and grow local roots
in key markets?
A. This new structure—and yes, you could call it
a transformation—is first and foremost about getting
more focused on execution. This means delivering
what we promised, on time and profitably. In some
ways, by simplifying our structure we’ve gone back
to basics. We’re making sure employees are focused
on the concrete things they need to do each day
so we can deliver profitably.
In terms of expanding our local roots globally, our
market-specific orientation in aerospace will allow us
to better understand the everyday needs of customers
wherever they are. At Transportation, the OneBT trans-
formation focuses on standardizing products and pro-
cesses. This will give us the agility to go into different
markets with robust platforms and a more efficient
and profitable response to customer needs.
As for investing in leading mobility solutions, we know
what we have to do. We’ve identified what it takes
to win, both in terms of securing orders and executing
profitably. I feel more confident than ever that we’re
on the right track.
Q. What gives you this confidence?
A. Our excellent customer relationships and new
orders. If you look at our backlog, it’s strong in both
traditional and newer markets, which is the ultimate
vote of confidence in our product strategy. Whether
Pierre Beaudoin
President and Chief Executive Officer
Q. Looking back at 2014, what stands out for you?
A. Two areas are top of mind for me: our products
and our reorganization in aerospace and rail transporta-
tion. Our businesses continued to evolve with exciting
new products about to come on line and our existing
portfolio taking us into promising new markets. With
our streamlined structure, we’re becoming a more
agile organization that’s focused on what counts:
the people who buy our products and delivering
on our project milestones.
We’ve aligned ourselves around four guiding principles
—a focus on customer impact, agility, a global mind-
set and accountability—all in the relentless pursuit of
value creation. Today there is one overriding objective
at Bombardier: execute better and improve margins,
in other words, become a true high performance
organization.
Q. Can you tell us a bit more about
this new structure and its benefits?
A. We will now have three aerospace business
segments—Business Aircraft, Commercial Aircraft, and
Aerostructures and Engineering Services—in addition
to our rail transportation business segment. All of them
report directly to me. This lighter, nimbler structure will
enable us to more readily identify and remove obstacles
to operational efficiency.
It will also give us more transparency across the
company along with greater investor visibility into
our profitability by market. This structure will position
us to fully benefit from the growth that’s around
the corner with our new products. We’ll also be able
to better respond to our customers’ evolving needs.
BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2014 1
it’s the Global business jet or the CSeries commercial
aircraft, our aerospace backlog is robust with new
products accounting for 40% of orders in backlog.
the State of Queensland’s New Generation Rollingstock
initiative in Australia and Transnet Freight Rail’s TRAXX
Africa Locomotives program in South Africa.
On the rail transportation side, it’s been a year of
growth across multiple geographies. We’ve seen sig-
nificant order activity in Australia, the U.K. and South
Africa as well as ongoing success in China. We were
already in Ethiopia with our Q400 turboprops at one
of the world’s best airlines, and now Transportation
is there too with a new signalling contract. Overall
we’re well positioned to gain market share and
become an even bigger global player.
As I mentioned, there are signs of economic recovery
in the U.S. after five difficult years. The U.S. represents
50% of the global aerospace market and things are
starting to pick up. Some interesting transit projects
are also in the works. We see great potential in the U.S.
which is why we continue to focus on tapping into this
powerful economic engine.
And with the significant reduction in oil prices, our aero-
space customers are in a better position to implement
their refleeting strategies. For consumers, lower prices
at the gas pump translate into more disposable income
for travel which in turn creates new capacity needs.
Q. As part of the restructuring, you created
a new business segment—Aerostructures
and Engineering Services. What does this signal
for Bombardier?
A. It signals a great opportunity. This new business
segment is part of our enhanced focus on growth
areas. When we develop new aircraft, we invest sig-
nificantly in advanced technologies that are potentially
valuable to third parties. I’m talking about technologies
such as complex composite and metallic aircraft struc-
tures that can be used in all classes of civil aircraft
and all categories of structures including fuselages
and wings. We see tremendous potential in marketing
these technologies to other manufacturers that are
investing in updating their products and developing
new platforms.
Q. Can you highlight some of the important
deliveries and orders in 2014?
A. We certified the Challenger 350 business
aircraft and homologated the Regio 2N regional
double-deck train in France. The INNOVIA monorail
system entered into service in São Paulo, Brazil.
We signed key new passenger rail contracts such as
Transport for London’s Crossrail project in the U.K.,
In the U.S., we’re executing on the New York subway
and nearing completion of the Chicago subway. Both
of these cities have attractive transit opportunities on
the horizon. San Francisco also ordered an additional
365 rapid transit vehicles from us.
As regional airlines gain traction in China, our CRJ
regional jet is in demand. In fact, we recently announced
our third CRJ contract in three years with China Express
Airlines. In terms of the CSeries aircraft family, we received
a major purchase agreement for 40 aircraft from the
leasing arm of Australia’s Macquarie AirFinance. With
orders and commitments for 563 CSeries airliners from
21 customers in 18 countries, including 243 firm orders,
we’re well on our way to achieving our target of 300
orders at entry-into-service.
Q. In recent years, Bombardier allocated
significant resources to developing its maintenance
services business in both aerospace and rail
transportation. How is this going?
A. Our services continue to grow in both sectors.
Examples include long-term maintenance contracts
with NetJets in the U.S., GO Transit in Toronto and
Transport for London in the U.K. Our services footprint
is expanding and we recently opened our first wholly
owned aerospace service centre in Singapore. Customers
increasingly want to concentrate on their core business
and growing revenue, not on maintaining their planes
and trains. We’ve consistently shown them that we’re
in the best position to service our products.
Q. What do you say to investors who may be
anxious to see new programs enter into service
and start generating revenue?
A. What we do is complex. It takes time to design
and build a new plane or train. That can test investors’
patience and, on occasion, ours too. A lengthy product
development cycle gives people the time to question
our strategy, especially when major programs are late
to schedule and cost more than planned.
It’s important to know that we’re constantly stress-
testing our product strategy and development priori-
ties. On occasion, this forces us to make difficult
yet absolutely necessary decisions. Suspending
our Learjet 85 business jet program due to persistent,
multi-year weak demand in this light aircraft category
was one of these decisions.
2 BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2014
In the meantime, we continue to move forward
with our two other clean-sheet aircraft programs.
The CSeries commercial aircraft is meeting performance
targets and we’re making good progress towards certifi-
cation in the second half of 2015. The Global 7000 and
Global 8000 large business jets are also progressing
well with the first flight test vehicle in final assembly.
We’ll certify the Challenger 650 super-mid-size
business jet in 2015. And with 600,000 kilometres
of testing completed, the ZEFIRO 380 very high speed
train received homologation in January 2015 and is now
ready for delivery in China.
Today it’s a question of ensuring we have the best
processes and of sharpening our game when it comes
to execution. This is the final push before we see
revenue from our new products.
In addition, the financing plan announced in early 2015
will position the company with a flexible and strong
financial profile.
Q. You often speak about Bombardier people
being among the best. What drove that home
for you in 2014?
A. When you restructure a company, it’s disruptive
for everyone. Despite the changes and distractions
of the past year, our people remained committed
and attentive to the tasks at hand. They’re focused
on what needs to be done and determined to deliver.
We’re aiming for a demonstrable and sustainable
high performance mindset across our organization.
Q. In terms of people, you also saw a few
changes on your Board in 2014.
A. Yes we did. André Bérard, who had been with
us since 2004, reached retirement age and stepped
down. André’s deep financial and banking expertise
was a real asset over the years. Thierry Desmarest,
who joined the Board in 2009, left to concentrate
on his new duties as Chairman of the French energy
company Total S.A. We thank both André and Thierry
for their valuable guidance and wish them well. We
also welcomed a new Board member, Vikram Pandit,
Chairman of TGG Group and former Chief Executive
Officer of Citigroup Inc. Vikram’s financial acumen
will further strengthen our Board.
Emeritus. The Board and I wish to thank Laurent for his
passion and his entrepreneurial spirit all through his
tenure. Under his guidance, Bombardier became more
than an iconic Canadian company; it became a global
mobility leader with 74,000 employees and a presence
in more than 60 countries across five continents.
I’ll assume the role of Executive Chairman, working with
Bombardier’s new President and Chief Executive Officer,
Alain Bellemare, and the senior management team.
Q. What are your expectations for the future?
A. 2015 will be a transitional year for us, with
profitability similar to 2014 levels.
The last stretch of any major development program
always takes the most effort and that’s where we are
right now. At the same time, we have robust product
demand and backlog. We sell our products globally.
We have the right people to be successful anywhere
in the world. And now we have a structure that will
allow us to improve our returns.
The companies that succeed over the long term are
the ones able to adjust quickly. The appointment of
Alain Bellemare is an example of our willingness to look
at every opportunity for the benefit of the company.
He’s an experienced executive with a deep knowledge
of the manufacturing sector. We took advantage of his
availability as we’re convinced he has the right qualities
to bring Bombardier to the next level.
In today’s world, it’s increasingly difficult to predict
what’s going to happen three years down the road,
never mind five or ten. That’s why we continuously
monitor global events to stay attuned to the changing
dynamics and mobility needs of countries and cities
around the world. Now we’ll be able to move quickly
to address these needs and participate in global
growth as we help connect more and more people
worldwide. That’s what Bombardier is all about:
improving the way people move around the globe.
Our focus on executing better, improving margins
and becoming a true high performance organization
has never been sharper. That’s why we’re confident
that the best is yet to come at Bombardier.
We also made changes at the beginning of the current
year with Laurent Beaudoin retiring as Chairman after
more than 50 years at the helm of Bombardier. He will
remain on the Board with the honorary title of Chairman
Pierre Beaudoin
President and Chief Executive Officer
Bombardier Inc.
BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2014 3
BOMBARDIER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the fiscal year ended December 31, 2014
OVERVIEW
AEROSPACE
TRANSPORTATION
OTHER
HISTORICAL FINANCIAL SUMMARY
PAGE
6
39
66
81
103
All amounts in this report are expressed in U.S. dollars, and all amounts in the tables are in millions of U.S. dollars,
unless otherwise indicated.
This MD&A is the responsibility of management and has been reviewed and approved by the Board of Directors of
Bombardier Inc. (the “Corporation”, "Management" or "Bombardier"). This MD&A has been prepared in accordance
with the requirements of the Canadian Securities Administrators. The Board of Directors is responsible for ensuring
that the corporation fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and
approving the MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of Directors and is comprised entirely of independent and
financially literate directors. The Audit Committee reports its findings to the Board of Directors for its consideration
when it approves the MD&A and financial statements for issuance to shareholders.
The data presented in this MD&A is structured by reportable segment: BA and BT, and then by market segment,
which is reflective of the Corporation's organizational structure.
IFRS and non-GAAP measures
This MD&A contains both IFRS and non-GAAP measures. Non-GAAP measures are defined and reconciled to the
most comparable IFRS measure (see the Non-GAAP financial measures and Liquidity and capital resources
sections in Overview and the Analysis of results sections in BA and BT).
Materiality for disclosures
Management determines whether information is material based on whether they believe a reasonable investor’s
decision to buy, sell or hold securities of the Corporation would likely be influenced or changed if the information
were omitted or misstated.
Certain totals, subtotals and percentages may not agree due to rounding.
The Financial Report for fiscal year 2014 comprises the President’s message to shareholders, this MD&A and the
consolidated financial statements.
4 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The following table shows the abbreviations used in the MD&A and the consolidated financial statements.
Term
AFS
AOCI
BA
BT
CAGR
CCTD
CGU
CIS
DB
DC
DDHR
DSU
EBIT
Description
Available for sale
Accumulated other comprehensive income
Bombardier Aerospace
Bombardier Transportation
Compound annual growth rate
Cumulative currency translation difference
Cash generating unit
Commonwealth of Independent States
Defined benefit
Defined contribution
Derivative designated in a hedge relationship
Deferred share unit
Earnings before financing expense, financing
income and income taxes
EBITDA Earnings before financing expense, financing
income, income taxes, amortization and impairment
charges on PP&E and intangible assets
EBT
EIS
EPS
Earnings before income taxes
Entry-into-service
Earnings per share attributable to equity holders of
Bombardier Inc.
FTV
Flight test vehicle
Term
FVTP&L
GAAP
GDP
HFT
IAS
IASB
IFRIC
IFRS
L&R
MD&A
NCI
OCI
PP&E
PSG
PSU
R&D
RVG
SG&A
U.K.
U.S.
Description
Fair value through profit and loss
Generally accepted accounting principles
Gross domestic product
Held for trading
International Accounting Standard(s)
International Accounting Standards Board
International Financial Reporting Interpretation
Committee
International Financial Reporting Standard(s)
Loans and receivables
Management’s discussion and analysis
Non-controlling interests
Other comprehensive income
Property, plant and equipment
Performance security guarantee
Performance share unit
Research and development
Residual value guarantee
Selling, general and administrative
United Kingdom
United States of America
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 5
OVERVIEW
OVERVIEW OF ACTIVITIES
Overview of operations
NEW ORGANIZATIONAL STRUCTURE
KEY PERFORMANCE MEASURES AND
METRICS
HIGHLIGHTS OF THE YEAR
GUIDANCE AND FORWARD-LOOKING
STATEMENTS
FINANCIAL PRIORITIES
RISK MANAGEMENT
Description of the new organizational structure effective
January 1, 2015
Key performance measures and associated metrics that are
used to monitor progress on a consolidated basis and key
financial data for the last five years
Highlights of the fiscal year with regard to results and key
events
Guidance and disclaimers in connection with forward-looking
statements
Key financial goals and leading initiatives to achieve these
goals
Key financing and market risks and related mitigation
strategies
CONSOLIDATED RESULTS OF OPERATIONS Consolidated results for the fourth quarter and fiscal year
LIQUIDITY AND CAPITAL RESOURCES
OTHER CREDIT FACILITIES
RETIREMENT BENEFITS
CAPITAL STRUCTURE
NON-GAAP FINANCIAL MEASURES
CONSOLIDATED FINANCIAL POSITION
ended December 31, 2014
Cash flows, available short-term capital resources and
expected future liquidity requirements
Committed and outstanding amounts
Overview of retirement benefit plans, associated risks and
related mitigation strategies as well as key financial data
Global metrics used to monitor capital structure
Definitions of non-GAAP financial measures and
reconciliations to the most comparable IFRS financial
measures
Explanations of significant variances in assets, liabilities and
equity
PAGE
7
8
9
10
13
14
18
23
26
28
29
34
35
38
6 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
OVERVIEW OF ACTIVITIES
Bombardier is the world’s leading manufacturer of both planes and trains, operating under two broad reportable
segments during fiscal year 2014: aerospace through BA and rail transportation through BT. See the next page for
a description of the new organizational structure effective January 1, 2015. Bombardier is driving the evolution of
mobility worldwide by providing more efficient, sustainable and enjoyable transportation. The Corporation's
products, services, and most of all its employees are what make it a global leader in mobility solutions.
BOMBARDIER AEROSPACE
BA is a world leader in the design, manufacture and support
of innovative aviation products for the business, commercial,
specialized and amphibious aircraft markets.
BOMBARDIER TRANSPORTATION
BT is a world leader in the design, manufacture and support
of rail equipment and systems.
Revenues
EBIT
EBIT before special items(1)
Free cash flow usage(1)
Order backlog
Number of employees(2)
$10.5 billion Revenues
$(995) million EBIT
$437 million EBIT before special items(1)
$(1.1) billion Free cash flow(1)
$36.6 billion Order backlog
34,100 Number of employees(2)
$9.6 billion
$429 million
$486 million
$122 million
$32.5 billion
39,700
Every day around the globe, the Corporation's 74,000 dedicated employees work diligently to earn worldwide
leadership in aerospace and rail transportation. As at the date of this report, the Corporation has 80 production
and engineering sites in 28 countries and a worldwide network of service centres.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section for definitions of these metrics and the Analysis of
results sections in BA and BT for reconciliations to the most comparable IFRS measures.
(2) As at December 31, 2014, including contractual and inactive employees.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 7
NEW ORGANIZATIONAL STRUCTURE
Following the reorganization announced in July 2014, Bombardier has adopted a new organizational structure.
The former BA has been divided into three segments: Bombardier Business Aircraft, Bombardier Commercial
Aircraft and Bombardier Aerostructures and Engineering Services. Along with BT, these segments now report
directly to the President and CEO in order to enhance agility. Corporate office expenses, previously allocated to
BA and BT, will now be presented separately, along with intersegment eliminations. This new structure is effective
January 1, 2015 and does not impact the presentation of 2014 results.
Bombardier Business Aircraft
Bombardier Business Aircraft designs, manufactures and provides aftermarket support for three families of
business jets (Learjet, Challenger and Global), spanning from the light to large categories.
Bombardier Commercial Aircraft
Bombardier Commercial Aircraft designs and manufactures a broad portfolio of commercial aircraft in the 60- to
149-seat categories, including the Q400 NextGen turboprops, the CRJ700, 900 and 1000 NextGen regional jets
as well as the clean-sheet CSeries mainline jet. Commercial Aircraft provides aftermarket support for these
aircraft as well as for the 20- to 59-seat range category.
Bombardier Aerostructures and Engineering Services
Bombardier Aerostructures and Engineering Services designs and manufactures major aircraft structural
components (such as engine nacelles, fuselages and wings) and provides aftermarket component repair and
overhaul as well as other engineering services for both internal and external clients.
Bombardier Transportation
Bombardier Transportation, a global leader in rail technology, offers the broadest portfolio in the rail industry and
delivers innovative products and services that set new standards in sustainable mobility.
Supplemental information regarding Bombardier's products and strategy can be found in Bombardier's Profile,
Strategy and Market presentation available on the dedicated investor relations website at ir.bombardier.com.
8 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
KEY PERFORMANCE MEASURES AND METRICS
BA and BT use multiple key performance measures to evaluate various key metrics. Refer to the respective Key
performance measures and metrics sections in BA and BT for descriptions of these measures.
In addition, the table below summarizes other relevant key performance measures and associated metrics
evaluated on a consolidated basis.
KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS
Profitability
Liquidity
Capital
structure
• Diluted EPS and adjusted EPS(1), as measures of global performance.
• Available short-term capital resources(2), as a measure of liquidity adequacy.
• Adjusted EBIT(1) to adjusted interest(1) ratio, as a measure of interest coverage.
• Adjusted debt(1) to adjusted EBITDA(1) ratio, as a measure of financial leverage.
• Weighted-average long-term debt maturity, as a measure of debt term structure.
Five-year summary
For the fiscal years ended and as at December 31
2014
$ 20,111
69.1
$
(566)
$
(2.8)%
923
4.6 %
(68.4)%
Revenues
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(1)
EBIT margin before special items(1)
Effective income tax rate
Net income (loss)
Adjusted net income(1)
Diluted EPS (in dollars)
Adjusted EPS (in dollars)(1)
Free cash flow (usage)(1)
Available short-term capital resources(2)
Interest coverage ratio(3)
Financial leverage ratio(3)
Weighted-average long-term debt
maturity (in years)
$ (1,246)
648
$
(0.74)
$
$
0.35
$ (1,117)
$ 3,846
3.1
4.7
$
December 31 December 31 December 31
2011
$ 17,904
53.9
$
1,166
$
$
2013
$ 18,151
69.7
$
923
$
5.1%
893
4.9%
25.8%
572
608
0.31
0.33
(907)
4,837
2.8
5.4
$
$
$
$
$
$
$
2012
$ 16,414
64.9
$
666
$
4.1%
806
4.9%
12.3%
470
671
0.25
0.36
(636)
3,967
3.2
4.2
$
$
$
$
$
$
(4)
January 31
2011
$ 17,497
51.9
$
1,198
$
6.8%
$
1,198
$
$
$
$
$
$
6.8%
24.5%
671
772
0.36
0.42
426
4,059
5.0
3.1
6.5%
$
1,166
6.5%
13.9%
737
$
887
$
0.41
$
$
0.49
$ (1,046)
3,642
$
4.5
3.3
6.4
6.4
7.4
8.0
8.9
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures and Liquidity and capital resources sections for definitions of
these metrics and reconciliations to the most comparable IFRS measures.
(2) Defined as cash and cash equivalents plus the amount available under the revolving credit facilities.
(3) Refer to the Capital structure and Non-GAAP financial measures sections for computations of these ratios.
(4) The fiscal year ended December 31, 2011 comprises 11 months of BA's results and 12 months of BT's results.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 9
HIGHLIGHTS OF THE YEAR
REVENUES
$20.1 billion
ADJUSTED NET
INCOME(1)
$648 million
ADJUSTED EPS(1)
FREE CASH FLOW(1)
ORDER BACKLOG
$0.35
$(1.1) billion
$69.1 billion
RESULTS
Variance
2014
$ 20,111
69.1
$
(566)
$
(2.8)%
923
4.6 %
(68.4)%
For the fiscal years ended and as at December 31
Revenues
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(1)
EBIT margin before special items(1)
Effective income tax rate
Net income (loss)
Diluted EPS (in dollars)
Adjusted net income(1)
Adjusted EPS (in dollars)
Net additions to PP&E and intangible assets
Net additions to aerospace program tooling
Free cash flow usage(1)
Available short-term capital resources(2)
nmf: information not meaningful
bps: basis points
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures and Liquidity and capital resources sections for definitions of
2013
$ 18,151
69.7
$
923
$
5.1%
893
4.9%
25.8%
572
0.31
608
0.33
2,287
1,983
(907)
4,837
$ (1,246)
(0.74)
$
648
$
0.35
$
$ 1,964
$ 1,655
$ (1,117)
$ 3,846
10.8 %
(0.9)%
nmf
nmf
3.4 %
-30 bps
nmf
nmf
nmf
6.6 %
6.1 %
(14.1)%
(16.5)%
(23.2)%
(20.5)%
$
$
$
$
$
$
$
$
$
$
these metrics and reconciliations to the most comparable IFRS measures.
(2) Defined as cash and cash equivalents plus the amount available under the revolving credit facilities.
REVENUES(2)
(for the fiscal years ended;
in billions of dollars)
ADJUSTED NET INCOME AND
ADJUSTED EPS(1)(2)(3)(4)
(for the fiscal years ended;
in millions of dollars, except per
share amounts)
FREE CASH FLOW(1)(2)
(for the fiscal years ended;
in millions of dollars)
ORDER BACKLOG(5)
(as at; in billions of dollars)
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures and Liquidity and capital resources sections for definitions of
these metrics and reconciliations to the most comparable IFRS measures.
(2) The fiscal year ended December 31, 2011 comprised 11 months of BA's results and 12 months of BT's results.
(3) Net income (loss) is $671 million, $737 million, $470 million, $572 million, and $(1,246) million for the years ending January 31, 2011,
December 31, 2011, December 31, 2012, December 31, 2013 and December 31, 2014, respectively.
(4) Diluted EPS of $0.36, $0.41, $0.25, $0.31, $(0.74) for the fiscal years ending January 31,2011, December 31, 2011, December 31, 2012,
December 31, 2013 and December 31, 2014, respectively.
(5) Some totals do not agree due to rounding.
10 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
KEY EVENTS
• On July 23, 2014, a new organizational structure was announced comprised of four business segments:
Bombardier Business Aircraft, Bombardier Commercial Aircraft, Bombardier Aerostructures and Engineering
Services and Bombardier Transportation. These segments now report directly to the President and CEO in
order to enhance agility. This new structure is effective as of January 1, 2015. Furthermore, in February 2015,
the Corporation announced that Mr. Laurent Beaudoin is retiring as Chairman of the Board of Directors after
more than 50 years at the helm of the Corporation. He will remain on the Board with the honorary title of
Chairman Emeritus. Mr. Pierre Beaudoin is appointed Executive Chairman, while Mr. Alain Bellemare
becomes President and Chief Executive Officer and member of the Board of Directors. These appointments
will all be effective February 13, 2015.
• Subsequent to the end of the fiscal year, on January 15, 2015, Bombardier announced the pause of its
Learjet 85 business aircraft program. The pause follows a downward revision of Bombardier’s business
aircraft market forecast, primarily due the continued weakness of the light aircraft category since the
economic downturn. As a result, the Corporation has recorded a pre-tax charge in special items in the fourth
quarter of 2014 of $1.4 billion ($1.6 billion after tax), mainly related to the impairment of Learjet 85
development costs.
• The following workforce reductions were undertaken:
•
• During the fiscal year 2014, workforce reductions were undertaken at BA for a total of approximately
3,700 employees. Related charges totaling $85 million were recorded as special items in 2014.
In July 2014, as part of its reorganization activities, BT announced the reduction of direct and indirect
positions by approximately 900 employees worldwide. A related charge of $57 million was recorded
as a special item in 2014.
• Subsequent to the end of the fiscal year, in January 2015, as a result of the decision to pause the
Learjet 85 business aircraft program, BA announced a workforce reduction of approximately 1,000
employees at the sites in Querétaro, Mexico, and Wichita, United States. A severance provision of
approximately $20 million will be recorded as a special item during the first quarter of 2015.
• The first four CS100 FTVs continue with flight testing activities. On-the-ground testing activities on FTV5 are
ongoing and FTV5 is expected to be handed over to the flight test team by the end of the first quarter of 2015.
The first CS300 FTV has been handed over to the flight test team and is being readied for its first flight which
is expected to take place by the end of the first quarter of 2015. As at the date of this report, the number of
firm orders and other agreements(1) for the CSeries family of aircraft reached 563 with 21 customers in 18
countries, including 243 firm orders.
• Subsequent to the end of the fiscal year, on January 30, 2015, the ZEFIRO 380 very high speed train
received homologation in China. Bombardier-Sifang Transportation, a Chinese entity in which Bombardier
holds a 50 percent interest, is expected to start delivery during the first quarter of 2015.
• On June 27, 2014, the Challenger 350 aircraft entered into service.
•
In October 2014, BA launched the new Challenger 650 program, the evolution of the Challenger 605 aircraft.
EIS is scheduled for the second half of 2015.
(1) The other agreements consist of conditional orders, letters of intent, options and purchase rights.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 11
Financing plan
Subsequent to the end of the fiscal year, in February 2015, Bombardier announced a plan to position the
Corporation with a flexible and strong financial profile whereby the Corporation intends to access the capital
markets, depending on market conditions, for the issuance of equity for approximately $600 million and new
long-term debt capital for up to $1.5 billion.
In order to realize the capital raising plan, the Corporation has filed on February 12, 2015 a preliminary short form
base shelf prospectus with the Canadian securities regulatory authorities, which will allow it to offer from time to
time over a 25-month period up to approximately $2 billion ($2.5 billion Canadian) of debt, equity or other
securities, including convertible securities. The Corporation may also offer the securities on a private placement
basis in the U.S. and in other jurisdictions.
In keeping with the Corporation's objectives, the Board of Directors has concluded that the Corporation's free
cash flow(1) would be more appropriately applied to bolstering the Corporation's financial structure and investing in
its core programs and businesses. Therefore, the Corporation is suspending the declaration of dividends on the
Class A and Class B shares. To complement this financing plan, the Corporation will explore other initiatives such
as certain business activities' potential participation in industry consolidation in order to reduce debt.
The Corporation is not currently authorized to issue a sufficient number of its Class B shares to realize the capital
raising plan, and provide ongoing flexibility to raise additional funds in the future. Accordingly, a special meeting of
holders of Class A and Class B shares, for the purpose of approving an amendment of the articles of the
Corporation to increase the number of Class A and Class B shares the Corporation is authorized to issue from
1,892,000,000 to 2,742,000,000, has been convened and will take place on or about March 27, 2015.
Shareholders of record on February 24, 2015, will be entitled to vote at the special meeting of shareholders.
Adoption of the special resolution approving the proposed amendment to the Corporation's articles requires the
approval of the 66 2/3% of the holders of Class A and Class B shares, present or represented by proxy at the
special meeting, voting together. Certain members of the Bombardier family currently exercising control or
direction over 266,863,185 Class A shares and 2,700,858 Class B shares, representing 58.24% of the total votes
attached to the Class A and Class B shares have agreed to vote in favour of the resolution approving the
amendment of the articles of the Corporation. In the event the special resolution is duly adopted by shareholders,
the amendment to the articles of the Corporation is expected to become effective on or about March 30, 2015.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Liquidity and capital resources, and BA and BT analysis of
results sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.
12 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
GUIDANCE AND FORWARD-LOOKING STATEMENTS
Summary of guidance for 2015 (1)
2015 guidance is provided under the new reporting segments as described in the New Organizational Structure
section.
Business
Aircraft
Commercial
Aircraft
Aerostructures
and Engineering
Services
Transportation
Profitability
Liquidity
EBIT margin of
approximately 7% an
improvement of approximately
1% compared to 2014.
Cash flow from operating activities between $1.0
billion and $1.4 billion.
Net additions to PP&E and intangible assets of
approximately $1.0 billion.
Deliveries/
Growth and order intake
Approximately 210
aircraft deliveries.
Neutral cash flows from operating activities.
Net additions to PP&E and intangible assets of
approximately $900 million.
Approximately 80
aircraft deliveries.
Negative EBIT of
approximately $200 million
including the dilutive impact of
the initial years of production of
the CSeries program.(2)
EBIT margin of
approximately 4%.
Neutral cash flows from operating activities.
Net additions to PP&E and intangible assets of
approximately $100 million.
Slight improvement in EBIT
margin compared to 2014.
Improvement in free cash flow(3) compared to 2014
although it is expected to remain below EBIT.
Revenues of approximately
$1.8 billion, mainly from internal
contracts with Business and
Commercial aircraft segments.
Excluding currency impacts,
revenues in 2015 are expected
to be higher than in 2014, with
percentage growth in the low-
single digits.
Book-to-bill ratio in
excess of 1.0.(4)
(1) The guidance provided in the 2013 financial report with respect to BA's level of net additions to PP&E and intangible assets for 2016 has
been withdrawn due to uncertainty with respect to longer term projections. See the Guidance and forward looking statements sections in
Overview, BA and BT for details regarding forward-looking statements and the assumptions on which they are based.
(2) Includes the dilutive impact of the CSeries program including the write-down of inventory to net realizable value. Early production units in a
new program incur higher costs and generally have lower selling prices than units produced later in the program's life cycle.
(3) See the Non-GAAP financial measures section for a definition of this metric.
(4) Defined as new orders over revenues.
This MD&A includes forward-looking statements, which may involve, but are not limited to: statements with respect to the Corporation's
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; and the expected impact of the legislative and regulatory environment and legal proceedings on the Corporation's business and
operations; the Corporation's available liquidities and the Corporation's capital raising plan. 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
management to make assumptions and are subject to important known and unknown risks and uncertainties, which may cause actual results
in future periods to differ materially from those forecasted. While management considers these assumptions to be reasonable and appropriate
based on information currently available, there is risk that they may not be accurate. For additional information with respect to the assumptions
underlying the forward-looking statements made in this MD&A, refer to the respective Guidance and forward-looking statements sections in BA
and in BT.
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 the Corporation's 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. 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 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, 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 MD&A are expressly qualified by this cautionary statement.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 13
FINANCIAL PRIORITIES
Strong financial discipline
is required to deliver on growth strategies
The Corporation operates in a competitive and capital-intensive environment. In recent years, extensive
investments in industry-leading, cost-optimized products and solutions have been made in order to improve
marketplace positioning and enhance the Corporation's ability to face competition in the aerospace and rail
transportation industries.
These investments continued in 2014 as the Corporation continued to drive The Evolution of Mobility with new
products, orders, deliveries and geographic markets. It was a year of change coupled with a sharper focus on
customers and profitable execution. This led to a reorganization of both BA and BT into a leaner, more nimble
structure. The new organization will enable management to more readily identify and remove obstacles to
operational efficiency and better positions the Corporation to respond quickly to evolving consumer needs,
changing market dynamics and world events. It will also provide more transparency across the business
segments and enable greater investor visibility into profitability by market.
New products launched around six years ago are making headway, and some are approaching the end of their
product development cycle. The CSeries commercial aircraft is meeting performance targets(1) and is making good
progress towards certification in the second half of 2015, with EIS expected to occur shortly thereafter. On
January 30, 2015, the Corporation received homologation for the ZEFIRO 380 very high speed train, following the
successful completion of 600,000 kilometres of testing in China. In addition, the first Global 7000/8000 flight test
vehicle is in final assembly. Both BA and BT have strong levels of order backlog, representing a leading indicator
of future revenues and a vote of confidence in the Corporation's product strategy. The consolidated backlog
reached $69.1 billion as at December 31, 2014, including a manufacturing backlog of $56.6 billion which
represents more than three years of manufacturing revenues, based on revenues for fiscal year 2014.
The combination of this strong backlog and the arrival to market of these new products results in a promising
future. The new structure that has been put in place puts the focus on better execution and will better enable the
Corporation to take advantage of this growth opportunity.
(1) Key performance targets under certain operating conditions when compared to aircraft currently in production for flights of 500 nautical
miles. See the CSeries family of aircraft program disclaimer at the end of this MD&A.
Increasing profitability is closely linked to improved execution and the successful EIS of new
products
Increasing the level and consistency of profitability remains a key financial priority. The Corporation's significant
investments in mobility solutions in recent years and the approaching EIS of industry-leading products are
intended to generate multiple years of sustained growth. In the short term, reaching financial targets will require
all business segments to improve their processes and execution.
14 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
BA achieved an EBIT margin before special items(1) of 4.2% in fiscal year 2014, compared to 4.1% last fiscal year.
The variation compared to 2014 guidance of approximately 5% is mainly due to pricing pressure on new aircraft
sold, increased provisions for credit and residual value guarantees as well as a decrease in the fair value of used
aircraft.
In fiscal year 2015, Business Aircraft and Aerostructures and Engineering Services expect to achieve EBIT
margins of approximately 7% and 4%, respectively while Commercial aircraft expects negative EBIT of
approximately $200 million including the dilutive impact of the initial years of production of the CSeries
program.(2)(3)
BT achieved an EBIT margin before special items of 5.1% in fiscal year 2014, compared to 5.8% last fiscal year.
The variation compared to 2014 guidance of approximately 6% is mainly due to revised escalation assumptions
for some contracts, mostly in rolling stock, which impacted estimated future revenues and resulted in a catch-up
adjustment to reflect lower contract margins on revenues already recognized. BT expects a slight improvement in
EBIT margin in 2015 compared to 2014, as BT continues to focus on contract execution and cost reduction while
increasing investment in a harmonized I.T. landscape and in R&D to develop standardized vehicle and sub-
systems platforms.(2)
At BT, the new OneBT organizational structure focuses on standardizing products and processes, as a part of
continued efforts to resolve execution issues faced in recent years in certain large rolling stock contracts and to
better position itself in the future. The new structure further empowers project management, reduces
organizational layers and overhead cost, and implements leaner processes to speed up decision making. In
addition, the increased share of services contracts in the backlog de-risks the portfolio, and, along with continued
cost reduction initiatives, will help increase margins.
The new organizational structures at BA and BT are first and foremost about focusing on execution. These
combined initiatives in BA and BT will support long-term competitiveness and improved profitability.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Liquidity and capital resources, and BA and BT analysis of
results sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.
(2) See the Guidance and forward looking statements sections in Overview, BA and BT for details regarding forward-looking statements and the
assumptions on which they are based.
(3) Includes the dilutive impact of the CSeries program including the write-down of inventory to net realizable value. Early production units in a
new program incur higher costs and generally have lower selling prices than units produced later in the program's life cycle.
Strong financial discipline will support planned investments in product development
Management continuously monitors liquidity levels, including available short-term capital resources and cash
flows from operations, to meet expected requirements, including the support of product development initiatives
and to ensure financial flexibility. In evaluating liquidity requirements, historic volatility and seasonal needs, the
maturity profile of long-term debt, the funding of product development programs, the level of customer advances,
working capital requirements, the economic environment and access to capital markets are all taken into account.
Management uses scenario analyses to stress-test cash flow projections.
In April 2014, the Corporation took advantage of strong demand and good pricing conditions in the debt capital
market in the U.S. to increase financial flexibility by issuing an aggregate of $1.8 billion in new unsecured Senior
Notes due in April 2019 and October 2022 which, after refinancing $1.3 billion in existing debt, yielded additional
liquidity of $0.5 billion.
The availability periods of the BT €500 million ( $607 million) and the $750 million unsecured revolving credit
facilities were both extended by one year in 2014, as were those of the BT and BA letter of credit facilities and the
PSG facility. See the Liquidity and capital resources and Other credit facilities sections for further details of these
facilities.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 15
On an on-going basis, the Corporation manages liabilities by taking into consideration expected free cash flows,
debt repayments and other material cash outlays expected to occur in the future. There is no significant debt
maturing before the year 2016.
As at December 31, 2014, $3.8 billion of short-term capital resources were available. Refer to the Liquidity and
capital resources section for further details on these resources. The Corporation maintains various other facilities
such as factoring facilities and sale and leaseback facilities, which also contribute to securing additional sources
of liquidity.
BA’s cash flows from operations in 2014 were $798 million, compared to a guidance of between $1.2 billion and
$1.6 billion, while net additions to PP&E and intangible assets were $1.9 billion in 2014, compared to a guidance
of between $1.6 billion and $1.9 billion. The cash flows from operating activities were lower than expected due to
a lower level of customer advances, lower EBIT and an increase in used aircraft inventory.
BT achieved free cash flow(1) of $122 million for the fiscal year ended December 31, 2014. Guidance indicated
free cash flow would be generally in line with EBIT; however, it was lower mainly due to a different cash flow
profile in some contracts and a lower level of advances on options in relation to framework contract agreements.
Business Aircraft expects cash flow from operating activities between $1.0 and $1.4 billion in 2015, with net
additions to PP&E and intangible assets of approximately $1.0 billion. Commercial Aircraft expects neutral cash
flows from operating activities in 2015, with net additions to PP&E and intangible assets of approximately $900
million. Aerostructures and Engineering Services expects neutral cash flows from operating activities and net
additions to PP&E and intangibles of approximately $100 million in 2015.(2)
The overall level of capital expenditures at BA is expected to gradually return to more normal levels in the coming
years following the peak of the investment cycle as significant programs approach the end of their product
development cycles.
BT expects an improvement in free cash flow(1) compared to 2014 although it is expected to remain below EBIT as
BT continues to ramp-up production related to several contracts and as a lower level of advances on large
contracts is anticipated.(2)
Investment in product development is expected to be funded through cash flows from operating activities and
available short-term capital resources of $3.8 billion. The Corporation may receive funding from governments and
contributions from key suppliers for certain aircraft programs, which increases financing flexibility as these parties
act as risk-sharing partners.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Liquidity and capital resources, and BA and BT analysis of
results sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.
(2) See the Guidance and forward looking statements sections in Overview, BA and BT for details regarding forward-looking statements and the
assumptions on which they are based.
The Corporation remains committed to the global metric targets despite the impact of
significant investments in industry-leading products on capital structure
The Corporation requires capital (predominantly for BA) to develop industry-leading products and to seize
strategic opportunities to increase competiveness and execute growth strategies. The Corporation takes
advantage of favourable capital market conditions when they materialize to extend debt maturity, reduce cost of
funds and increase diversity of capital resources.
Subsequent to the end of the fiscal year, in February 2015, the Corporation announced a plan to position the
Corporation with a flexible and strong financial profile. Pursuant to this plan, the Corporation intends to access
the capital markets, depending on market conditions, for the issuance of equity for approximately $600 million
and new long-term debt capital for up to $1.5 billion.
16 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
In order to realize the capital raising plan, the Corporation has filed on February 12, 2015 a preliminary short form
base shelf prospectus with the Canadian securities regulatory authorities, which will allow it to offer from time to
time over a 25-month period up to approximately $2 billion ($2.5 billion Canadian) of debt, equity or other
securities, including convertible securities. The Corporation may also offer the securities on a private placement
basis in the U.S. and in other jurisdictions.
The Board of Directors has concluded that the Corporation's free cash flow(1) would be more appropriately applied
to bolstering the Corporation's financial structure and investing in its core programs and businesses. Therefore,
the Corporation is suspending the declaration of dividends on the Corporation's Class A and Class B shares.
To complement this financing plan, the Corporation will explore other initiatives such as a certain business
activities' potential participation in industry consolidation in order to reduce debt.
Management assesses and manages creditworthiness using the global metrics as described in the Capital
structure section. Management continuously monitors the Corporation's capital structure to ensure sufficient
liquidity to fund product development programs. The Corporation's long-term objective is to improve leverage
metrics by de-leveraging the balance sheet with strategic long-term debt repayments, in line with active
management of consolidated liquidity, weighted-average cost of capital and term structure.
WEIGHTED-AVERAGE LONG-TERM DEBT MATURITY
(as at; in years)
DEBT MATURITY PROFILE (NOTIONAL AMOUNT)
(for calendar years; in millions of dollars)
* Debt maturing in 2022 includes the $500 million and $1.2 billion
Senior Notes due in March and October 2022, respectively.
Managing the net retirement benefit liability and the security of benefits is also a key part of the overall
management of capital structure. Over the years, several initiatives were put in place to mitigate risks that stem
from both pension liabilities and assets. Refer to the Retirement benefits section for details on the risk
management initiatives related to the Corporation's retirement plans.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Liquidity and capital resources, and BA and BT analysis of
results sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 17
As at December 31, 2014, the Corporation's credit ratings were three notches below investment grade. In January
2015, Standard & Poors Rating Services changed their rating from BB- to B+.
Credit Ratings
Investment-grade rating
Fitch Ratings Ltd.
Moody’s Investors Service, Inc.
Standard & Poor’s Rating Services
BBB-
Baa3
BBB-
February 11, 2015
BB-
Ba3
B+
Bombardier Inc.’s rating
December 31, 2013
BB
Ba2
BB
Over the long term, management believes that the Corporation will be in a good position to improve credit ratings
while progressing towards profitability targets and returning to a more normalized level of investment in product
development.
RISK MANAGEMENT
Active risk management has been one of the
Corporation's priorities for many years and is a key
component of the corporate strategy framework. To
achieve these risk management objectives, risk
management activities have been embedded in the
operational responsibilities of management and made an
integral part of the overall governance, planning,
decision making, organizational and accountability
structure.
For each risk or category of risks, the risk management
process includes activities performed in a continuous
cycle. Risk assessment, including risk identification,
analysis and evaluation, ensures that each risk is
analyzed to identify the consequence and likelihood of
the risk occurring and the adequacy of existing controls.
Each reportable segment is responsible for
implementing the appropriate structures, processes and
tools to allow proper identification of risks. Once the risks
have been identified, analyzed and evaluated, risk
mitigation identifies the actions to be implemented by
management. Each reportable segment has
implemented risk management processes that are
embedded in governance and activities to achieve the
objectives of the Corporation's Corporate Risk
Management Policy.
Source: International Organization for Standardization
(ISO) 31000:2009
In addition, every year, the Corporate Audit Services and Risk Assessment (CASRA) team assess the
Corporation's major risks. Senior management reviews this risk assessment and develops action plans to address
the identified risks. The Board of Directors is ultimately responsible for reviewing the overall risks faced by the
Corporation. The Board exercises its duty through the Finance and Risk Management Committee, consisting of
five independent Directors, which reviews material business risks and the measures that management takes to
monitor, control and manage such risks, including the adequacy of policies, procedures and controls designed by
management to assess and manage these risks. To complement the annual CASRA review of the major risks,
each reportable segment, in coordination with CASRA, has implemented an annual review process that results in
standardized heat maps.
18 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Management has also designed disclosure controls and procedures to provide reasonable assurance that
material information relating to the Corporation is properly communicated and that information required to be
disclosed in public filings is recorded, processed, summarized and reported within the time periods specified in
securities legislation. Refer to the Controls and procedures section in Other for more details.
Key exposures to financing and market risks
and related mitigation strategies
The Corporation is exposed to various financing and market risks. The following is a description of key exposures
to those risks together with the strategies in place to mitigate them. Market risks associated with pension plans
are discussed in the Retirement benefits section.
Exposure to foreign exchange risk
The Corporation's main exposures to foreign currencies are managed in accordance with the Foreign Exchange
Risk Management Policy in order to mitigate the impact of foreign exchange rate movements. This policy requires
each reportable segment’s management to identify all actual and potential foreign currency exposures arising
from their operations. This information is communicated to the Corporate Office central treasury function, which
has the responsibility to execute hedging transactions in accordance with policy requirements. In addition, the
central treasury function manages balance sheet exposures to foreign currency movements by matching asset
and liability positions. This program consists mainly in matching long-term debt in a foreign currency with assets
denominated in the same currency.
Foreign exchange management
Owner
Hedged exposures
Hedging policy(1)
Risk-mitigation strategies
BA
BT
Forecast cash outflows denominated
in a currency other than the
functional currency of the entity
incurring the cash flows, mainly in
Canadian dollars and pounds
sterling.
Forecast cash inflows and outflows
denominated in a currency other
than the functional currency of the
entity incurring the cash flows.
Hedge 85% of the identified
exposures for the first three
months, 75% for the next 15
months and up to 50% for the
following six months.
Hedge 100% of the identified
exposures at the time of order
intake.
Corporate
Office
Forecast cash outflows other than
interest, denominated in a currency
other than the functional currency of
the entity incurring the cash flows,
mainly in Canadian dollars.
Interest cash outflows in currencies
other than the U.S. dollar, i.e. the
euro and the Canadian dollar.
Balance sheet exposures, including
long-term debt and net investments
in foreign operations with non-U.S.
dollar functional currencies.
Hedge 85% of the identified
exposures for the first 18
months and up to 75% for the
following six months.
Hedge 100% of the identified
exposure unless the
exposure is recognized as an
economic hedge of an
exposure arising from the
translation of financial
statements in foreign
currencies to the U.S. dollar.
Hedge 100% of the identified
exposures affecting the
Corporation's net income.
Use of forward foreign exchange
contracts, mainly to sell U.S. dollars and
buy Canadian dollars and pounds
sterling.
Use of forward foreign exchange
contracts, mainly to sell or purchase
Canadian dollars, euros, U.S. dollars,
Swiss francs, Swedish kronor and other
Western European currencies.
Use of forward foreign exchange
contracts mainly to sell U.S. dollars and
buy Canadian dollars.
Use of forward foreign exchange
contracts mainly to sell U.S. dollars and
buy euros and Canadian dollars.
Asset/liability management techniques.
Designation of long-term debt as
hedges of the Corporation's net
investments in foreign operations with
non-U.S. dollar functional currencies.
(1) Deviations from the policy are allowed, subject to pre-authorization and maximum pre-determined risk limits.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 19
BA
The hedged portion of BA’s significant foreign currency denominated costs for the 12-month periods ending
December 31, 2015 and 2016 was as follows as at December 31, 2014:
Canadian dollars
Pounds sterling
2015
$3,158
2016
$3,107
80%
0.94
60%
0.89
2015
£376
80%
1.60
2016
£390
57%
1.61
EVOLUTION OF FOREIGN EXCHANGE RATES
(as at)
For the 12 month periods ending December 31
Expected costs denominated in foreign currency
Hedged portion of expected costs denominated in
foreign currency
Weighted-average hedge rates – foreign currency/USD
Sensitivity analysis
A U.S. one-cent change in the value of the Canadian
dollar compared to the U.S. dollar would impact BA’s
expected costs for the 12-month period ending
December 31, 2015 by approximately $32 million before
giving effect to forward foreign exchange contracts ($8
million impact after giving effect to such contracts).
A U.S. one-cent change in the value of the pound
sterling compared to the U.S. dollar would impact BA’s
expected costs for the 12-month period ending
December 31, 2015 by approximately $4 million before
giving effect to forward foreign exchange contracts ($1
million impact after giving effect to such contracts).
The CAD/USD and EUR/USD exchange rates have since
decreased notably, to 0.80 and 1.13, respectively, as at
February 10, 2015
BT and Corporate Office
BT’s foreign currency exposure, arising from its long-term contracts, spreads over many years. Such exposures
are generally entirely hedged at the time of order intake, contract-by-contract, for a period that is often shorter
than the maturity of the cash flow exposure. Upon maturity of the hedges, BT enters into new hedges in a rollover
strategy for periods up to the maturity of the cash flow exposure. As such, BT’s results of operations are not
significantly exposed to gains and losses from transactions in foreign currencies, but remain exposed to
translation and cash flow risks on a temporary basis. On a cumulative basis, however, cash outflows or inflows
upon rollover of these hedges are offset by cash inflows or outflows in opposite directions when the cash flow
exposure materializes.
Corporate Office’s identified cash flow exposures are not significant and mainly arise from expenses denominated
in Canadian dollars. Corporate Office’s balance sheet exposure arises mainly from investments in foreign
operations and long-term debt. Despite the Corporation's risk mitigation strategies, the impact of foreign currency
fluctuations on equity can be significant given the size of investments in foreign operations with non-U.S. dollar
functional currencies, mainly the euro.
Sensitivity analysis
For investments in foreign operations exposed to foreign currency movements, a 1% fluctuation of the relevant
currencies as at December 31, 2014 would have impacted equity, before the effect of income taxes, by
$11 million.
20 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Exposure to credit risk
The effective monitoring and controlling of credit risk is a key component of the Corporation's risk management
activities. Credit risk is monitored on an ongoing basis using different systems and methodologies depending on
the underlying exposure.
Credit risk management
Owner
Key risks
Risk mitigation measures initiated by management
Corporate
Office
BA and BT
BA
Through normal treasury
activities, the Corporation is
exposed to credit risk
through derivative financial
instruments and investing
instruments.
Credit risks arising from treasury activities are managed by a central treasury
function in accordance with the Corporate Foreign Exchange Risk Management
Policy and the Corporate Investment Management Policy. The objective of
these policies is to minimize exposure to credit risk from treasury activities by
ensuring that the Corporation transacts strictly with investment-grade financial
institutions and money market funds, based on pre-established consolidated
counterparty risk limits per financial institution and fund.
The Corporation is exposed
to credit risk through trade
receivables arising from
normal commercial
activities and lending
activities, related primarily
to aircraft loans and lease
receivables provided to BA
customers in connection
with the sale of commercial
aircraft.
Credit risks arising from normal commercial activities and lending activities are
managed and controlled by BA and BT, in accordance with the Corporate Office
policy. Customer credit ratings and credit limits are analyzed and established by
internal credit specialists, based on inputs from external rating agencies,
recognized rating methods and experience with the customers. The credit risk
and credit limits are dynamically reviewed based on fluctuations in the
customers’ financial results and payment behaviour. These customer credit
ratings and credit limits are critical inputs in determining the conditions under
which credit or financing is extended to customers, including obtaining collateral
to reduce exposure to losses. Specific governance is in place to ensure that
credit risk arising from large transactions are analyzed and approved by the
appropriate level of management before financing or credit support is offered to
the customer.
In connection with the sale
of certain products, mainly
commercial aircraft, the
Corporation may provide
credit guarantees in the
form of lease and loan
payment guarantees.
Substantially all financial
support involving potential
credit risk lies with regional
airline customers.
Credit guarantees provide support through contractually limited payments to the
guaranteed party to mitigate default-related losses. Credit guarantees are
usually triggered if customers do not perform during the term of the financing
under the relevant financing arrangements. In the event of default, the
Corporation usually acts as agent for the guaranteed parties for the
repossession, refurbishment and re-marketing of the underlying assets.
This exposure arising from credit guarantees is partially mitigated by the net
benefit expected from the estimated value of aircraft and other assets available
to mitigate exposure under these guarantees. In addition, lease subsidy
liabilities would be extinguished in the event of credit default by certain
customers.
Exposure to liquidity risk
The management of exposure to liquidity risk requires a constant monitoring of expected cash inflows and
outflows, which is achieved through maintenance of detailed forecasts of cash flows and liquidity position, as well
as long-term operating and strategic plans. Liquidity adequacy is continually monitored, taking into consideration
historical volatility, the economic environment, seasonal needs, the maturity profile of indebtedness, access to
capital markets, the level of customer advances, working capital requirements, the funding of product
development and other financial commitments. Management also monitors any financing opportunities to optimize
the capital structure and maintain appropriate financial flexibility. In addition, the Corporation engages in certain
working capital financing initiatives such as the sale of receivables, aircraft sale and leaseback transactions and
the negotiation of extended payment terms with certain suppliers.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 21
Exposure to interest rate risk
Future cash flows are exposed to fluctuations from changing interest rates, arising mainly from assets and
liabilities indexed to variable interest rates, including fixed-rate long-term debt synthetically converted to variable
interest rates. From time to time, the Corporation may also be exposed to changes in interest rates for certain
financing commitments, when a fixed financing rate has been guaranteed to a customer. For these items, cash
flows could be impacted by a change in benchmark rates such as Libor, Euribor or Banker’s Acceptance. The
Corporate Office central treasury function manages these exposures as part of the overall risk management
policy.
The Corporation is also exposed to gains and losses on certain assets and liabilities as a result of changes in
interest rates, principally financial instruments carried at fair value and credit and residual value guarantees. The
financial instruments carried at fair value include certain aircraft loans and lease receivables, investments in
securities, investments in financing structures, lease subsidies and derivative financial instruments.
Sensitivity analysis
A 100-basis point increase in interest rates impacting the measurement of financial instruments carried at fair
value and credit and residual value guarantees, excluding net retirement benefit liabilities, would have negatively
impacted EBT for fiscal year 2014 by $22 million.
22 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
CONSOLIDATED RESULTS OF OPERATIONS
The results of operations and cash flows for the fourth quarter are not necessarily indicative of the results of
operations and cash flows for the full fiscal year. The fourth quarter has generally been the strongest in terms of
revenues, profitability and cash flows.
Results of operations
Revenues
Cost of sales
Gross margin
SG&A
R&D
Share of income of joint ventures and associates
Other expense
EBIT before special items(1)
Special items(2)
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to
Equity holders of Bombardier Inc.
NCI
EPS (in dollars)
Basic and diluted
Non-GAAP financial measures(1)
EBITDA
EBITDA before special items
Adjusted net income
Adjusted EPS
$
$
$
$
$
$
$
$
$
$
Fourth quarters
ended December 31
2013
2014
5,324
5,960
4,698
5,314
626
646
351
351
83
112
(17)
(25)
23
52
186
156
1
1,357
185
(1,201)
75
65
(30)
(17)
140
(1,249)
43
341
97
(1,590)
$
(1,594)
4
(0.92)
$
$
$
95
2
0.05
Fourth quarters
ended December 31
2013
2014
291
181
292
272
129
83
0.07
0.04
$
$
$
$
$
Fiscal years
ended December 31
2013
2014
18,151
20,111
15,658
17,534
2,493
2,577
1,417
1,358
293
347
(119)
(89)
9
38
893
923
(30)
1,489
923
(566)
271
249
(119)
(75)
771
(740)
199
506
572
(1,246)
$
(1,260)
14
(0.74)
$
$
$
564
8
0.31
Fiscal years
ended December 31
2013
2014
1,314
1,117
1,284
1,340
608
648
0.33
0.35
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Refer to the Non-GAAP financial measures section for details, definitions and reconciliations of these metrics to the most comparable IFRS
measures.
(2) Refer to the special items section on the next page.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 23
Revenues, EBIT margin and EBIT margin before special items
Revenues
BA
BT
Consolidated
EBIT margin
BA
BT
Consolidated
EBIT margin before special items(1)
BA
BT
Consolidated
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
$ 3,326
$ 2,634
$ 5,960
$
$
$
2,873
2,451
5,324
$ 10,499
$ 9,612
$ 20,111
9,385
$
8,766
$
$ 18,151
(39.2)%
3.9 %
(20.2)%
1.6 %
3.9 %
2.6 %
3.2%
3.8%
3.5%
3.3%
3.8%
3.5%
(9.5)%
4.5 %
(2.8)%
4.2 %
5.1 %
4.6 %
4.5%
5.8%
5.1%
4.1%
5.8%
4.9%
(1) Refer to the Non-GAAP financial measures section for details, definitions and reconciliations of these metrics to the most comparable IFRS
measures.
Analysis of consolidated results
Detailed analyses of revenues and EBIT are provided in the Analysis of results sections in BA and BT.
Special items
Special items comprise items which do not reflect, in management’s opinion, the Corporation’s core performance
such as the impact of restructuring charges, significant impairment charges and reversals, as well as other
significant unusual items.
Special items were as follows:
Pause of the Learjet 85 program
Restructuring charge
Loss on repurchase of long-term debt
Gains on resolution of litigations
Inventory write-down
Gain on disposal of a business
Of which is presented in
Special items in EBIT
Financing expense - loss on
repurchase of long-term debt
Financing income - interests related to
the resolution of litigations
Ref
1
1
2
1
1
1
1
2
3
$
$
$
$
$
Fourth quarters
ended December 31
2013
2014
—
1,357
—
—
—
—
—
—
24
—
(23)
—
$
1,357 (1) $
1 (1) $
$
Fiscal years
ended December 31
2013
—
—
—
(43)
24
(23)
(42) (1)
2014
1,357
142
43
(18)
—
—
1,524 (1) $
1,357
$
—
—
1,357
$
1
—
—
1
$
1,489
$
(30)
43
(8)
1,524
$
$
—
(12)
(42)
(1) The amount of taxes on special items for the fourth quarter and fiscal year ended December 31, 2014 were $283 million and $273 million,
respectively (nil for the fourth quarter and fiscal year ended December 31, 2013) .
1. Refer to the Analysis of results sections in BA and BT for details these items.
2. Represents the loss related to the redemption of the €785 million ($1.1 billion) Senior Notes.
3.
Interest portion of gains on successful resolution of litigations at BA in connection with Part IV of the Québec
Income Tax Act, the Tax on Capital. See Analysis of results in BA for more details.
24 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Net financing expense
Net financing expense amounted to $48 million and $174 million, respectively, for the fourth quarter and fiscal
year ended December 31, 2014, compared to $45 million and $152 million for the corresponding periods last
fiscal year.
The $3 million increase for the three-month period is mainly due to:
a prior year favourable variance related to changes in discount rates for provisions ($7 million); and
higher interest on long-term debt, after the effect of hedges ($7 million).
lower accretion on retirement benefit obligations ($9 million).
The $22 million increase for the fiscal year is mainly due to:
a loss on repurchase of long-term debt(1) ($43 million);
a net loss on certain financial instruments compared to a net gain last fiscal year ($25 million); and
a prior year favourable variance related to changes in discount rates for provisions ($18 million).
•
•
Partially offset by:
•
•
•
•
Partially offset by:
•
•
lower accretion on retirement benefit obligations ($37 million); and
higher borrowing costs capitalized to PP&E and intangible assets ($22 million).
(1) Following the redemption of the €785 million ($1.1 billion) Senior Notes, a related loss of $43 million was recorded in financing expense,
which is treated as a special item.
Income taxes
The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2014 were (27.3)% and
(68.4)%, respectively, compared to the statutory income tax rate in Canada of 26.8%. For the three-month period
and for the fiscal year, the higher effective income tax rates are mainly due to the charge recorded as a special
item in relation to the pause of the Learjet 85 program, which triggered a write-down of deferred income tax
assets and the non-recognition of income tax benefits related to tax losses and temporary differences.
The effective income tax rates before special items for the fourth quarter and fiscal year ended December 31,
2014 were 53.0% and 31.1%, respectively, compared to the statutory income tax rate in Canada of 26.8%.
For the three-month period, the higher effective income tax rate is mainly due to:
•
the non-recognition of income tax benefits related to tax losses and temporary differences and the write
down of deferred income tax assets.
Partially offset by:
•
the positive impact of the recognition of previously unrecognized tax losses or temporary differences and
permanent differences.
For the fiscal year ended December 31, 2014, the higher effective income tax rate is mainly due to:
the non-recognition of income tax benefits related to tax losses and temporary differences.
•
Partially offset by:
•
the positive impact of the recognition of previously unrecognized tax losses or temporary differences and
permanent differences.
The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2013 were 30.7% and
25.8%, respectively, compared to the statutory income tax rate in Canada of 26.8%.
For the three-month period, the higher effective tax rate is mainly due to:
•
the write down of deferred income tax assets and the non-recognition of income tax benefits related to tax
losses and temporary differences.
Partially offset by:
•
the recognition of previously unrecognized tax losses or temporary differences.
For the fiscal year ended December 31, 2013, the lower effective tax rate is mainly due:
•
to the positive impact of the recognition of previously unrecognized tax losses or temporary differences
and permanent differences.
Partially offset by
•
the non-recognition of income tax benefits related to tax losses and temporary differences and write down
of deferred income tax assets.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 25
LIQUIDITY AND CAPITAL RESOURCES
Reconciliation of segmented free cash flow to cash flows from operating activities
Segmented free cash flow (usage)(1)
BA
BT
Segmented free cash flow (usage)
Net income taxes and net interest (paid) received(2)
Free cash flow (usage)
Add back: Net additions to PP&E and
intangible assets
Cash flows from operating activities
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
$
$
29
506
535
55
590
495
1,085
$
$
87
767
854
(83)
771
627
1,398
$
$
(1,059)
122
(937)
(180)
(1,117)
1,964
847
$
$
(1,239)
668
(571)
(336)
(907)
2,287
1,380
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section for definitions of these metrics and the Analysis of
results sections in BA and BT for reconciliations to the most comparable IFRS measures.
(2) Not allocated to reportable segments.
Variation in cash and cash equivalents
Balance at the beginning of period/fiscal year
Net proceeds from issuance of long-term debt
Repayments of long-term debt
Free cash flow (usage)(1)
Dividends paid
Effect of exchange rate changes on cash
and cash equivalents
Net proceeds from disposal of a business(2)
Net variation in AFS investments in securities
Other
Balance at the end of period/fiscal year
$
Fourth quarters
ended December 31
2013
2014
2,590
1,935
3
5
(15)
(16)
771
590
(48)
(45)
(100)
—
53
67
2,489
33
83
52
(72)
3,397
$
$
$
Fiscal years
ended December 31
2013
2014
2,557
3,397
1,983
1,820
(51)
(1,334)
(907)
(1,117)
(196)
(182)
$
(169)
25
—
49
2,489
(2)
83
(70)
—
3,397
$
$
$
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section for definitions of these metrics and the Analysis of
results sections in BA and BT for reconciliations to the most comparable IFRS measures.
(2) Related to the sale of the main assets and related liabilities of the Corporation’s Flexjet activities completed in December 2013. In fiscal
year 2014, the Corporation received the balance of the sale price.
26 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
December 31, 2014
2,489
$
1,357
3,846
$
$
December 31, 2013
3,397
1,440
4,837
$
AVAILABLE SHORT-TERM CAPITAL RESOURCES(1)
(as at; in billions of dollars)
Available short-term capital resources
Cash and cash equivalents
Available revolving credit facilities
Available short-term capital resources
The Corporation's available short-term capital resources
include cash and cash equivalents as well as the
amounts available under the two unsecured revolving
credit facilities. These facilities are available for cash
drawings for the general needs of the Corporation.
Under these facilities, the same financial covenants must
be met as for the BA and BT letter of credit facilities.
Refer to the Other credit facilities section for details of
these financial covenants.
In March 2014, the Corporation extended the maturity
dates of the BT €500 million ( $607 million) and the $750
million unsecured revolving credit facilities by one year
to March 2016 and June 2017, respectively.
(1)Some totals do not agree due to rounding.
In April 2014, the Corporation issued, at par, unsecured Senior Notes comprised of $600 million, bearing interest
at 4.75%, due on April 15, 2019 and $1.2 billion, bearing interest at 6.00%, due on October 15, 2022.
The Corporation used the net proceeds of $1.8 billion to finance the redemption of the €785 million ($1.1 billion)
Senior Notes due November 15, 2016 pursuant to an optional redemption exercised on April 4, 2014, to finance
the repayment of the $162 million Notes due May 1, 2014 with the remainder being for general corporate
purposes.
In May 2014, the Corporation entered into interest-rate swap agreements to convert the interest rate of the $1.2
billion 6.00% Senior Notes from fixed to variable 3-month Libor +3.5557.
The interest-rate swap agreement related to the €780 million Senior Notes was settled in the fourth quarter of
fiscal year 2014. As this interest-rate swap was in a fair value hedge relationship, the related deferred gain
recorded in the hedged item will be amortized in interest expense up to the maturity of the debt.
In February 2015, the Corporation announced a financing plan to position the Corporation with a flexible and
strong financial profile. Pursuant to this plan, the Corporation intends to access capital markets, depending on
market conditions, for the issuance of equity for approximately $600 million and long-term debt capital for up to
$1.5 billion.
In order to realize the capital raising plan, the Corporation has filed on February 12, 2015 a preliminary short form
base shelf prospectus with the Canadian securities regulatory authorities, which will allow it to offer from time to
time over a 25-month period up to approximately $2 billion ($2.5 billion Canadian) of debt, equity or other
securities, including convertible securities. The Corporation may also offer the securities on a private placement
basis in the U.S. and in other jurisdictions.
In addition, the Corporation is suspending the declaration of dividends on the Class A and Class B shares. To
complement this financing plan, the Corporation will explore other initiatives such as certain business activities'
potential participation in industry consolidation in order to reduce debt.
Management considers that the Corporation's expected cash flows from operating activities, combined with
available short-term capital resources of $3.8 billion, will enable the development of new products to enhance
competitiveness and support growth; will allow the payment of dividends, if and when declared by the Board of
Directors; and will enable the Corporation to meet all other expected financial requirements in the foreseeable
future.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 27
Expected timing of future liquidity requirements
December 31, 2014
Long-term debt(1)
Interest payments
Operating lease obligations
Purchase obligations(2)
Trade and other payables
Other financial liabilities
Derivative financial liabilities
Total
7,376
3,053
1,115
11,435
4,216
1,491
703
29,389
$
$
Less than
1 year
56
449
165
7,061
4,179
357
620
12,887
$
$
1 to 3 years
854
$
844
260
3,711
2
134
83
5,888
$
3 to 5 years
1,273
$
735
178
430
—
77
—
2,693
$
Thereafter
5,193
1,025
512
233
35
923
—
7,921
$
$
(1) Includes principal repayments only. Debt maturing between one to three years includes the $750 million Senior Notes due in January 2016.
(2) Purchase obligations represent contractual agreements to purchase goods or services in the normal course of business that are legally
binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, variable or indexed price
provisions; and the appropriate timing of the transaction. These agreements are generally cancellable with a substantial penalty. Purchase
obligations are generally matched with revenues over the normal course of operations.
The table above presents the expected timing of contractual liquidity requirements. Other payments contingent on
future events, such as payments in connection with credit and residual value guarantees related to the sale of
aircraft and product warranties have not been included in the above table because of the uncertainty of the
amount and timing of payments arising from their contingent nature. In addition, required pension contributions
have not been reflected in this table as such contributions depend on periodic actuarial valuations for funding
purposes. For 2015, contributions to retirement benefit plans are estimated at $428 million (see the Retirement
benefits section for more details). The amounts presented in the table represent the undiscounted payments and
do not give effect to the related hedging instruments, if applicable.
OTHER CREDIT FACILITIES
Letter of credit facilities
Letter of credit facilities are only available for the issuance of letters of credit. As these facilities are unfunded
commitments from banks, they typically provide better pricing for the Corporation than credit facilities that are
available for cash drawings. Letters of credit are generally issued in support of performance obligations and
advance payments received from customers.
As at December 31, 2014, the Corporation had $5.4 billion committed under the BA, BT and PSG facilities
($6.0 billion as at December 31, 2013). Letters of credit issued under these facilities amounted to $4.2 billion as at
December 31, 2014 ($4.9 billion as at December 31, 2013).
In March 2014, the availability periods of the BT and BA letter of credit facilities were extended by one year each,
to May 2017 and June 2017, respectively. In June 2014, the availability period of the PSG facility was extended
by one year to June 2015.
In addition to the outstanding letters of credit mentioned above, letters of credit of $1.7 billion were outstanding
under various bilateral agreements as at December 31, 2014 ($1.0 billion as at December 31, 2013).
The Corporation also uses numerous bilateral bonding facilities with insurance companies to support BT’s
operations. An amount of $2.4 billion was outstanding under such facilities as at December 31, 2014 ($2.3 billion
as at December 31, 2013).
See Note 30 – Credit facilities, to the consolidated financial statements, for additional information.
28 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Financial covenants
Under the BA and BT letter of credit facilities and the two unsecured revolving credit facilities available for cash
drawings, various financial covenants must be maintained, which must be met on a quarterly basis. The BA
$600 million letter of credit facility and the $750 million unsecured revolving facility include financial covenants
requiring a minimum EBITDA to fixed charges ratio, a maximum net debt to EBITDA ratio and a minimum liquidity
level of $500 million at the end of each quarter, all calculated based on an adjusted consolidated basis (i.e.
excluding BT). BT’s €3.5 billion ( $4.2 billion) letter of credit facility and €500 million ( $607 million) unsecured
revolving facility financial covenants require a minimum liquidity level of €600 million ( $728 million) at the end of
each quarter, as well as a minimum equity level and a maximum debt to EBITDA ratio, all calculated on a BT
stand-alone basis. These terms and ratios are defined in the respective agreements and do not correspond to the
Corporation's global metrics or to any specific terms used in the MD&A. A breach of any of these agreements or
the inability to comply with these covenants could result in a default under these facilities, which would permit the
Corporation's banks to request immediate defeasance or cash cover of all outstanding letters of credit, and bond
holders and other lenders to declare amounts owed to them to be immediately payable.
The financial covenants under these credit facilities were all met as at December 31, 2014 and 2013 and as at
January 1, 2013.
On balance sheet sale and leaseback facilities
BA enters into sale and leaseback facilities with third parties under which it can sell certain pre-owned business
aircraft and lease them back for a period not greater than 24 months. The Corporation has the right to buy the
aircraft back during the term of the lease for predetermined amounts. As at December 31, 2014, the Corporation
had sale and leaseback facilities with third parties under which a total of $260 million was outstanding as at
December 31, 2014 ($138 million as at December 31, 2013).
RETIREMENT BENEFITS
Significant decrease in retirement benefit contributions
Overview of retirement benefit plans
The Corporation sponsors several Canadian and
foreign retirement benefit plans consisting of funded
and unfunded pension plans, as well as other
unfunded defined benefit plans. Funded plans are
plans for which segregated plan assets are invested in
trusts. Unfunded plans are plans for which there are
no segregated plan assets, as the establishment of
segregated plan assets is generally not permitted or
not in line with local practice. Therefore unfunded
plans will always be in a deficit position.
Pension plans are categorized as DB or DC. DB plans
specify the amount of benefits an employee is to
receive at retirement, while DC plans specify how
contributions are determined. As a result, there is no
deficit or surplus for DC plans. Hybrid plans are a
combination of DB and DC plans.
RETIREMENT BENEFIT CONTRIBUTIONS
(for fiscal years ended; in millions of dollars)
F: Forecast
*For the fiscal year ended December 31, 2011, contributions
comprise 11 months for BA plans and 12 months for BT plans.
Retirement benefit contributions to DB pension plans decreased by $97 million to $370 million for the fiscal year
ended December 31, 2014, compared to $467 million the previous year. This reduction in contributions result from
the improvement in the funding ratio of the funded plans, which has improved from 74% to 87% since the fiscal
year ended December 31, 2011.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 29
EVOLUTION OF PENSION PLAN ASSETS, FUNDED PLAN
OBLIGATIONS AND DEFICIT
(as at; in billions of dollars)
EVOLUTION OF FUNDING RATIO
(as at; plan assets as a percentage of funded plan obligations)
Net retirement benefit liability
Discount rates dropped sharply to near their historical lows in 2014. This drop was the main reason for the
increase in the net retirement benefit liability from $2.0 billion as at December 31,2013 to $2.5 billion as at
December 31, 2014. Despite lower discount rates, the net retirement benefit liability has decreased by
$748 million since reaching its peak on December 31, 2011.
EVOLUTION OF WEIGHTED-AVERAGE DISCOUNT RATE
(as at; used to determine the defined benefit pension obligation)
NET RETIREMENT BENEFIT LIABILITY
(as at; in millions of dollars)
* Includes liability arising from minimum funding requirement and
impact of asset ceiling test.
Variation in net retirement benefit liability
Balance as at December 31, 2013
Changes in discount rates and other financial assumptions
Actuarial gains on pension plan assets
Employer contributions
Service costs
Changes in foreign exchange rates
Accretion on net retirement benefit obligation
Net actuarial gains on defined benefit obligations
Other
Balance as at December 31, 2014
$
$
1,987 (1)
1,514
(676)
(386)
252
(208)
76
(71)
(18)
2,470 (1)
(1) Includes retirement benefit assets of $159 million as at December 31, 2014 ($174 million as at December 31, 2013).
Bombardier's net retirement benefit liability increased by $483 million in 2014, mainly due to the reduction in
discount rates in 2014. This increase was partly offset by actuarial gains on plan assets, excess of employer
contributions over service costs and favourable foreign currency exchange rates.
30 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The value of plan assets is highly dependent on the
pension funds’ asset performance and on the level of
contributions. The performance of the financial
markets is a key driver in determining the funds’ asset
performance as assets in the plans are composed
mostly of publicly traded equity and fixed income
securities. IFRS requires that the excess (deficit) of
actual return on plan assets compared to the
estimated return be reported as an actuarial gain or
loss in other comprehensive income. The return on
plan assets must be calculated using the discount rate
that is used to measure the net retirement benefit
liability, which is derived using high-quality corporate
bond yields. During fiscal year 2014, the actual gain on
plan assets was $1.1 billion, of which $676 million was
accounted for as an actuarial gain.
INCREASE IN NET RETIREMENT BENEFIT LIABILITY
(in millions of dollars)
* Other is mainly comprised of changes in other actuarial
assumptions.
** Mainly comprised of changes in discount rates.
DB plan contributions for 2014 of $386 million were in excess of current service cost of $252 million, which helped
to reduce the net retirement benefit liability. DB plan contributions are estimated at $337 million for 2015. The
future level of contributions will be impacted by the evolution of market interest rates and the actual return on plan
assets.
In Canada and the U.S., since September 1, 2013, all new non-unionized employees join DC plans (they no
longer have the option of joining DB or hybrid plans). In the U.K., seven of nine DB plans are closed to new
members. Employees who are members of a DB or hybrid plan closed to new members continue to accrue
service in their original plan. As a result of these changes, contributions to DC plans have increased over the past
several years. In fiscal year 2014, DC pension contributions were made totaling $90 million. These contributions
are estimated at $91 million for 2015.
Investment Policy
The investment policies are established to achieve a long-term investment return so that, in conjunction with
contributions, the plans have sufficient assets to pay for the promised benefits while maintaining a level of risk that
is acceptable given the tolerance of plan stakeholders. See below for more information regarding risk
management initiatives.
The target asset allocation is determined based on expected economic and market conditions, the maturity profile
of the plans’ liabilities, the funded status of the respective plans and the plan stakeholders’ tolerance to risk.
The plans’ investment strategy is to invest broadly in fixed income and equity securities and to have a smaller
portion of the funds’ assets invested in real return asset securities (including global infrastructure and real estate
listed securities).
As at December 31, 2014, the average target asset allocation was as follows:
•
•
•
52%, 50% and 51% in fixed income securities, for Canadian, U.K. and U.S. plans, respectively;
38%, 35% and 44% in equity securities, for Canadian, U.K. and U.S. plans, respectively; and
10%, 15% and 5% in real return asset securities, for Canadian, U.K. and U.S. plans, respectively.
In addition, to mitigate interest rate risk, interest rate hedging overlay portfolios (comprised of long-term interest
rate swaps and long-term Gilt forwards) were implemented in 2013 for most of the plans. The interest rate
hedging overlay portfolios were liquidated in 2014 to crystallize the gains realized from declining bond yields.
These portfolios will be re-implemented when the market will be favorable.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 31
The plan administrators have also established dynamic de-risking strategies. As a result, asset allocation will
likely become more conservative in the future and interest rate hedging overlay portfolios are likely to be
established as plan funding status and market conditions continue to improve. Bombardier Inc. Pension Asset
Management Services monitors the de-risking triggers on a daily basis to ensure timely and efficient
implementation of these strategies. The Corporation and administrators periodically undertake asset and liability
studies to determine the appropriateness of the investment policies and de-risking strategies.
Risk management initiatives
The Corporation's pension plans are exposed to various risks, including equity, interest rate, inflation, foreign
exchange, liquidity and longevity risks. Several risk strategies and policies have been put in place to mitigate the
impact these risks could have on the funded status of DB plans and on the future level of contributions. The
following is a description of key risks together with the mitigation measures in place to address them.
Equity risk
Equity risk is the risk that results from fluctuations in equity prices. This risk is managed by maintaining
diversification of portfolios across geographies, industry sectors and investment strategies.
Interest rate risk
Interest rate risk is the risk that results from fluctuations in the fair value of plan assets and liabilities due to
movements in interest rates. This risk is managed by reducing the mismatch between the duration of plan assets
and the duration of pension obligation. This is accomplished by having a significant portion of the portfolio
invested in long-term fixed income securities and interest rate hedging overlay portfolios.
Inflation risk
Inflation risk is the risk that benefits indexed to inflation increase significantly as a result of changes in inflation
rates. To manage this risk, the benefit indexation has been capped in certain plans and a portion of plan assets
has been invested in real return asset securities and real return fixed income securities.
Foreign exchange risk
Currency risk exposure arises from fluctuations in the fair value of plan assets denominated in a currency other
than the currency of the plan liabilities. Currency risk is managed with foreign currency hedging strategies as per
plan investment policies.
Liquidity risk
Liquidity risk is the risk stemming from holding assets which cannot be readily converted to cash when needed for
the payment of benefits or to rebalance the portfolios. Liquidity risk is managed through investment in government
bonds and equity futures and by having no investments in private placements or hedge funds.
Longevity risk
Longevity risk is the risk that increasing life expectancy results in longer-than-expected benefit payments. This
risk is mitigated by using the most recent mortality tables to set the level of contributions.
32 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Retirement benefit cost
The retirement benefit cost for fiscal year 2015 for DB plans is estimated at $416 million, of which $333 million
relates to EBIT expense or capitalized cost and $83 million relates to net financing expense, compared to $330
million for fiscal year 2014. This increase is mainly due to the negative impact of decreases in discount rate
assumptions, partially offset by the return on plan assets. The following table provides the components of the
retirement benefit cost, for fiscal years:
Pension
benefits
310
$
90
400
$
$
$
$
$
$
264
46
90
339
61
Other
benefits
20
$
—
20
$
n/a
20
n/a
5
15
$
$
$
2014
Total
$ 330
90
$ 420
$ 264
$ 66
$ 90
$ 344
$ 76
Pension
benefits
380
$
87
467
$
$
$
$
$
$
335
45
87
371
96
Other
benefits
29
$
—
29
$
n/a
29
n/a
12
17
$
$
$
2013
Total
$ 409
87
$ 496
$ 335
74
$
87
$
$ 383
$ 113
DB plans
DC plans
Total retirement benefit cost
Related to
Funded DB plans
Unfunded DB plans
DC plans
Recorded as follows
EBIT expense or capitalized cost
Financing expense
n/a: Not applicable
Sensitivity analysis
The net retirement benefit liability is highly dependent on discount rates, expected inflation rates, expected rates
of compensation increase, life expectancy assumptions and actual return on plan assets. The discount rates
represent the market rate for high-quality corporate fixed-income investments at the end of the reporting period
consistent with the currency and estimated term of the benefit obligations. As a result, discount rates change
based on market conditions.
A 0.25 percentage point increase in one of the following weighted-average actuarial assumptions would have the
following effects, all other actuarial assumptions remaining unchanged:
Increase (decrease)
Discount rate
Inflation rate
Rate of compensation increase
Retirement
benefit cost for
fiscal year 2015
(Forecast)
(34)
8
10
$
$
$
Net retirement benefit
liability as at
December 31, 2014
$
$
$
(483)
138
89
A one-year increase in life expectancy for all DB plan beneficiaries would impact plans in major countries as
follows:
Increase (decrease)
Canada
U.K.
U.S.
Retirement
benefit cost for
fiscal year 2015
(Forecast)
9
5
2
$
$
$
Net retirement benefit
liability as at
December 31, 2014
$
$
$
119
91
30
Details regarding assumptions used are provided in Note 21 – Retirement benefits, to the consolidated financial
statements.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 33
CAPITAL STRUCTURE
Management analyzes capital structure using global metrics, which are based on a broad economic view of the
Corporation, in order to assess the creditworthiness of the Corporation. These global metrics are managed and
monitored in order to achieve an investment-grade profile.
Reconciliations of these measures to the most comparable IFRS financial measures are in the Non-GAAP
financial measures section. Adjusted EBIT and adjusted EBITDA exclude special items, such as restructuring
charges, significant impairment charges and reversals, as well as other significant unusual items, which
management does not consider representative of the Corporation's core performance.
The Corporation's objectives with regard to the global metrics are as follows:
adjusted EBIT to adjusted interest ratio greater than 5.0; and
adjusted debt to adjusted EBITDA ratio lower than 2.5.
•
•
Global metrics(1)
Interest coverage ratio
Adjusted EBIT(2)
Adjusted interest(2)
Adjusted EBIT to adjusted interest ratio
Financial leverage ratio
Adjusted debt
Adjusted EBITDA(2)
Adjusted debt to adjusted EBITDA ratio
December 31
2014
December 31
2013
Explanation of significant
variances
$
$
$
$
1,262 $
401 $
3.1
8,401 $
1,775 $
4.7
967
346
2.8
7,912
1,454
5.4
Improved due to higher Adjusted
EBIT, partially offset by higher net
interest paid.
Improved due to higher Adjusted
EBITDA and the repayment of
approximately $1.3 billion of
existing debt, partially offset by the
issuance of $1.8 billion of long term
debt in April 2014.
(1) Refer to the Non-GAAP financial measures section for definitions and reconciliations to the most comparable IFRS measures.
(2) For the four-quarter trailing periods.
ADJUSTED DEBT
(as at; in millions of dollars)
ADJUSTED EBIT TO ADJUSTED INTEREST
RATIO
(for fiscal years ended)
ADJUSTED DEBT TO ADJUSTED EBITDA
RATIO
(as at)
These global metrics do not represent the calculations required for bank covenants. They represent key business
metrics and as such are used to analyze capital structure. For compliance purposes, management regularly
monitors bank covenants to ensure they are met.
34 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
In addition to the above global metrics, management separately monitors the Corporation's net retirement benefit
liability which amounted to $2.5 billion as at December 31, 2014 ($2.0 billion as at December 31, 2013). The
measurement of this liability is dependent on numerous key long-term assumptions such as discount rates, future
compensation increases, inflation rates and mortality rates. In recent years, this liability has been particularly
volatile due to changes in discount rates. Such volatility is exacerbated by the long-term nature of the obligation.
Management closely monitors the impact of the net retirement benefit liability on the Corporation's future cash
flows and has introduced significant risk mitigation initiatives in recent years to gradually reduce key risks
associated with the retirement benefit plans. (See the Retirement benefits section for further details.)
NON-GAAP FINANCIAL MEASURES
This MD&A is based on reported earnings in accordance with IFRS and on the following non-GAAP financial
measures:
Non-GAAP financial measures
EBITDA
Earnings before financing expense, financing income, income taxes, amortization and impairment
charges on PP&E and intangible assets.
EBIT before special
items
EBIT excluding the impact of restructuring charges, significant impairment charges and reversals,
as well as other significant unusual items.
EBITDA before special
items
Adjusted net income
Adjusted EPS
Free cash flow
Adjusted debt
Adjusted EBIT
Adjusted EBITDA
Adjusted interest
EBIT before special items, amortization and impairment charges on PP&E and intangible assets.
Net income 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.
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.
Cash flows from operating activities less net additions to PP&E and intangible assets.
Long-term debt as presented in the consolidated statements of financial position adjusted for the
fair value of derivatives (or settled derivatives) designated in related hedge relationships plus sale
and leaseback obligations and the net present value of operating lease obligations.
EBIT before special items plus interest adjustment for operating leases and interest received (as
per the supplemental information provided in the consolidated statements of cash flows, adjusted,
if needed, for the settlement of fair value hedge derivatives before their contractual maturity
dates).
Adjusted EBIT plus amortization and impairment charges on PP&E and intangible assets, and
amortization adjustment for operating leases.
Interest paid, as per the supplemental information provided in the consolidated statements of
cash flows, plus accretion expense on sale and leaseback obligations and interest adjustment for
operating leases.
Management believes that providing certain non-GAAP financial measures in addition to IFRS measures provides
users of the consolidated financial statements with enhanced understanding of results and related trends and
increases transparency and clarity of the core results of the business. For these reasons, a significant number of
users of the MD&A analyze the Corporation's results based on these performance measures. EBIT before special
items, EBITDA before special items, adjusted net income and adjusted EPS exclude items that do not reflect, in
management's opinion, core performance and help users of the MD&A to better analyze results, enabling better
comparability of these results from one period to another and with peers.
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. From time to time, management may
exclude additional items if they believe doing so would result in a more transparent and comparable disclosure.
Other entities in the Corporation's industry may define the above measures differently than management 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.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 35
Reconciliations of non-GAAP financial measures to the most comparable IFRS financial measures are provided in
the tables hereafter, except for the following reconciliations:
• EBIT before special items to EBIT – see the Results of operations table in BA, BT and the Consolidated
•
results of operations section; and
free cash flow usage to cash flows from operating activities – see the respective Free cash flow usage
tables in BA and in BT and the Reconciliation of segmented free cash flow usage to cash flow from
operating activities table in the Liquidity and capital resources section.
Reconciliation of EBITDA before special items and EBITDA to EBIT
EBIT
Amortization
Impairment charge on intangible assets(1)
EBITDA
Special items excluding impairment(2)
EBITDA before special items
$
Fourth quarters
ended December 31
2013
185
106
—
291
1
292
2014
$ (1,201)
116
1,266
181
91
272
$
$
$
Fiscal years
ended December 31
2013
923
391
—
1,314
(30)
1,284
2014
(566)
417
1,266
1,117
223
1,340
$
$
$
Reconciliation of adjusted net income to net income (loss)
Fourth quarters ended December 31
2013
(per share)
2014
(per share)
Net income (loss)
Adjustments to EBIT related to special items(1)
Adjustments to net financing expense related to:
Accretion on net retirement benefit obligations
Net change in provisions arising from changes in interest rates
and net loss on certain financial instruments
Tax impact of special and other adjusting items
Adjusted net income
$ (1,590)
1,357
$
0.78
19
12
285
83
$
0.01
0.01
0.16
$
$
97
1
28
7
(4)
129
Reconciliation of adjusted EPS to diluted EPS (in dollars)
Diluted EPS
Impact of special and other adjusting items
Adjusted EPS
2014
(0.92)
0.96
0.04
$
$
Reconciliation of adjusted net income to net income (loss)
$
—
0.02
—
—
2013
0.05
0.02
0.07
$
$
Fiscal years ended December 31
2013
2014
(per share)
(per share)
Net income (loss)
Adjustments to EBIT related to special items(2)
Adjustments to net financing expense related to:
$ (1,246)
1,489
$
0.86
Loss on repurchase of long-term debt(2)
Accretion on net retirement benefit obligations
Net change in provisions arising from changes in interest rates
and net loss (gain) on certain financial instruments
Interest portion of gains related to special items(2)
Tax impact of special and other adjusting items
Adjusted net income
$
43
76
21
(8)
273
648
0.02
0.04
0.01
—
0.16
(1) Relates to the pause of the Learjet 85 program. Refer to Analysis of results in BA for further details.
(2) Refer to the Analysis of results sections in Overview, BA and BT for details regarding special items.
$
$
572
(30)
—
113
(22)
(12)
(13)
608
$
(0.02)
—
0.06
(0.01)
—
(0.01)
36 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Reconciliation of adjusted EPS to diluted EPS (in dollars)
Diluted EPS
Impact of special and other adjusting items
Adjusted EPS
Reconciliation of adjusted debt to long-term debt
Long-term debt
Adjustment for the fair value of derivatives designated
(or settled derivatives) in related hedge relationships
Long-term debt, net
Sale and leaseback obligations
Operating lease obligations(1)
Adjusted debt
2014
(0.74)
1.09
0.35
$
$
2013
0.31
0.02
0.33
$
$
As at
December 31, 2014 December 31, 2013
7,203
7,683
$
$
(407)
7,276
260
865
8,401
$
(293)
6,910
138
864
7,912
$
(1) Discounted using the average five-year U.S. Treasury Notes plus the average credit spread, given the Corporation's credit rating, for the
corresponding period.
Reconciliation of adjusted EBITDA and adjusted EBIT to EBIT
EBIT
Special items(1)
Interest received
Interest adjustment for operating leases(2)
Adjusted EBIT
Amortization adjustment for operating leases(3)
Amortization
Adjusted EBITDA
2014
(566)
1,489
298
41
1,262
96
417
1,775
$
$
$
Fiscal years
2013
923
(30)
36
38
967
96
391
1,454
$
(1) Refer to Analysis of results in BA and BT for details of special items.
(2) Represents the interest cost of a debt equivalent to operating lease obligations included in adjusted debt, bearing interest at the average
five-year U.S. swap rate plus the average credit default swap spread for the related period, given the Corporation's credit rating.
(3) Represents a straight-line amortization of the amount included in adjusted debt for operating leases, based on a nine-year amortization
period.
Reconciliation of adjusted interest to interest paid
Interest paid
Accretion expense on sale and leaseback obligations
Interest adjustment for operating leases(1)
Adjusted interest
2014
354
6
41
401
$
$
$
Fiscal years
2013
303
5
38
346
$
(1) Represents the interest cost of a debt equivalent to operating lease obligations included in adjusted debt, bearing interest at the average
five-year U.S. swap rate plus the average credit default swap spread for the related period, given the Corporation's credit rating.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OVERVIEW 37
CONSOLIDATED FINANCIAL POSITION
CONSOLIDATED FINANCIAL POSITION - ASSETS
CONSOLIDATED FINANCIAL POSITION -
LIABILITIES AND EQUITY
* Includes equity of $55 million.
The total assets for the fiscal year decreased by
$1.7 billion including a decrease of $1.0 billion
related to foreign exchange. The decrease excluding
currency impacts is mainly explained by:
•
•
•
a $739 million decrease in cash and cash
equivalents. See the Variation in cash and
cash equivalents table and Free cash flow in
BA and BT for details;
a $731 million increase in Advances and
progress billings; and
a $311 million decrease in deferred tax
assets, mainly due to a write-down of
deferred tax assets as a result of the charge
recorded as a special item in relation to the
pause of the Learjet 85 program.
Partially offset by:
•
a $644 million increase in gross inventory
following ramp-up of production ahead of
deliveries in BT partly offset by a decrease
in aerospace program work-in-process
inventories.
The total liabilities and equity for the fiscal year
decreased by $1.7 billion including a decrease of
liabilities of $886 million related to foreign exchange.
The decrease excluding currency impacts is mainly
explained by:
•
•
a $2.4 billion decrease in equity, mainly due
to the net loss for the fiscal year and an
increase in net actuarial losses on
retirement benefits; and
a $529 million decrease in Advances and
progress billings in excess of long-term
contract inventories.
Partially offset by:
•
•
•
•
a $783 million increase in long-term debt,
mainly related to the $1.8 billion issuance of
unsecured Senior Notes, partially offset by
the redemption of the €785-million Senior
Notes ($1.1 billion);
a $579 million increase in Retirement benefit
liability. See the Variation in net retirement
benefit liability table for details;
a $336 million increase in Trade and other
payables in BT; and
a $170 million increase in Provisions mainly
due to provisions recorded related to the
pause of the Learjet 85 program.
38 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
AEROSPACE
The data presented in this section of the MD&A contains both IFRS and non-GAAP measures and is structured by
market segment (business aircraft, commercial aircraft and services), which is reflective of the Corporation's
organizational structure during fiscal year 2014.
Management believes that providing certain non-GAAP performance measures, in addition to IFRS measures,
provides users of the MD&A with enhanced understanding of BA’s results and related trends and increases
transparency and clarity of the core results of the business. EBIT before special items and EBITDA before special
items are non-GAAP measures which exclude items which do not reflect core performance in management's
opinion. Accordingly, these non-GAAP measures provide more transparent disclosures to analyze earnings,
enabling better comparability of results from one period to another and better comparability with peers.
KEY PERFORMANCE MEASURES
AND METRICS
Key performance measures and associated metrics that are used to
monitor progress
Financial results over the last five fiscal years
HIGHLIGHTS OF THE YEAR
Highlights of the fiscal year with regard to results and key events
GUIDANCE AND FORWARD-LOOKING
STATEMENTS
What was said, what was done and what’s next
Assumptions and risks related to forward-looking statements
INDUSTRY AND ECONOMIC
ENVIRONMENT
ANALYSIS OF RESULTS
Industry and economic factors affecting the business
Financial performance for the fourth quarter and fiscal year ended
December 31, 2014
Update on investments in product development
Deliveries, orders, order backlog and workforce
PAGE
40
41
43
44
53
Supplemental information regarding BA’s products and strategy, as well as the aerospace industry and market,
can be found in Bombardier's Profile, Strategy and Market presentation available on the dedicated investor
relations website at ir.bombardier.com.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 39
KEY PERFORMANCE MEASURES AND METRICS
The table below summarizes BA's most relevant key performance measures and associated metrics.
KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS
• Order backlog, as a measure of future revenues.
• Book-to-bill ratio(1), as an indicator of future revenues.
• Revenues and delivery units, as measures of growth.
• Market share (in terms of revenues and units delivered), as measures of competitive
Growth and
competitive
positioning
positioning.
Profitability
• EBIT, EBIT margin, EBIT before special items(2) and EBIT margin before special items(2), as
measures of performance.
Liquidity
Customer
satisfaction
• Free cash flow(2), as a measure of liquidity generation.
• On-time aircraft deliveries, as a measure of meeting BA's commitment to customers.
• Fleet dispatch reliability, as a measure of the products’ reliability.
• Regional availability of parts and material to support customer requests, as a measure of
meeting customer needs for the entire life of the aircraft.
Execution
• Achievement of program development milestones, as a measure of flawless execution.
• Achievement of engagement and enablement targets, as a measure of employee
engagement and motivation.
The incentive-based compensation plan for non-unionized employees across all BA sites rewards the collective
efforts of employees in achieving objectives using performance indicator targets. A total of 18,200 employees
worldwide, or 60% of permanent employees, participate in the program. In 2014, as part of this program,
incentive-based compensation was linked to the achievement of targeted results, based on EBIT before special
items, free cash flow, executing according to plan in new product development programs, on-time aircraft
deliveries and fleet dispatch reliability.
(1) Defined as net orders received over aircraft deliveries, in units.
(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics. Refer to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
Five-year summary
For the fiscal years ended and as at December 31 December 31 December 31 December 31
2011
2014
$ 8,594
$ 10,499
2013
9,385
2012
8,628
$
$
Revenues
Aircraft deliveries (in units)
(5)
January 31
2011
8,808
$
Business aircraft
Commercial aircraft
Amphibious aircraft
Net orders (in units)
Book-to-bill ratio(1)
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(2)(3)
EBIT margin before special items(2)(3)
Free cash flow (usage)(2)
204
84
2
290
282
1.0
36.6
(995)
(9.5)%
437
4.2 %
$
$
$
180
55
3
238
388
1.6
37.3
418
4.5%
388
4.1%
$
$
$
$ (1,059)
$ (1,239)
179
50
4
233
481
2.1
32.9
390
4.5%
367
4.3%
(867)
$
$
$
$
163
78
4
245
249
1.0
23.9
491
5.7%
491
5.7%
(418)
$
$
$
$
155
97
4
256
201
0.8
20.4
546
6.2%
546
6.2%
3
$
$
$
$
Total number of employees(4)
34,100
37,700
35,500
33,600
30,300
(1) Defined as net orders received over aircraft deliveries, in units.
(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics. Refer to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
(3) Refer to the Analysis of results section for details of special items recorded in fiscal 2014 and 2013. The special item for the fiscal year
ended December 31, 2012 relates to a $23-million gain following the successful resolution of a litigation in connection with Part I.3 of the
Canadian Income Tax Act, the Tax on Large Corporations.
(4) Including contractual and inactive employees.
(5) The fiscal year ended December 31, 2011 comprises 11 months of results.
40 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
HIGHLIGHTS OF THE YEAR
Good revenue growth and significant investment in product development
REVENUES
$10.5 billion
EBIT MARGIN
BEFORE SPECIAL
ITEMS(1)
4.2%
FREE CASH FLOW(1)
$(1.1) billion
RESULTS
NET ADDITIONS TO
PP&E & INTANGIBLE
ASSETS
$1.9 billion
ORDER BACKLOG
$36.6 billion
For the fiscal years ended and as at December 31
Revenues
Aircraft deliveries (in units)
Net orders (in units)
Book-to-bill ratio(2)
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(1)
EBIT margin before special items(1)
EBITDA before special items(1)
EBITDA margin before special items(1)
Free cash flow usage(1)
Net additions to PP&E and intangible assets
Net additions to aerospace program tooling
2014
$ 10,499
290
282
1.0
36.6
(995)
(9.5)%
437
4.2 %
738
7.0 %
$
$
$
$
$
$
$
$
$
2013
9,385
238
388
1.6
37.3
418
4.5%
388
4.1%
655
7.0%
$ (1,059)
$ 1,857
$ 1,655
$ (1,239)
2,213
$
1,983
$
Variance
11.9 %
52
(106)
nmf
(1.9)%
nmf
nmf
12.6 %
10 bps
12.7 %
0 bps
14.5 %
(16.1)%
(16.5)%
nmf: information not meaningful
bps: basis points
REVENUES(3)(4)
(for the fiscal years ended;
in billions of dollars)
EBIT BEFORE SPECIAL
ITEMS(1)(3)(5)
(for the fiscal years ended;
in millions of dollars)
FREE CASH FLOW
(USAGE)(1)(3)
(for the fiscal years ended;
in millions of dollars)
ORDER BACKLOG
(as at; in billions of dollars)
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
(2) Defined as net orders received over aircraft deliveries, in units.
(3) The fiscal year ended December 31, 2011 comprises 11 months of results.
(4) Some totals do not agree due to rounding.
(5) EBIT and EBIT margin of $546 million and 6.2%, $491 million and 5.7%, $390 million and 4.5%, $418 million and 4.5% and $(995) million
and (9.5%) for fiscal years ended January 31, 2011, December 31, 2011, December 31, 2012, December 31, 2013 and December 31, 2014,
respectively. See the five-year summary on the prior page and the Analysis of results section for details regarding special items.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 41
KEY EVENTS
New organizational structure
• On July 23, 2014, a new organizational structure was announced. The previous Bombardier Aerospace has
been divided into three reporting segments: Bombardier Business Aircraft, Bombardier Commercial Aircraft
and Bombardier Aerostructures and Engineering Services. These segments now report directly to the
President and CEO in order to enhance agility. This new structure is effective as of January 1, 2015.
Business aircraft
• Subsequent to the end of the fiscal year, on January 15, 2015, Bombardier announced the pause of its
Learjet 85 business aircraft program. The pause follows a downward revision of Bombardier’s business
aircraft market forecast, primarily due to the continued weakness of the light aircraft category since the
economic downturn. As a result, the Company has recorded a pre-tax charge in special items in the fourth
quarter of 2014 of $1.4 billion ($1.6 billion after tax), mainly related to the impairment of Learjet 85
development costs.
• On June 27, 2014, the Challenger 350 aircraft entered into service.
•
In October 2014, BA launched the new Challenger 650 aircraft, the evolution of the Challenger 605 aircraft.
EIS is scheduled in the second half of 2015.
Commercial aircraft
• The first four CS100 FTVs continue with flight testing activities. On-the-ground testing activities on FTV5 are
ongoing and FTV5 is expected to be handed over to the flight test team by the end of the first quarter of 2015.
The first CS300 FTV has been handed over to the flight test team and is being readied for its first flight which
is expected to take place by the end of the first quarter of 2015.
• As at the date of this report, the number of firm orders and other agreements(1) for the CSeries family of
aircraft reached 563 with 21 customers in 18 countries, including 243 firm orders:
•
In January 2014, a firm order for 16 CS300 aircraft with options for an additional 10 CS300 aircraft was
signed with Al Qahtani Aviation Company from the Kingdom of Saudi Arabia. Based on list price, the firm
order is valued at approximately $1.2 billion.
In September 2014, a firm order for 40 CS300 aircraft with options for an additional 10 CS300 aircraft was
signed with a wholly owned affiliate of Macquarie AirFinance. Based on list price, the firm order is valued
at approximately $3.1 billion.
•
•
In December 2014, American Airlines, Inc., a wholly owned subsidiary of American Airlines Group Inc.,
converted 24 options for CRJ900 NextGen aircraft into a firm order. Based on list price, the firm order is
valued at approximately $1.1 billion.
Workforce reductions
• During the fiscal year 2014, workforce reductions were undertaken at BA for a total of approximately 3,700
employees. Related charges totaling $85 million were recorded as special items in 2014.
• Subsequent to the end of the fiscal year, in January 2015, as a result of the decision to pause the Learjet 85
business aircraft program, BA announced a workforce reduction of approximately 1,000 employees at the
sites in Querétaro, Mexico, and Wichita, United States. A severance provision of approximately $20 million will
be recorded as a special item during the first quarter of 2015.
(1) The other agreements consist of conditional orders, letters of intent, options and purchase rights.
42 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
GUIDANCE AND FORWARD-LOOKING STATEMENTS
2014 Performance
2014 Guidance
2014 Performance
Profitability EBIT margin of approximately 5%.
EBIT margin before special items(1) of 4.2%.
Liquidity
Cash flows from operating activities between $1.2
billion and $1.6 billion.
Cash flows from operating activities of $798 million.
Net additions to PP&E and intangible assets between
$1.6 billion and $1.9 billion.
Net additions to PP&E and intangible assets of
$1.9 billion.
2015 net additions to PP&E and intangible assets
between $1.2 billion and $1.5 billion.
See the 2015 guidance below for updates on expected
net additions to PP&E and intangible assets for 2015.
2016 net additions to PP&E and intangible assets
below $1.0 billion.
Deliveries
Approximately 200 business aircraft.
Previously issued guidance on net additions to PP&E
and intangible assets for 2016 is withdrawn. See
below for details.
204 business aircraft deliveries.
Approximately 80 commercial aircraft.
84 commercial aircraft deliveries.
The EBIT margin before special items(1) was lower than the guidance, mainly due to pricing pressure on new
aircraft sold, increased provisions for credit and residual value guarantees as well as a decrease in fair value of
used aircraft.
Cash flows from operating activities were lower than the guidance, mainly due to a lower level of customer
advances, a lower EBIT and an increase in used aircraft inventory.
The guidance provided in the 2013 financial report with respect to BA's level of net additions to PP&E and
intangible assets for 2016 has been withdrawn due to uncertainty with respect to longer term projections.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
2015 Guidance
Bombardier Business Aircraft
2015 Guidance(1)
Profitability EBIT margin of approximately 7%, an improvement of approximately 1% compared to 2014.
Liquidity
Cash flows from operating activities between $1.0 billion and $1.4 billion.
Net additions to PP&E and intangible assets of approximately $1.0 billion.
Deliveries
Approximately 210 aircraft deliveries.
Bombardier Commercial Aircraft
2015 Guidance(1)
Profitability Negative EBIT of approximately $200 million including the dilutive impact of the initial years of production of the
CSeries program.(2)
Liquidity
Neutral cash flows from operating activities.
Net additions to PP&E and intangible assets of approximately $900 million.
Deliveries
Approximately 80 aircraft deliveries.
(1) See Forward-looking statements on the following page.
(2) Includes the dilutive impact of the CSeries program including the write-down of inventory to net realizable value. Early production units in a
new program incur higher costs and generally have lower selling prices than units produced later in the program's life cycle.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 43
Bombardier Aerostructures and Engineering Services
2015 Guidance(1)
Profitability EBIT margin of approximately 4%.
Liquidity
Neutral cash flows from operating activities.
Net additions to PP&E and intangible assets of approximately $100 million.
Revenues
Revenues of approximately $1.8 billion, mainly from internal contracts with Business and Commercial Aircraft
segments.
(1) See Forward-looking statements below.
The overall increase to $2.0 billion in expected net additions to PP&E and intangible assets for 2015 compared to
the previous guidance provided in the 2013 financial report of between $1.2 billion and $1.5 billion is mainly due to
increased anticipated additions to intangible assets related to the CSeries, Global 7000 and 8000 aircraft
programs, partially offset by lower additions related to the Learjet 85 as a result of the decision to pause the aircraft
program.
Forward-looking statements:
Forward-looking statements(2) in this section of the MD&A are based on:
•
•
•
•
•
•
current firm order backlog and estimated future order intake;(3)
a similar level of aircraft deliveries and improved pricing in fiscal year 2015 compared to fiscal year 2014;
continued deployment and execution of strategic initiatives related to quality improvement and cost reductions;
the ability to meet scheduled EIS dates and planned costs for new aircraft programs;
the ability to recruit and retain highly skilled resources to deploy the product development strategy;
the ability of the supply base to support planned production rates; and
stability of foreign exchange rates.
•
(2) Also see the Guidance and forward-looking statements section in Overview.
(3) Demand forecast is based on the analysis of main market indicators, including real GDP growth, industry confidence, wealth creation
and profitability within BA customer base, aircraft utilization, pre-owned business jet inventory levels, pilot scope clauses, environmental
regulations, globalization of trade, 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 section.
INDUSTRY AND ECONOMIC ENVIRONMENT
Strong long-term potential
The state of the world economy and those of individual countries are key factors in the demand for air travel. As
such, the health of the aerospace industry is a function of general economic conditions, with a lag typically
between economic recovery and the time it takes to reflect on the original equipment manufacturers’ deliveries
and revenues. Real GDP growth is a widely accepted measure of economic activity.
Worldwide real GDP increased by 2.6% in 2014, which is slightly higher compared to the increase of 2.5% in
2013, but lower than the anticipated 3.2% increase. The world economy is predicted to grow by 2.8% in 2015.(1)
The GDP in the U.S., the largest market for business and commercial aircraft, is expected to grow at 3.1% in
2015, compared to the 2.4% GDP growth in 2014. In Europe, BA's second largest market in terms of sales, the
GDP is expected to grow by 1.8% in 2015, compared to the 1.4% GDP growth in 2014.(1)
In regions with high growth potential for business and commercial aviation, growth in 2015 is expected to be at
6.5% and 6.7% for China and India, respectively. The CIS are expected to decline by 2.2%. In 2014, the GDP
growth was at 7.3%, 5.9% and 0.8% for China, India and the CIS, respectively.(1)
(1) According to IHS Global Insight’s Comparative World Overview dated January 15, 2015.
44 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Business aircraft
Overall, the business aircraft market indicators are positive as detailed in the table below; however, the light
business aircraft category remains weak since the economic downturn.
In 2014, BA estimates the level of industry orders in the market categories in which the Corporation competes
decreased by 15% compared to last year. During 2014, the industry experienced an increase of 6.4% in deliveries
and a 6.1% increase in billings in these market categories when compared to last year.(1)
Some aircraft manufacturers, like BA, have a number of new business jets in development, with the view that the
new models should not only benefit from improved market conditions expected in the future, but also contribute to
the recovery by stimulating demand. Refer to Bombardier's Profile, Strategy and Market presentation on the
dedicated investor relations website at ir.bombardier.com for additional information.
(1) Based on BA's estimates and other public sources.
The following key indicators are used to monitor the health of the business aviation market in the short term:
Indicator
Current situation
Status
Industry
confidence
The UBS Business Jet Market Index, which measures industry confidence, has been increasing
for the last five quarters. For the first time in several years, it was above the threshold of market
stability in the fourth quarter of 2014.
Corporate
profits
U.S. corporate profits increased year-over-year by 2.1% to an all-time high of $2.2 trillion for the
first nine months of 2014(1) which should translate into future demand for aircraft from corporations.
Pre-owned
business jet
inventory
levels
Aircraft
utilization
rates
Aircraft
shipments
and billings
The total number of pre-owned aircraft available for sale as a percentage of the total in-service
fleet has been trending downward over the past several years and is at 11.2%. BA considers this
level of pre-owned inventory to be within the normal range for the overall market.
In the light and medium categories, the level of pre-owned business aircraft inventory has
been trending downward.
In the large category, the level of pre-owned business aircraft inventory has increased in
the current year but remains below what Bombardier considers to be the normal range
for the overall market.
Business jet utilization in the U.S. increased by 2.8% in 2014 compared to 2013. Business jet
utilization in Europe increased by 2.3% in 2014 compared to 2013.
In the business aircraft market categories in which BA competes, business aircraft deliveries
increased by 6.4% and total billings increased by 6.1% in 2014 as compared to 2013.(2)
Identifies a favourable, neutral or negative status, respectively, in the market categories in which BA competes, based on the
current environment.
(1) According to the U.S. Bureau of Economic Analysis.
(2) Based on BA's estimates and other public sources.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 45
UBS BUSINESS JET MARKET INDEX(1)
(for calendar quarters; average on a 100-point scale)
PRE-OWNED BUSINESS JET INVENTORY
(for calendar years; as a percentage of total business jet fleet,
excluding very light jets)
Source: UBS
Sources: JETNET and Ascend Online
(1) The UBS Business Jet Market Index is a measure of market
confidence from industry professionals, gathered through bi-
monthly surveys of brokers, dealers, manufacturers, fractional
providers, financiers and others.
Shaded area indicates what BA considers to be a normal range of
pre-owned business jet inventory available for sale, i.e. between 11%
and 14%.
U.S. BUSINESS JET UTILIZATION
(for calendar years; in thousands of departures and arrivals for all
business jets)
EUROPEAN BUSINESS JET UTILIZATION
(for calendar years; in thousands of departures and arrivals for all
business jets)
Source: U.S. Federal Aviation Administration (FAA) website
Source: Eurocontrol
Short-term outlook
Despite current favorable trends in the key indicators above, the business aviation market experiences a delay in
the timing of the market upturn and BA anticipates that the light business aircraft category will continue to be weak
in the short-term.
Long-term outlook
BA believes that the long-term market drivers of growth for the business jet industry, such as GDP growth,
globalization of trade, fleet replacement, new aircraft programs and growth in non-traditional markets, remain
solid. The continued wealth creation in major non-traditional markets, coupled with aviation infrastructure
development, is expected to accelerate the use of business aircraft dramatically from levels seen today.
46 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Bombardier estimates 22,000 aircraft deliveries in the light to large categories for the 20-year period from 2014 to
2033, valued at $617 billion in constant 2013 U.S. dollars.(1) The worldwide business aircraft fleet is expected to
more than double from 15,200 aircraft at the end of 2013 to 32,450 aircraft in 2033. North America is expected to
receive the greatest number of new business jet deliveries in the 20-year period with 8,760 aircraft, followed by
Europe with 3,575 aircraft. Notably, China is expected to become the third largest market for business jet
deliveries, with 2,225 deliveries between 2014 and 2033. BA also expects other key growth markets in non-
traditional economies to receive a significant share of business jet deliveries during the next 20 years.(2)
BUSINESS AIRCRAFT FLEET EVOLUTION BY
GEOGRAPHIC REGION(2)
(for calendar years 2014 to 2033; in units)
BUSINESS AIRCRAFT DELIVERIES FORECAST
BY CATEGORY(2)
(for calendar years 2014 to 2033; in billions of constant 2013
U.S. dollars and in units)
*Includes 330, 130 and 30 retirements for Europe, the Other Asia-
Pacific and China regions, respectively.
(1) Average worldwide GDP growth for the 20-year period is expected to be approximately 3.3%.
(2) As stated in BA's Business Aircraft Market Forecast, published in July 2014 and available on Bombardier’s dedicated investor relations
website at ir.bombardier.com.
Commercial aircraft
The commercial aircraft market is building momentum. Passenger traffic levels and forecast airline financial
performance have improved in 2014 and industry deliveries of aircraft in the 20- to 149-seat category have
increased by 17.6% compared to last year.(1) The economic environment is improving in the U.S., the largest
market for Bombardier's aircraft, and in most emerging economies, while some countries in Europe continue to
lag.
Airline financial performance improved in all regions during the year, particularly in the U.S. where the
improvement was driven by airline mergers.(2)
One significant market constraint, particularly evident in North America, has been “scope clauses” negotiated
between network carriers and their unionized pilots. These contractual agreements restrict the use, number and
seating capacity of regional aircraft flying on behalf of a network carrier. Orders for large regional aircraft are
stimulated by the relaxation of restrictions defined by scope clauses. Over the next 20 years, the assumption -
based on historical evidence - is that scope clauses are expected to continue to evolve, allowing the operation of
larger regional aircraft by regional carriers. This evolution is driven by network airlines’ goals for cost efficiency
and continued network coverage.
(1) BA's estimates based on delivery data available from Ascend and other public sources.
(2) Per IATA’s forecast for 2014 in the Economic Performance of the Airline Industry 2014 year-end report.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 47
The following key indicators are used to monitor the health of the commercial airline industry in the short term:
Status
Indicator
Passenger
traffic levels
Fuel prices
Airline
profitability
Environ-
mental
regulations
Current situation
The demand for new aircraft is primarily driven by the demand for air travel. Scheduled domestic
and international passenger traffic, measured by revenue passenger kilometres (“RPK”), were
5.3% and 6.1% higher, respectively, for the year-to-date period ended November 2014 compared
to the same period last year.(1)
Airlines achieved both domestic and international average passenger load factors of 80.7% and
79.3%, respectively, for the year-to-date period ended November 2014 compared to 80.0% and
79.4%, respectively, for the same period last year. Continued increases in traffic over recent
months resulted in upward movement of domestic load factors. Yields in the U.S., defined as
average passenger revenue per revenue passenger kilometre, slightly increased in 2014
compared to 2013.(1)
During 2014, regional passenger traffic measured by RPK for the four leading U.S. network
carriers and their affiliates, which represent a major portion of the regional airline passenger traffic
in the U.S., BA's largest market, remained essentially unchanged compared to fiscal year 2013.
These airlines achieved an average passenger load factor of 80.6% for the year-to-date period
ended December 2014, up from the 79.0% experienced in the same period last year.
Planning is difficult for airlines when the price for one of the largest components of their operating
costs remains volatile. The average annual price of Brent crude oil decreased from $106 per barrel
in 2013 to a $99 per barrel in 2014.(2)
last quarter of fiscal 2014 and as at the date of this report was at $56 per barrel. Although some
airlines may delay their decision to renew their fleet, in the short term, this should help improve
airline profitability, which in turn would provide an opportunity for airlines to reinvest in their fleets.
The high volatility in crude oil prices should result in continued demand for more fuel efficient
aircraft.
. The price of Brent crude oil has dropped significantly in the
Airline financial performance continued to improve in 2014. Airline profits are forecast to total $19.9
billion in 2014, a fifth consecutive year of positive net profits for the industry. North American
airlines are forecast to generate the highest profit in terms of dollars and profit margins due to a
combination of consolidation, a more efficient industry and an improving economy, followed by
airlines in the Asia-Pacific region. European airlines are expected to generate the third highest net
profit but lower profit margins than airlines in the Middle East, Latin America and Asia-Pacific.
Airline financial performance is expected to increase to total profits of $25.0 billion in 2015.(3)
Environmental issues and new environmental regulation should increasingly shape the world’s
airline industry. These issues can be broadly categorized as: local air quality, aircraft emissions
and community noise. The aviation industry has consistently improved its environmental
performance throughout its history and is expected to continue to do so. The aviation industry has
committed to carbon-neutral growth by 2020 and a 50% reduction in carbon emissions from 2005
levels by 2050. The application of new technology in aircraft designs is expected to be important in
meeting these commitments and should speed up retirement of older aircraft worldwide.(4)
Aircraft
shipments
In 2014, there were 327 deliveries for the industry of aircraft in the 20- to 149-seat category, an
increase of 17.6% compared to 2013.(5)
Replace-
ment
demand
Bombardier estimates that most commercial aircraft have life cycles ranging between 15 to
30 years. At the end of 2014, approximately 3,600 aircraft representing an estimated 37% of the
world’s active fleet in the 20- to 149-seat aircraft category were over 15 years old compared to
approximately 3,380 aircraft representing 34% at the end of 2013.(6)
Identifies a favourable, neutral or negative status, respectively, in the market categories in which BA competes, based on the current
environment.
(1) Per IATA’s November 2014 Air Passenger Market Analysis and Airlines Financial Monitor reports.
(2) According to the U.S. Energy Information Administration’s (EIA) 2014 Annual Energy Outlook.
(3) Per IATA's Economic Performance of the Airline Industry 2014 year-end report.
(4) According to BA's Commercial Aircraft Market Forecast, published in July 2014 and available on Bombardier’s dedicated investor relations
website at ir.bombardier.com.
(5) BA's estimates based on delivery data available from Ascend and other public sources.
(6) Based on data obtained from Ascend fleet database. Comparative figures have been restated to reflect passenger aircraft only and to
exclude aircraft in business, executive, freight, specialized or missionized configurations or aircraft in storage.
48 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
FUEL PRICES
(Brent crude oil prices; in dollars per barrel)
GLOBAL AIRLINES’ NET PROFIT (LOSS)
(for calendar years; in billions of dollars)
Source: U.S. EIA
Short-term outlook
Source: IATA Financial Forecast, December 2014
F: Forecast
The world economy is projected to grow by 2.8%, 3.2% and 3.3% over each of the next three years.(1) Historically,
as the world economy improves, demand for air travel increases and order intake follows. BA believes that the
market for larger regional aircraft and smaller mainline aircraft should grow in North America as airlines continue
to focus on fleet optimization, efficiency and reducing environmental impacts.
In Europe, GDP is expected to grow at only 1.8% in 2015. In this context, BA does not expect much growth in
demand for regional aircraft in Europe in 2015. For 2016 and 2017, the expected growth is at 2.1%.(1) European
airlines are likely to continue to focus on consolidation and operational restructuring.
The strong correlation between passenger traffic and economic growth in non-traditional markets should translate
into continued aircraft demand in the near future. This demand is expected to be met by a combination of pre-
owned and new aircraft.
(1) According to IHS Global Insight’s Comparative World Overview dated January 15, 2015.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 49
Long-term outlook(1)
Bombardier remains confident that continuing economic growth should increase demand for air travel over the
next 20 years. The financial outlook for the world’s airlines is improving as economic growth returns to most
regions.
BA estimates 13,100 new aircraft deliveries for the 20- to 149-seat commercial aircraft category for the 20-year
period from 2014 to 2033 valued at $658 billion in constant 2013 U.S. dollars.
WORLDWIDE FLEET FORECAST FOR 20- TO 149-SEAT
COMMERCIAL AIRCRAFT(1)
(for calendar years 2014 to 2033; in units)
20- TO 149-SEAT COMMERCIAL AIRCRAFT DELIVERIES
FORECAST BY REGION(1)
(for calendar years 2014 to 2033; in units)
Most new 20- to 149-seat aircraft deliveries to mature aviation markets such as North America, Europe, Oceania
and Northeast Asia (Japan and South Korea) are expected to replace retiring aircraft fleets.
In emerging markets, demand for air travel is growing with increasing GDP and an expanding middle class. The
airline industries in the emerging regions of Asia-Pacific, Greater China, India, Latin America and the CIS are at
different stages of maturity, but all are expected to require aircraft with different seat capacities and operating
economics to meet passenger demand. Fleet growth is expected to drive the majority of new 20- to 149-seat
aircraft deliveries to emerging regions.
The 60- to 99-seat aircraft market should see substantial growth over the forecast period with delivery demand for
5,600 aircraft worth $185 billion. The outsourcing of regional aircraft operations to carriers with low-cost
structures, namely regional airlines, continues to be the main thrust of network optimization efforts. Generally,
regional airlines act as contractors for mainline airlines by connecting passengers from smaller cities to mainline
hubs, thereby providing market access to smaller cities that would otherwise be cost-prohibitive to serve using
larger mainline aircraft. Large regional jets and turboprops should become an increasingly important tool for
network connectivity. Some of the fleet growth in this segment should be a result of airlines moving towards larger
aircraft with more seat capacity, lower seat-kilometre costs and flexible cabins. Overall, demand for regional
aircraft in the 60- to 99-seat aircraft market is expected to be evenly split in terms of units between turboprops and
jets.
The 100- to 149-seat aircraft segment is expected to enjoy the strongest growth, with delivery demand for 7,100
aircraft worth $465 billion. This segment has not been the focus of aircraft development for at least the past two
decades. The arrival of new-technology, clean-sheet design aircraft optimized for the 100- to 149-seat segment is
expected to accelerate the economic obsolescence of previous-generation aircraft.
(1) According to BA's Commercial Aircraft Market Forecast, published in July 2014 and available on Bombardier’s dedicated investor relations
website at ir.bombardier.com.
50 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Customer services
BA's worldwide customer services network includes parts hubs, parts depots, authorized service facilities (“ASF”),
line maintenance facilities (“LMF”), service centres, regional support offices (“RSO”), customer response centres
(“CRC”), customer response teams (“CRT”), as well as training centres and authorized training providers (“ATP”).
Supplemental information regarding BA's support locations can be found in Bombardier's Profile, Strategy and
Market presentation available on the dedicated investor relations website at ir.bombardier.com.
The demand for customer services is driven by the size of the fleet of Bombardier aircraft, by the number of hours
flown by said fleet (aircraft utilization rates) and the average age of the fleet.
Customer services market indicators
Indicator
Current situation
Status
Installed
base
Aircraft
utilization
rates
The installed base for active in-service Bombardier commercial aircraft remained essentially at the
same level in 2014 compared to 2013 with approximately 2,210 aircraft. The installed base for
active in-service Bombardier business aircraft increased by 3.8% in 2014 compared to 2013 and
is standing at more than 4,400 aircraft at the end of 2014.(1)
Based on BA's estimates, Bombardier aircraft fleet utilization, measured by the average hours
flown per aircraft, decreased by approximately 1.0% for commercial aircraft for the year-to-date
period ended October 31, 2014 compared to the same period last year mainly due to aircraft
being transferred from one airline to another during the restructuring of the airline industry in the
U.S. The business aircraft fleet utilization increased by approximately 2.0% for the year-to-date
period ended December 31, 2014, compared to the same period last year.
Average
age of fleet
Typically, aircraft direct maintenance costs increase as an aircraft ages. Therefore, the average
age of the fleet of Bombardier aircraft is expected to impact the size of the maintenance market.
There has been a slight increase in the average age of the Bombardier commercial aircraft fleet in
2014 compared to 2013. There was no significant change in the average age of the Bombardier
business aircraft fleet in 2014 compared to 2013.(1)
Identifies a favourable, neutral or negative status, respectively, in the market categories in which BA competes, based on the current
environment.
(1) Based on data obtained from Ascend fleet database.
Short-term outlook
Based on the market indicators above, the demand for spare parts and service programs is expected to grow.
Bombardier continues to actively seek out strategic locations for expansion in order to move closer to customers,
improve response times and build stronger relationships around the globe.
Historically, the U.S. represented the largest share of deliveries for both business and commercial aircraft,
however, wealth creation and economic development in non-traditional markets is driving a shift in the proportion
of business and commercial aircraft delivered outside of the U.S. This trend in demand impacts the geographical
layout of BA's support network. In the non-traditional markets, the strategy is to increase the Corporation's local
customer support presence and leverage on third-parties to deploy the full span of services.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 51
Long-term outlook
The continued growth of the installed base is expected to stimulate demand for customer services. While
traditional markets such as North America and Europe should dominate in terms of market size, the fleet growth in
non-traditional markets is accelerating and creating new opportunities for customer services.
In the next 10 years, business aircraft industry deliveries should see the highest growth rates in emerging
economies such as China and India. This growing demand along with Bombardier's customer support offerings is
expected to drive growth outside of traditional markets.(1)
A key driver of the maintenance, repair and overhaul (“MRO”) market is aircraft utilization. The size of the
commercial aircraft aviation MRO market is greater than that of the business and general aviation MRO market
due to the significantly higher utilization of commercial aircraft. With respect to the commercial aircraft market, the
global air transport MRO market in 2014 was expected to be approximately $58 billion for a current total global
fleet of approximately 23,000 aircraft, over 25% of which are turboprops and regional jets. The global MRO
market for commercial aircraft is expected to grow to approximately $87 billion by 2024, representing a 4.2%
CAGR over the 10-year period. North America will remain the single largest region for the MRO value; however,
Asia (including Asia-Pacific, China, and India) is expected to constitute the largest share of the MRO market in
2024.The growth will vary by region, with the highest growth rates expected in India and China. The lowest rates
(those below the total MRO market CAGR of 4.2%) are expected in developed regions such as North America
and Western Europe.(2)
(1) As stated in BA's Business Aircraft Market Forecast, published in July 2014 and available on Bombardier’s dedicated investor relations
website at ir.bombardier.com.
(2) According to the January 2014 Global MRO Market Economic Assessment Air Transport report by Team SAI.
52 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
ANALYSIS OF RESULTS
Strong revenue growth
Results of operations
Revenues
Manufacturing
Business aircraft
Commercial aircraft
Other
Total manufacturing
Services(1)
Other(2)
Total revenues
Cost of sales
Gross margin
SG&A
R&D
Other expense(3)
EBIT before special items(4)
Special items(5)
EBIT
Amortization(6)
Impairment charge on intangible assets(7)
EBITDA(4)
EBITDA before special items(4)
(as a percentage of total revenues)
Gross margin
EBIT before special items
EBIT
EBITDA before special items
EBITDA
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
$ 2,038
503
153
2,694
419
213
3,326
2,973
353
182
61
56
54
1,357
(1,303)
88
1,266
51
142
$
$
$
$
$
1,544
467
184
2,195
508
170
2,873
2,535
338
176
47
21
94
1
93
74
—
167
168
$ 5,744
1,956
537
8,237
1,619
643
10,499
9,148
1,351
672
199
43
437
1,432
(995)
301
1,266
572
738
$
$
10.6 %
1.6 %
(39.2)%
4.3 %
1.5 %
11.8%
3.3%
3.2%
5.8%
5.8%
12.9 %
4.2 %
(9.5)%
7.0 %
5.4 %
$
$
$
5,038
1,248
550
6,836
1,897
652
9,385
8,118
1,267
699
173
7
388
(30)
418
267
—
685
655
13.5%
4.1%
4.5%
7.0%
7.3%
(1) Includes revenues from parts services, Flexjet fractional ownership and hourly flight entitlement programs’ service activities (prior to
disposal on December 4, 2013), product support activities (including aircraft maintenance and commercial training), Specialized Aircraft
Solutions and Military Aviation Training.
(2) Includes mainly sales of pre-owned aircraft.
(3) Includes i) net loss (gain) on certain financial instruments measured at fair value and changes in estimates related to certain provisions or
certain financial instruments, excluding the losses (gains) arising from changes in interest rates; ii) severance and other involuntary
termination costs (including changes in estimates); and iii) (gains) loss on disposals of PP&E; except when such items are reported as
special items.
(4) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics.
(5) Refer to the Special items section hereafter.
(6) Amortization is included in cost of sales, SG&A and R&D expense based on the underlying function of the asset.
(7) Relates to the pause of the Learjet 85 program. Refer to the Special items section hereafter.
Revenues by geographic region(1)
North America
Europe
Asia-Pacific
Rest of world(2)
Fiscal years ended December 31
2013
2014
$
$
5,215
1,959
1,620
1,705
10,499
50%
19%
15%
16%
100%
$
$
5,503
2,036
1,170
676
9,385
59%
22%
12%
7%
100%
(1) Revenues are attributed to countries based on the location of the customer.
(2) The Rest of world region includes South America, Central America, Africa, the Middle East and the CIS.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 53
Total aircraft deliveries
(in units)
Business aircraft
Commercial aircraft
Amphibious aircraft
Fourth quarters
ended December 31
2013
2014
60
78
21
22
2
1
83
101
Fiscal years
ended December 31
2013
2014
180
204
55
84
3
2
238
290
BUSINESS AIRCRAFT DELIVERIES(1)
(for the fiscal years ended; in units)
COMMERCIAL AIRCRAFT DELIVERIES(1)
(for the fiscal years ended; in units)
REVENUE DISTRIBUTION BY
GEOGRAPHIC REGION(2)
(for the fiscal years ended)
(1) The fiscal year ended December 31, 2011 comprises 11 months of results.
(2) Revenues are attributed to countries based on the location of the customer.
Manufacturing revenues
The $499 million increase for the three-month period is mainly due to higher revenues from business aircraft
($494 million).
The $1.4 billion increase for the fiscal year is mainly due to:
•
•
higher revenues from commercial aircraft ($708 million), mainly due to higher deliveries of regional jets,
partially offset by lower deliveries of turboprops; and
higher revenues from business aircraft ($706 million), mainly due to higher deliveries in all business
aircraft categories and a favorable mix.
Services revenues
The $89 million decrease for the three-month period is mainly due to the sale of Flexjet’s fractional ownership and
hourly flight entitlement programs’ service activities in the fourth quarter of 2013 and lower volume of activities for
product support.
The $278 million decrease for the fiscal year is mainly due to the sale of Flexjet’s fractional ownership and hourly
flight entitlement programs’ service activities in the fourth quarter of 2013 and lower volume of activities for
product support, partially offset by higher volume of activities from parts services and Specialized Aircraft
Solutions.
Other revenues
The $43 million increase for the three-month period is mainly due to higher deliveries and favorable mix of pre-
owned business aircraft, partially offset by lower deliveries of pre-owned commercial aircraft and the sale of
Flexjet’s pre-owned fractional shares activities in the fourth quarter of 2013.
The $9 million decrease for the fiscal year is mainly due to the sale of Flexjet’s pre-owned fractional shares
activities in the fourth quarter of 2013 and lower deliveries and unfavorable mix of pre-owned commercial aircraft,
partially offset by higher deliveries and favorable mix of pre-owned business aircraft.
54 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Special items
Special items comprise items which do not reflect, in management’s opinion, the Corporation’s core performance
such as the impact of restructuring charges, significant impairment charges and reversals, as well as other
significant unusual items.
Special items in EBIT were as follows:
Pause of the Learjet 85 program
Restructuring charge
Gains on resolution of litigations
Inventory write-down
Gain on disposal of a business
Ref
1
2
3
4
5
EBIT % impact
(40.8)%
$
Fourth quarters
ended December 31
2014
$ 1,357
—
—
—
—
$ 1,357
2013
—
—
—
24
(23)
1
(0.1)%
$
$
Fiscal years
ended December 31
2013
2014
—
$ 1,357
—
85
(31)
(10)
24
—
(23)
—
(30)
$ 1,432
0.4%
(13.7)%
$
1. Loss related to the pause of the Learjet 85 aircraft program announced in January 2015, mainly comprised of a
$1.3 billion impairment charge taken on the related aerospace program tooling.
2. Restructuring charges in fiscal year 2014 relate to:
• a $63 million expense for the workforce reduction of approximately 2,000 positions, located mostly in
Canada, the U.S. and the U.K., related to the new organizational structure announced in July 2014; and
• a $22 million expense for the workforce reduction announced in January 2014 of approximately 1,700
positions, located mostly in Canada and the U.S.
3. Gains on resolution of litigations represent a gain upon the successful resolution of a litigation of $10 million in
connection with Part IV of the Quebec Income Tax Act, the Tax on Capital ($31 million in fiscal year 2013).
4. Inventory write-down in fiscal year 2013 relates to the prolonged production pause for the Learjet 60 XR
program.
5. Gain on disposal of a business relates to the sale of the main assets and related liabilities of the Corporation's
Flexjet activities completed in December 2013.
EBIT margin
The EBIT margin before special items for the three-month period decreased by 1.7 percentage points mainly as a
result of:
•
•
higher write-down of inventory to net realizable value for the CSeries aircraft program(1);
higher other expenses, mainly due to a net negative variance of provisions for credit and residual
guarantees, partially offset by a net positive variance in other financial assets; and
the acceleration of recognition of fractional ownership deferred revenues in the fourth quarter of fiscal
year 2013.
Partially offset by:
•
•
the mix of business aircraft deliveries; and
higher absorption of SG&A expenses.
•
(1) Early production units in a new aircraft program incur higher costs than units produced later in the program and the selling prices of early
units are generally lower.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 55
higher absorption of lower SG&A expenses;
higher margins from commercial aircraft, mainly due to the mix of aircraft; and
costs incurred in Canadian dollars translated at lower exchange rates, after giving effect to hedges.
The EBIT margin before special items for the twelve-month period increased by 0.1 percentage points mainly as a
result of:
•
•
•
Partially offset by:
•
•
•
higher write-down of inventory to net realizable value for the CSeries aircraft program(1);
the mix of commercial aircraft versus business aircraft deliveries;
higher other expenses, mainly due to a net negative variance of provisions for credit and residual
guarantees;
lower net selling prices for business aircraft; and
the acceleration of recognition of fractional ownership deferred revenues in the fourth quarter of fiscal
year 2013.
•
•
(1) Early production units in a new aircraft program incur higher costs than units produced later in the program and the selling prices of early
units are generally lower.
Cash flows from operating activities partially financed the significant
investment in product development
Free cash flow (usage)(1)
EBIT
Amortization
Impairment charge on intangible assets
EBITDA
Other non-cash items
(Gains) losses on disposals of PP&E
Share-based expense (income)
Dividends received from joint ventures and associates
Net change in non-cash balances
Cash flows from operating activities
Net additions to PP&E and intangible assets
Free cash flow (usage)(1)
Fourth quarters
ended December 31
2013
2014
93
(1,303)
74
88
—
1,266
167
51
$
1
1
—
425
478
(449)
29
$
—
(8)
—
519
678
(591)
87
$
$
Fiscal years
ended December 31
2013
2014
418
(995)
267
301
—
1,266
685
572
$
1
1
2
222
798
(1,857)
(1,059)
(1)
5
—
285
974
(2,213)
(1,239)
$
$
$
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics.
The $58 million decrease for the three-month period is mainly due to:
•
•
lower EBITDA ($116 million) (see analysis of results explanations above); and
a negative period-over-period variation in net change in non-cash balances ($94 million) (see explanation
below).
Partially offset by:
•
lower net additions to PP&E and intangible assets ($142 million).
The $180 million improvement for the fiscal year is mainly due to:
lower net additions to PP&E and intangible assets ($356 million).
•
Partially offset by:
•
•
lower EBITDA ($113 million) (see analysis of results explanations above); and
a negative period-over-period variation in net change in non-cash balances ($63 million) (see explanation
below).
56 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
•
•
Partially offset by:
•
•
•
Partially offset by:
•
Net change in non-cash balances
For the three-month period ended December 31, 2014, the $425 million cash inflow is mainly due to:
a decrease in aerospace program work-in-process inventories, mainly in business aircraft;
a decrease in finished product inventories, mainly due to a decrease in medium and light business aircraft
categories and turboprops;
an increase in provisions, mainly related to the pause of the Learjet 85 program; and
an increase in trade and other payables.
a decrease in advances on aerospace programs, mainly in business aircraft.
For the three-month period ended December 31, 2013, the $519 million cash inflow was mainly due to:
a decrease in raw material and work-in-process inventories, mainly in the light and medium business
aircraft categories;
an increase in advances on aerospace programs, mainly in the medium business aircraft category; and
an increase in trade and other payables.
an increase in finished product inventories, mainly due to business aircraft not associated with a firm order.
For the fiscal year ended December 31, 2014, the $222 million cash inflow is mainly due to:
•
•
•
a decrease in aerospace program work-in-process inventories, mainly in business aircraft and regional
jets;
an increase in provisions, mainly related to the pause of the Learjet 85 program; and
a decrease in finished product inventories, mainly due to a decrease in the medium business aircraft and
regional jets categories, partially offset by an increase in business aircraft pre-owned aircraft inventories.
Partially offset by:
•
a decrease in trade and other payables.
For the fiscal year ended December 31, 2013, the $285 million cash inflow was mainly due to:
an increase in other liabilities, mainly related to supplier contributions to aerospace programs under
development;
an increase in advances on aerospace programs in commercial aircraft and in the large business aircraft
category; and
an increase in trade and other payables.
•
Partially offset by:
•
an increase in aerospace program work-in-process inventories, mainly in the large business aircraft
category and in regional jets;
an increase in other assets, mainly in prepaid expenses and retirement benefit assets; and
an increase in finished product inventories, mainly due to business aircraft not associated with a firm
order.
•
•
•
•
•
•
•
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 57
Continued significant investment in product development
Investment in product development
Fourth quarters
ended December 31
2014
389
5
394
14.6%
2013
490
5
495
22.6%
$
$
Fiscal years
ended December 31
2014
1,655
27
1,682
2013
1,983
26
2,009
$
$
$
$
Program tooling(1)
R&D expense(2)
$
$
As a percentage of manufacturing revenues
(1) Net amount capitalized in aerospace program tooling.
(2) Excluding amortization of aerospace program tooling of $56 million and $172 million, respectively, for the fourth quarter and fiscal year ended
29.4%
20.4%
December 31, 2014 ($42 million and $147 million, respectively, for the fourth quarter and fiscal year ended December 31, 2013), as the
related investments are already included in aerospace program tooling.
Program tooling additions essentially relate to the development of the CSeries family of aircraft, the Global 7000
and Global 8000 aircraft programs as well as the Learjet 85 aircraft.
EXPENDITURES ON PRODUCT DEVELOPMENT(1)
(for the fiscal years ended)
AEROSPACE PROGRAM TOOLING(1)(2)
(as at)
(1) Comparative expenditures figures have been restated to conform
to the presentation adopted in the current period.
* The fiscal year ended December 31, 2011 comprises 11 months of
operations.
(1) Capitalized borrowing costs included in the aerospace program
tooling balance amounted to $731 million as at December 31,
2014 ($609 million as at December 31, 2013).
(2) The net carrying value of business aircraft tooling as at December
31, 2014 is net of an impairment charge of $1,266 million related
to the pause of the Learjet 85 aircraft program announced in
January 2015.
Until EIS of the CS300 aircraft program, CSeries aerospace program tooling is anticipated to increase by
approximately $850 million in relation to development spending and approximately $225 million in relation to
capitalized borrowing costs. In addition, $325 million related to acquired development costs carried out by BA's
vendors, that will be repayable upon future delivery of aircraft, must be recognized as aerospace program tooling
at the EIS of the aircraft. This latter amount is a non-cash item and will impact the net additions to PP&E and
intangible assets in the cash flow once the payments are made to the suppliers upon delivery of the aircraft.
A thorough review process is followed which starts, before an aircraft is launched, by assessing all new programs
through the Aircraft Portfolio Strategy Board (APSB). With representation from all key functions involved, APSB
ensures alignment and capability to deliver on commitments at all levels of the organization. Among others, this
review confirms the availability of human and financial resources, the maturity and manufacturing readiness of new
technologies and the overall strength of the business case, by imposing increasingly strict business guidelines as a
program approaches launch. This process is performed in parallel with the pre-launch Bombardier Engineering
System stages (conceptual definition and launch preparation), and ultimately culminates with the approval of
Bombardier’s Board of Directors, at which time capitalization of product development expenditures as program
tooling usually begins.
58 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Recognizing the long-term nature of product development activities, as well as the significant human and financial
resources required, a gated product development process is followed focusing on early identification and mitigation
of potential risks. All programs follow the Bombardier Engineering System, the heart of the process, throughout the
product development cycle. The product development process is constantly refined to integrate the lessons
learned from BA's programs and from the industry. The stages in the process are described hereafter and specific
milestones must be met before a product can move from one stage of development to another. The gates consist
of exit reviews with different levels of management and technical experts to demonstrate feasibility, customer
acceptance and financial return. Designing products with minimal environmental impacts throughout their entire
lifecycle is central to BA's product responsibility strategy. In addition to the Design for Environment approach,
health and safety considerations are also embedded in product design.
The following tables explain the key elements of BA's product development process and the status of the most
significant programs under development.
PRODUCT DEVELOPMENT PROCESS
Stage
Conceptual definition JTAP
JCDP
Launch preparation
Preliminary definition JDP
Detail definition
DDP
Product definition release
Product certification
Program completion
Description
Joint Technical Assessment Phase - Preliminary review with potential partners and
suppliers to analyze technologies desired to build or modify an aircraft.
Joint Conceptual Definition Phase - Cooperative effort with potential partners and
suppliers to perform a configuration trade-off study and define the system architecture
and functionality.
Continuation of the design definition and technical activities.
Creation of a project plan to define the schedule, cost, scope, statement of work and
resource requirements for the program.
Joint Definition Phase - Joint determination with partners and suppliers of the
technical design of the aircraft and sharing of the work required. Optimization of the
aircraft design with respect to manufacturing, assembly and total life-cycle costs.
Detailed Design Phase - Preparation of detailed production drawings and confirmation
of the design based on the preliminary design definition agreed in the previous phase.
Formal issue of the engineering drawings to manufacturing, allowing for the completion
of tool designs and the assembly of the first produced aircraft.
Completion of certification activities to demonstrate that the aircraft complies with the
original design requirements and all regulatory airworthiness standards.
Conclusion of final design activity.
Preparation for EIS.
THE CSERIES AIRCRAFT PROGRAMS
Both the CS100 and CS300 aircraft programs are in the product certification phase. The type certification for the
CS100 aircraft is targeted for the second half of 2015 and the CS300 aircraft’s type certification is expected to follow
approximately six months afterwards. The EIS of each program is expected to occur shortly after their respective
type certification dates.
Production
and testing
The first four CS100 FTVs continue with flight testing activities.
FTV5, which is fitted with a full interior, has successfully completed the Emergency Passenger Evacuation test
in the presence of representatives from Transport Canada (TC), the Federal Aviation Administration (FAA) and
the European Aviation Safety Agency (EASA). FTV5 is expected to be handed over to the flight test team by the
end of the first quarter of 2015.
Additionally, the first CS300 FTV has been handed over to the flight test team and is being readied for its first
flight which is expected to take place by the end of the first quarter of 2015. Assembly of the second CS300 FTV
has started in the new Mirabel CSeries final assembly facility.
While the Mirabel facility remains the primary flight test center for the CSeries aircraft, the Wichita facility is
being leveraged for flight testing activities that require more favorable climate conditions in order to accelerate
these activities.
The majority of the fuel burn validation testing has been completed and results are in line with expectations.(1)
On-the-ground static testing, including all the baseline ultimate load certification tests, has also been completed
successfully. The fatigue testing on the full fatigue aircraft article, as well as the wing fatigue article are
progressing to plan.
The initial on-the-ground, flight and aircraft structural test performance results are in line with expectations. The
data received to date confirms that the aircraft development programs are on track to reach key performance
targets.(1)
The assembly of CS100 production aircraft continues in the Mirabel CSeries final assembly facility.
(1) Key performance targets under certain operating conditions when compared to aircraft currently in production for flights of 500 nautical miles.
See the CSeries family of aircraft program disclaimer at the end of this MD&A.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 59
THE LEARJET 85 AIRCRAFT PROGRAM
The light business aircraft category has remained weak since the economic downturn. Due to the weak market demand in this
category, in January 2015 Bombardier announced its decision to pause the Learjet 85 program and the flight testing activities.
Bombardier believes the Learjet 85 program meets specific market requirements and that it has long-term market potential.
The Corporation continues to monitor the market for light aircraft and will respond accordingly.
THE GLOBAL 7000 AND GLOBAL 8000 AIRCRAFT PROGRAMS
Development is in the product definition release phase and the assembly of the first FTV is progressing. Going
forward, the Corporation will provide updates on the development program, including EIS, once significant
milestones have been achieved.
Production
and testing
Development is progressing as planned, with the majority of the production drawings already released. The
experimental and ground test teams are progressing on the build and the commissioning of the various ground
test rigs that should be used throughout the development and certification of the aircraft.
Both internal and external major structural suppliers have begun the assembly of components for the remaining
FTVs and the Complete Airframe Static Test (CAST) article.
Suppliers
Major system level test rigs have been commissioned and various systems development and certification tests
are ongoing.
Engine development is progressing and ground test results are in line with GE Aviation's expectations. Flight
testing of the engine has begun on GE Aviation’s flying test bed.
THE CHALLENGER 650 AIRCRAFT PROGRAM
The Challenger 650 aircraft program is in the product certification phase and is progressing towards EIS in the
second half of 2015.
Production
and testing
The Challenger 650 aircraft program, the evolution of the Challenger 605 aircraft, was launched in
October 2014. A Challenger 605 aircraft with upgraded avionics is being used to perform certification testing.
Increase in business aircraft deliveries
Business aircraft deliveries
(in units)
Light
Learjet 70/75 and Learjet 40 XR/45 XR
Learjet 60 XR
Medium
Challenger 300/350
Challenger 605
Challenger 800 Series
Large
Global 5000/Global 6000
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
18
—
19
16
—
25
78
18
2
13
8
2
17
60
33
1
54
36
—
80
204
19
10
55
32
2
62
180
Deliveries of business aircraft in the three-month period increased by 30% compared to the same period last year,
mainly due to higher deliveries in the medium and large business aircraft categories. In the twelve-month period
ended December 31, 2014, there were higher deliveries in the light and large business aircraft categories. The
increase in the light business aircraft category is mainly due to the transition to the Learjet 70 and Learjet 75
aircraft, which negatively impacted the deliveries of Learjet aircraft in the previous fiscal year, offset by lower
deliveries of Learjet 60 XR aircraft in fiscal year 2014 compared to last year.
In fiscal year 2014, BA captured 37% of the market share in the overall market in which the Corporation
competes, based on revenue, and 34% of the market share based on units delivered. BA was the market leader
in terms of units delivered and second in terms of revenues. This compares with a market share of 33% and 32%,
based on revenues and units delivered respectively, in fiscal year 2013. In 2013, BA was also the market leader in
terms of units delivered and second in terms of revenues.(1)
(1) Based on BA's estimates and other public sources.
60 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Significant increase in commercial aircraft deliveries
Commercial aircraft deliveries
(in units)
Regional jets
CRJ700 NextGen
CRJ900 NextGen
CRJ1000 NextGen
Turboprops
Q400 NextGen
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
1
13
—
8
22
—
11
—
10
21
7
48
4
25
84
1
18
7
29
55
Deliveries of commercial aircraft for the fiscal year ended December 31, 2014 increased compared to last year,
mainly due to the deliveries of CRJ900 NextGen aircraft related to the significant orders received from Delta Air
Lines, Inc. and American Airlines Group Inc. in December 2012 and 2013, respectively.
For the three-year period ended December 31, 2014, BA captured 27% of the market share in the 20- to 99-seat
category based on units delivered. This compares to a market share of 31% for the three-year period ended
December 31, 2013.(1)
(1) BA's estimates based on delivery data available from Ascend and other public sources.
Total aircraft net orders
(in units)
Fourth quarters ended
Business aircraft
Commercial aircraft
Amphibious aircraft
Fiscal years ended
Business aircraft
Commercial aircraft
Amphibious aircraft
Order intake
Gross
orders Cancellations
December 31, 2014
Net
orders
Gross
orders Cancellations
December 31, 2013
Net
orders
49
32
3
84
181
149
5
335
(17)
—
—
(17)
(52)
(1)
—
(53)
32
32
3
67
129
148
5
282
231
42
2
275
369
92
2
463
(23)
—
—
(23)
(64)
(11)
—
(75)
208
42
2
252
305
81
2
388
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 61
Business aircraft
BUSINESS AIRCRAFT GROSS/NET ORDERS(1)
(for fiscal years ended; gross orders exclude swaps)
The high order intake of business aircraft during fiscal
years 2011 to 2013 reflects the significant multi-aircraft
orders signed with NetJets Inc., Flexjet, LLC as well as
with Vistajet and various undisclosed customers.
(1) The fiscal year ended December 31, 2011 comprises 11 months of
results.
Commercial aircraft
Commercial aircraft net orders
(in units)
Regional jets
CRJ700 NextGen
CRJ900 NextGen
CRJ1000 NextGen
Commercial jets
CS100
CS300
Turboprops
Q400 NextGen
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
—
25
—
—
—
7
32
—
33
—
—
5
4
42
1
45
—
—
61
41
148
2
25
3
(3)
37
17
81
COMMERCIAL AIRCRAFT GROSS/NET ORDERS(1)
(for fiscal years ended; gross orders exclude swaps)
There has been a significant order increase in all
commercial aircraft categories in the twelve-month
period ended December 31, 2014.
(1) The fiscal year ended December 31, 2011 comprises 11 months of
results.
62 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The following significant orders were received during the fiscal year ended December 31, 2014:
Customer
Fourth quarter
Firm order
Value(1)
Options(2)
American Airlines, Inc. (U.S.)(3)
GE Capital Aviation Services (U.S.)
24 CRJ900 NextGen
5 Q400 NextGen
Third quarter
Macquarie AirFinance (Australia)
Undisclosed customer
WestJet Encore Ltd. (Canada)(3)
Second quarter
40 CS300
5 Q400 NextGen
5 Q400 NextGen
China Express Airlines (China)
16 CRJ900 NextGen
$
$
$
$
$
$
1,140
160
—
10 Q400 NextGen
3,140
168
167
10 CS300
—
—
727
8 CRJ900 NextGen
First quarter
Al Qahtani Aviation Company
(Kingdom of Saudi Arabia)
(1) Value of firm order based on list prices.
(2) Not included in the order backlog.
(3) These transactions are conversions of options to firm orders.
16 CS300
$
1,210
10 CS300
Subsequent to the end of the fiscal year, the following significant firm order, which is not included in the total order
backlog as at December 31, 2014, was signed:
• A firm purchase agreement was signed with Chorus Aviation Inc. (Chorus), the parent company of Jazz
Aviation LP (Jazz) for 13 Q400 NextGen aircraft, with options for an additional ten. Based on list price, the
firm order is valued at approximately $424 million. Chorus and Jazz are the launch customer and operator
for the industry's first Dash 8-300 aircraft Extended Service Program that will extend the life of the
Dash 8-300 turboprop aircraft from the original 80,000 flight cycles to 120,000 flight cycles.
Book-to-bill ratio and order backlog
Fourth quarters
ended December 31
2013
2014
3.5
0.4
2.0
1.5
3.0
0.7
Fiscal years
ended December 31
2013
2014
1.7
0.6
1.5
1.8
1.6
1.0
NET ORDERS AND BOOK-TO-BILL RATIO(1)
(for the fiscal years ended)
Book-to-bill ratio(1)
Business aircraft
Commercial aircraft
Total
(1) Defined as net orders received over aircraft deliveries, in units.
The book-to-bill ratios for the three and twelve-
month periods ended December 31, 2014 for
business aircraft reflect lower order intake than
deliveries.
The book-to-bill ratio for the fourth quarter of 2014
for commercial aircraft reflects a strong order intake
for CRJ900 NextGen aircraft while the book-to-bill
ratio for the twelve-month period ended
December 31, 2014 reflects a strong order intake for
the CS300 aircraft and higher orders than deliveries
for turboprops, partly offset by lower orders than
deliveries for regional jets.
(1) The fiscal year ended December 31, 2011 comprises 11
months of results.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 63
Order backlog
(in billions of dollars)
Aircraft programs
Long-term maintenance and spares support agreements
Military Aviation Training(1)
As at
December 31, 2014 December 31, 2013
33.9
2.9
0.5
37.3
(1) On January 26, 2015, Bombardier announced that it has reached a definitive agreement for the sale of its Military Aviation Training (MAT)
33.4
2.8
0.4
36.6
$
$
$
$
activities to CAE Inc.
The decrease in order backlog as at December 31, 2014 reflects lower order intake than deliveries for business
aircraft, partly offset by the order intake for the CSeries family of aircraft. The order backlog and the production
horizon for programs are monitored to align production rates to reflect market demand.
ORDER BACKLOG IN MONTHS OF PRODUCTION(1)
(as at December 31, 2014)
(1) The number of months in
production is calculated by dividing
the order backlog in units as at
December 31, 2014 for each family of
aircraft (excluding orders for the
Learjet 85, Global 7000 and
Global 8000 aircraft) by the number of
aircraft delivered in the previous
12 months, converted into an
equivalent number of months. The
order backlog in months of production
provides insight on the depth of the
order backlog based on the last 12-
month production rates. This metric is
not forward-looking, and does not
take into account potential changes in
production rates or the ability of the
customers to take delivery of the
aircraft and the timing of such
delivery.
Commercial aircraft order backlog and options
(in units)
Regional jets
CRJ700 NextGen
CRJ900 NextGen
CRJ1000 NextGen
Commercial jets
CS100
CS300
Turboprops
Q400 NextGen
Firm orders
December 31, 2014
Options
As at
December 31, 2013
Options
Firm orders
10
57
31
(1)
(1)
63
180
42
383
—
56
22
49
113
94
334
16
60
35
(2)
(2)
63
119
26
319
-
73
22
49
93
90
327
(1) The total of 243 orders includes 86 firm orders with conversion rights to the other CSeries aircraft model.
(2) The total of 182 orders includes 80 firm orders with conversion rights to the other CSeries aircraft model.
The total CSeries firm order backlog comprises 243 aircraft with 14 customers in 13 countries as at December 31,
2014. As at the date of this report, firm orders and other agreements(1) for a total of 563 CSeries aircraft have been
signed with 21 customers in 18 countries, including 243 firm orders.
(1) The other agreements consist of conditional orders, letters of intent, options and purchase rights.
64 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Ongoing expansion of global presence
During the third quarter, the new manufacturing facility in Casablanca, Morocco started manufacturing and
delivering components.
In 2014, the expansion in the customer service network across the globe continued with the opening of new
support locations to better serve customers. Bombardier added seven service locations to support business
aircraft customers and four were added to the commercial aircraft network.
Workforce - lighter structure and increased agility
Total number of employees
Permanent(1)
Contractual
December 31, 2014
30,300
3,800
34,100
As at
December 31, 2013
32,400
5,300
37,700
Percentage of permanent employees covered by collective agreements
49%
47%
(1) Including inactive employees.
The workforce as at December 31, 2014 decreased by approximately 10% when compared to previous year. This
is due to the workforce reductions of approximately 3,700 employees announced during the year, including
approximately 2,000 employees (mostly in indirect positions) as a result of the new organizational structure
announced on July 23, 2014.
The total number of employees in the table above does not reflect the anticipated workforce reduction of
approximately 1,000 employees related to the pause of the Learjet 85 program. Such reductions will take place in
fiscal year 2015.
Major collective agreements
Location
Union
Montréal
Belfast
Toronto
International Association of Machinists and
Aerospace Workers (IAMAW) – Local 712
Unite the Union and the General
Machinists & Boilermakers
Unifor - Locals 112 and 673
Montréal Global aircraft
completion centre
Unifor - Local 62
Approximate number of
permanent employees
covered as at December
31, 2014
Expiration of current
collective agreement
4,600
November 28, 2014(1)
4,100
January 24, 2016
2,300
June 22, 2015
1,700
December 5, 2016
Querétaro
Wichita
Confederación de Trabajadores de México
1,100
April 30, 2015
International Association of Machinists and
Aerospace Workers (IAMAW) – Local 639
650
October 9, 2017
(1)As at the date of this report, negotiations are ongoing.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AEROSPACE 65
TRANSPORTATION
The data presented in this section of the MD&A contains both IFRS and non-GAAP measures and is structured by
market segment (rolling stock, services, system and signalling), which is reflective of the Corporation's
organizational structure, and by geographic region (Europe, North America, Asia-Pacific and Rest of world).
Management believes that providing certain non-GAAP performance measures, in addition to IFRS measures,
provides users of the MD&A with enhanced understanding of BT’s results and related trends and increases
transparency and clarity of the core results of the business. EBIT before special items and EBITDA before special
items are non-GAAP measures which exclude items which do not reflect core performance in management's
opinion. Accordingly, these non-GAAP measures provide more transparent disclosures to analyze earnings,
enabling better comparability of results from one period to another and better comparability with peers.
KEY PERFORMANCE MEASURES
AND METRICS
Key performance measures and associated metrics that are used to
monitor progress
Financial results over the last five fiscal years
HIGHLIGHTS OF THE YEAR
Highlights of the fiscal year with regard to results and key events
GUIDANCE AND FORWARD-LOOKING
STATEMENTS
What was said, what was done and what’s next
Assumptions and risks related to forward-looking statements
INDUSTRY AND ECONOMIC
ENVIRONMENT
ANALYSIS OF RESULTS
Industry and economic factors affecting the business
Financial performance for the fourth quarter and fiscal year ended
December 31, 2014
Orders, order backlog and workforce
PAGE
67
68
69
71
74
Supplemental information regarding BT’s products and strategy, as well as the rail industry and market, can be
found in Bombardier’s Profile, Strategy and Market presentation available on the dedicated investor relations
website at ir.bombardier.com.
66 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
KEY PERFORMANCE MEASURES AND METRICS
The table below summarizes BT's most relevant key performance measures and associated metrics.
KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS
• Order backlog, as a measure of future revenues.
Growth and
• Book-to-bill ratio(1), as an indicator of future revenues.
competitive
• Revenues by product segments and the geographic diversification of revenues, as measures
positioning
of growth and sustainability of competitive positioning.
• Market position, as a measure of BT's competitive positioning.
Profitability • EBIT, EBIT margin, EBIT before special items(2) and EBIT margin before special items(2), as
Liquidity
Customer
satisfaction
Execution
measures of performance.
• Free cash flow(2), as a measure of liquidity generation.
• Various customer satisfaction metrics, focusing on the four main dimensions: sales and
prices, customer orientation, project execution and product offering.
• Achievement of product development and delivery milestones, as a measure of flawless
execution.
• Achievement of engagement and enablement targets, as a measure of employee
engagement and motivation.
In 2014, BT's employee incentive-based compensation was linked to the achievement of targeted results, based
on EBIT before special items, free cash flow and employee engagement.
Five-year summary
For the fiscal years ended and as at December 31 December 31 December 31 December 31
2011
2014
2012
2013
Revenues
Rolling stock
Services
System and signalling
Order intake (in billions of dollars)
Book-to-bill ratio(1)
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(2)(3)
EBIT margin before special items(2)(3)
Free cash flow (usage)(2)
Number of employees(4)
$
$
$
$
$
$
$
6,330
1,717
1,565
9,612
12.6
1.3
32.5
429
4.5%
486
5.1%
122
39,700
$
$
$
$
$
$
$
5,511
1,596
1,659
8,766
8.8
1.0
32.4
505
5.8%
505
5.8%
668
38,500
$
$
$
$
$
$
$
5,071
1,437
1,278
7,786
9.2
1.2
32.0
276
3.5%
439
5.6%
$ 6,412
1,409
1,489
$ 9,310
9.5
$
1.0
30.1
675
7.3%
675
7.3%
$
$
$
488
$
(296)
36,000
36,200
January 31
2011
$
$
$
$
$
$
$
5,991
1,308
1,390
8,689
13.9
1.6
31.5
652
7.5%
652
7.5%
586
34,900
(1) Defined as new orders over revenues.
(2)
Non-GAAP financial measure. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics. Refer to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
(3) Refer to the Analysis of results section for details of special items recorded in fiscal 2014. The special items for the fiscal year ended
December 31, 2012 include restructuring charges of $119 million related to the closure of a plant in Aachen, Germany, and the reduction of
worldwide direct and indirect personnel by 1,200 employees; a foreign exchange hedging loss of $25 million; and a loss of $19 million
related to flooding in New Jersey, U.S.
(4) Including contractual and inactive employees.
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 67
HIGHLIGHTS OF THE YEAR
Increased revenues and strong order intake
REVENUES
$9.6 billion
EBIT MARGIN
BEFORE SPECIAL
ITEMS(1)
5.1%
FREE CASH FLOW(1)
ORDER INTAKE
ORDER BACKLOG
$122 million
$12.6 billion
$32.5 billion
RESULTS
For the fiscal years ended and as at December 31
Revenues
Order intake (in billions of dollars)
Book-to-bill ratio(2)
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(1)
EBIT margin before special items(1)
EBITDA before special items(1)
EBITDA margin before special items(1)
Free cash flow(1)
2014
9,612
12.6
1.3
32.5
429
4.5%
486
5.1%
602
6.3%
122
$
$
$
$
$
$
$
2013
8,766
8.8
1.0
32.4
505
5.8%
505
5.8%
629
7.2%
668
$
$
$
$
$
$
$
Variance
9.7 %
43.2 %
nmf
0.3 %
(15.0)%
-130 bps
(3.8)%
-70 bps
(4.3)%
-90 bps
(81.7)%
nmf: information not meaningful
bps: basis points
REVENUES
(for the fiscal years ended; in
billions of dollars)
EBIT BEFORE SPECIAL
ITEMS(1)
(for the fiscal years ended; in
millions of dollars)
FREE CASH FLOW (USAGE)(1)
(for the fiscal years ended; in
millions of dollars)
ORDER BACKLOG
(as at; in billions of dollars)
(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
(2) Defined as new orders over revenues.
* See the five-year summary on the prior page and the analysis of results section for details regarding special items.
68 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
KEY EVENTS
• Strong order intake of $12.6 billion, leading to a backlog of $32.5 billion for the fiscal year, which included
•
•
•
contracts worth $2.7 billion with the State of Queensland, Australia, for EMUs and fleet maintenance services;
$2.1 billion with Transport for London, U.K., for AVENTRA trains and fleet maintenance services for the
London Crossrail project; and $1.2 billion with Transnet Freight Rail, South Africa, for TRAXX locomotives.
In July 2014, BT announced further cost reduction measures as part of the reorganization initiatives. These
measures include the reduction of direct and indirect positions by approximately 900 employees worldwide,
savings in non-product related costs and a general hiring freeze for all indirect functions. A restructuring
charge of $57 million related to headcount reductions has been recorded as a special item in the third quarter.
In August 2014, São Paulo’s new INNOVIA Monorail 300 system started passenger service. The line will carry
over half a million passengers every day along the east side of São Paulo.
In November 2014, BT announced that it has signed an agreement with CSR Puzhen Co. Ltd (CSR Puzhen)
to create a joint venture to develop and manufacture INNOVIA vehicles for urban and airport transit systems,
thus demonstrating the firm commitment of both parties to develop a long-term industrial partnership that
addresses China’s need for urban and airport transportation.
• Subsequent to the end of the fiscal year, on January 30, 2015, the ZEFIRO 380 very high speed train received
homologation in China. Bombardier-Sifang Transportation, a Chinese entity in which Bombardier holds a 50
percent interest, is expected to start delivery during the first quarter of 2015.
GUIDANCE AND FORWARD-LOOKING STATEMENTS
2014 Performance
Profitability While an EBIT margin of 8% remains the objective,
2014 Guidance
Liquidity
management expects an EBIT margin of
approximately 6% in 2014 as BT focuses on contract
execution improvement.
Maintain a free cash flow(1) generally in line with EBIT,
although it may vary significantly from quarter to
quarter.
2014 Performance
EBIT before special items(1) of 5.1%.
Free cash flow(1) of $122 million.
Growth and
order intake
Excluding currency impacts, revenues in 2014 are
expected to be higher than in 2013, with percentage
growth in the mid-single digits.
Revenue growth of 9.7% excluding currency impacts.
In fiscal year 2014, management expects a
book-to-bill(2) ratio in excess of 1.0.
Book-to-bill(2) ratio of 1.3.
The EBIT before special items(1) is lower than BT’s guidance and is mainly due to revised escalation assumptions
for some contracts, mainly in rolling stock, which impacted estimated future revenues and resulted in a catch-up
adjustment to reflect lower contract margins on revenues already recognized.
The free cash flow(1) is lower than BT’s guidance and is mainly due to a different cash profile in some contracts
and a lower level of advances on options in relation to framework contract agreements.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
(2) Defined as new orders over revenues.
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 69
2015 Guidance
2015 Guidance(3)
Profitability
Liquidity
Growth and
order intake
Slight improvement in EBIT margin compared to 2014.
Improvement in free cash flow(1) compared to 2014 although it is expected to remain below EBIT.
Excluding currency impacts, revenues in 2015 are expected to be higher than in 2014, with percentage
growth in the low-single digits.
Book-to-bill ratio(2) in excess of 1.0.
A slight improvement in EBIT margin is expected in 2015 compared to 2014 as BT continues to focus on contract
execution and cost reduction, while increasing investment in a harmonized I.T. landscape and R&D to develop
standardized vehicle and sub-systems platforms.
An improvement in free cash flow(1) is expected in 2015 compared to 2014 although it is expected to remain below
EBIT due to further ramp-up in production related to several contracts and as a lower level of advances on large
contracts is anticipated.
(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the
Analysis of results section for reconciliations to the most comparable IFRS measures.
(2) Defined as new orders over revenues.
(3) See forward-looking statements below.
Focused on continuous improvement to reach profitability targets
The strong level of order activity across all segments and geographies in fiscal year 2014 is an expression of
customers’ continued confidence in BT’s innovative products and services.
BT ended the year with a strong order intake of $12.6 billion leading to a backlog of $32.5 billion. The increased
share of services in the backlog, as well as the balanced distribution of the order intake in 2014 with respect to the
product portfolio and geographic regions, will enable BT to grow its profitability and at the same time de-risk
project execution by reducing complexity.
In 2014, BT experienced a decrease in EBIT margin before special items mainly as a result of revised escalation
assumptions that negatively impacted future revenues and resulted in lower contract margins, mostly in rolling
stock. In addition, contracts with execution issues in the past continued to negatively impact the results.
BT established a new organizational structure in 2014, OneBT, putting measures in place to significantly reduce
execution risk and secure long-term competitiveness. The new structure further empowers project management,
reduces organizational layers and overhead cost, and implements leaner processes to speed up decision making.
In 2014, BT announced cost saving initiatives such as a reduction of direct and indirect positions by approximately
900 employees worldwide and savings in non-product related costs. The generated savings will be invested in a
harmonized I.T. landscape as well as in a higher level of upfront R&D to develop standardized vehicle and sub-
systems platforms.
BT’s commitment to customer support and flawless execution is based on continuously improving its project
management capabilities. BT has continued sharing best practices across the global project management
community in order to improve project execution via definition of integrated planning, improved handover from bid
to project and simplified governance.
Management is confident that these measures in combination with an increasing share of services contracts in
BT’s order backlog will reduce execution risk in the future and contribute to the growth of future profitability.
Forward-looking statements
Forward-looking statements(1) in this section of the MD&A are based on:
•
•
•
current order backlog;
the realization of upcoming tenders and BT's ability to capture them;
normal contract execution and continued deployment and execution of leading initiatives, especially those linked to cost
reductions, including operational improvement initiatives;
a sustained level of public sector spending; and
the ability of BT's supply base to support the execution of projects.
•
•
(1) Also see the Guidance and forward-looking statements section in Overview.
70 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
INDUSTRY AND ECONOMIC ENVIRONMENT
The future outlook for the rail market remains positive supported by favorable long-term trends in the rail industry.
Urbanization, population growth, and government policies aimed at reducing emissions will continue to positively
impact demand for public transportation.
The following key indicators are used to monitor the health of the rail market:
Indicator
Current situation
Status
Population growth and
mass urbanization
Environmental awareness
Public funding
Liberalization
The worldwide population will increase from approximately 7.2 to 9.6 billion by
2050 together with a growing share of people living in urban areas from 54% to
66% in the same time period.(1) Population growth and urbanization create an
increasing demand for high capacity solutions for public transport especially in
congested cities and areas.
Governments increasingly commit to long-term climate and energy goals.
Measures to reach these goals include investments in eco-friendly transport
solutions such as rail transport. Rail is responsible for less than 3.3% of the
transport energy-related CO2 emissions compared to 72.6% for road
transportation.(2)
Most of the rolling stock business is conducted with rail operators from the public
sector. Public indebtedness and austerity measures may impede public tender
processes for some new railway projects however, governments tend to increase
investments in infrastructure during these times. Together with the long-term
market environment and growing demand, a decrease in overall investments in
rail transportation is not expected.
Liberalization attracts more private operators to enter the market and invest in
new rail equipment and services. The European Commission supports the
liberalization of domestic passenger rail services within the EU.
Identifies a favourable, neutral or negative status, respectively, in the market categories in which BT competes, based on the current
environment.
(1) According to the United Nations: “World Urbanization Prospects: The 2014 Revision”.
(2) According to the International Union of Railways: “Railway Handbook 2014. Energy Consumption & CO2 Emissions”.
The Association of the European Rail Industry
(UNIFE) confirms the positive outlook for the global
rail industry in its World Rail Market Study published
in September 2014. The study expects the overall
accessible rail market(1) to grow with a CAGR of
2.7%. As large rail projects are often delayed by
several months, single year market volumes can be
subject to a high degree of volatility. UNIFE
therefore focuses on three-year average annual
market volumes in order to facilitate comparison
between different periods. While Europe remains
the largest region in terms of order volumes, the
study expects Asia-Pacific to show the highest
annual growth rate. The overall order volume is
expected to reach an annual average of
approximately $111 billion in the period of
2017-2019. Rolling stock will remain the largest
segment, but services and signalling will maintain
the highest growth rates.
ANNUAL ACCESSIBLE MARKET(1) BY REGION
(three-year average orders; in billions of dollars)
Source: UNIFE World Rail Market Study "Forecast 2014 to
2019" and extrapolated figures(2)
(1)
The overall accessible rail market is the world rail market, excluding the share of markets associated with contracts that are awarded to local
players without open-bid competition. BT’s accessible market also excludes the infrastructure, freight wagon and shunter segments.
(2) Based on data from the UNIFE World Rail Market Study “Forecast 2014 to 2019” published in September 2014 for BT's accessible markets
only. UNIFE data is updated every two years based on the 55 largest rail markets worldwide. UNIFE figures are published in euro. An
exchange rate of 1€ = $1.31475, the average cumulative exchange rate over the 2012-14 period, was used to convert all figures. Figures
for 2012-14 were extrapolated based on UNIFE data for 2011-13 and 2014-16.
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 71
Europe
The European market continues to be the largest
rail market and is characterized by a high degree of
competition and challenging customer
requirements. Highest standards for safety,
performance, reliability and availability are key
requirements demanded by European customers.
Accordingly, customers recognize the ability to
deliver highly innovative technology with a strong
focus on reduced lifecycle cost.
Compared to 2013, the European market
maintained a high level of order volume in 2014
driven by large rolling stock orders in Western
Europe, especially in the U.K. for regional and
commuter trains, in France for double-deck trains as
well as in Switzerland for high-speed trains.
EUROPE ANNUAL ACCESSIBLE MARKET(1)
(three-year average orders; in billions of dollars)
Source: UNIFE World Rail Market Study "Forecast 2014 to
2019" and extrapolated figures(2)
In the upcoming years, Western Europe continues to be a strong market with further investments expected in
regional and commuter trains in France, Belgium, Germany and the U.K. New metro trains for London and Paris
are expected to be tendered in 2016. Aging fleets in Eastern Europe especially in Hungary, Poland and the Czech
Republic denote potential for modernization or replacement. Furthermore, rolling stock and services orders are
expected in Turkey, since the Turkish state intends to further extend its high-speed network.
North America
In the last year, the rail market in North America
showed a significant increase in order volume
compared to 2013. The increased order volume was
mainly driven by large metro as well as operations
and maintenance contracts in the U.S. In the
upcoming years, the U.S. is expected to continue
investing in metros and services as well as in
electric commuters due to the extension of the
electric railway network. Canada’s market activity
has been low in 2014 but opportunities for light rail
vehicles, services and signalling are expected to
generate a higher order level in the next years.
Mexico is expected to continue investing in urban
mobility such as commuter and metro trains.
NORTH AMERICA ANNUAL ACCESSIBLE MARKET(1)
(three-year average orders; in billions of dollars)
Source: UNIFE World Rail Market Study "Forecast 2014 to
2019" and extrapolated figures(2)
(1)
The overall accessible rail market is the world rail market, excluding the share of markets associated with contracts that are awarded to local
players without open-bid competition. BT’s accessible market also excludes the infrastructure, freight wagon and shunter segments.
(2) Based on data from the UNIFE World Rail Market Study “Forecast 2014 to 2019” published in September 2014 for BT's accessible markets
only. UNIFE data is updated every two years based on the 55 largest rail markets worldwide. UNIFE figures are published in euro. An
exchange rate of 1€ = $1.31475, the average cumulative exchange rate over the 2012-14 period, was used to convert all figures. Figures
for 2012-14 were extrapolated based on UNIFE data for 2011-13 and 2014-16.
72 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Asia-Pacific
The Asia-Pacific region maintained a high
order-intake level in 2014, although at a lower level
compared to 2013. Australia awarded a large
commuter project in the State of Queensland and
China further invested in high speed and metro
projects. In the upcoming years, Australia is
expected to invest in the segments of commuter
trains, light rail vehicles and signalling. Further
investments in urban rail especially in the metro
segment are expected in China over the next years.
With the recent decision to further enhance the
Chinese high-speed network, additional trains will
be required. The Services segment is also expected
to continue to grow in China, as the large rolling
stock orders of the past decade will require
increasing maintenance efforts in the next years.
ASIA-PACIFIC ANNUAL ACCESSIBLE MARKET (1)
(three-year average orders; in billions of dollars)
Source: UNIFE World Rail Market Study "Forecast 2014 to
2019" and extrapolated figures(2)
India is expected to develop its freight rail network by placing large orders for locomotives and wagons. The new
government in India also plans to further develop high-speed networks. Metro projects are also expected in the
large urban centers of South-East Asia such as Bangkok and Ho Chi Minh.
REST OF WORLD ANNUAL ACCESSIBLE MARKET (1)
(three-year average orders; in billions of dollars)
Rest of world(3)
In 2014, the Rest of world region continued to show
a high level of order intake, which was slightly
above the 2013 level. Particularly in South Africa,
large locomotive and commuter contracts were
awarded, representing the largest rolling stock
supply projects in the history of South Africa. In the
Middle East, political and public interest in rail
mobility is high and as such, large mass transit
projects are expected to be tendered. Furthermore,
the rapid urbanization in South America shows
significant demand for high capacity transport
solutions.
Source: UNIFE World Rail Market Study "Forecast 2014 to
2019" and extrapolated figures(2)
In 2014, the overall accessible rail market(1) experienced increased consolidation and competitiveness.
Nevertheless, BT is well positioned in both mature and emerging markets, as the large order intake across
regions and segments in the last years have shown.
(1)
The overall accessible rail market is the world rail market, excluding the share of markets associated with contracts that are awarded to local
players without open-bid competition. BT’s accessible market also excludes the infrastructure, freight wagon and shunter segments.
(2) Based on data from the UNIFE World Rail Market Study “Forecast 2014 to 2019” published in September 2014 for BT's accessible markets
only. UNIFE data is updated every two years based on the 55 largest rail markets worldwide. UNIFE figures are published in euro. An
exchange rate of 1€ = $1.31475, the average cumulative exchange rate over the 2012-14 period, was used to convert all figures. Figures
for 2012-14 were extrapolated based on UNIFE data for 2011-13 and 2014-16.
(3) The Rest of world region includes South America, Central America, Africa, the Middle East and the CIS.
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 73
ANALYSIS OF RESULTS
Results of operations
Revenues
Rolling stock(1)
Services(2)
System and signalling(3)
Total revenues
Cost of sales
Gross margin
SG&A
R&D
Share of income of joint ventures and associates
Other expense (income)(4)
EBIT before special items(5)
Special items(6)
EBIT
Amortization(7)
EBITDA(5)
EBITDA before special items(5)
(as a percentage of total revenues)
Gross margin
EBIT before special items
EBIT
EBITDA before special items
EBITDA
Fourth quarters
ended December 31
2013
2014
Fiscal years
ended December 31
2013
2014
$
$
$
1,746
434
454
2,634
2,341
293
169
51
(25)
(4)
102
—
102
28
130
130
11.1%
3.9%
3.9%
4.9%
4.9%
$
$
$
1,480
450
521
2,451
2,163
288
175
36
(17)
2
92
—
92
32
124
124
11.8%
3.8%
3.8%
5.1%
5.1%
$
$
$
6,330
1,717
1,565
9,612
8,386
1,226
686
148
(89)
(5)
486
57
429
116
545
602
12.8%
5.1%
4.5%
6.3%
5.7%
$
$
$
5,511
1,596
1,659
8,766
7,540
1,226
718
120
(119)
2
505
—
505
124
629
629
14.0%
5.8%
5.8%
7.2%
7.2%
(1) Comprised of revenues from light rail vehicles, metros, commuter and regional trains, intercity trains, high speed and very high speed trains,
locomotives, propulsion and controls and bogies.
(2) Comprised of revenues from fleet maintenance, refurbishment and overhaul and material solutions.
(3) Comprised of revenues from mass transit and airport systems, mainline systems, operation and maintenance services, e-mobility solutions,
mass transit signalling and mainline signalling. Excludes the rolling stock portion of system orders manufactured by BT's other divisions.
Includes i) severance and other involuntary termination costs (including changes in estimates), ii) losses (gains) on sale of PPE; except
when such items are reported as special items.
(4)
(5) Non-GAAP financial measures. Refer to Non-GAAP financial measures sections in Overview for definitions of these metrics.
(6)
The special items for the fiscal year ended December 31, 2014 relate to a restructuring charge of $57 million related to the reduction of
direct and indirect positions by approximately 900 employees worldwide.
Amortization is included in cost of sales, SG&A and R&D expense, based on the nature of the underlying function of the asset.
(7)
Revenues by geographic region
Europe(1)
North America
Asia-Pacific(1)
Rest of world(1) (2)
Fourth quarters ended December 31
2013
68% $ 6,471
18%
1,527
8%
1,041
6%
573
100% $ 9,612
2014
66% $ 1,677
429
15%
189
14%
156
5%
100% $ 2,451
$ 1,728
393
366
147
$ 2,634
Fiscal years ended December 31
2013
67%
18%
9%
6%
100%
2014
67% $ 5,874
1,581
16%
770
11%
541
6%
100% $ 8,766
(1) The increases in Europe reflect a negative currency impact of $114 million for the fourth quarter and a positive currency impact of $70
million for the fiscal year ended December 31, 2014, while the increases in Asia-Pacific reflect negative currency impacts of $12 million and
$38 million respectively, and the variances in the Rest of world region reflect negative currency impacts of $17 million and $34 million
respectively.
(2) The Rest of world region includes South America, Central America, Africa, the Middle East and the CIS.
74 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Revenues excluding currency impact(1)
Revenues
Rolling stock
Services
System and signalling
Revenues
Rolling stock
Services
System and signalling
Revenues
$
$
1,746
434
454
2,634
Revenues
$
$
6,330
1,717
1,565
9,612
$
$
$
$
Fourth quarters ended December 31
2013
2014
Revenues
excluding
currency
impact
Revenues
Currency
impact
(92)
(20)
(31)
(143)
$
$
1,838
454
485
2,777
$
$
1,480
450
521
2,451
Fiscal years ended December 31
2013
2014
Revenues
excluding
currency
impact
Currency
impact
19
17
(38)
(2)
$
$
6,311
1,700
1,603
9,614
Revenues
$
$
5,511
1,596
1,659
8,766
Variance
358
4
(36)
326
Variance
800
104
(56)
848
$
$
$
$
(1) The results of operations of entities using functional currencies other than the U.S. dollar (mainly the euro, pound sterling and other
European currencies) are translated into U.S. dollars using the average exchange rates for the relevant periods. The impact of lower
exchange rates of foreign currencies compared to the U.S. dollar negatively affects revenues and positively affects expenses, while higher
exchange rates have the opposite impacts (defined as “negative currency impact” and “positive currency impact”). See the Foreign
exchange rates section in Other for the average exchange rates used to translate revenues and expenses.
The following analysis is based on revenues excluding the impact of foreign exchange.
Total revenues for the fourth quarter and fiscal year ended December 31, 2014, have increased by $326 million,
or 13.3%, and $848 million, or 9.7%, respectively, compared to the same periods last fiscal year. These increases
were mostly driven by ramp-up in production related to contracts in Europe and Asia-Pacific.
Rolling stock revenues
The $358 million increase for the fourth quarter is mainly explained by:
•
higher activities in Europe and Asia-Pacific mainly due to ramp-up in production related to some
commuter and regional train, locomotive and high speed train contracts in Europe as well as a very high
speed train contract and some metro and commuter and regional train contracts in Asia-Pacific ($428
million).
Partially offset by:
•
lower activities in North America and the Rest of world region following completion of some commuter and
regional train contracts in North America and some commuter and regional train and propulsion contracts
in the Rest of world region, partly offset by ramp-up in production related to some locomotive contracts in
the Rest of world region ($70 million).
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 75
The $800 million increase for the fiscal year is mainly explained by:
•
higher activities in Europe and Asia-Pacific mainly due to ramp-up in production related to some
commuter and regional train, locomotive, intercity and high speed train and metro contracts in Europe as
well as some commuter and regional train and metro contracts and a very high speed train contract in
Asia-Pacific, partly offset by completion of some high speed train and metro contracts in Asia-Pacific
($928 million).
Partially offset by:
•
lower activities in North America following completion of some commuter and regional train and metro
contracts ($127 million).
Service revenues
The $104 million increase for the fiscal year is mainly due to higher activities in Asia-Pacific and North America
($130 million), partly offset by lower activities in the Rest of world region ($31 million).
System and signalling revenues
The $36 million decrease for the fourth quarter is mainly due to:
lower activities in Europe mostly due to finalization of a systems project ($86 million).
higher activities in the Rest of world region mostly due to increased activities in systems and in signalling
contracts ($50 million).
The $56 million decrease for the fiscal year is mainly due to:
lower activities in Europe mostly due to finalization of a systems project ($249 million).
higher activities in the Rest of world region and North America, mostly due to increased activities in
systems and in signalling contracts ($174 million).
EBIT margin
The EBIT margin for the fourth quarter increased by 0.1 percentage points mainly as a result of:
a higher gross margin in rolling stock due to a favourable contract mix in the quarter;
higher absorption of lower SG&A expenses; and
a higher share of income of joint ventures and associates.
•
Partially offset by:
•
•
Partially offset by:
•
•
•
•
Partially offset by:
•
•
•
•
•
a negative impact on gross margin resulting from revised escalation assumptions for some contracts,
mainly in rolling stock, which impacted estimated future revenues and resulted in a catch-up adjustment
to reflect lower contract margins on revenues already recognized;
a lower gross margin in system and signalling due to finalization of a major systems project which had a
favourable impact on the contract mix in the comparative period; and
higher R&D expenses.
The EBIT margin for the fiscal year decreased by 1.3 percentage points. The EBIT margin before special items
(see explanations of special items below) decreased by 0.7 percentage points mainly as a result of:
a lower gross margin in system and signalling due to finalization of a major systems project which had a
favourable impact on the contract mix in the comparative period;
a negative impact on gross margin resulting from revised escalation assumptions for some contracts,
mainly in rolling stock, which impacted estimated future revenues and resulted in a catch-up adjustment
to reflect lower contract margins on revenues already recognized; and
a lower share of income of joint ventures and associates.
•
Partially offset by:
•
•
a higher gross margin in rolling stock due to a favourable contract mix in the current year; and
higher absorption of lower SG&A expenses.
For the fiscal year 2014, a special item negatively impacted the EBIT margin by 0.6 percentage points, related to
a restructuring charge of $57 million recorded during the third quarter. The charge related to measures taken to
further improve competitiveness and cost structure of indirect functions and align capacity, mainly the reduction of
direct and indirect positions by approximately 900 employees worldwide.
76 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Free Cash Flow
Free cash flow(1)
EBIT
Amortization
EBITDA (1)
Other non-cash items
Share of income of joint ventures and associates
(Gains) losses on disposals of PP&E
Share-based expense (income)
Dividends received from joint ventures and associates
Net change in non-cash balances
Cash flows from operating activities
Net additions to PP&E and intangible assets
Free cash flow
Fourth quarters
ended December 31
2013
2014
92
102
32
28
124
130
$
(25)
—
2
38
407
552
(46)
506
$
(17)
—
(6)
18
684
803
(36)
767
$
$
Fiscal years
ended December 31
2013
2014
505
429
124
116
629
545
$
(89)
(4)
1
99
(323)
229
(107)
122
$
(119)
1
6
115
110
742
(74)
668
$
$
(1) Non-GAAP financial measures. Refer to Non-GAAP financial measures sections in Overview for definitions of these metrics.
The $261 million deterioration for the fourth quarter is mainly due to:
a negative period-over-period variation in net change in non-cash balances ($277 million) (see
explanation below); and
higher net additions to PP&E and intangible assets ($10 million).
higher dividends received from joint ventures and associates ($20 million).
The $546 million deterioration for the fiscal year is mainly due to:
a negative period-over-period variation in net change in non-cash balances ($433 million) (see
explanation below);
lower EBITDA ($84 million);
higher net additions to PP&E and intangible assets ($33 million); and
lower dividends received from joint ventures and associates ($16 million).
•
•
•
Partially offset by:
•
•
•
•
Partially offset by:
•
lower negative impact arising from other non-cash items ($20 million), mainly from lower share of income
of joint ventures and associates.
Net change in non-cash balances
For the fourth quarter ended December 31, 2014, the $407 million cash inflow is mainly due to:
•
•
•
•
•
an increase in trade and other payables resulting from higher activities in the quarter;
a decrease in trade and other receivables;
an increase in advances and progress billings on existing contracts and new orders;
an increase in other liabilities mainly from higher accruals for long-term contract costs; and
a decrease in inventories following delivery in a few contracts ahead of ramp-up of production.
For the fourth quarter ended December 31, 2013, the $684 million cash inflow was mainly due to:
•
•
deliveries in several contracts as well as the impact of new orders received, which led to an increase in
advances and progress billings for new orders and existing contracts and a decrease in inventories; and
an increase in trade and other payables.
For the fiscal year ended December 31, 2014, the $323 million cash outflow is mainly due to:
an increase in inventories following ramp-up of production ahead of deliveries;
an increase in trade and other receivables;
an increase in other assets mainly related to sales and other taxes;
a decrease in other liabilities; and
a decrease in retirement benefit liabilities.
•
•
•
•
•
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 77
Partially offset by:
•
•
•
•
an increase in trade and other payables resulting from higher activities in the year;
an increase in advances and progress billings on existing contracts and new orders;
an increase in other financial liabilities, mainly related to derivative liabilities; and,
a decrease in other financial assets, mainly related to derivative assets.
For the fiscal year ended December 31, 2013, the $110 million cash inflow was mainly due to:
•
deliveries in several contracts as well as the impact of new orders received which led to an increase in
advances and progress billings on existing contracts and new orders; and
an increase in trade and other payables.
•
Partially offset by:
•
•
an increase in inventories due to ramp-up of production ahead of deliveries; and
lower provisions, mostly as a result of a decrease in product warranty provisions, mainly for contracts
nearing the end of their warranty periods.
Significant order intake in all regions
Order intake and book-to-bill ratio
Order intake (in billions of dollars)
Rolling stock
Services
System and signalling
Book-to-bill ratio(1)
(1) Ratio of new orders over revenues.
$
$
$
Fourth quarters
ended December 31
2013
2014
1.4
1.1
0.5
0.5
—
0.2
1.9
1.8
0.8
0.7
$
$
Fiscal years
ended December 31
2013
2014
5.4
7.0
2.0
4.4
1.4
1.2
8.8
12.6
1.0
1.3
$
$
$
ORDER INTAKE BY REGION
(for fiscal years ended; in billions of dollars)
ORDER INTAKE AND BOOK-TO-BILL RATIO
(for the fiscal years ended)
The order intakes for the fourth quarter and fiscal year ended December 31, 2014 reflect negative currency
impacts of $140 million and $247 million, respectively.
In the fiscal year of 2014, BT won several significant orders across various regions and product segments and
maintained a leading position(1) in the overall accessible rail market(2) with a cumulative order intake of $30.6 billion
over the past three years.
(1) Based on a rolling 36-month order intake with latest data published by companies publishing order intake for at least 36 months.
(2)
The overall accessible rail market is the world rail market, excluding the share of markets associated with contracts that are awarded to local
players without open-bid competition. BT’s accessible market also excludes the infrastructure, freight wagon and shunter segments.
78 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The significant orders obtained during the fiscal year ended December 31, 2014 were as follows:
Customer
Fourth quarter
Country
Product or service
Number
of cars
Market
segment
Value
Syndicat des Transports d’Île-
France
Double-deck Electrical Multiple
336
Rolling stock
$
484
de-France (STIF) and
Société Nationale des
Chemins de fer Français
(SNCF)
Govia Thameslink Railway
U.K.
Units (EMUs)
ELECTROSTAR Electrical
Multiple Units (EMUs)
108
Rolling stock
Italy
Fleet maintenance
n/a
Services
(GTR)
Trenitalia
Third quarter
New Jersey Transit Corporation
U.S.
Operations and maintenance
n/a
Services
(NJ TRANSIT)
services
Société Nationale des Chemins
France
Electrical Multiple Units
176
Rolling stock
de fer Français (SNCF)
(EMUs)
Second quarter
Undisclosed
Railpool GmbH
Virgin Trains
First quarter
Germany
U.K.
TRAXX locomotives
Extension of fleet maintenance
35
n/a
Rolling stock
Rolling stock
Services
$
$
$
$
$
$
$
227
191
296
218
338
184
175
(1)
(1)
State of Queensland
Australia
Construction of a depot and
n/a
Services
$ 1,700
Transport for London (TfL)
U.K.
fleet maintenance
Electrical Multiple Units
(EMUs)
AVENTRA trains
Construction of a depot and
Transnet Freight Rail (TFR)
San Francisco Bay Area Rapid
Transit District (BART)
Deutsche Bahn AG (DB)
fleet maintenance
South Africa TRAXX locomotives
U.S.
Metro cars
450
Rolling stock
$ 1,000
585
n/a
240
365
Rolling stock
Services
Rolling stock
Rolling stock
$ 1,400
700
$
$ 1,200
639
$
Germany
TALENT 2 EMUs
107
Rolling stock
$
203
(1) Contract signed as part of a consortium. Only the value of BT's share is stated.
n/a: Not applicable
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - TRANSPORTATION 79
Order backlog
(in billions of dollars)
Rolling stock(1)
Services
System and signalling
December 31, 2014
19.9
$
9.3
3.3
32.5
$
As at
December 31, 2013
21.1
$
7.4
3.9
32.4
$
(1) Of which $9.9 billion, or 50% of rolling stock order backlog, had a percentage of completion from 0% to 25% as at December 31, 2014
($12.0 billion, or 57%, as at December 31, 2013).
The $0.1 billion increase in order backlog is due to
order intake being higher than revenues recorded
($3.0 billion), partially offset by the weakening of
some foreign currencies versus the U.S. dollar as at
December 31, 2014, compared to December 31,
2013 ($2.9 billion), mainly the euro, pound sterling,
Australian dollar and Swiss franc.
ORDER BACKLOG
(as at; in billions of dollars)
Increase in workforce across all regions
in line with higher level of activities
Total number of employees
Permanent(1)
Contractual
Percentage of permanent employees covered by collective agreements
(1) Including inactive employees.
December 31, 2014
December 31, 2013
As at
34,750
4,950
39,700
69%
34,250
4,250
38,500
67%
WORKFORCE BY GEOGRAPHIC REGION
(as at)
Since December 31, 2013 the number of employees
has increased in all regions by 3% or 1,200
employees.
Headcount in Asia-Pacific, North America and the
Rest of world region has increased mainly as a
result of the start of work on major orders received in
these regions in previous fiscal years.
The increase in Europe is mostly due to the hiring of
contractual employees to support increased
workload in connection with the development of new
products as well as the start of work on major orders
received this year and in previous years. At the
same time, this increase in contractual workforce
was partially offset by reduction of permanent
headcount.
80 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
OTHER
OFF-BALANCE SHEET ARRANGEMENTS
RISKS AND UNCERTAINTIES
ACCOUNTING AND REPORTING DEVELOPMENTS
FINANCIAL INSTRUMENTS
RELATED PARTY TRANSACTIONS
CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES
CONTROLS AND PROCEDURES
FOREIGN EXCHANGE RATES
SHAREHOLDER INFORMATION
SELECTED FINANCIAL INFORMATION
QUARTERLY DATA (UNAUDITED)
PAGE
82
83
91
92
93
94
98
99
100
101
102
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 81
OFF-BALANCE SHEET ARRANGEMENTS
Factoring facilities
In the normal course of its business, BT has set up factoring facilities under which it can sell, without credit
recourse, qualifying trade receivables. For more details, refer to Note 15 - Trade and other receivables, to the
consolidated financial statements.
Credit and residual value guarantees
In connection with the sale of certain of the Corporation's products, mainly commercial aircraft, the Corporation
has provided financing support in the form of credit and residual value guarantees to enhance the ability of certain
customers to arrange third-party financing for their acquisitions.
Credit guarantees provide support through contractually limited payments to the guaranteed party to mitigate
default-related losses. Credit guarantees are triggered if customers do not perform during the term of the
financing under the relevant financing arrangements. The remaining terms of these financing arrangements range
from 1 to 12 years. In the event of default, the Corporation usually act as an agent for the guaranteed parties for
the repossession, refurbishment and re-marketing of the underlying assets. The Corporation typically receives a
fee for these services.
Residual value guarantees provide protection to the guaranteed parties in cases where the market value of the
underlying asset falls below the guaranteed value at an agreed-upon date. In most cases, these guarantees are
provided as part of a customer financing arrangement (these arrangements have remaining terms ranging from
1 to 12 years). The value of the underlying asset may be adversely affected by a number of factors. To mitigate
the exposure, the financing arrangements generally require the aircraft used as collateral to meet certain
contractual return conditions in order to exercise the guarantee. If a residual value guarantee is exercised, it
provides for a contractually limited payment to the guaranteed parties, which is typically a specified maximum
amount of the first losses incurred by the guaranteed party. A claim under the guarantee may typically be made
only at the end of the financing arrangement, upon the sale of the underlying asset to a third party.
When credit and residual value guarantees are provided in connection with a financing arrangement for the same
underlying asset, residual value guarantees can only be exercised if the credit guarantee expires without having
been exercised and, as such, the guarantees are mutually exclusive.
For more details, refer to Note 37 – Commitments and contingencies, to the consolidated financial statements.
Financing commitments
The Corporation sometimes provides financing support to facilitate customers’ access to capital. This support may
take a variety of forms, including providing assistance to customers in accessing and structuring debt and equity
for aircraft acquisitions or providing assurance that debt and equity are available to finance such acquisitions.
As at December 31, 2014, the Corporation had no commitments to arrange financing for customers in relation to
the future sale of aircraft.
Financing structures related to the sale of commercial aircraft
In connection with the sale of commercial aircraft, BA has provided credit and/or residual value guarantees and
subordinated debt to, and retained residual interests in, certain entities created solely to provide financing related
to the sale of commercial aircraft. BA also provides administrative services to certain of these entities in return for
a market fee.
Typically, these entities are financed by third-party long-term debt and equity. Often, equity investors benefit from
tax incentives. The aircraft serve as collateral for the entities’ long-term debt.
For more details, refer to Note 36 – Unconsolidated structured entities, to the consolidated financial statements.
82 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
RISKS AND UNCERTAINTIES
The Corporation operates in industry segments which present a variety of risk factors and uncertainties. The risks
and uncertainties described below are risks that could materially affect the business activities, financial condition,
cash flows and results of operations of the Corporation, but are not necessarily the only risks that the Corporation
faces. Additional risks and uncertainties, presently unknown to management or currently believed to be
immaterial, may also adversely affect the business.
General economic
risk
Business
environment risk
Operational risk
Financing plan
Financing risk
Market risk
Potential loss due to unfavourable economic conditions, such as a macroeconomic downturn in key
markets, could result in potential buyers postponing the purchase of the Corporation's products or
services, lower order intake, order cancellations or deferral of deliveries, lower availability of customer
financing, an increase in the Corporation's involvement in customer financing, downward pressure on
selling prices, increased inventory levels, decreased level of customer advances, slower collection of
receivables, reduction in production activities, paused or discontinued production of certain products,
termination of employees or adverse impacts on suppliers.
Business environment risk is the risk of potential loss due to external risk factors. These factors may
include the financial condition of the airline industry, business aircraft customers and major rail
operators; government policies related to import and export restrictions and business acquisitions;
changing priorities and possible spending cuts by government agencies; government support for
export sales; world trade policies including specific regional trade practices; increased competition
from other businesses including new entrants in market segments in which the Corporation competes;
as well as scope clauses in pilot union agreements restricting the operation of smaller jetliners by
major airlines or by their regional affiliates. In addition, acts of terrorism, natural disasters, global health
risks, political instability or the outbreak of war or continued hostilities in certain regions of the world
could result in lower orders or the rescheduling or cancellation of part of the existing order backlog for
some of the Corporation's products.
Operational risk is the risk of potential loss due to the nature of the Corporation's operations. Sources
of operational risk include development of new products and services; development of new business;
actions of business partners; product performance warranty and casualty claim losses; regulatory and
legal conditions; environmental, health and safety issues; as well as dependence on customers,
suppliers, partners and human resources. In addition, the large and complex projects which are
common in the Corporation's capital intensive businesses are often structured as fixed-price contracts
and thus exposed to production and project execution risks. The Corporation is also subject to risks
related to problems with supply chain management, reliance on information systems, reliance on
intellectual property rights as well as the successful integration of new business acquisitions.
The Corporation’s ability to achieve its business and cash generation plans is based on a number of
assumptions which involve significant judgments and estimates of future performance, borrowing
capacity and credit availability, which cannot at all times be assured. The Corporation has taken the
initiative to launch a financing plan. The components of this plan include, inter alia, potential equity
financing and debt capital markets financings.To complement the financing plan, the Corporation will
explore other initiatives such as certain business activities' potential participation in industry
consolidation in order to reduce debt. There are no assurances that the Corporation will be able to
implement this plan or any particular strategic options or complete on favourable terms and timing or at
all, and, if implemented, that such actions would have the planned results, which may have an adverse
effect on the Corporation’s business, results, liquidity and financial condition.
Financing risk is the risk of potential loss related to the liquidity of the Corporation's financial assets,
including counterparty credit risk; access to capital markets; restrictive debt covenants; financing
support provided for the benefit of certain customers; and government support.
Market risk is the risk of potential loss due to adverse movements in market factors, including foreign
currency fluctuations, changing interest rates, decreases in residual values of assets, increases in
commodity prices and inflation rate fluctuations.
Financial condition of the airline industry and business aircraft customers
Business environment risk
The airline industry’s financial condition and viability, including airlines’ ability to secure financing, can influence
the demand for BA’s commercial aircraft. The nature of the airline industry makes it difficult to predict when
economic downturns or recoveries will impact the industry and economic cycles may be longer than expected.
Continued cost pressures and efforts to achieve acceptable profitability in the airline industry may constrain the
selling price of BA’s products. Scope clauses in pilot union agreements in the U.S. restrict the operation of smaller
jetliners by major airlines or by their regional affiliates and, therefore, may restrict demand in the regional aircraft
market.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 83
The purchase of BA's products and services may represent a significant investment for a corporation, an
individual or a government. When economic or business conditions are unfavourable, potential buyers may delay
the purchase of BA's products and services. The availability of financing is also an important factor and credit
scarcity can cause customers to either defer deliveries or cancel orders.
An increased supply of used aircraft as companies restructure, downsize or discontinue operations could also add
downward pressure on the selling price of new and used business and commercial aircraft. BA could then be
faced with the challenge of finding ways to further reduce costs and improve productivity to sustain a favourable
market position at acceptable profit margins. The loss of any major commercial airline or fractional ownership or
charter operator as a customer or the termination of a contract could significantly impact BA's financial results.
These challenges could continue in 2015 and beyond. The Corporation recently announced the pause of its
Learjet 85 business aircraft program due to weak market demand in that segment and following a downward
revision of the Corporation's business aircraft market forecast. As a result of the Corporation’s continuing review
of its businesses to reduce cost, improve its manufacturing platform, and better position itself in the marketplace,
it may be necessary to curtail even more production or permanently shut down facilities, which could result in
asset write-downs at the affected facilities and could materially adversely impact the Corporation’s cash flows,
results of operations, financial condition and prospects.
Financial condition of the rail industry
The rail industry is usually resilient during economic downturns. Challenging economic and financial conditions in
specific areas, however, may have a negative impact on some rail operators. As governments respond to
economic crises with austerity measures or by increasing their level of indebtedness to fund economic stimulus
plans, it may become more difficult for publicly-owned rail operators to obtain government funding. Funding
shortages may result in projects being reduced in size, postponed or even cancelled. Such actions by rail
operators or governments would negatively impact BT’s order intake and revenues and put pressure on the cost
structure and prices. In addition, payment terms, including the level and timing of advance payments from BT's
customers, may deteriorate and negatively impact cash flows.
Political instability
Political instability in certain regions of the world may be prolonged and unpredictable. A prolongation of political
instability could lead to delays or cancellation of orders, deliveries or projects in which the Corporation has
invested significant resources, particularly when the customers are state-owned or state-controlled entities.
Force majeure events or natural disasters
Force majeure events or natural disasters (including seismic and severe weather-related events such as ice
storms, hurricanes, flooding, tornadoes or other calamities) are unpredictable and may have significant adverse
results such as: personal injury or fatality; damage to or destruction of ongoing projects, facilities or equipment;
environmental damage; delays or cancellations of orders and deliveries; delays in the receipt of materials from the
Corporation's suppliers; delays in projects; or legal liability.
Developing new products and services
Operational risk
Changes as a result of global trends such as climate change, oil scarcity, the rising cost of energy, urbanization,
population growth and demographic factors influence customer demands in the Corporation's main markets. To
meet customers’ needs, the Corporation must continuously develop and design new products, improve existing
products and services and invest in and develop new technologies. Introducing new products or technologies
requires a significant commitment to R&D investment, including maintaining a significant level of highly skilled
employees. Furthermore, the Corporation's investments in new products or technologies may or may not be
successful.
84 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Results may be impacted if products are invested in that are not accepted in the marketplace, if customer demand
or preferences change, if new products are not approved by regulatory authorities or are not brought to market in
a timely manner or if the Corporation's products become obsolete. Cost overruns may be incurred in developing
new products and there is the risk that new products will not meet performance specifications to which the
Corporation has committed to customers. Despite measures used to protect proprietary information such as
confidentiality agreements, patents and licenses, the Corporation may not always be able to enforce the right to
intellectual property or preclude misuse of technology.
The Corporation is subject to stringent certification and approval requirements, as well as to the ability of
regulatory bodies to perform these assessments on a timely basis, which vary by country and can delay the
certification of products. Non-compliance with current or future regulatory requirements imposed by Transport
Canada (TC), the U.S. Federal Aviation Administration (FAA), the European Aviation Safety Agency (EASA), the
Transport Safety Institute in the U.S., national rail regulatory bodies or other regulatory authorities could result in
service interruption of the Corporation's products, fewer sales or slower deliveries, reduction in inventory values or
impairment of assets.
In the market segments in which BA competes, competitors are developing numerous aircraft programs, with
entries-into-service expected throughout the next decade. BA faces the risk that market share may be eroded if
potential customers opt for competitors’ products. The Corporation may also be negatively impacted if product
support expectations are not met or exceeded or an international presence is not provided for a diverse customer
base.
Customer acceptance of BT’s highly complex and customized products may be delayed for various reasons,
including customer requirements not being met or a divergence in the interpretation of customer requirements,
which may also result in delayed deliveries, a build-up of inventories and a consequential financial impact. BT’s
results could also be negatively impacted if the Corporation fails to design or obtain accreditation for new
technologies and platforms on budget and in a timely manner. Further, long-term growth, competitiveness and
continued profitability are dependent on the ability to continue to develop product mix and align global presence
with worldwide market opportunities.
In the market segments in which BT competes, increased consolidation and competitiveness was recognized in
the last years. BT faces the risk that market share may be eroded if these competitors further grow their presence
or that pressure on market prices lead to lower margins.
Fixed-price commitments, capital intensive businesses and production and project execution
The Corporation has historically offered, and will continue to offer, virtually all products on fixed price contracts
rather than contracts under which payment is determined solely on a time and material basis. Generally, the
Corporation cannot terminate contracts unilaterally.
Risks are associated with these fixed-price contracts, including unexpected technological problems, difficulties
with partners and subcontractors, logistical difficulties and other execution issues that could lead to cost overruns,
late delivery penalties or delays in receiving milestone payments. The Corporation may also incur late delivery
penalties in the event of an inability to increase production rates quickly enough to meet commitments. In
addition, due to the nature of the bidding process, long-term contract revenues are based, in part, on cost
estimates which in turn are subject to a number of assumptions such as forecasted costs of materials, inflation
rates, foreign exchange rates, labour productivity, employment levels and salaries, and are influenced by the
nature and complexity of the work to be performed. Long-term contract revenues and costs may also vary from
initial forecasts due to the impact of change orders and delayed deliveries.
In addition, the Corporation’s businesses are capital intensive and require that it regularly incur capital
expenditures in order to, among other matters, maintain equipment, increase operating efficiency, continuously
develop and design new products, improve existing products and services, invest in and develop new
technologies and maintain a significant level of highly skilled employees. If the Corporation's cash flows and
capital resources are insufficient to fund its programs and other capital expenditures and debt service obligations,
the Corporation could be forced to reduce or delay investments and capital expenditures or to seek additional
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 85
debt or equity capital. The Corporation may not be able to effect any such alternative measures, if necessary, on
favorable terms or at all.
Business partners
In some of the projects carried out through consortia or other partnership vehicles in which the Corporation
participates, partners are jointly and severally liable to the customer. The success of these partnerships is
dependent on satisfactory performance by the Corporation and business partners. Failure of the business
partners to fulfill their contractual obligations could result in additional financial and performance obligations which
could result in increased costs, unforeseen delays or impairment of assets. In addition, a partner withdrawing from
a consortium during the bid phase may result in the loss of potential order intake.
Product performance warranty and casualty claim losses
The products that the Corporation manufactures are highly complex and sophisticated and may contain defects
that are difficult to detect or correct. These products are subject to detailed specifications, which are listed in the
individual contracts with customers, as well as to stringent certification or approval requirements. Defects may be
found in products before and after they are delivered to the customer. When discovered, the Corporation may
incur significant additional costs to modify and/or retrofit products and may not be able to correct defects in a
timely manner or at all. The occurrence of defects and failures in products could give rise to non-conformity costs,
including warranty and damage claims, negatively affects the Corporation's reputation and profitability and result
in the loss of customers. Correcting such defects could require significant capital investment.
In addition, due to the nature of the Corporation's business, there may be liability claims arising from accidents,
incidents or disasters involving products and services that the Corporation has provided, including claims for
serious personal injuries or death. These accidents may include misfortunes caused by climatic factors or human
error. The Corporation cannot be certain that current insurance coverage will be sufficient to cover one or more
substantial claims. Furthermore, there can be no assurance that the Corporation will be able to obtain insurance
coverage at acceptable levels and costs in the future.
Regulatory and legal risks
The Corporation is subject to numerous risks relating to current and future regulations, as well as legal
proceedings, both present or that may arise in the future, like the harmonization of the European railway market
through the new European standards which will require investments in upgrading existing products. The
Corporation becomes party to lawsuits in the ordinary course of business, including those involving allegations of
late deliveries of goods or services, product liability, product defects, quality problems and intellectual property
infringement. Material losses may be incurred relating to litigation beyond the limits or outside the coverage of
current insurance and existing provisions for litigation-related losses may not be sufficient to cover the ultimate
loss or expenditure. In addition, employee, agent, supplier or partner misconduct or failure to comply with anti-
bribery and other government laws and regulations could harm the Corporation's reputation, reduce revenues and
profitability, and subject the Corporation to criminal and civil enforcement actions.
Also refer to Note 37 – Commitments and contingencies, to the consolidated financial statements, for information
regarding current litigation proceedings, related to the S-Bahn claim and the investigation in Brazil.
Environmental, health and safety risks
The Corporation's products, as well as manufacturing and service activities, are subject to environmental laws
and regulations in each operating jurisdiction, governing, among other things: product performance or materials
content; energy use and greenhouse gas emissions; air, water and noise pollution; the use, storage, labelling,
transportation and disposal or release of hazardous substances; human health risks arising from the exposure to
hazardous or toxic materials; and the remediation of soil and groundwater contamination on or under the
Corporation's properties (regardless of cause), or on or under other properties and caused by current or past
corporate operations.
86 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Environmental regulatory requirements, or enforcements thereof, may become more stringent in the future and
the Corporation may incur additional costs to be compliant with such future requirements or enforcements. In
addition, there may be contractual or other liabilities for environmental matters relating to businesses, products or
properties that the Corporation has closed, sold or otherwise disposed of, or will close, sell or dispose of in the
future.
Dependence on customers
The Corporation depends on a limited number of customers and management believe that this dependence will
persist. Consequently, the loss of such a customer could result in fewer sales and/or a lower market share. Since
the majority of BT’s customers are public-sector companies or operate under public contracts, BT’s order intake is
also dependent on public-sector budgets and spending policies.
Business development
The Corporation’s businesses are dependent on obtaining new orders and customers, thus continuously
replenishing the order backlog. The Corporation’s results may be negatively impacted if the Corporation is unable
to effectively execute strategies to gain access to new markets, capture growth or successfully establish roots in
new markets.
Dependence on suppliers
The Corporation's manufacturing operations are dependent on a limited number of suppliers for the delivery of
raw materials (mainly aluminum, advanced aluminum alloy and titanium) and major systems (such as engines,
wings, nacelles, landing gear, avionics, flight controls and fuselages) at BA, and raw materials (mainly steel and
aluminum), services (mainly engineering, civil and electrical subcontracts) and major systems (such as brakes,
doors, heating, ventilation and air conditioning) at BT. A failure by one or more suppliers to meet performance
specifications, quality standards or delivery schedules could adversely affect the Corporation's ability to meet
commitments to customers.
Some of these suppliers participate in the development of products such as aircraft or rolling stock platforms. The
advancement of many of the Corporation's new product development programs also relies on the performance of
these key suppliers and, therefore, supplier delays which go unmitigated could result in delays to a program as a
whole. These suppliers subsequently deliver major components and own some of the intellectual property related
to key components they have developed. Contracts with these suppliers are therefore on a long-term basis. The
replacement of such suppliers could be costly and take a significant amount of time.
Human resources (including collective agreements)
Human resource risk includes the risk of delays in the recruitment of or inability to retain and motivate highly
skilled employees, including those involved in R&D and manufacturing activities that are essential to success. In
addition, the Corporation is party to several collective agreements that are due to expire at various times in the
future. An inability to renew these collective agreements on mutually agreeable terms, as they become subject to
renegotiation from time to time, could result in work stoppages or other labour disturbances such as strikes, walk-
outs or lock-outs, and/or increased costs of labour, which could adversely affect the Corporation's ability to deliver
products and services in a timely manner.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 87
Liquidity and access to capital markets
Financing risk
Sufficient capital resources and continued access to capital markets are required to support the Corporation's
capital intensive operating activities and the development of new products. To satisfy these financing needs, the
Corporation relies on cash and cash equivalents, cash flows generated by operations, capital market resources
such as debt and equity and other financing arrangements such as revolving credit facilities. A decline in credit
ratings, a significant reduction in the surety or financing market global capacity, widening credit spreads, changes
in the Corporation’s outlook or guidance, significant changes in market interest rates or general economic
conditions or an adverse perception in bank and capital markets of the Corporation's financial condition or
prospects could all significantly increase the cost of financing or impede the Corporation’s ability to access
financial markets. The Corporation has recently experienced corporate credit ratings downgrades and has been
placed under review for possible additional downgrade. The Corporation's credit ratings may be impacted by
many factors, including factors outside of the Corporation’s control relating to the industries or countries
and regions in which it operates, and, accordingly, no assurance can be given that they may not be downgraded
in the future. Actual or anticipated changes or downgrades in our credit ratings, including any announcement that
our ratings are under further review for a downgrade, may increase the Corporation's borrowing costs.
The Corporation's right to convert into cash certain deposits or investments, held in financing structures to
guarantee obligations, may be subject to restrictions. Additionally, in some countries, cash generated by
operations may be subject to restrictions on the right to convert and/or repatriate money and may thus not be
available for immediate use.
Retirement benefit plan risk
The Corporation is required to make contributions to a number of pension plans, most of which are presently in a
deficit position. Pension funding requirements are dependent on regulatory requirements and on the valuations of
plan assets and liabilities, which are subject to a number of factors, including expected returns on plan assets,
long-term interest rates, as well as applicable actuarial practices and various other assumptions. The potential
requirement to make additional contributions as a result of changes to regulations or other factors may reduce the
amount of funds available for operating purposes, thus weakening the Corporation's financial condition.
There is no assurance that retirement benefit plan assets will earn the expected rates of return. The ability of
retirement benefit plan assets to earn these expected rates of return depends in large part on the performance of
capital markets. Market conditions also affect the discount rates used to calculate the Corporation's net retirement
benefit liabilities and could also impact retirement benefit costs, cash funding requirements and liquidity position.
Credit risk
The Corporation is exposed to credit risk through derivative financial instruments and other investing activities
carried out as part of normal treasury activities, as well as through trade receivables arising from normal
commercial activities and through financing activities provided to BA customers primarily in the form of aircraft
loans and lease receivables. Reduced liquidity may result if customers or other counterparties are unable to make
payment of amounts owed to the Corporation, or delay these payments, which could lead to impairment losses on
these assets. Furthermore, if customers experience deteriorating credit quality, the Corporation may need to:
i) provide additional direct or indirect financing support to maintain sales, increasing exposure to credit risk, or
ii) reduce customers’ credit limits, which could negatively affect revenues.
The Corporation also has exposure to banks in the form of i) deposits periodically placed and ii) credit
commitments. In the case of the latter, in the event the banks with which the Corporation transacts are unable to
withstand regulatory or liquidity pressures, credit facilities, including letter of credit facilities, may become
unavailable or extension of such facilities upon their maturity might not be possible.
88 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Substantial debt and significant interest payment requirements
The Corporation currently has, and will continue to have, a substantial amount of debt and significant interest
payment requirements. The Corporation’s level of indebtedness could have significant consequences, including
the following:
• making it more difficult for it to satisfy its obligations with respect to its indebtedness;
increasing its vulnerability to general adverse economic and industry conditions;
•
requiring it to dedicate a substantial portion of its cash flows from operations to making interest and principal
•
payments on its indebtedness, reducing the availability of its cash flows to fund capital expenditures, working
capital, acquisitions, new business initiatives and other general corporate purposes;
limiting its flexibility in planning for, or reacting to, changes in its businesses and the industries in which it
operates;
placing it at a disadvantage compared to its competitors that have less debt or greater financial resources;
limiting, along with the financial and other restrictive covenants in its indebtedness, among other things, its
ability to borrow additional funds on commercially reasonable terms, if at all;
cause it to monetize assets on terms that may be unfavourable to it; and
cause it to offer debt or equity securities on terms that may not be favourable to the Corporation or its
shareholders.
•
•
•
•
•
For more information regarding the Corporation’s long-term debt, see notes to the Corporation’s audited
consolidated financial statements for the fiscal years ended December 31, 2014 and December 31, 2013.
Restrictive debt covenants
The indentures governing certain of the Corporation's indebtedness, revolving credit facilities and letter of credit
facilities contain covenants that, among other things, restrict the ability of the Corporation, and in some cases the
ability of its subsidiaries, to:
•
•
•
•
•
•
•
•
incur additional debt and provide guarantees;
repay subordinated debt;
create or permit certain liens;
use the proceeds from the sale of assets and capital stock of subsidiaries;
pay dividends and make certain other disbursements;
allow subsidiaries to pay dividends or make other payments;
engage in certain transactions with affiliates; and
enter into certain consolidations, mergers or transfers of all or certain assets.
These restrictions could impair the Corporation's ability to finance future operations or capital needs, or engage in
other business activities that may be beneficial.
The Corporation is subject to various financial covenants under the BA and BT letter of credit facilities and
unsecured revolving credit facilities which must be met on a quarterly basis. The BA $600-million letter of credit
facility and the $750-million unsecured revolving facility include financial covenants requiring a minimum EBITDA
to fixed charges ratio, a maximum net debt to EBITDA ratio and a minimum liquidity level of $500 million, all
calculated based on an adjusted consolidated basis (i.e. excluding BT). BT’s €3.5-billion letter of credit facility and
€500-million unsecured revolving facility require a minimum liquidity level of €600 million as well as a minimum
equity level and a maximum debt to EBITDA ratio, all calculated on a BT stand-alone basis. These terms and
ratios are defined in their respective agreements and do not correspond to the Corporation's global metrics or to
specific terms used in the MD&A.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 89
The Corporation's ability to comply with these covenants may also be affected by events beyond its control. A
breach of any of these agreements or the inability to comply with these covenants could result in a default under
these facilities, which would permit the Corporation's banks to request immediate defeasance or cash cover of all
outstanding letters of credit, and bond holders and other lenders to declare amounts owed to them to be
immediately payable. If any of these facilities is accelerated, or the Corporation is subject to significant cash cover
calls, the Corporation may not have access to sufficient liquidity or credit to refinance such facilities. In addition, if
the Corporation incurs additional debt in the future, it may be subject to additional covenants, which may be more
restrictive than those that it is subject to now.
Financing support provided for the benefit of certain customers
From time to time, the Corporation provides aircraft financing support to customers. This support may include,
directly or indirectly, credit and residual value guarantees or guarantee of a maximum credit spread, to support
financing for certain customers such as airlines or to support financing by certain special purpose entities created
solely i) to purchase commercial aircraft and to lease those aircraft to airline companies or ii) to purchase financial
assets such as loans and lease receivables related to the sale of commercial aircraft. Under these arrangements,
the Corporation is obligated to make payments to a guaranteed party in the event that the original debtor or
lessee does not make the loan or lease payments, or if the market or resale value of the aircraft is below the
guaranteed residual value amount at an agreed-upon date. A substantial portion of these guarantees has been
extended to support original debtors or lessees with less than investment grade credit ratings.
Government support
From time to time, the Corporation receives various types of government financial support. Some of these
financial support programs require the repayment of amounts to the government at the time of product delivery.
The level of government support reflects government policy and depends on fiscal spending levels and other
political and economic factors. Management cannot predict if future government-sponsored support will be
available. The loss of or any substantial reduction in the availability of government support could negatively
impact liquidity assumptions related to the development of aircraft or rail products and services. In addition, any
future government support received by competitors could have a negative impact on the Corporation's
competitiveness, sales and market share.
Foreign exchange risk
Market risk
The Corporation's financial results are reported in U.S. dollars and a significant portion of sales and operating
costs are transacted in currencies other than U.S. dollars, most often euros, Canadian dollars, pounds sterling,
Swiss francs and Swedish kronor. The results of operations are therefore affected by movements in these
currencies against the U.S. dollar. Significant fluctuations in relative currency values against the U.S. dollar could
thus have a significant impact on future profitability. Additionally, the settlement timing of foreign currency
derivatives could significantly impact liquidity.
Interest rate risk
Changes in interest rates may result in fluctuations in future cash flows related to variable rate financial assets
and liabilities, including long-term fixed-rate debt synthetically converted to variable interest rates. Changes in
interest rates may also affect future cash flows related to commitments to provide financing support to facilitate
customers’ access to capital. For these items, cash flows could be impacted by changes in benchmark rates such
as Libor, Euribor or Bankers’ Acceptance. In addition, the Corporation is exposed to gains and losses arising from
changes in interest rates, including marketability risk, through financial instruments carried at fair value such as
certain aircraft loans and lease receivables, investments in securities and certain derivatives.
90 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Residual value risk
The Corporation is exposed to residual value risks through RVGs provided in support of commercial aircraft sales.
These RVGs may be provided either directly to an airline, a lessor or to a financing party that participates in a
long-term financing associated with the sale of commercial aircraft. RVGs are offered as a strip of the value of an
aircraft with a ceiling and a floor. If the underlying aircraft is sold at the end of the financing period (or during this
period in limited circumstances), the resale value is compared to the RVG strip. The Corporation is required to
make payments under these RVGs when the resale value of the aircraft falls below the ceiling of the strip covered
by the guarantee, but payment is capped at the floor of the strip if the resale value of the aircraft is below that
level.
Commodity price risk
The Corporation is exposed to commodity price risk relating principally to fluctuations in the cost of materials used
in the supply chain, such as aluminum, advanced aluminum alloy, titanium and steel, which could adversely affect
the business and results of operations.
Inflation risk
BA is exposed to inflation risk relating to fluctuations in costs and revenue for aircraft orders received but for
which the delivery of the aircraft will take place several years in the future. Revenues for these orders are
adjusted for price escalation clauses linked to inflation. At BT, contract cost estimates are subject to inflation rate
assumptions. Estimated revenues at completion are adjusted for price escalation clauses, several of which are
linked to inflation. Fluctuations in inflation rates could have a significant impact on future profitability if the inflation
rate assumption used varies from the actual inflation rate.
ACCOUNTING AND REPORTING DEVELOPMENTS
Future changes in accounting policies
Financial instruments
In July 2014, the IASB completed the three-part project to replace IAS 39, Financial instruments: recognition and
measurement by issuing IFRS 9, Financial instruments. IFRS 9, Financial instruments includes classification and
measurement of financial assets and financial liabilities, a forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
IFRS 9 uses a new approach to determine whether a financial asset is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial
instruments and the contractual cash flow characteristics of the financial assets. Most of the requirements in
IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9. However, the
portion of the changes in fair value related to the entity’s own credit risk, in measuring a financial liability at
FVTP&L, will be presented in OCI rather than in the statement of income.
IFRS 9 also introduced a new, expected-loss impairment model that will require more timely recognition of
expected credit losses. Specifically, the new Standard requires entities to account for expected credit losses from
when financial instruments are first recognized and to recognize full lifetime expected losses on a more timely
basis.
Lastly, IFRS 9 introduced a new hedge accounting model, together with corresponding disclosures about risk
management activities. The new hedge accounting model, represents a substantial overhaul of hedge accounting
that will enable entities to better reflect their risk management activities in their financial statements.
IFRS 9 will be effective for the Corporation’s fiscal year beginning on January 1, 2018, with earlier application
permitted. The Corporation has not yet assessed the impact of the adoption of this standard on its consolidated
financial statements.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 91
Employee benefits
In November 2013, the IASB amended IAS 19, Employee benefits, in order to simplify the accounting for
contributions of defined benefit plans that are independent of the number of years of employee service, for
example, employee contributions that are calculated according to a fixed percentage of salary. This amendment
will be effective for the Corporation’s fiscal year beginning on January 1, 2015, with earlier application permitted.
The Corporation has started to assess the impact the adoption of this standard will have on its consolidated
financial statements and no significant impact is expected.
Revenue Recognition
In May 2014, the IASB released IFRS 15, Revenue from contracts with customers, which supersedes IAS 11,
Construction Contracts, IAS 18, Revenues, IFRIC 13, Customer Loyalty Programs, IFRIC 15, Agreement for the
Construction of Real Estate, IFRIC 18, Transfers of Assets from Customers and SIC-31, Revenue – Barter
Transactions Involving Advertising Services. The core principle of IFRS 15 is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 will also
result in enhanced disclosures about revenue, provide guidance for transactions that were not previously
addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for
multiple-element arrangements. IFRS 15 will be effective for the Corporation’s fiscal year beginning on
January 1, 2017, with earlier application permitted. The Corporation has not yet assessed the impact of the
adoption of this standard on its consolidated financial statements.
FINANCIAL INSTRUMENTS
An important portion of the consolidated balance sheets is composed of financial instruments. Financial assets of
the Corporation include cash and cash equivalents, trade and other receivables, aircraft loans and lease
receivables, investments in securities, investments in financing structures, long-term contract receivables,
restricted cash and derivative financial instruments with a positive fair value. Financial liabilities of the Corporation
include trade and other payables, long-term debt, lease subsidies, government refundable advances, vendor non-
recurring costs, sale and leaseback obligations and derivative financial instruments with a negative fair value.
Derivative financial instruments are mainly used to manage exposure to foreign exchange and interest rate risks.
They consist mostly of forward foreign exchange contracts, interest rate swap agreements and cross-currency
interest rate swap agreements.
The use of financial instruments exposes the Corporation primarily to credit, liquidity and market risks, including
foreign exchange and interest rate risks. A description on how these risks are managed is included in the Risk
management section of Overview and in Note 32 – Financial risk management, to the consolidated financial
statements.
Fair value of financial instruments
All financial instruments are required to be recognized at their fair value on initial recognition, plus transaction
costs for financial instruments not at FVTP&L. Subsequent measurement is at amortized cost or fair value
depending on the classifications of the financial instruments. Financial instruments classified as FVTP&L or AFS
are carried at fair value, while all others are carried at amortized cost. The classification of financial instruments as
well as the revenues, expenses, gains and losses associated with these instruments are provided in
Note 2 - Summary of significant accounting policies and in Note 13 – Financial instruments, to the consolidated
financial statements.
92 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Note 33 - Fair value of financial instruments, to the consolidated financial statements, provides a detailed
description of the methods and assumptions used to determine the fair values of financial instruments. These
values are point-in-time estimates that may change in subsequent reporting periods due to market conditions or
other factors. Fair value is determined by reference to quoted prices in the principal market for that instrument to
which the Corporation has immediate access. However, there is no active market for most of the Corporation’s
financial instruments. In the absence of an active market, the Corporation determines fair value based on internal
or external valuation models, such as stochastic models, option-pricing models and discounted cash flow models.
Fair value determined using valuation models requires the use of assumptions concerning the amount and timing
of estimated future cash flows, discount rates, the creditworthiness of the borrower, the aircraft’s expected future
value, default probability, generic industrial bond spreads and marketability risk. In determining these
assumptions, the Corporation uses primarily external, readily observable market inputs, including factors such as
interest rates, credit ratings, credit spreads, default probabilities, currency rates, and price and rate volatilities, as
applicable. Assumptions or inputs that are not based on observable market data are used when external data are
unavailable. These calculations represent management’s best estimates. Since they are based on estimates, the
fair values may not be realized in an actual sale or immediate settlement of the instruments.
Note 33 – Fair value of financial instruments, to the consolidated financial statements, also provides a
three-level fair value hierarchy, categorizing financial instruments by the inputs used to measure their fair value.
The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1) and the
lowest priority to unobservable inputs (Level 3). In cases where the inputs used to measure fair value are
categorized within different levels of hierarchy, the fair value measurement is reported at the lowest level of the
input that is significant to the entire measurement. Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgment, taking into account factors specific to the asset or liability. The fair
value hierarchy is not meant to provide insight on the liquidity characteristics of a particular asset or on the degree
of sensitivity of an asset or liability to other market inputs or factors.
The Corporation considers gains and losses arising from certain changes in fair value of financial instruments
incidental to core performance, such as those arising from changes in market yields, as the Corporation's
intention is to continue to hold these instruments for the foreseeable future. These gains and losses are excluded
from adjusted net income and adjusted EPS to provide users of the financial statements a better understanding of
the core results of business and enable better comparability of results from one period to another and with peers.
In connection with the sale of commercial aircraft, the Corporation holds financial assets and has incurred
financial liabilities, measured at fair value, some of which are reported as Level 3 financial instruments, including
certain aircraft loans and lease receivables, certain investments in financing structures and lease subsidies. The
fair values of these financial instruments are determined using various assumptions, with the assumption on
marketability risk being the most likely to change the fair value significantly from period to period. The fair value of
aircraft loans and lease receivables was also moderately impacted by credit rating changes in the recent past.
Sensitivity analysis
The Corporation's main exposures to changes in fair value of financial instruments are related to changes in
foreign exchange, interest rates, aircraft residual value curves, credit ratings and marketability adjustments. Note
32 – Financial risk management and Note 33 – Fair value of financial instruments, to the consolidated financial
statements, present sensitivity analyses assuming variations in foreign exchange and interest rates.
RELATED PARTY TRANSACTIONS
Related parties, as defined by IFRS, are the Corporation's joint ventures, associates and key management
personnel. A description of transactions with these related parties is included in Note 35 – Transactions with
related parties, to the consolidated financial statements.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 93
CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES
The Corporation's significant accounting policies and use of estimates and judgment are described in Note 2 –
Summary of significant accounting policies and Note 4 – Use of estimates and judgment, to the consolidated
financial statements. The preparation of financial statements in conformity with IFRS requires the use of estimates
and judgment. Critical accounting estimates, which are evaluated on a regular ongoing basis and can change
from period to period, are described in this section. An accounting estimate is considered critical if:
•
the estimate requires management to make assumptions about matters that are highly uncertain at the time
the estimate is made; and
• management could have reasonably used different estimates in the current period, or changes in the
estimate are reasonably likely to occur from period to period that would have a material impact on the
Corporation's financial condition, changes in financial condition or results of operations.
Management’s best estimates regarding the future are based on the facts and circumstances available at the time
estimates are made. Management uses historical experience, general economic conditions and trends, as well as
assumptions regarding probable future outcomes as the basis for determining estimates. Estimates and their
underlying assumptions are reviewed periodically and the effects of any changes are recognized immediately.
Actual results will differ from the estimates used, and such differences could be material.
Management’s budget and strategic plan cover a three-year period and are fundamental information used as a
basis for many estimates necessary to prepare financial information. Management prepares a budget and
strategic plan covering a three-year period, on an annual basis, using a process whereby a detailed one-year
budget and two-year strategic plan are prepared by each business unit and then consolidated at the reportable
segment and Corporation levels. Cash flows and profitability included in the budget and strategic plan are based
on existing and future contracts and orders, general market conditions, current cost structures, anticipated cost
variations and in-force collective agreements. The budget and strategic plan are subject to approval at various
levels, including senior management and the Board of Directors. Management uses the budget and strategic plan
as well as additional projections or assumptions to derive the expected results for periods thereafter. Management
then tracks performance as compared to the budget and strategic plan at various levels within the Corporation.
Significant variances in actual performance are a key trigger to assess whether certain estimates used in the
preparation of financial information must be revised.
The following areas require management’s most critical estimates and judgments. The sensitivity analyses below
should be used with caution as the changes are hypothetical and the impact of changes in each key assumption
may not be linear.
Long-term contracts
BT conducts most of its business under long-term manufacturing and service contracts and BA has some long-
term maintenance service contracts, as well as design and development contracts for third parties. Revenues and
margins from long-term contracts relating to the designing, engineering or manufacturing of specially designed
products (including rail vehicles and component overhaul) and service contracts are recognized using the
percentage-of-completion method of accounting. The long-term nature of these contracts requires estimates of
total contract costs and revenues at completion.
Estimated revenues at completion are adjusted for change orders, claims, performance incentives, price
escalation clauses and other contract terms that provide for the adjustment of prices. If it is probable that changes
in revenues will occur, they are included in estimated revenues at completion.
Contract costs include material, direct labour, manufacturing overhead and other costs, such as warranty and
freight. Estimated contract costs at completion incorporate forecasts for material and labour usage and costs,
foreign exchange rates (including the effect of hedges) and labour productivity. These costs are influenced by the
nature and complexity of the work to be performed, as well as the impact of change orders and potential delays in
delivery. Cost estimates are based mainly on historical performance trends, economic trends, collective
agreements and contracts signed with suppliers. Management applies judgment to determine the probability that
the Corporation will incur additional costs from delays or other penalties and such costs, if probable, are included
in estimated costs at completion.
94 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Recognized revenues and margins are subject to revisions as contracts progress towards completion.
Management conducts quarterly reviews of estimated costs and revenues to completion on a contract-by-contract
basis. In addition, a detailed annual review is performed on a contract-by-contract basis as part of the budget and
strategic plan process. The effect of any revision may be significant and is recorded by way of a cumulative catch-
up adjustment in the period in which the estimates are revised. In the fourth quarter of fiscal year 2014, the
Corporation revised the escalation assumptions for some contracts, mainly in rolling stock, which impacted
estimated future revenues and resulted in a catch-up adjustment to reflect lower contract margins on revenue
already recognized.
Sensitivity analysis
A 1% increase in the estimated future costs to complete all ongoing long-term contracts would have decreased
BT’s gross margin for fiscal year 2014 by approximately $97 million.
Aerospace program tooling
BA capitalizes development costs as aerospace program tooling when certain criteria for deferral are met.
Aerospace program tooling is amortized over the expected number of aircraft to be produced, beginning on the
delivery date of the first aircraft of a program, and an impairment test is performed at least annually for aircraft
programs under development and, for all programs, when there is an indication that the asset may be impaired.
An impairment charge is recorded when the recoverable amount of a group of assets generating independent
cash inflows (a CGU) is less than the carrying value of those assets.
If key estimates change significantly, amortization expense may be understated or capitalized costs may not be
recoverable and aerospace program tooling may be overstated.
Aerospace program tooling amortization and the calculation of recoverable amounts used in impairment testing
require estimates of the expected number of aircraft to be delivered over the life of each program. The expected
number of aircraft is based on management’s aircraft market forecasts and the Corporation's expected share of
each market. Such estimates are reviewed in detail as part of the budget and strategic plan process. For
purposes of impairment testing, management exercises judgment to identify independent cash inflows to identify
CGUs by family of aircraft. The recoverable amount of a group of assets is based on fair value less costs of
disposal, generally determined using a discounted cash flow model. Other key estimates used to determine the
recoverable amount include the applicable discount rate, the expected future cash flows over the remaining life of
each program, which include costs to complete the development activities, if any, as well as potential upgrades
and derivatives expected over the life of the program. The estimated cost of potential upgrades and derivatives is
based on past experience with previous programs. They also include future cash flows from aftermarket activities,
as well as expected cost savings due to synergies from the perspective of a market participant.
The discount rate is based on a weighted average cost of capital calculated using market-based inputs, available
directly from financial markets or based on a benchmark sampling of representative publicly traded companies in
the aerospace sector.
The estimated future cash flows for the first three years are based on the budget and strategic plan. After the
initial three years, long-range forecasts prepared by management are used. Forecast future cash flows are based
on management’s risk-adjusted best estimate of future sales under existing firm orders, expected future orders,
timing of payments based on expected delivery schedule, revenues from related services, procurement costs
based on existing contracts with suppliers, future labour costs, general market conditions, foreign exchange rates
and applicable income tax rates. The recoverable amounts were established during the fourth quarter of fiscal
year 2014 using the assumptions described above. A post-tax discount rate of 8.0% was used.
On January 15, 2015 the Corporation announced its decision to pause the Learjet 85 business aircraft program.
The pause follows a downward revision of Bombardier’s business aircraft market forecast, primarily due the
continued weakness of the light aircraft category since the economic downturn. As a result, the Corporation has
recorded an impairment charge in the fourth quarter of fiscal year 2014 of $1.3 billion. See Note 20 - Intangible
assets to the consolidated financial statements for further details.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 95
Sensitivity analysis
The following analyses are presented in isolation from one another, i.e. all other estimates left unchanged:
A 10% decrease in the expected future net cash inflows for all programs evenly distributed over future periods,
would have resulted in an additional impairment charge of approximately $410 million in fiscal year 2014 for
certain programs under development.
An increase of 100-basis points in the discount rate used to perform the impairment test would have resulted in an
additional impairment charge of approximately $440 million in fiscal year 2014 for certain programs under
development.
Goodwill
Goodwill is related to the DaimlerChrysler Rail Systems GmbH (Adtranz) acquisition in May 2001. This goodwill is
monitored by management at the BT operating segment level. An impairment assessment is performed at least
annually, and whenever circumstances such as significant declines in expected sales, earnings or cash flows
indicate that it is more likely than not that goodwill might be impaired. The Corporation selected the fourth quarter
to perform an annual impairment assessment of goodwill.
During the fourth quarter of fiscal year 2014, an impairment test was completed. The recoverable amount of the
BT operating segment was calculated based on fair value less costs to sell using a discounted cash flow model.
The Corporation did not identify any impairment.
Estimated future cash flows were based on the budget and strategic plan for the first three years and a constant
growth rate of 1% was applied to derive estimated cash flows beyond the initial three-year period.
The post-tax discount rate is also a key estimate in the discounted cash flow model and was based on a
representative weighted average cost of capital. The post-tax discount rate used to calculate the recoverable
amount in fiscal year 2014 was 7.25%. A 100-basis point change in the post-tax discount rate would not have
resulted in an impairment charge in fiscal year 2014. A 10% decrease on the growth rate of 1% would not have
resulted in an impairment charge in fiscal year 2014.
Valuation of deferred income tax assets
To determine the extent to which deferred income tax assets can be recognized, management estimates the
amount of probable future taxable profits that will be available against which deductible temporary differences and
unused tax losses can be utilized. Such estimates are made as part of the budget and strategic plan by tax
jurisdiction on an undiscounted basis and are reviewed on a quarterly basis. Management exercises judgment to
determine the extent to which realization of future taxable benefits is probable, considering factors such as the
number of years to include in the forecast period, the history of taxable profits and availability of conservative tax
strategies. On January 15, 2015 the Corporation announced its decision to pause the Learjet 85 business aircraft
program. The pause follows a downward revision of Bombardier’s business aircraft market forecast, primarily due
the continued weakness of the light aircraft category since the economic downturn. As a result, the Corporation
has recorded a write-down of deferred income tax assets in the fourth quarter of fiscal year 2014. See Note 11 -
Income taxes for more details.
Tax contingencies
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the
amount and timing of future taxable income. Given the wide range of international business relationships and the
long-term nature and complexity of existing contractual agreements, differences arising between the actual results
and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax
income and expense already recorded. The Corporation establishes tax provisions for possible consequences of
audits by the tax authorities of each country in which it operates. The amount of such provisions is based on
various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the
taxable entity and the responsible tax authority. Such differences in interpretation may arise for a wide variety of
issues depending on the conditions prevailing in the respective domicile of the legal entities.
96 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Credit and residual value guarantees
Credit and residual value guarantees are generally provided to airlines or to participants in financing structures
created in connection with the sale of commercial aircraft. A corresponding provision is recorded, measured at the
amounts expected to be paid under the guarantees, using an internal valuation model based on stochastic
simulations to measure the amounts expected to be paid under credit and residual value guarantees.
The amounts expected to be paid under the guarantees depend on whether credit defaults occur during the term
of the original financing. When a credit default occurs, the credit guarantee may be called upon. In the absence of
a credit default the residual value guarantee may be triggered. In both cases, the guarantees can only be called
upon if there is a loss upon the sale of the aircraft. Therefore, the value of the guarantee is in large part impacted
by the future value of the underlying aircraft. Aircraft residual value curves, prepared by management based on
information from external appraisals and adjusted to reflect specific factors of the current aircraft market and a
balanced market in the medium and long term, are used to estimate this future value. The amount of the liability is
also significantly impacted by the current market assumption for interest rates since payments under these
guarantees are mostly expected to be made in the medium to long term. Other key estimates in calculating the
value of the guarantees include default probabilities, estimated based on published credit ratings when available
or, when not available, on internal assumptions regarding the credit risk of customers, as well as on the likelihood
that credit or residual value guarantees will be called upon at the expiry of the financing arrangements. The
estimates are reviewed on a quarterly basis.
Sensitivity analysis
The following analyses are presented in isolation from one another, i.e. all other estimates left unchanged:
Assuming a decrease of 5% in the residual value curves of all aircraft as at December 31, 2014, EBIT for fiscal
year 2014 would have been negatively impacted by $18 million.
Assuming a 100-basis point decrease in interest rates as at December 31, 2014, EBT for fiscal year 2014 would
have been negatively impacted by $16 million. Assuming a 100-basis point increase in interest rates as at
December 31, 2014, EBT for fiscal year 2014 would have been positively impacted by $15 million.
Retirement and other long-term employee benefits
The actuarial valuation process used to measure pension and other post-employment benefit costs, assets and
obligations is dependent on assumptions regarding discount rates, compensation and pre-retirement benefit
increases, inflation rates, health-care cost trends, as well as demographic factors such as employee turnover,
retirement and mortality rates. The impacts from changes in discount rates and, when significant, from key events
and other circumstances, are recorded quarterly.
Discount rates are used to determine the present value of the expected future benefit payments and represent the
market rates for high-quality corporate fixed-income investments consistent with the currency and the estimated
term of the retirement benefit liabilities.
As the Canadian high-quality corporate bond market, as defined under IFRS, includes relatively few medium- and
long-term maturity bonds, the discount rate for the Corporation's Canadian pension and other post-employment
plans is established by constructing a yield curve using four maturity ranges. The first maturity range of the curve
was based on observed market rates for AA-rated corporate bonds with maturities of less than six years. In the
longer maturity ranges, due to the smaller number of high-quality bonds available, the curve is derived using
market observations and extrapolated data. The extrapolated data points were created by adding a term-based
yield spread over long-term provincial bond yields. This spread is based on the observed spreads between AA-
rated corporate bonds and AA-rated provincial bonds in the last three maturity ranges of the curve.
Expected rates of compensation increases are determined considering the current salary structure, as well as
historical and anticipated wage increases, in the context of current economic conditions.
See Note 21 – Retirement benefits for further details regarding assumptions used and sensitivity to changes in
critical actuarial assumptions.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 97
Consolidation
Entities are consolidated when, based on an evaluation of the substance of the relationship, it is established that
the Corporation controls the investee. An investee is controlled when the Corporation is exposed to, or has rights
to, variable returns from involvement with the investee and the ability to use power over the investee to affect the
amount of those returns. Management reassess the initial determination of control if facts or circumstances
indicate that there may be changes to one or more elements of control.
From time to time, the Corporation participates in structured entities where voting rights are not the dominant
factor in determining control. In these situations, management may use a variety of complex estimation processes
involving both qualitative and quantitative factors to determine whether the Corporation is exposed to, or has
rights to, significant variable returns. The quantitative analyses involve estimating the future cash flows and
performance of the investee and analyzing the variability in those cash flows. The qualitative analyses involve
consideration of factors such as the purpose and design of the investee and whether the Corporation is acting as
an agent or principal. There is a significant amount of judgment exercised in evaluating the results of these
analyses as well as in determining if the Corporation has power to affect the investee’s returns, including an
assessment of the impact of potential voting rights, contractual agreements and de facto control. Management
reassesses its initial determination of control if facts or circumstances indicate that there may be changes to one
or more elements of control.
CONTROLS AND PROCEDURES
In compliance with the Canadian Securities Administrators’ Regulation
certificates signed by the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) that, among
other things, report on the design and effectiveness of disclosure controls and procedures and the design and
effectiveness of internal controls over financial reporting.
the Corporation has filed
Disclosure controls and procedures
The CEO and the CFO have designed disclosure controls and procedures, or have caused them to be designed
under their supervision, in order to provide reasonable assurance that:
• material information relating to the Corporation has been made known to them; and
•
information required to be disclosed in the Corporation’s filings is recorded, processed, summarized and
reported within the time periods specified in securities legislation.
An evaluation was carried out, under the supervision of the CEO and the CFO, of the design and effectiveness of
the Corporation's disclosure controls and procedures. Based on this evaluation, the CEO and the CFO concluded
that the disclosure controls and procedures are effective.
Internal controls over financial reporting
The CEO and the CFO have also designed internal controls over financial reporting, or have caused them to be
designed under their supervision, in order to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with IFRS.
An evaluation was carried out, under the supervision of the CEO and the CFO, of the design and effectiveness of
the Corporation's internal controls over financial reporting. Based on this evaluation, the CEO and the CFO
concluded that the internal controls over financial reporting are effective, using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated
Framework (2013 Framework).
98 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Changes in internal controls over financial reporting
No changes were made to the Corporation's internal controls over financial reporting that occurred during the
quarter and fiscal year ended December 31, 2014 that have materially affected, or are reasonably likely to
materially affect, the internal controls over financial reporting.
FOREIGN EXCHANGE RATES
The Corporation is subject to currency fluctuations from the translation of revenues, expenses, assets and
liabilities of foreign operations with non-U.S. dollar functional currencies, mainly the euro, pound sterling and other
European currencies, and from transactions denominated in foreign currencies, mainly the Canadian dollar and
pound sterling.
The foreign exchange rates used to translate assets and liabilities into U.S. dollars were as follows, as at:
Euro
Canadian dollar
Pound sterling
December 31, 2014
1.2141
0.8633
1.5587
December 31, 2013
1.3791
0.9400
1.6542
Increase (decrease)
(12%)
(8%)
(6%)
The average foreign exchange rates used to translate revenues and expenses into U.S. dollars were as follows,
for the fourth quarters ended:
Euro
Canadian dollar
Pound sterling
December 31, 2014
1.2496
0.8809
1.5839
December 31, 2013
1.3616
0.9537
1.6194
Increase (decrease)
(8%)
(8%)
(2%)
The average foreign exchange rates used to translate revenues and expenses into U.S. dollars were as follows,
for the fiscal years ended:
Euro
Canadian dollar
Pound sterling
December 31, 2014
1.3297
0.9061
1.6483
December 31, 2013
1.3285
0.9717
1.5654
Increase (decrease)
0%
(7%)
5%
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 99
SHAREHOLDER INFORMATION
Authorized, issued and outstanding share data, as at February 10, 2015
Class A Shares (multiple voting)(1)
Class B Shares (subordinate voting)(2)
Series 2 Cumulative Redeemable Preferred Shares
Series 3 Cumulative Redeemable Preferred Shares
Series 4 Cumulative Redeemable Preferred Shares
(4)
(4)
Authorized
1,892,000,000
1,892,000,000
12,000,000
12,000,000
9,400,000
Issued and
outstanding
314,273,255
1,425,395,218
9,692,521
2,307,479
9,400,000
(3)
(1) Ten votes each, convertible at the option of the holder into one Class B Share (subordinate voting).
(2) Convertible at the option of the holder into one Class A Share (multiple voting) under certain conditions.
(3) Net of 18,736,908 Class B Shares (subordinate voting) purchased and held in trust in connection with the PSU plan.
(4) A special meeting of holders of Class A and Class B shares will take place on March 27, 2015 to approve the amendment of the articles of
the Corporation to increase the number of Class A and Class B shares the Corporation is authorized to issue from 1,892,000,000 to
2,742,000,000.
Share option, PSU and DSU data as at December 31, 2014
Options issued and outstanding under the share option plans
PSUs and DSUs issued and outstanding under the PSU and DSU plans
Class B Shares held in trust to satisfy PSU obligations
31,446,124
33,712,400
18,736,908
Information
Bombardier Inc.
Investor Relations
800 René-Lévesque Blvd. West
Montréal, Québec, Canada H3B 1Y8
Telephone: +1 514 861 9481, extension 13273
Fax: +1 514 861 2420
Email: investors@bombardier.com
Additional information relating to the Corporation, including the annual information form, are available on SEDAR
at sedar.com or on the Corporation's dedicated investor relations website at ir.bombardier.com.
100 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
SELECTED FINANCIAL INFORMATION
The following selected financial information has been derived from, and should be read in conjunction with, the
consolidated financial statements for fiscal years ended December 31, 2012, 2013 and 2014.
The following table provides selected financial information for the last three fiscal years.
Fiscal years
Revenues
Net income (loss) attributable to equity holders of Bombardier Inc.
EPS (in dollars)
Basic and diluted
Cash dividends declared per share (in Canadian dollars)
Class A Shares (multiple voting)
Class B Shares (subordinate voting)
Series 2 Preferred Shares
Series 3 Preferred Shares
Series 4 Preferred Shares
As at
Total assets
Non-current financial liabilities
The quarterly data table is shown hereafter.
February 11, 2015
2014
$ 20,111
$ (1,260)
2013
$ 18,151
$
564
2012
$ 16,414
$
460
$
(0.74)
$
0.31
$
0.25
$
$
$
$
$
0.10
0.10
0.75
0.78
1.56
$
$
$
$
$
0.10
0.10
0.75
0.78
1.56
$
$
$
$
$
0.10
0.10
0.75
1.05
1.56
December 31
2014
$ 27,614
December 31
2013
$ 29,363
December 31
2012
$ 25,175
$ 8,229
$ 7,705
$ 5,961
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - OTHER 101
BOMBARDIER INC.
QUARTERLY DATA (UNAUDITED)
(the quarterly data has been prepared in accordance with IAS 34, Interim financial reporting, except market price ranges)
(in millions of U.S. dollars, except per share amounts)
Fiscal years
Revenues
BA
BT
EBIT
BA
BT
Financing expense(1)
Financing income(1)
EBT
Income taxes
Net income (loss)
Attributable to
Total
Fourth
quarter
Third
quarter
Second
quarter
2014
First
quarter
Total
Fourth
quarter
Third
quarter
Second
quarter
$ 10,499
9,612
$ 20,111
$
$
3,326
2,634
5,960
$
$
2,572
2,334
4,906
$
(995) $ (1,303) $
429
(566)
249
(75)
(740)
506
102
(1,201)
65
(17)
(1,249)
341
$ (1,246) $ (1,590) $
$
$
$
$
$
$
$
2,512
2,379
4,891
141
116
257
90
(49)
216
61
155
153
2
155
0.08
$
$
$
$
$
$
$
2,089
2,265
4,354
$
9,385
8,766
$ 18,151
93
114
207
51
(17)
173
58
115
113
2
115
0.06
$
$
$
$
$
418
505
923
271
(119)
771
199
572
564
8
572
0.31
$
$
$
$
$
$
$
2,873
2,451
5,324
93
92
185
75
(30)
140
43
97
95
2
97
0.05
$
$
$
$
$
$
$
1,999
2,059
4,058
86
124
210
58
(22)
174
27
147
145
2
147
0.08
$
$
$
$
$
$
$
2,255
2,175
4,430
138
150
288
83
(47)
252
72
180
181
(1)
180
0.10
$
$
$
$
$
$
$
74
97
171
66
(15)
120
46
74
68
6
74
2013
First
quarter
2,258
2,081
4,339
101
139
240
75
(40)
205
57
148
143
5
148
0.08
Equity holders of Bombardier Inc.
NCI
$ (1,260) $ (1,594) $
14
4
$ (1,246) $ (1,590) $
EPS (in dollars)
Basic and diluted
$
(0.74) $
(0.92) $
0.03
Market price range of Class B Shares (in Canadian dollars)
4.43
3.41
High
Low
4.68
3.41
$
$
$
$
$
$
3.89
3.42
$
$
4.43
3.54
$
$
4.68
3.44
$
$
5.43
3.80
$
$
5.43
4.32
$
$
5.18
4.55
$
$
5.00
3.80
$
$
4.35
3.81
(1) The amounts presented on a yearly basis may not correspond to the sum of the four quarters as certain reclassifications to quarterly figures to or from financing income and financing expense
may be required on a cumulative basis.
102 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
BOMBARDIER INC.
HISTORICAL FINANCIAL SUMMARY
(in millions of U.S. dollars, except per share amounts, number of common shares and shareholders of record)
For the fiscal years ended
Revenues
BA
BT
EBIT before special items
BA
BT
Special items
BA
BT
EBIT
BA
BT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to
Equity holders of Bombardier Inc.
NCI
Adjusted net income
EPS (in dollars)
Basic
Diluted
Adjusted
General information
Export revenues from Canada
Net additions to PP&E and intangible assets
Amortization
Impairment charges on PP&E and intangible
assets
Dividend per common share
(in Canadian dollars)
Class A
Class B
Dividend per preferred share
(in Canadian dollars)
Series 2
Series 3
Series 4
Market price ranges (in Canadian dollars)
Class A
High
Low
Close
Class B
High
Low
Close
As at
Number of common shares (in millions)
Book value per common share (in dollars)
Shareholders of record
December 31
2014
December 31
2013
December 31
2012
December 31
2011
(1)
January 31
2011
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
10,499
9,612
20,111
437
486
923
1,432
57
1,489
(995)
429
(566)
249
(75)
(740)
506
(1,246)
(1,260)
14
648
(0.74)
(0.74)
0.35
8,086
1,964
417
1,266
0.10
0.10
0.75
0.78
1.56
4.68
3.30
4.13
4.68
3.41
4.15
1,740
(0.18)
14,166
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
9,385
8,766
18,151
388
505
893
(30)
—
(30)
418
505
923
271
(119)
771
199
572
564
8
608
0.31
0.31
0.33
6,767
2,287
391
—
0.10
0.10
0.75
0.78
1.56
5.42
3.81
4.60
5.43
3.80
4.61
1,739
1.20
13,503
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8,628
7,786
16,414
367
439
806
(23)
163
140
390
276
666
295
(165)
536
66
470
460
10
671
0.25
0.25
0.36
6,129
2,074
364
9
0.10
0.10
0.75
1.05
1.56
5.00
3.08
3.83
4.93
2.97
3.76
1,730
0.50
13,544
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8,594
9,310
17,904
491
675
1,166
—
—
—
491
675
1,166
380
(70)
856
119
737
737
—
887
0.41
0.41
0.49
5,866
1,447
325
—
0.10
0.10
0.69
1.32
1.56
7.29
3.41
4.06
7.29
3.30
4.06
1,724
0.10
13,427
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8,808
8,689
17,497
546
652
1,198
—
—
—
546
652
1,198
395
(86)
889
218
671
658
13
772
0.37
0.36
0.42
6,285
1,189
413
8
0.10
0.10
0.66
1.32
1.56
6.24
4.28
5.72
6.24
4.25
5.70
1,726
0.58
13,591
(1) The fiscal year ended December 31, 2011 comprises 11 months of BA’s results and 12 months of BT’s results.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - HISTORICAL FINANCIAL SUMMARY 103
BOMBARDIER INC.
HISTORICAL FINANCIAL SUMMARY (CONTINUED)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of U.S. dollars)
As at
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Current assets
Invested collateral
PP&E
Aerospace program tooling
Goodwill
Deferred income taxes
Investments in joint ventures and
associates
Other financial assets
Other assets
Non-current assets
Liabilities
Trade and other payables
Provisions
Advances and progress billings in excess of
long-term contract inventories
Advances on aerospace programs
Other financial liabilities
Other liabilities
Current liabilities
Provisions
Advances on aerospace programs
Long-term debt
Retirement benefits
Other financial liabilities
Other liabilities
Non-current liabilities
Equity
Attributable to equity holders
of Bombardier Inc.
Attributable to NCI
December 31
December 31
December 31
December 31
January 31
2014
2013
2012
2011
2011
$
$
$
$
2,489
1,538
7,970
530
592
13,119
—
2,092
6,823
2,127
875
294
1,328
956
14,495
27,614
4,216
990
1,698
3,339
1,010
2,182
13,435
562
1,608
7,627
2,629
602
1,096
14,124
27,559
42
13
55
27,614
$
$
$
$
3,397
1,492
8,234
637
626
14,386
—
2,066
6,606
2,381
1,231
318
1,568
807
14,977
29,363
4,089
881
2,352
3,228
1,009
2,227
13,786
584
1,688
6,988
2,161
717
990
13,128
26,914
2,426
23
2,449
29,363
$
$
$
$
2,557
1,311
7,540
443
564
12,415
—
1,933
4,770
2,316
1,421
311
1,339
670
12,760
25,175
3,310
1,000
1,763
3,053
455
2,212
11,793
608
1,600
5,360
2,999
601
957
12,125
23,918
1,211
46
1,257
25,175
$
$
$
$
2,892
1,342
7,305
522
559
12,620
—
1,779
3,168
2,244
1,476
275
1,311
466
10,719
23,339
3,032
1,019
1,638
2,788
732
2,208
11,417
726
1,266
4,748
3,231
502
902
11,375
22,792
515
32
547
23,339
$
$
$
$
3,559
1,356
7,191
690
648
13,444
676
1,816
2,088
2,349
1,210
259
1,111
403
9,912
23,356
2,857
1,136
1,971
2,989
860
2,168
11,981
709
1,193
4,645
1,978
532
908
9,965
21,946
1,343
67
1,410
23,356
104 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended
December 31, 2014 and 2013
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - FINANCIAL STATEMENTS 105
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements and MD&A of Bombardier Inc. and all other information in the financial
report are the responsibility of management and have been reviewed and approved by the Board of Directors.
The consolidated financial statements have been prepared by management in accordance with IFRS as issued by
the International Accounting Standards Board. The MD&A has been prepared in accordance with the
requirements of Canadian Securities Administrators. The financial statements and MD&A include items that are
based on best estimates and judgments of the expected effects of current events and transactions. Management
has determined such items on a reasonable basis in order to ensure that the financial statements and MD&A are
presented fairly in all material respects. Financial information presented in the MD&A is consistent with that in the
consolidated financial statements.
Bombardier Inc.’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have designed disclosure
controls and procedures and internal controls over financial reporting, or have caused them to be designed under
their supervision, to provide reasonable assurance that material information relating to Bombardier Inc. has been
made known to them; and information required to be disclosed in Bombardier Inc.’s filings is recorded, processed,
summarized and reported within the time periods specified in Canadian securities legislation.
Bombardier Inc.’s CEO and CFO have also evaluated the effectiveness of Bombardier Inc.’s disclosure controls
and procedures and internal controls over financial reporting as of the end of the fiscal year 2014. Based on this
evaluation, the CEO and the CFO concluded that the disclosure controls and procedures and internal controls
over financial reporting were effective as of that date, using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) on Internal Control – Integrated Framework (2013
framework). In addition, based on this assessment, they determined that there were no material weaknesses in
internal control over financial reporting as of the end of the fiscal year 2014. In compliance with the Canadian
Securities Administrators’ National Instrument 52-109, Bombardier Inc.’s CEO and CFO have provided a
certification related to Bombardier Inc.’s annual disclosure to the Canadian Securities Administrators, including the
consolidated financial statements and MD&A.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial
reporting and is ultimately responsible for reviewing and approving the consolidated financial statements and
MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of Directors and is comprised entirely of independent and
financially literate directors. The Audit Committee meets periodically with management, as well as with the internal
and independent auditors, to review the consolidated financial statements, independent auditors’ report, MD&A,
auditing matters and financial reporting issues, to discuss internal controls over the financial reporting process,
and to satisfy itself that each party is properly discharging its responsibilities. In addition, the Audit Committee has
the duty to review the appropriateness of the accounting policies and significant estimates and judgments
underlying the consolidated financial statements as presented by management, and to review and make
recommendations to the Board of Directors with respect to the independence and the fees of the independent
auditors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves
the consolidated financial statements and MD&A for issuance to shareholders.
The consolidated financial statements have been audited by Ernst & Young LLP, the independent auditors, in
accordance with Canadian generally accepted auditing standards and International Standards on auditing on
behalf of the shareholders. The independent auditors have full and free access to the Audit Committee to discuss
their audit and related matters.
Pierre Beaudoin,
President and Chief Executive Officer
Pierre Alary, FCPA, FCA
Senior Vice President and Chief Financial Officer
February 11, 2015
106 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF BOMBARDIER INC.
We have audited the accompanying consolidated financial statements of Bombardier Inc. which comprise the
consolidated statements of financial position as at December 31, 2014, 2013 and January 1, 2013, and the
consolidated statements of income, comprehensive income, changes in equity and cash flows for fiscal years
ended December 31, 2014 and 2013, and a summary of significant accounting policies and other explanatory
information.
Management's Responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, as issued by the International Accounting Standards
Board, and for such internal control as Management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards and International
Standards on auditing. Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Bombardier Inc. as at December 31, 2014, 2013 and January 1, 2013, and its financial performance and its cash
flows for fiscal years ended December 31, 2014 and 2013 in accordance with International Financial Reporting
Standards, as issued by the International Accounting Standards Board.
(1)
Ernst & Young LLP
Montréal, Canada
February 11, 2015
(1) CPA auditor, CA, public accountancy permit no. A112431
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - AUDITORS' REPORT 107
CONSOLIDATED FINANCIAL STATEMENTS
For fiscal years 2014 and 2013
(Tabular figures are in millions of U.S. dollars, unless otherwise indicated)
Consolidated financial statements
Notes to consolidated financial statements
BASIS OF PREPARATION
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.
FUTURE CHANGES IN ACCOUNTING POLICIES
3.
4.
USE OF ESTIMATES AND JUDGMENT
SEGMENT DISCLOSURE
5.
RESEARCH AND DEVELOPMENT
6.
OTHER EXPENSE
7.
SPECIAL ITEMS
8.
FINANCING EXPENSE AND FINANCING INCOME
9.
EMPLOYEE BENEFITS COSTS
10.
INCOME TAXES
11.
EARNINGS PER SHARE
12.
FINANCIAL INSTRUMENTS
13.
CASH AND CASH EQUIVALENTS
14.
TRADE AND OTHER RECEIVABLES
15.
INVENTORIES
16.
OTHER FINANCIAL ASSETS
17.
OTHER ASSETS
18.
PROPERTY, PLANT AND EQUIPMENT
19.
INTANGIBLE ASSETS
20.
RETIREMENT BENEFITS
21.
TRADE AND OTHER PAYABLES
22.
PROVISIONS
23.
OTHER FINANCIAL LIABILITIES
24.
OTHER LIABILITIES
25.
LONG-TERM DEBT
26.
SHARE-CAPITAL
27.
SHARE-BASED PLANS
28.
NET CHANGE IN NON-CASH BALANCES
29.
CREDIT FACILITIES
30.
CAPITAL MANAGEMENT
31.
FINANCIAL RISK MANAGEMENT
32.
FAIR VALUE OF FINANCIAL INSTRUMENTS
33.
34.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
35.
TRANSACTIONS WITH RELATED PARTIES
UNCONSOLIDATED STRUCTURED ENTITIES
36.
COMMITMENTS AND CONTINGENCIES
37.
38.
RECLASSIFICATION
See MD&A for the abbreviations used in the consolidated financial statements.
108 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
109
114
114
114
124
126
130
132
133
133
134
134
135
137
137
140
140
141
142
142
143
144
145
154
155
156
156
157
158
161
163
164
165
166
170
173
174
175
176
179
BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF INCOME
For the fiscal years ended December 31
(in millions of U.S. dollars, except per share amounts)
Revenues
Cost of sales
Gross margin
SG&A
R&D
Share of income of joint ventures and associates
Other expense
Special items
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to
Equity holders of Bombardier Inc.
NCI
EPS (in dollars)
Basic and diluted
The notes are an integral part of these consolidated financial statements.
Notes
16
6
34
7
8
9
9
11
12
2014
20,111
17,534
2,577
1,358
347
(89)
38
1,489
(566)
249
(75)
(740)
506
(1,246)
(1,260)
14
(1,246)
(0.74)
$
$
$
$
$
2013
18,151
15,658
2,493
1,417
293
(119)
9
(30)
923
271
(119)
771
199
572
564
8
572
0.31
$
$
$
$
$
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - FINANCIAL STATEMENTS 109
BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the fiscal years ended December 31
(in millions of U.S. dollars)
Net income (loss)
OCI
Items that may be reclassified to net income
Net change in cash flow hedges
Foreign exchange re-evaluation
Net gain (loss) on derivative financial instruments
Reclassification to income or to the related non-financial asset(1)(2)
Income taxes
AFS financial assets
Net unrealized gain (loss)
CCTD
Net investments in foreign operations
Net gain (loss) on related hedging items
Items that are never reclassified to net income
Retirement benefits
Remeasurements of defined benefit plans(3)
Income taxes
Total OCI
Total comprehensive income (loss)
Attributable to
Equity holders of Bombardier Inc.
NCI
Note
2014
(1,246)
$
$
2013
572
17
(389)
216
37
(119)
7
(146)
4
(142)
21
(646)
(45)
(691)
(945)
(2,191)
(2,198)
7
(2,191)
$
$
$
$
$
$
(6)
26
(32)
6
(6)
(5)
36
(15)
21
911
(87)
824
834
1,406
1,399
7
1,406
(1) Include $97 million of loss reclassified to the related non-financial asset for fiscal year 2014 ($10 million of gain for fiscal year 2013).
(2) $196 million of net deferred loss is expected to be reclassified from OCI to the carrying amount of the related non-financial asset or to
income during fiscal year 2015.
(3) Include net actuarial gains (losses).
The notes are an integral part of these consolidated financial statements.
110 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at
(in millions of U.S. dollars)
Notes
December 31
2014
December 31
2013
January 1
2013
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Current assets
PP&E
Aerospace program tooling
Goodwill
Deferred income taxes
Investments in joint ventures and associates
Other financial assets
Other assets
Non-current assets
Liabilities
Trade and other payables
Provisions
Advances and progress billings in excess of
long-term contract inventories
Advances on aerospace programs
Other financial liabilities
Other liabilities
Current liabilities
Provisions
Advances on aerospace programs
Long-term debt
Retirement benefits
Other financial liabilities
Other liabilities
Non-current liabilities
$
$
$
14
15
16
17
18
19
20
20
11
17
18
22
23
16
24
25
23
26
21
24
25
Equity
Attributable to equity holders of Bombardier Inc.
Attributable to NCI
Commitments and contingencies
$
37
The notes are an integral part of these consolidated financial statements.
On behalf of the Board of Directors,
2,489
1,538
7,970
530
592
13,119
2,092
6,823
2,127
875
294
1,328
956
14,495
27,614
4,216
990
1,698
3,339
1,010
2,182
13,435
562
1,608
7,627
2,629
602
1,096
14,124
27,559
42
13
55
27,614
$
$
$
$
3,397
1,492
8,234
637
626
14,386
2,066
6,606
2,381
1,231
318
1,568
807
14,977
29,363
4,089
881
2,352
3,228
1,009
2,227
13,786
584
1,688
6,988
2,161
717
990
13,128
26,914
2,426
23
2,449
29,363
$
$
$
$
2,557
1,311
7,540
443
564
12,415
1,933
4,770
2,316
1,421
311
1,339
670
12,760
25,175
3,310
1,000
1,763
3,053
455
2,212
11,793
608
1,600
5,360
2,999
601
957
12,125
23,918
1,211
46
1,257
25,175
Laurent Beaudoin, C.C., FCPA, FCA
Director
Sheila Fraser, FCPA, FCA
Director
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - FINANCIAL STATEMENTS 111
BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the fiscal years ended
(in millions of U.S. dollars)
Attributable to equity holders of Bombardier Inc.
Share capital
Retained earnings
(deficit)
Accumulated OCI
As at January 1, 2013
$
347
$
1,342
$
2,239
$
(2,794)
$
109
$
10
$
(197) $
155
$
1,211
$
46
$
1,257
Preferred
shares
Common
shares
Other
retained
earnings
Remea-
surement
losses
Contributed
surplus
AFS
financial
assets
Cash flow
hedges
CCTD
Total
NCI
Total
Equity
Total comprehensive income
Net income
OCI
Options exercised
Dividends
Common shares
Preferred shares
Capital distribution
Shares distributed - PSU plans
Share-based expense
As at December 31, 2013
Total comprehensive income
Net income (loss)
OCI
Dividends
Common shares
Preferred shares
Capital distribution
Shares distributed - DSU plans
Share-based expense
As at December 31, 2014
—
—
—
—
—
—
—
—
—
$
347
$
—
—
—
—
—
—
—
—
$
347
$
—
—
—
13
—
—
—
25
564
—
564
—
(173)
(32)
—
—
—
1,380
$
—
2,598
—
—
—
—
—
—
1
(1,260)
—
(1,260)
(160)
(27)
—
—
—
1,381
$
—
1,151
The notes are an integral part of these consolidated financial statements.
—
824
824
—
—
—
—
—
—
—
—
—
(3)
—
—
—
(25)
11
$
(1,970)
$
92
$
—
(691)
(691)
—
—
—
—
—
$
(2,661)
$
—
—
—
—
—
—
(2)
2
92
—
(5)
(5)
—
—
—
—
—
—
5
—
7
7
—
—
—
—
—
—
(6)
(6)
—
—
—
—
—
—
22
22
—
—
—
—
—
—
(203) $
$
—
177
564
835
1,399
10
(173)
(32)
—
—
11
$
2,426
$
—
(119)
(119)
—
—
—
—
—
(322) $
—
(135)
(135)
(1,260)
(938)
(2,198)
—
—
—
—
—
42
$
(160)
(27)
—
(1)
2
42
$
8
(1)
7
—
—
—
(30)
—
—
23
14
(7)
7
—
—
(17)
—
—
13
572
834
1,406
10
(173)
(32)
(30)
—
11
$
2,449
(1,246)
(945)
(2,191)
(160)
(27)
(17)
(1)
2
55
$
$
12
$
112 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended December 31
(in millions of U.S. dollars)
Operating activities
Net income (loss)
Non-cash items
Amortization
Impairment charge on intangible assets
Deferred income taxes
Gains on disposals of PP&E
Gain on disposal of a business(1)
Share of income of joint ventures and associates
Share-based expense
Loss on repurchase of long-term debt
Dividends received from joint ventures and associates
Net change in non-cash balances
Cash flows from operating activities
Investing activities
Additions to PP&E and intangible assets
Proceeds from disposals of PP&E and intangible assets
Additions to AFS investments in securities
Proceeds from disposal of AFS investments in securities
Net proceeds from disposal of a business(1)
Other
Cash flows from investing activities
Financing activities
Net proceeds from issuance of long-term debt
Repayments of long-term debt
Dividends paid(2)
Other
Cash flows from financing activities
Effect of exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information(3)(4)
Cash paid for
Interest
Income taxes
Cash received for
Interest
Income taxes
Notes
2014
2013
$
(1,246)
$
572
8, 20
11
7
8
34
28
8
29
26
26
417
1,266
354
(3)
—
(89)
2
43
101
2
847
(1,982)
18
(53)
53
25
(17)
(1,956)
1,820
(1,334)
(182)
66
370
(169)
(908)
3,397
2,489
354
111
298
6
$
$
$
$
$
391
—
74
—
(23)
(119)
11
—
115
359
1,380
(2,357)
70
(122)
52
83
13
(2,261)
1,983
(51)
(196)
(13)
1,723
(2)
840
2,557
3,397
303
80
36
20
$
$
$
$
$
(1) Related to the sale of the main assets and related liabilities of the Corporation’s Flexjet activities completed in December 2013. In fiscal
year 2014, the Corporation received the balance of the sale price.
(2) $22 million of dividends paid relate to preferred shares for fiscal year 2014 ($23 million for fiscal year 2013).
(3) Amounts paid or received for interest are reflected as cash flows from operating activities, except if they were capitalized in PP&E or
intangible assets, in which case they are reflected as cash flows from investing activities. Amounts paid or received for income taxes are
reflected as cash flows from operating activities.
(4) Interest paid comprises interest on long-term debt after the effect of hedges, if any, excluding up-front costs paid related to the negotiation
of debts or credit facilities. Interest received comprises interest received related to cash and cash equivalents, investments in securities,
loans and lease receivable after the effect of hedges, if any, the interest portion of a gain related to the resolution of a litigation in connection
with part IV of the Quebec Income Tax Act, the Tax on Capital and part 1.3 of the Canadian Income Tax Act, the Tax on Large Corporations
and the interest portion related to the settlement of a cross-currency interest-rate swap and an interest-rate swap.
The notes are an integral part of these consolidated financial statements.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - FINANCIAL STATEMENTS 113
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the fiscal years ended December 31, 2014 and 2013
(Tabular figures are in millions of U.S. dollars, unless otherwise indicated)
1.
BASIS OF PREPARATION
Bombardier Inc. is incorporated under the laws of Canada. The consolidated financial statements include the
accounts of Bombardier Inc. and its subsidiaries (“the Corporation”). The Corporation is a manufacturer of
transportation equipment, including business and commercial aircraft and rail transportation equipment and
systems, and is a provider of related services. The Corporation carries out its operations in two distinct segments,
the aerospace segment (BA) and the transportation segment (BT). The main activities of the Corporation are
described in Note 5 - Segment disclosure.
The Corporation’s consolidated financial statements for fiscal years 2014 and 2013 were authorized for issuance
by the Board of Directors on February 11, 2015.
The comparative year includes the results of the Corporation’s Flexjet activities which have been disposed of on
December 4, 2013.
Statement of compliance
The Corporation’s consolidated financial statements are expressed in U.S. dollars and have been prepared in
accordance with IFRS, as issued by the IASB.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, unless otherwise stated.
Basis of consolidation
Subsidiaries – Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated
until the date control over the subsidiaries ceases.
The Corporation consolidates investees, including structured entities when, based on the evaluation of the
substance of the relationship with the Corporation, it concludes that it controls the investees. The Corporation
controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee.
The Corporation’s principal subsidiaries, whose revenues represent more than 10% of total revenues of their
respective segment, are as follows:
Subsidiary
Bombardier Transportation GmbH
Bombardier Transportation (Holdings) UK Ltd.
Bombardier Transportation S.A.S.
Learjet Inc.
Location
Germany
U.K.
France
U.S.
Revenues of these subsidiaries combined with those of Bombardier Inc. totalled 71% of consolidated revenues for
fiscal year 2014 (69% for fiscal year 2013).
114 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Joint ventures – Joint ventures are those entities over which the Corporation exercises joint control, requiring
unanimous consent of the parties sharing control of relevant activities such as, strategic financial and operating
decision making and where the parties have rights to the net assets of the arrangement. The Corporation
recognizes its interest in joint ventures using the equity method of accounting.
Associates – Associates are entities in which the Corporation has the ability to exercise significant influence over
the financial and operating policies. Investments in associates are accounted for using the equity method of
accounting.
Foreign currency translation
The consolidated financial statements are expressed in U.S. dollars, the functional currency of Bombardier Inc.
The functional currency is the currency of the primary economic environment in which an entity operates. The
functional currency of most foreign subsidiaries is their local currency, mainly the U.S. dollar in BA, and the euro,
pound sterling, various other European currencies and the U.S. dollar in BT.
Foreign currency transactions – Transactions denominated in foreign currencies are initially recorded in the
functional currency of the related entity using the exchange rates in effect at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated using the closing exchange rates. Any
resulting exchange difference is recognized in income except for exchange differences related to retirement
benefits asset and liability, as well as financial liabilities designated as hedges of the Corporation’s net
investments in foreign operations, which are recognized in OCI. Non-monetary assets and liabilities denominated
in foreign currencies and measured at historical cost are translated using historical exchange rates, and those
measured at fair value are translated using the exchange rate in effect at the date the fair value is determined.
Revenues and expenses are translated using the average exchange rates for the period or the exchange rate at
the date of the transaction for significant items.
Foreign operations – Assets and liabilities of foreign operations whose functional currency is other than the U.S.
dollar are translated into U.S. dollars using closing exchange rates. Revenues and expenses, as well as cash
flows, are translated using the average exchange rates for the period. Translation gains or losses are recognized
in OCI and are reclassified in income on disposal or partial disposal of the investment in the related foreign
operation.
The exchange rates for the major currencies used in the preparation of the consolidated financial statements were
as follows:
Euro
Canadian dollar
Pound sterling
December 31
2014
1.2141
0.8633
1.5587
December 31
2013
1.3791
0.9400
1.6542
Exchange rates
as at
January 1
2013
1.3194
1.0043
1.6167
Average exchange rates
for fiscal years
2014
1.3297
0.9061
1.6483
2013
1.3285
0.9717
1.5654
Revenue recognition
Long-term contracts – Revenues from long-term contracts related to designing, engineering or manufacturing
specifically designed products (including rail vehicles and component overhaul) and service contracts are
recognized using the percentage-of-completion method of accounting. The percentage of completion is generally
determined by comparing the actual costs incurred to the total costs anticipated for the entire contract, excluding
costs that are not representative of the measure of performance. Estimated revenues at completion are adjusted
for change orders, claims, performance incentives, price escalation clauses and other contract terms that provide
for the adjustment of prices. If it is probable that changes in revenues will occur, they are included in estimated
revenues at completion. If a contract review indicates a negative gross margin, the entire expected loss on the
contract is recognized in cost of sales in the period in which the negative gross margin is identified. When the
contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses
incurred are expected to be recovered.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 115
When a contract covers a number of products, the construction of each product is treated as a separate contract
when (1) separate proposals have been submitted for each product, (2) each product has been subject to
separate negotiation, and (3) the costs and revenues of each product can be identified. A group of contracts,
whether with a single customer or with several customers, are treated as a single contract when (1) the group of
contracts is negotiated as a single package, (2) the contracts are so closely interrelated that they are, in effect,
part of a single project with an overall profit margin, and (3) the contracts are performed concurrently or in a
continuous sequence. Options for additional assets are treated as a separate contract when (1) the asset differs
significantly in design, technology or function from the asset or assets covered by the original contract or (2) the
price of the asset is negotiated without regard to the original contract price.
Aerospace programs – Revenues from the sale of new aircraft are recognized when the aircraft has been
delivered, risks and rewards of ownership have been transferred to the customer, the amount of revenue can be
measured reliably, and collection of the related receivable is reasonably assured. All costs incurred or to be
incurred in connection with the sale, including warranty costs and sales incentives, are charged to cost of sales or
as a deduction from revenues at the time revenue is recognized.
Multiple deliverables – Sales of goods and services sometimes involve the provision of multiple components. In
these cases, the Corporation determines whether the contract or arrangement contains more than one unit of
accounting. When certain criteria are met, such as when the delivered item has value to the customer on a stand-
alone basis, the recognition criteria are applied to the separate identifiable components of a single transaction to
reflect the substance of the transaction. Conversely, two or more transactions may be considered together for
revenue recognition purposes, when the commercial effect cannot be understood without reference to a series of
transactions as a whole. Revenue is allocated to the separate components based on their relative fair value.
Sales of aircraft fractional shares are considered together with the related service agreement for purpose of
revenue recognition. Accordingly, revenues from such sales are recognized over the period during which the
related services are rendered to the customer, generally five years. At the time of sale, the proceeds from the sale
are recorded in other liabilities, under Flexjet fractional ownership deferred revenues. The carrying value of the
related aircraft is transferred to other assets, under Flexjet fractional ownership deferred costs, and is charged to
cost of sales over the same period.
Other – Revenues from the sale of pre-owned aircraft and spare parts are recognized when the goods have been
delivered, risks and rewards of ownership have been transferred to the customer, the amount of revenue can be
measured reliably, and collection of the related receivable is reasonably assured.
Government assistance and refundable advances
Government assistance, including investment tax credits, is recognized when there is a reasonable assurance
that the assistance will be received and that the Corporation will comply with all relevant conditions. Government
assistance related to the acquisition of inventories, PP&E and intangible assets is recorded as a reduction of the
cost of the related asset. Government assistance related to current expenses is recorded as a reduction of the
related expenses.
Government refundable advances are recorded as a financial liability if there is reasonable assurance that the
amount will be repaid.
Special items
Special items comprise items which do not reflect, in management’s opinion, the Corporation’s core performance
such as the impact of restructuring charges, significant impairment charges and reversals, as well as other
significant unusual items.
Income taxes
The Corporation applies the liability method of accounting for income taxes. Deferred income tax assets and
liabilities are recognized for the future income tax consequences of temporary differences between the carrying
amounts of assets and liabilities and their respective tax bases, and for tax losses carried forward. Deferred
income tax assets and liabilities are measured using the substantively enacted tax rates that will be in effect for
the year in which the differences are expected to reverse.
116 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be
available against which the deductible temporary differences and unused tax losses can be utilized.
Deferred income tax assets and liabilities are recognized directly in income, OCI or equity based on the
classification of the item to which they relate.
Earnings per share
Basic EPS is computed based on net income attributable to equity holders of Bombardier Inc. less dividends on
preferred shares, including taxes, divided by the weighted-average number of Class A Shares (Multiple Voting)
and Class B Shares (Subordinate Voting) outstanding during the fiscal year.
Diluted EPS are computed using the treasury stock method, giving effect to the exercise of all dilutive elements.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or
equity instrument of another party. Financial assets of the Corporation include cash and cash equivalents, trade
and other receivables, aircraft loans and lease receivables, investments in securities, investments in financing
structures, long-term contract receivables, restricted cash and derivative financial instruments with a positive fair
value. Financial liabilities of the Corporation include trade and other payables, long-term debt, lease subsidies,
government refundable advances, vendor non-recurring costs, sale and leaseback obligations and derivative
financial instruments with a negative fair value.
Financial instruments are recognized in the consolidated statement of financial position when the Corporation
becomes a party to the contractual obligations of the instrument. On initial recognition, financial instruments are
recognized at their fair value plus, in the case of financial instruments not at FVTP&L, transaction costs that are
directly attributable to the acquisition or issue of financial instruments. Subsequent to initial recognition, financial
instruments are measured according to the category to which they are classified, which are: a) financial
instruments classified as HFT, b) financial instruments designated as FVTP&L, c) AFS financial assets, d) L&R, or
e) other than HFT financial liabilities. Their classification is determined by management on initial recognition
based on the purpose for their acquisition. Financial instruments are subsequently measured at amortized cost,
unless they are classified as AFS or HFT or designated as FVTP&L, in which case they are subsequently
measured at fair value.
A financial asset is derecognized when the rights to receive cash flows from the asset have expired, or the
Corporation has transferred its rights to receive cash flows from the asset and either (a) the Corporation has
transferred substantially all the risks and rewards of the asset, or (b) the Corporation has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
For transactions where it is not obvious whether the Corporation has transferred or retained substantially all the
risks and rewards of ownership, the Corporation performs a quantitative analysis to compare its exposure to the
variability in asset cash flows before and after the transfer. Judgment is applied in determining a number of
reasonably possible scenarios that reflect the expected variability in the amount and timing of net cash flows, and
then in assigning each scenario a probability with greater weighting being given to those outcomes which are
considered more likely to occur.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
When an existing liability is replaced by another from the same creditor on substantially different terms, or the
terms of the liability are substantially modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognized in the statement of income.
a) Financial instruments classified as HFT
Cash and cash equivalents – Cash and cash equivalents consist of cash and highly liquid investments
held with investment-grade financial institutions and money market funds, with maturities of three months
or less from the date of acquisition.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 117
Derivative financial instruments – Derivative financial instruments are mainly used to manage the
Corporation’s exposure to foreign exchange and interest-rate market risks, generally through forward
foreign exchange contracts, interest rate swap agreements and cross-currency interest-rate swap
agreements. Derivative financial instruments include derivatives that are embedded in financial or non-
financial contracts that are not closely related to the host contracts.
Derivative financial instruments are classified as HFT, unless they are designated as hedging instruments
for which hedge accounting is applied (see below). Changes in the fair value of derivative financial
instruments not designated in a hedging relationship, excluding embedded derivatives, are recognized in
cost of sales or financing expense or financing income, based on the nature of the exposure.
Embedded derivatives of the Corporation include financing rate commitments related to the sale of
aircraft, call options on long-term debt and foreign exchange instruments included in sale or purchase
agreements. Upon initial recognition, the fair value of financing rate commitments linked to the sale of
products is recognized as deferred charge in other assets. The deferred charge is recorded as an
adjustment of the sale price of the related products. Call options on long-term debt that are not closely
related to the host contract are measured at fair value, with the initial value recognized as an increase of
the related long-term debt and amortized to net income using the effective interest method. Upon initial
recognition, the fair value of the foreign exchange instruments not designated in a hedge relationship is
recognized in cost of sales. Subsequent changes in fair value of embedded derivatives are recorded in
cost of sales, other expense (income) or financing expense or financing income, based on the nature of
the exposure.
b) Financial instruments designated as FVTP&L
Financial instruments may be designated on initial recognition as FVTP&L if any of the following criteria is
met: (i) the financial instrument contains one or more embedded derivatives that otherwise would have to
be accounted for separately; (ii) the designation eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise from measuring the financial asset or liability or
recognizing the gains and losses on them on a different basis; or (iii) the financial asset and financial
liability are part of a group of financial assets, financial liabilities, or both that is managed and its
performance is evaluated on a fair value basis, in accordance with a documented risk management or
investment strategy. The Corporation has designated as FVTP&L, certain aircraft loans and lease
receivables, certain investments in financing structures and lease subsidies, which were all designated as
FVTP&L based on the above criterion (iii).
Subsequent changes in fair value of such financial instruments are recorded in other expense (income),
except for the fair value changes arising from a change in interest rates which are recorded in financing
expense or financing income.
c) AFS financial assets
Investments in securities are usually classified as AFS. They are accounted for at fair value if reliably
measurable, with unrealized gains and losses included in OCI, except for foreign exchange gains and
losses on monetary investments, such as fixed income investments, which are recognized in income.
Equity instruments that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured are recorded at cost.
When a decline in the fair value of an AFS financial asset has been recognised in OCI and there is
objective evidence that the asset is impaired, the cumulative loss equal to the difference between the
acquisition cost of the investments and its current fair value, less any impairment loss on that financial
asset previously recognized in net income, is removed from AOCI and recognized in net income.
Impairment losses recognized in net income for financial instruments classified as AFS can be reversed,
except for investments in equity instruments.
d) L&R
Trade and other receivables, restricted cash, certain aircraft loans and lease receivables, certain
investments in financing structures, long-term contract receivables and other financial assets, are
118 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
classified as L&R. Financial assets classified as L&R are measured at amortized cost using the effective
interest rate method less any impairment losses.
Trade receivables as well as other financial assets classified as L&R are subject to periodic impairment
review and are classified as impaired when there is objective evidence that an impairment loss has been
incurred. The amount of the loss is measured as the difference between the asset's carrying amount and
the present value of estimated future cash flows discounted at the original effective interest rate. If, in a
subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed.
e) Other than HFT financial liabilities
Trade and other payables, long-term debt, government refundable advances, vendor non-recurring costs,
sale and leaseback obligations and certain other financial liabilities are classified as other than HFT
liabilities and are measured at amortized cost using the effective interest rate method.
Hedge accounting
Designation as a hedge is only allowed if, both at the inception of the hedge and throughout the hedge period, the
changes in the fair value of the derivative and non-derivative hedging financial instruments are expected to
substantially offset the changes in the fair value of the hedged item attributable to the underlying risk exposure.
The Corporation formally documents all relationships between the hedging instruments and hedged items, as well
as its risk management objectives and strategy for undertaking various hedge transactions. This process includes
linking all derivatives to forecasted cash flows or to a specific asset or liability. The Corporation also formally
documents and assesses, both at the hedge’s inception and on an ongoing basis, whether the hedging
instruments are highly effective in offsetting the changes in the fair value or cash flows of the hedged items. There
are three permitted hedging strategies.
Fair value hedges – The Corporation generally applies fair value hedge accounting to certain interest-rate
derivatives and forward foreign exchange contracts hedging the exposures to changes in the fair value of
recognised financial assets and financial liabilities. In a fair value hedge relationship, gains or losses from the
measurement of derivative hedging instruments at fair value are recorded in net income, while gains or losses
on hedged items attributable to the hedged risks are accounted for as an adjustment to the carrying amount
of hedged items and are recorded in net income.
Cash flow hedges – The Corporation generally applies cash flow hedge accounting to forward foreign
exchange contracts and interest-rate derivatives entered into to hedge foreign exchange risks on forecasted
transactions and recognized assets and liabilities. In a cash flow hedge relationship, the portion of gains or
losses on the hedging item that is determined to be an effective hedge is recognized in OCI, while the
ineffective portion is recorded in net income. The amounts recognized in OCI are reclassified in net income as
a reclassification adjustment when the hedged item affects net income. However, when an anticipated
transaction is subsequently recorded as a non-financial asset, the amounts recognized in OCI are reclassified
in the initial carrying amount of the related asset.
Hedge of net investments in foreign operations – The Corporation generally designates certain long-term
debt as hedges of its net investments in foreign operations. The portion of gains or losses on the hedging
instrument that is determined to be an effective hedge is recognized in OCI, while the ineffective portion is
recorded in net income. The amounts recognized in OCI are reclassified in net income when corresponding
exchange gains or losses arising from the translation of the foreign operations are recorded in net income.
The portion of gains or losses on the hedging instrument that is determined to be an effective hedge is recorded
as an adjustment of the cost or revenue of the related hedged item. Gains and losses on derivatives not
designated in a hedge relationship and gains and losses on the ineffective portion of effective hedges are
recorded in cost of sales or financing expense or financing income for the interest component of the derivatives or
when the derivatives were entered into for interest rate management purposes.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 119
Hedge accounting is discontinued prospectively when it is determined that the hedging instrument is no longer
effective as a hedge, the hedging instrument is terminated or sold, or upon the sale or early termination of the
hedged item.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the arrangement conveys a right to use the asset. When
substantially all risks and rewards of ownership are transferred from the lessor to the lessee, lease transactions
are accounted for as finance leases. All other leases are accounted for as operating leases.
When the Corporation is the lessee – Leases of assets classified as finance leases are presented in the
consolidated statements of financial position according to their nature. The interest element of the lease payment
is recognized over the term of the lease based on the effective interest rate method and is included in financing
expense. Payments made under operating leases are recognized in income on a straight-line basis over the term
of the lease.
When the Corporation is the lessor – Assets subject to finance leases, mainly commercial aircraft, are initially
recognized at an amount equal to the net investment in the lease and are included in aircraft lease receivables.
Interest income is recognized over the term of the applicable leases based on the effective interest rate method.
Assets under operating leases, mostly pre-owned regional and business aircraft, are included in PP&E. Lease
income from operating leases is recognized on a straight-line basis over the term of the lease and is included in
revenues.
Inventory valuation
Long-term contracts – Long-term contract inventories include materials, direct labour, manufacturing overhead
and other costs incurred in bringing the inventories to their present location and condition, as well as estimated
contract margins. Advances and progress billings received on accounts of work performed for long-term contracts
are deducted from related long-term contract inventories. Advances and progress billings received in excess of
related long-term contract inventories are shown as liabilities.
Aerospace program and finished products – Aerospace program work in progress, raw materials, and finished
product inventories are valued at the lower of cost or net realizable value. Cost is generally determined using the
unit cost method, except for the cost of spare part inventory that is determined using the moving average method.
The cost of manufactured inventories comprises all costs that are directly attributable to the manufacturing
process, such as materials, direct labour, manufacturing overhead, and other costs incurred in bringing the
inventories to their present location and condition. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and the estimated selling costs, except for raw
materials for which it is determined using replacement cost. The Corporation estimates the net realizable value
using both external and internal aircraft valuations, including information developed from the sale of similar aircraft
in the secondary market.
Impairment of inventories – Inventories are written down to net realizable value when the cost of inventories is
determined not to be recoverable. When the circumstances that previously caused inventories to be written down
no longer exist or when there is clear evidence of an increase in net realizable value because of changed
economic circumstances, the amount of the write-down is reversed.
Retirement and other long-term employee benefits
Retirement benefit plans are classified as either defined benefit plans or defined contribution plans.
Defined benefit plans
Retirement benefit liability or asset recognised on the consolidated statement of financial position is measured at
the difference between the present value of the defined benefit obligation and the fair value of plan asset at the
reporting date. When the Corporation has a surplus in a defined benefit plan, the value of any plan asset
recognized is restricted to the asset ceiling - i.e. the present value of economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan (“asset ceiling test”). A minimum liability is
recorded when legal minimum funding requirements for past services exceed economic benefits available in the
120 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
form of refunds from the plan or reductions in future contributions to the plan. A constructive obligation is recorded
as a defined benefit obligation when there is no realistic alternative but to pay employee benefits. Retirement
benefit liability or asset includes the effect of any asset ceiling, minimum liability and constructive obligation.
The cost of pension and other benefits earned by employees is actuarially determined for each plan using the
projected unit credit method, and management’s best estimate of salary escalation, retirement ages, life
expectancy, inflation, discount rates and health care costs. Plan assets are assets that are held by a long-term
employee benefit fund or qualifying insurance policies. These assets are measured at fair value at the end of the
reporting period, which is based on published market mid-price information in the case of quoted securities. The
discount rates are determined at each reporting date by reference to market yields at the end of the reporting
period on high quality corporate fixed-income investments consistent with the currency and the estimated terms of
the related retirement benefit liability.
The remeasurement gains and losses (including the foreign exchange impact) arising on the plan assets and
defined benefit obligation and the effect of any asset ceiling and minimum liability are recognized directly in OCI in
the period in which they occur and are never reclassified to net income. Past service costs (credits) are
recognized directly in income in the period in which they occur.
The accretion on net retirement benefit obligations is included in financing income or financing expense. The
remaining components of the benefit cost are either capitalized as part of labour costs and included in inventories
and in certain PP&E and intangible assets during their construction, or are recognized directly in income. The
benefit cost recorded in net income is allocated to labour costs based on the function of the employee accruing
the benefits.
Defined contribution plans
Contributions to defined contribution plans are recognized in net income or are either capitalized as part of labour
costs and included in inventories and in certain PP&E and intangible assets during their construction. The benefit
cost recorded in net income is allocated to labour costs based on the function of the employee accruing the
benefits.
Other long-term employee benefits – The accounting method is similar to the method used for defined benefit
plans, except that all actuarial gains and losses are recognized immediately in income. Other long-term employee
benefits are included in other liabilities.
Property, plant and equipment
PP&E are carried at cost less accumulated amortization and impairment losses. The cost of an item of PP&E
includes its purchase price or manufacturing cost, borrowing costs as well as other costs incurred in bringing the
asset to its present location and condition. If the cost of certain components of an item of PP&E is significant in
relation to the total cost of the item, the total cost is allocated between the various components, which are then
separately depreciated over the estimated useful lives of each respective component. The amortization of PP&E
is computed on a straight-line basis over the following useful lives:
Buildings
Equipment
Other
5 to 75 years
2 to 15 years
3 to 20 years
The amortization method and useful lives are reviewed on a regular basis, at least annually, and changes are
accounted for prospectively. The amortization expense and impairments are recorded in cost of sales, SG&A or
R&D expenses based on the function of the underlying asset or in special items. Amortization of assets under
construction begins when the asset is ready for its intended use.
When a significant part is replaced or a major inspection or overhaul is performed, its cost is recognized in the
carrying amount of the PP&E if the recognition criteria are satisfied, and the carrying amount of the replaced part
or previous inspection or overhaul is derecognized. All other repair and maintenance costs are charged to income
when incurred.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 121
Intangible assets
Internally generated intangible assets include development costs (mostly aircraft prototype design and testing
costs) and internally developed or modified application software. These costs are capitalized when certain criteria
for deferral such as proven technical feasibility are met. The costs of internally generated intangible assets include
the cost of materials, direct labour, manufacturing overheads and borrowing costs.
Acquired intangible assets include the cost of development activities carried out by vendors for which the
Corporation controls the underlying output from the usage of the technology, as well as the cost related to
externally acquired licences, patents and trademarks.
Intangible assets are recorded at cost less accumulated amortization and impairment losses and include goodwill,
aerospace program tooling, as well as other intangible assets such as licenses, patents and trademarks. Other
intangible assets are included in other assets.
Amortization of aerospace program tooling begins at the date of completion of the first aircraft of the program.
Amortization of other intangibles begins when the asset is ready for its intended use. Amortization expense is
recognized as follows:
Aerospace program tooling
Other intangible assets
Method
Unit of production
Estimated useful life
Expected number of aircraft to be produced(1)
Licenses, patent and trademarks
Other
Straight-line
Straight-line
3 to 20 years
3 to 5 years
(1) As at December 31, 2014, the remaining number of units to fully amortize the aerospace program tooling, except for aerospace program
tooling under development, is expected to be produced over the next 6 years.
The amortization methods and estimated useful lives are reviewed on a regular basis, at least annually, and
changes are accounted for prospectively. The amortization expense is recorded in cost of sales, SG&A or R&D
expenses based on the function of the underlying assets.
The Corporation does not have indefinite-life intangible assets, other than goodwill. Goodwill represents the
excess of the purchase price over the fair value of the identifiable net assets acquired in a business acquisition.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Borrowing costs
Borrowing costs consist of interest on long-term debt and other costs that the Corporation incurs in connection
with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised as part of the cost of that asset and are deducted from the financing expense to
which they relate. The Corporation suspends the capitalisation of borrowing costs during extended periods in
which it suspends active development of a qualifying asset. All other borrowing costs are expensed in the period
they occur.
Impairment of PP&E and intangible assets
The Corporation assesses at each reporting date whether there is an indication that a PP&E or intangible asset
may be impaired. If any indication exists, the Corporation estimates the recoverable amount of the individual
asset, when possible.
When the asset does not generate cash inflows that are largely independent of those from other assets or group
of assets, the asset is tested at the CGU level. Most of the Corporation’s non-financial assets are tested for
impairment at the CGU level. The recoverable amount of an asset or CGU is the higher of its fair value less costs
to sell and its value in use.
• The fair value less costs to sell reflects the amount the Corporation could obtain from the asset’s disposal
in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of
disposal. If there is no binding sales agreement or active market for the asset, the fair value is assessed
by using appropriate valuation models dependent on the nature of the asset or CGU, such as the
discounted cash flow models.
122 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
• The value in use is calculated using estimated net cash flows, with detailed projections generally over a
three-year period and subsequent years being extrapolated using a growth assumption. The estimated
net cash flows are discounted to their present value using a discount rate before income taxes that
reflects current market assessments of the time value of money and the risk specific to the asset or CGU.
When the recoverable amount is less than the carrying value of the related asset or CGU, the related assets are
written down to their recoverable amount and an impairment loss is recognized in net income.
For PP&E and intangible assets other than goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognized impairment losses may no longer exist or may have decreased.
If such indication exists, the Corporation estimates the recoverable amount of the asset or CGU. A previously
recognized impairment loss is reversed only if there has been a change in the estimates used to determine the
recoverable amount since the last impairment loss was recognized. The reversal of impairment losses is limited to
the amount that would bring the carrying value of the asset or CGU to the amount that would have been recorded,
net of amortization, had no impairment loss been recognized for the asset or CGU in prior years. Such reversal is
recognized to income in the same line item where the original impairment was recognized.
Intangible assets and PP&E not yet available for use and goodwill are reviewed for impairment at least annually
or more frequently if circumstances such as significant declines in expected sales, earnings or cash flows indicate
that it is more likely than not that the asset or CGU might be impaired. Impairment losses relating to goodwill are
not reversed in future periods.
Provisions
Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of a
past event, it is probable that an outflow of resources will be required to settle the obligation and the cost can be
reliably estimated. These liabilities are presented as provisions when they are of uncertain timing or amount.
Provisions are measured at their present value.
Product warranties – A provision for warranty cost is recorded in cost of sales when the revenue for the related
product is recognized. The interest component associated with product warranties, when applicable, is recorded
in financing expense. The cost is estimated based on a number of factors, including the historical warranty claims
and cost experience, the type and duration of warranty coverage, the nature of products sold and in service and
counter-warranty coverage available from the Corporation’s suppliers. Claims for reimbursement from third parties
are recorded if their realization is virtually certain. Product warranties typically range from one to five years,
except for aircraft structural and bogie warranties that extend up to 20 years.
Credit and residual value guarantees – Credit and residual value guarantees related to the sale of aircraft are
recorded at the amount the Corporation expects to pay under these guarantees when the revenue for the related
product is recognized. Subsequent to initial recognition, changes in the value of these guarantees are recorded in
other expense (income), except for the changes in value arising from a change in interest rates, which are
recorded in financing expense or financing income.
Credit guarantees provide support through contractually limited payments to the guaranteed party to mitigate
default-related losses. Credit guarantees are triggered if customers do not perform during the term of the
financing.
Residual value guarantees provide protection, through contractually limited payments, to the guaranteed parties
in cases where the market value of the underlying asset falls below the guaranteed value. In most cases, these
guarantees are provided as part of a financing arrangement.
Restructuring provisions – Restructuring provisions are recognised only when the Corporation has an actual or
a constructive obligation. The Corporation has a constructive obligation when a detailed formal plan identifies the
business or part of the business concerned, the location and number of employees affected, a detailed estimate
of the associated costs and an appropriate timeline. Furthermore, the affected employees or worker councils must
have been notified of the plan’s main features.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 123
Onerous contracts – If it is more likely than not that the unavoidable costs of meeting the obligations under a
contract, other than a long-term contract, exceed the economic benefits expected to be received under it, a
provision for onerous contracts is recorded in cost of sales, except for the interest component, which is recorded
in financing expense. Unavoidable costs include anticipated cost overruns, as well as expected costs associated
with late delivery penalties and technological problems. Costs incurred to set up an efficient manufacturing
process in the early phase of an aircraft program are not considered unavoidable costs related to a specific
contract. Provisions for onerous contracts are measured at the lower of the expected cost of fulfilling the contract
and the expected cost of terminating the contract.
Termination benefits – Termination benefits are usually paid when employment is terminated before the normal
retirement date or when an employee accepts voluntary redundancy in exchange for these benefits. The
Corporation recognizes termination benefits when it is demonstrably committed, through a detailed formal plan
without possibility of withdrawal, to terminate the employment of current employees. Termination benefits are
included in provisions.
Environmental costs – A provision for environmental costs is recorded when environmental claims or remedial
efforts are probable and the costs can be reasonably estimated. Legal asset retirement obligations and
environmental costs of a capital nature that extend the life, increase the capacity or improve the safety of an asset
or that mitigate, or prevent environmental contamination that has yet to occur, are included in PP&E and are
generally amortized over the remaining useful life of the underlying asset. Costs that relate to an existing
condition caused by past operations and that do not contribute to future revenue generation are expensed and
included in cost of sales.
Litigation – A provision for litigation is recorded in case of legal actions, governmental investigations or
proceedings when it is probable that an outflow of resources will be required to settle the obligation and the cost
can be reliably estimated.
Share-based payments
Equity-settled share-based payment plans – Equity-settled share-based payments are measured at fair value
at the grant date. For the PSUs and DSUs, the value of the compensation is measured based on the closing price
of a Class B Share (Subordinate Voting) of the Corporation on the Toronto Stock Exchange adjusted to take into
account the terms and conditions upon which the shares were granted, if any, and is based on the PSUs and
DSUs that are expected to vest. For share option plans, the value of the compensation is measured using a
Black-Scholes option pricing model. The effect of any change in the number of options, PSUs and DSUs that are
expected to vest is accounted for in the period in which the estimate is revised. Compensation expense is
recognized on a straight-line basis over the vesting period, with a corresponding increase in contributed surplus.
Any consideration paid by plan participants on the exercise of stock options is credited to share capital.
Employee share purchase plan – The Corporation’s contributions to the employee share purchase plan are
measured at cost and accounted for in the same manner as the related employee payroll costs. Compensation
expense is recorded at the time of the employee contribution.
3.
FUTURE CHANGES IN ACCOUNTING POLICIES
Financial instruments
In July 2014, the IASB completed the three-part project to replace IAS 39, Financial instruments: recognition and
measurement by issuing IFRS 9, Financial instruments. IFRS 9, Financial instruments includes classification and
measurement of financial assets and financial liabilities, a forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
IFRS 9 uses a new approach to determine whether a financial asset is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial
instruments and the contractual cash flow characteristics of the financial assets. Most of the requirements in
IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9. However, the
124 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
portion of the changes in fair value related to the entity’s own credit risk, in measuring a financial liability at
FVTP&L, will be presented in OCI rather than in the statement of income.
IFRS 9 also introduced a new, expected-loss impairment model that will require more timely recognition of
expected credit losses. Specifically, the new Standard requires entities to account for expected credit losses from
when financial instruments are first recognized and to recognize full lifetime expected losses on a more timely
basis.
Lastly, IFRS 9 introduced a new hedge accounting model, together with corresponding disclosures about risk
management activities. The new hedge accounting model, represents a substantial overhaul of hedge accounting
that will enable entities to better reflect their risk management activities in their financial statements.
IFRS 9 will be effective for the Corporation’s fiscal year beginning on January 1, 2018, with earlier application
permitted. The Corporation has not yet assessed the impact of the adoption of this standard on its consolidated
financial statements.
Employee benefits
In November 2013, the IASB amended IAS 19, Employee benefits, in order to simplify the accounting for
contributions of defined benefit plans that are independent of the number of years of employee service, for
example, employee contributions that are calculated according to a fixed percentage of salary. This amendment
will be effective for the Corporation’s fiscal year beginning on January 1, 2015, with earlier application permitted.
The Corporation has started to assess the impact the adoption of this standard will have on its consolidated
financial statements and no significant impact is expected.
Revenue Recognition
In May 2014, the IASB released IFRS 15, Revenue from contracts with customers, which supersedes IAS 11,
Construction Contracts, IAS 18, Revenues, IFRIC 13, Customer Loyalty Programs, IFRIC 15, Agreement for the
Construction of Real Estate, IFRIC 18, Transfers of Assets from Customers and SIC-31, Revenue – Barter
Transactions Involving Advertising Services. The core principle of IFRS 15 is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 will also
result in enhanced disclosures about revenue, provide guidance for transactions that were not previously
addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for
multiple-element arrangements. IFRS 15 will be effective for the Corporation’s fiscal year beginning on
January 1, 2017, with earlier application permitted. The Corporation has not yet assessed the impact of the
adoption of this standard on its consolidated financial statements.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 125
4.
USE OF ESTIMATES AND JUDGMENT
The application of the Corporation’s accounting policies requires management to use estimates and judgments
that can have a significant effect on the revenues, expenses, comprehensive income, assets and liabilities
recognized and disclosures made in the consolidated financial statements. Estimates and judgments are
significant when:
•
•
the outcome is highly uncertain at the time the estimates and judgments are made; and
if different estimates or judgments could reasonably have been used that would have had a material
impact on the consolidated financial statements.
Management’s best estimates regarding the future are based on the facts and circumstances available at the time
estimates are made. Management uses historical experience, general economic conditions and trends, as well as
assumptions regarding probable future outcomes as the basis for determining estimates. Estimates and their
underlying assumptions are reviewed periodically and the effects of any changes are recognized immediately.
Actual results will differ from the estimates used, and such differences could be material.
Management’s budget and strategic plan cover a three-year period and are fundamental information used as a
basis for many estimates necessary to prepare financial information. Management prepares a budget and
strategic plan covering a three-year period, on an annual basis, using a process whereby a detailed one-year
budget and two-year strategic plan are prepared by each business unit and then consolidated at the reportable
segment and Corporation levels. Cash flows and profitability included in the budget and strategic plan are based
on existing and future contracts and orders, general market conditions, current cost structures, anticipated cost
variations and in-force collective agreements. The budget and strategic plan are subject to approval at various
levels, including senior management and the Board of Directors. Management uses the budget and strategic plan
as well as additional projections or assumptions to derive the expected results for periods thereafter. Management
then tracks performance as compared to the budget and strategic plan at various levels within the Corporation.
Significant variances in actual performance are a key trigger to assess whether certain estimates used in the
preparation of financial information must be revised.
The following areas require management’s most critical estimates and judgments. The sensitivity analyses below
should be used with caution as the changes are hypothetical and the impact of changes in each key assumption
may not be linear.
Long-term contracts – BT conducts most of its business under long-term manufacturing and service contracts
and BA has some long-term maintenance service contracts, as well as design and development contracts for third
parties. Revenues and margins from long-term contracts relating to the designing, engineering or manufacturing
of specially designed products (including rail vehicles and component overhaul) and service contracts are
recognized using the percentage-of-completion method of accounting. The long-term nature of these contracts
requires estimates of total contract costs and revenues at completion.
Estimated revenues at completion are adjusted for change orders, claims, performance incentives, price
escalation clauses and other contract terms that provide for the adjustment of prices. If it is probable that changes
in revenues will occur, they are included in estimated revenues at completion.
Estimated contract costs at completion incorporate forecasts for material and labour usage and costs, foreign
exchange rates (including the effect of hedges) and labour productivity. These costs are influenced by the nature
and complexity of the work to be performed, as well as the impact of change orders and potential delays in
delivery. Cost estimates are based mainly on historical performance trends, economic trends, collective
agreements and contracts signed with suppliers. Management applies judgment to determine the probability that
the Corporation will incur additional costs from delays or other penalties and such costs, if probable, are included
in estimated costs at completion.
Recognized revenues and margins are subject to revisions as contracts progress towards completion.
Management conducts quarterly reviews of estimated costs and revenues to completion on a contract-by-contract
basis. In addition, a detailed annual review is performed on a contract-by-contract basis as part of the budget and
strategic plan process. The effect of any revision may be significant and is recorded by way of a cumulative catch-
126 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
up adjustment in the period in which the estimates are revised. In the fourth quarter of fiscal year 2014, the
Corporation revised the escalation assumptions for some contracts, mainly in rolling stock, which impacted
estimated future revenues and resulted in a catch-up adjustment to reflect lower contract margins on revenue
already recognized.
Sensitivity analysis
A 1% increase in the estimated future costs to complete all ongoing long-term contracts would have decreased
BT’s gross margin for fiscal year 2014 by approximately $97 million.
Aerospace program tooling – Aerospace program tooling amortization and the calculation of recoverable
amounts used in impairment testing require estimates of the expected number of aircraft to be delivered over the
life of each program. The expected number of aircraft is based on management’s aircraft market forecasts and the
Corporation’s expected share of each market. Such estimates are reviewed in detail as part of the budget and
strategic plan process. For purposes of impairment testing, management exercises judgment to identify
independent cash inflows to identify CGUs by family of aircraft. The recoverable amount of a group of assets is
based on fair value less costs of disposal, generally determined using a discounted cash flow model. Other key
estimates used to determine the recoverable amount include the applicable discount rate, the expected future
cash flows over the remaining life of each program, which include costs to complete the development activities, if
any, as well as potential upgrades, and derivatives expected over the life of the program. The estimated cost of
potential upgrades and derivatives is based on past experience with previous programs. They also include future
cash flows from aftermarket activities, as well as expected cost savings due to synergies from the perspective of a
market participant. The inputs used in the discounted cash flow model are Level 3 inputs (inputs that are not
based on observable market data).
The discount rate is based on a weighted average cost of capital calculated using market-based inputs, available
directly from financial markets or based on a benchmark sampling of representative publicly traded companies in
the aerospace sector.
The estimated future cash flows for the first three years are based on the budget and strategic plan. After the
initial three years, long-range forecasts prepared by management are used. Forecast future cash flows are based
on management’s risk-adjusted best estimate of future sales under existing firm orders, expected future orders,
timing of payments based on expected delivery schedule, revenues from related services, procurement costs
based on existing contracts with suppliers, future labour costs, general market conditions, foreign exchange rates
and applicable income tax rates.
The recoverable amounts were established during the fourth quarter of fiscal year 2014 using the assumptions
described above. A post-tax discount rate of 8.0% was used.
On January 15, 2015 the Corporation announced its decision to pause the Learjet 85 business aircraft program.
The pause follows a downward revision of Bombardier’s business aircraft market forecast, primarily due the
continued weakness of the light aircraft category since the economic downturn. As a result, the Corporation has
recorded an impairment charge in the fourth quarter of fiscal year 2014 of $1.3 billion. See Note 20 - Intangible
assets for more details.
Sensitivity analysis
The following analyses are presented in isolation from one another, i.e. all other estimates left unchanged:
A 10% decrease in the expected future net cash inflows for all programs evenly distributed over future periods,
would have resulted in an additional impairment charge of approximately $410 million in fiscal year 2014 for
certain programs under development.
An increase of 100-basis points in the discount rate used to perform the impairment test would have resulted in an
additional impairment charge of approximately $440 million in fiscal year 2014 for certain programs under
development.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 127
Goodwill – The recoverable amount of the BT operating segment, the group of CGUs at which level goodwill is
monitored by management, is based on the higher of fair value less costs to sell and value in use. During fiscal
year 2014, the Corporation completed an impairment test. The recoverable amount was calculated based on fair
value less costs to sell using a discounted cash flow model. The inputs used in the discounted cash flow model
are Level 3 inputs (inputs that are not based on observable market data). The Corporation did not identify any
impairment.
Estimated future cash flows were based on the budget and strategic plan for the first three years and a constant
growth rate of 1% was applied to derive estimated cash flows beyond the initial three-year period. The post-tax
discount rate is also a key estimate in the discounted cash flow model and was based on a representative
weighted average cost of capital. The post-tax discount rate used to calculate the recoverable amount in fiscal
year 2014 was 7.25%. A 100-basis point change in the post-tax discount rate would not have resulted in an
impairment charge in fiscal year 2014. A 10% decrease on the growth rate of 1% would not have resulted in an
impairment charge in fiscal year 2014.
Valuation of deferred income tax assets – To determine the extent to which deferred income tax assets can be
recognized, management estimates the amount of probable future taxable profits that will be available against
which deductible temporary differences and unused tax losses can be utilized. Such estimates are made as part
of the budget and strategic plan by tax jurisdiction on an undiscounted basis and are reviewed on a quarterly
basis. Management exercises judgment to determine the extent to which realization of future taxable benefits is
probable, considering factors such as the number of years to include in the forecast period, the history of taxable
profits and availability of conservative tax strategies. On January 15, 2015 the Corporation announced its decision
to pause the Learjet 85 business aircraft program. The pause follows a downward revision of Bombardier’s
business aircraft market forecast, primarily due the continued weakness of the light aircraft category since the
economic downturn. As a result, the Corporation has recorded a write-down of deferred income tax assets in the
fourth quarter of fiscal year 2014. See Note 11 - Income taxes for more details.
Tax contingencies – Uncertainties exist with respect to the interpretation of complex tax regulations, changes in
tax laws, and the amount and timing of future taxable income. Given the wide range of international business
relationships and the long-term nature and complexity of existing contractual agreements, differences arising
between the actual results and the assumptions made, or future changes to such assumptions, could necessitate
future adjustments to tax income and expense already recorded. The Corporation establishes tax provisions for
possible consequences of audits by the tax authorities of each country in which it operates. The amount of such
provisions is based on various factors, such as experience of previous tax audits and differing interpretations of
tax regulations by the taxable entity and the responsible tax authority. Such differences in interpretation may arise
for a wide variety of issues depending on the conditions prevailing in the respective domicile of the legal entities.
Credit and residual value guarantees – The Corporation uses an internal valuation model based on stochastic
simulations to measure the amounts expected to be paid under credit and residual value guarantees. The
amounts expected to be paid under the guarantees depend on whether credit defaults occur during the term of
the original financing. When a credit default occurs, the credit guarantee may be called upon. In the absence of a
credit default the residual value guarantee may be triggered. In both cases, the guarantees can only be called
upon if there is a loss upon the sale of the aircraft. Therefore, the value of the guarantee is in large part impacted
by the future value of the underlying aircraft. Aircraft residual value curves, prepared by management based on
information from external appraisals and adjusted to reflect specific factors of the current aircraft market and a
balanced market in the medium and long term, are used to estimate this future value. The amount of the liability is
also significantly impacted by the current market assumption for interest rates since payments under these
guarantees are mostly expected to be made in the medium to long term. Other key estimates in calculating the
value of the guarantees include default probabilities, estimated based on published credit ratings when available
or, when not available, on internal assumptions regarding the credit risk of customers, as well as on the likelihood
that credit or residual value guarantees will be called upon at the expiry of the financing arrangements. The
estimates are reviewed on a quarterly basis.
128 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Sensitivity analysis
The following analyses are presented in isolation from one another, i.e. all other estimates left unchanged:
Assuming a decrease of 5% in the residual value curves of all aircraft as at December 31, 2014, EBIT for fiscal
year 2014 would have been negatively impacted by $18 million.
Assuming a 100-basis point decrease in interest rates as at December 31, 2014, EBT for fiscal year 2014 would
have been negatively impacted by $16 million. Assuming a 100-basis point increase in interest rates as at
December 31, 2014, EBT for fiscal year 2014 would have been positively impacted by $15 million.
Retirement and other long-term employee benefits – The actuarial valuation process used to measure pension
and other post-employment benefit costs, assets and obligations is dependent on assumptions regarding discount
rates, compensation and pre-retirement benefit increases, inflation rates, health-care cost trends, as well as
demographic factors such as employee turnover, retirement and mortality rates. The impacts from changes in
discount rates and, when significant, from key events and other circumstances, are recorded quarterly.
Discount rates are used to determine the present value of the expected future benefit payments and represent the
market rates for high-quality corporate fixed-income investments consistent with the currency and the estimated
term of the retirement benefit liabilities. As the Canadian high-quality corporate bond market, as defined under
IFRS, includes relatively few medium- and long- term maturity bonds, the discount rate for the Corporation's
Canadian pension and other post-employment plans is established by constructing a yield curve using four
maturity ranges. The first maturity range of the curve was based on observed market rates for AA-rated corporate
bonds with maturities of less than six years. In the longer maturity ranges, due to the smaller number of high-
quality bonds available, the curve is derived using market observations and extrapolated data. The extrapolated
data points were created by adding a term-based yield spread over long-term provincial bond yields. This spread
is based on the observed spreads between AA-rated corporate bonds and AA-rated provincial bonds in the last
three maturity ranges of the curve.
Expected rates of compensation increases are determined considering the current salary structure, as well as
historical and anticipated wage increases, in the context of current economic conditions.
See Note 21 – Retirement benefits for further details regarding assumptions used and sensitivity to changes in
critical actuarial assumptions.
Consolidation – From time to time, the Corporation participates in structured entities where voting rights are not
the dominant factor in determining control. In these situations, management may use a variety of complex
estimation processes involving both qualitative and quantitative factors to determine whether the Corporation is
exposed to, or has rights to, significant variable returns. The quantitative analyses involve estimating the future
cash flows and performance of the investee and analyzing the variability in those cash flows. The qualitative
analyses involve consideration of factors such as the purpose and design of the investee and whether the
Corporation is acting as an agent or principal. There is a significant amount of judgment exercised in evaluating
the results of these analyses as well as in determining if the Corporation has power to affect the investee’s
returns, including an assessment of the impact of potential voting rights, contractual agreements and de facto
control. Management reassesses its initial determination of control if facts or circumstances indicate that there
may be changes to one or more elements of control.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 129
5.
SEGMENT DISCLOSURE
The Corporation has two reportable segments: BA and BT. Each reportable segment offers different products and
services and requires different technology and marketing strategies.
BA
BT
BA is a world leader in the design, manufacture and support of
innovative aviation products. BA's aircraft portfolio includes a
comprehensive line of business aircraft, commercial aircraft
including regional jets, turboprops and single-aisle mainline jets,
as well as specialized and amphibious aircraft. BA also offers
aftermarket services. BA was also offering Flexjet fractional
ownership and flight entitlement programs up to December 4,
2013.
BT is a world leader in the design, manufacture and
support of rail equipment and systems, offering a full
range of passenger railcars, locomotives, light rail
vehicles and automated people movers. It also provides
bogies, electric propulsion, control equipment and
maintenance services, as well as complete rail
transportation systems and rail control solutions.
The segmented information is prepared using the accounting policies described in Note 2 – Summary of
significant accounting policies.
Management assesses segment performance based on EBIT and EBIT before special items. Corporate charges
are allocated to segments mostly based on each segment’s revenues. The segmented results of operations and
other information are as follows, for fiscal years:
Results of operations
Revenues
Cost of sales
Gross margin
SG&A
R&D
Share of income of joint ventures
and associates
Other expense (income)
EBIT before special items
Special items(1)
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Other information
Net additions to PP&E and
intangible assets(2)
Amortization
Impairment charge on intangible
assets(3)
$ 10,499
9,148
1,351
672
199
—
43
437
1,432
(995)
1,857
301
1,266
$
$
$
$
$
$
$
$
$
(1) See Note 8 – Special items for more details.
(2) As per the consolidated statements of cash flows.
(3) See Note 20 – Intangible assets for more details.
BA
BT
9,612
8,386
1,226
686
148
(89)
(5)
486
57
429
2014
Total
$ 20,111
17,534
2,577
1,358
347
(89)
38
923
1,489
(566)
249
(75)
(740)
506
$ (1,246)
107
116
$
$
1,964
417
— $
1,266
BA
BT
9,385
8,118
1,267
699
173
—
7
388
(30)
418
$
$
8,766
7,540
1,226
718
120
(119)
2
505
—
505
2,213
267
$
$
74
124
2013
Total
$ 18,151
15,658
2,493
1,417
293
(119)
9
893
(30)
923
271
(119)
771
199
572
2,287
391
$
$
$
— $
— $
—
$
$
$
$
$
130 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The reconciliation of total assets and total liabilities to segmented assets and liabilities is as follows, as at:
December 31, 2014
December 31, 2013
January 1, 2013
$
27,614
$
29,363
$
25,175
Assets
Total assets
Assets not allocated to segments
Cash and cash equivalents
Income tax receivable(1)
Deferred income taxes
Segmented assets
Liabilities
Total liabilities
Liabilities not allocated to segments
Interest payable(2)
Income taxes payable(3)
Long-term debt(4)
Deferred income taxes(3)
Segmented liabilities
Net segmented assets
BA
BT
2,489
64
875
24,186
27,559
124
248
7,683
—
19,504
4,407
275
$
$
$
$
$
$
(1) Included in other assets.
(2) Included in trade and other payables.
(3) Included in other liabilities.
(4) The current portion of long-term debt is included in other financial liabilities.
The Corporation’s revenues by market segments are as follows, for fiscal years:
BA
Manufacturing
Business aircraft
Commercial aircraft
Other
Total manufacturing
Services(1)
Other(2)
BT
Rolling stock(3)
Services(4)
System and signalling(5)
$
$
3,397
27
1,231
24,708
26,914
116
198
7,203
—
19,397
4,921
390
2014
5,744
1,956
537
8,237
1,619
643
10,499
6,330
1,717
1,565
9,612
20,111
$
$
$
$
$
2,557
—
1,421
21,197
23,918
66
109
5,405
46
18,292
2,618
287
2013
5,038
1,248
550
6,836
1,897
652
9,385
5,511
1,596
1,659
8,766
18,151
(1) Includes revenues from parts services, Flexjet fractional ownership and hourly flight entitlement programs’ service activities (prior to
disposal on December 4, 2013), product support activities (including aircraft maintenance and commercial training), Specialized Aircraft
Solutions and Military Aviation Training.
(2) Includes mainly sales of pre-owned aircraft.
(3) Comprised of revenues from light rail vehicles, metros, commuter and regional trains, intercity trains, high speed and very high speed trains,
locomotives, propulsion and controls, and bogies.
(4) Comprised of revenues from fleet maintenance, refurbishment and overhaul, and material solutions.
(5) Comprised of revenues from mass transit and airport systems, mainline systems, operation and maintenance systems, e-mobility solutions,
mass transit signalling and mainline signalling. Excludes the rolling stock portion of system orders manufactured by the other divisions of
the Corporation.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 131
The Corporation’s revenues and PP&E and intangible assets are, allocated to countries, as follows:
North America
United States
Canada
Mexico
Europe
Germany
United Kingdom
France
Switzerland
Other
Asia-Pacific
China
Australia
India
Other
Other
Russia
Other
Revenues for fiscal years (1)
PP&E and intangible assets as at (2)
2014
2013
December 31 December 31
2013
2014
January 1
2013
$
5,417
1,096
229
6,742
2,318
1,691
1,412
450
2,559
8,430
815
748
171
927
2,661
$
5,640
1,351
93
7,084
1,954
1,913
960
575
2,508
7,910
560
471
224
685
1,940
$
1,198
5,839
84
7,121
1,092
1,801
43
368
670
3,974
7
28
24
4
63
$
2,003
4,746
151
6,900
1,235
1,767
50
398
803
4,253
7
20
27
2
56
$
1,517
3,565
106
5,188
1,214
1,501
52
387
797
3,951
8
21
34
2
65
505
1,773
2,278
$ 20,111
240
977
1,217
$ 18,151
1
39
40
$ 11,198
1
29
30
11,239
$
1
24
25
9,229
$
(1) Allocated to countries based on the location of the customer.
(2) PP&E and intangible assets, excluding goodwill, are attributed to countries based on the location of the assets. Goodwill is attributed to
countries based on the Corporation’s allocation of the related purchase price.
6. RESEARCH AND DEVELOPMENT
R&D expense, net of government assistance, was as follows, for fiscal years:
R&D expenditures
Less: development expenditures capitalized to aerospace program tooling
Add: amortization of aerospace program tooling
2014
1,831
(1,656)
175
172
347
$
$
2013
2,130
(1,984)
146
147
293
$
$
132 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
7.
OTHER EXPENSE
Other expense was as follows, for fiscal years:
Changes in estimates and fair value(1)
Severance and other involuntary termination costs (including changes in estimates)(2)
Gains on disposals of PP&E
Other
2014
42
4
(3)
(5)
38
$
$
2013
17
(2)
—
(6)
9
$
$
(1) Includes net loss (gain) on certain financial instruments measured at fair value and changes in estimates related to certain provisions or
certain financial instruments, excluding losses (gains) arising from changes in interest rates.
(2) Excludes those presented in special items for fiscal year 2014.
8.
SPECIAL ITEMS
Special items were as follows, for fiscal years:
Impairment charge and other(1)
Restructuring charge(2)
Loss on repurchase of long-term debt(3)
Gains on resolution of litigations(4)
Inventory write-down(5)
Gain on disposal of a business(6)
Of which is presented in
Special items in EBIT
Financing expense - loss on repurchase of long-term debt
Financing income - interests related to the resolution of litigations
2014
1,357
142
43
(18)
—
—
1,524
1,489
43
(8)
1,524
$
$
$
$
$
$
$
$
2013
—
—
—
(43)
24
(23)
(42)
(30)
—
(12)
(42)
(1) As a result of the decision to pause the Learjet 85 program, an impairment charge of $1,266 million, an inventory write-down of $21 million
and $71 million of other provisions were recorded as special items. See Note 20 - Intangible assets for more details.
(2) Represents restructuring charges of $155 million and a curtailment gain of $13 million related to the workforce reduction announced in
January and July 2014, of which $85 million relates to BA and $57 million to BT, for fiscal year 2014. These measures include the reduction
of approximately 3,700 employees at BA and 900 employees at BT.
(3) Represents the loss related to the redemption of the €785 million ($1,093 million) Senior Notes.
(4) Represent a gain at BA upon the successful resolution of a litigation of $18 million in connection with Part IV of the Quebec Income Tax Act,
the Tax on Capital, of which $8 million represents the interest portion of the gain for fiscal year 2014 ($43 million of which $12 million
represents the interest portion of the gain for fiscal year 2013).
(5) Represents a BA inventory write-down related to the prolonged production pause for the Learjet 60 program.
(6) Related to the sale of the main assets and related liabilities of the Corporation's Flexjet activities completed in December 2013.
Subsequent to the end of the fiscal year, in January 2015, as a result of the decision to pause the Learjet 85
business aircraft program, BA announced a workforce reduction of approximately 1,000 employees at the sites in
Querétaro, Mexico, and Wichita, United States. A severance provision of approximately $20 million will be
recorded as a special item during the first quarter of 2015.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 133
9.
FINANCING EXPENSE AND FINANCING INCOME
Financing expense and financing income were as follows, for fiscal years:
Financing expense
Loss on repurchase of long-term debt(1)
Accretion on net retirement benefit obligations
Amortization of letter of credit facility costs
Accretion on other financial liabilities
Accretion on provisions
Net loss on certain financial instruments(2)
Other
Interest on long-term debt, after effect of hedges
Financing income
Interest related to the resolution of litigations(4)
Changes in discount rates of provisions
Net gain on certain financial instruments(2)
Other
Interest on loans and lease receivables, after effect of hedges
Interest on cash and cash equivalents
Income from investment in securities
2014
2013
$
43
76
16
19
8
21
29
212
37
249 (3) $
$
(8)
—
—
(17)
(25)
(27)
(11)
(12)
(50)
(75) (5) $
—
113
16
29
4
—
21
183
88
271 (3)
(12)
(18)
(4)
(27)
(61)
(33)
(14)
(11)
(58)
(119) (5)
$
$
$
$
(1) Represents the loss related to the redemption of the €785 million ($1,093 million) Senior Notes, which was recorded as a special item.
(2) Net losses (gains) on certain financial instruments classified as FVTP&L, including losses (gains) arising from changes in interest rates.
(3) Of which $70 million represents the interest expense calculated using the effective interest rate method for financial liabilities classified as
other than HFT for fiscal year 2014 ($125 million for fiscal year 2013).
(4) Represents the interest portion of a gain of $18 million for fiscal year 2014 upon the successful resolution of a litigation in connection with
Part IV of the Quebec Income Tax Act, the Tax on Capital ($43 million for fiscal year 2013). The remaining $10 million of the gain was
recorded in EBIT as special items for fiscal year 2014 ($31 million for fiscal year 2013).
(5) Of which $9 million represents the interest income calculated using the effective interest rate method for financial assets classified as L&R
for fiscal year 2014 ($16 million for fiscal year 2013).
Borrowing costs capitalized to PP&E and intangible assets totalled $293 million for fiscal year 2014, using an
average capitalization rate of 4.88% ($271 million and 5.48% for fiscal year 2013). Capitalized borrowing costs
are deducted from the related interest expense (i.e. interest on long-term debt or accretion on other financial
liabilities, if any).
10. EMPLOYEE BENEFIT COSTS
Employee benefit costs(1) were as follows, for fiscal years:
Wages, salaries and other employee benefits
Retirement benefits(2)
Share-based expense
Restructuring, severance and other involuntary termination costs
Notes
21
28
7, 8
2014
5,893
420
2
142
6,457
$
$
2013
5,961
496
11
(2)
6,466
$
$
(1) Employee benefit costs include costs capitalized as part of the cost of inventories and other self-constructed assets.
(2) Includes defined benefit and defined contribution plans.
134 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
11.
INCOME TAXES
Analysis of income tax expense
Details of income tax expense were as follows, for fiscal years:
Current income taxes
Deferred income taxes
2014
152
354
506
2013
125
74
199
$
$
$
$
The reconciliation of income taxes, computed at the Canadian statutory rates, to income tax expense was as
follows, for fiscal years:
EBT
Canadian statutory tax rate
Income tax expense (recovery) at statutory rate
Increase (decrease) resulting from
Non-recognition of tax benefits related to tax losses and temporary differences
Write-down of deferred income tax assets
Income tax rates differential of foreign subsidiaries and other investees
Recognition of previously unrecognized tax losses or temporary differences
Permanent differences
Effect of substantively enacted income tax rate changes
and tax status changes in certain entities
Other
Income tax expense
Effective tax rate
$
$
$
2014
(740)
26.8%
(198)
488
409
(139)
(57)
(36)
—
39
506
(68.4)%
(1) $
2013
771
26.8%
207
200
51
(33)
(211)
(36)
(6)
27
199
25.8%
(1) An income tax expense of $283 million was recorded as a result of the special item in relation to the pause of the Learjet 85 program.
The Corporation’s applicable Canadian statutory tax rate is the Federal and Provincial combined tax rate
applicable in the jurisdiction in which the Corporation operates.
Details of deferred income tax expense were as follows, for fiscal years:
Non-recognition of tax benefits related to tax losses and temporary differences
Origination and reversal of temporary differences
Write-down of deferred income tax assets
Recognition of previously unrecognized tax losses or temporary differences
Effect of substantively enacted income tax rate changes
and tax status changes in certain entities
2014
488
(486)
409
(57)
—
354
$
$
2013
200
40
51
(211)
(6)
74
$
$
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 135
Deferred income taxes
The significant components of the Corporation’s deferred income tax asset and liability were as follows, as at:
Operating tax losses carried forward
Retirement benefits
Advance and progress billings in excess
of long-term contract inventories and
advances on aerospace programs
Inventories
Provisions
Other financial assets and other assets
PP&E
Other financial liabilities and other
liabilities
Intangible assets
Other
Unrecognized deferred tax assets
$
$
December 31, 2014
Asset
Liability
1,919
609
$
— $
—
December 31, 2013
Asset
Liability
1,985
444
$
— $
—
1,007
120
428
(161)
(55)
231
(436)
175
3,837
(2,962)
875
$
—
—
—
—
—
—
—
—
—
—
— $
927
240
370
(172)
(63)
155
(821)
167
3,232
(2,001)
1,231
$
—
—
—
—
—
—
—
—
—
—
— $
The changes in the net deferred income tax asset were as follows for the fiscal years:
Balance at beginning of year, net
In net income
In OCI
Retirement benefits
Cash flow hedges
AFS financial assets
Other(1)
Balance at end of year, net
(1) Mainly comprises foreign exchange rate effects.
$
$
January 1, 2013
Liability
—
—
Asset
1,788
714
$
900
305
448
(183)
(36)
61
(591)
166
3,572
(2,151)
1,421
2014
1,231
(354)
(45)
37
—
6
875
$
$
$
—
(46)
—
—
—
—
—
—
(46)
—
(46)
2013
1,375
(74)
(87)
6
—
11
1,231
The net operating losses carried forward and deductible temporary differences for which deferred tax assets have
not been recognized amounted to $9,688 million as at December 31, 2014, of which $1,718 million relates to
retirement benefits that will reverse through OCI ($7,121 million as at December 31, 2013 of which $954 million
relates to retirement benefits that will reverse through OCI and $7,852 million as at January 1, 2013 of which
$1,678 million relates to retirement benefits that will reverse through OCI). Of these amounts, approximately
$7,383 million as at December 31, 2014 has no expiration date ($6,506 million as at December 31, 2013 and
$7,390 million as at January 1, 2013) and approximately $2,214 million relates to the Corporation’s operations in
Germany where a minimum income tax is payable on 40% of taxable income ($2,066 million as at December 31,
2013 and $1,636 million as at January 1, 2013) and $444 million relate to the Corporation’s operations in France
where a minimum income tax is payable on 50% of taxable income ($338 million as at December 31, 2013).
In addition, the Corporation has $694 million of unused investment tax credits, most of which can be carried
forward for 20 years and $80 million of net capital losses carried forward for which deferred tax assets have not
been recognized ($517 million and $57 million as at December 31, 2013). Net capital losses can be carried
forward indefinitely and can only be used against future taxable capital gains.
136 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Net deferred tax assets of $242 million were recognized as at December 31, 2014 ($639 million as at
December 31, 2013 and $821 million as at January 1, 2013) in jurisdictions that incurred losses this fiscal year or
the preceding fiscal year. Based upon the level of historical taxable income, projections for future taxable income
and prudent tax planning strategies, management believes it is probable the Corporation will realize the benefits of
these deductible differences and operating tax losses carried forward. A write-down of $283 million of previously
recognized tax assets was recorded in fiscal year 2014. As a result of the pause of the Learjet 85 program,
management believes there is uncertainty related to the recoverability of these deferred tax assets. See Note 4 –
Use of estimates and judgment for more information on how the Corporation determines the extent to which
deferred income tax assets are recognized.
No deferred tax liabilities have been recognized on undistributed earnings of the Corporation’s foreign subsidiaries,
joint ventures and associates when they are considered to be indefinitely reinvested, unless it is probable that
these temporary differences will reverse. Upon distribution of these earnings in the form of dividends or otherwise,
the Corporation may be subject to corporation and/or withholding taxes. Taxable temporary differences for which a
deferred tax liability was not recognized amount to approximately $343 million as at December 31, 2014
($364 million as at December 31, 2013 and $269 million as at January 1, 2013).
12. EARNINGS PER SHARE
Basic and diluted EPS were computed as follows, for fiscal years:
(Number of shares, stock options, PSUs and DSUs, in thousands)
Net income (loss) attributable to equity holders of Bombardier Inc.
Preferred share dividends, including taxes
Net income (loss) attributable to common equity holders of Bombardier Inc.
Weighted-average number of common shares outstanding
Net effect of stock options, PSUs and DSUs
Weighted-average diluted number of common shares
EPS (in dollars)
Basic and diluted
2014
2013
$
(1,260)
(27)
$
(1,287)
1,741,733
733
1,742,466
$
564
(32)
$
532
1,738,916
2,213
1,741,129
$
(0.74)
$
0.31
The effect of the exercise of stock options, PSUs and DSUs was included in the calculation of diluted EPS in the
above table, except for 41,274,213 stock options, PSUs and DSUs for fiscal year 2014 (45,300,120 stock options,
PSUs and DSUs for fiscal year 2013) since the average market value of the underlying shares was lower than the
exercise price, or because the predetermined target market price thresholds of the Corporation’s Class B Shares
(subordinate voting) or predetermined financial performance targets had not been met.
13.
FINANCIAL INSTRUMENTS
Net gains (losses) on financial instruments recognized in income were as follows, for fiscal years:
Financial instruments measured at amortized cost
L&R - impairment charges
Financial instruments measured at fair value
FVTP&L - changes in fair value
Designated as FVTP&L
Financial assets
Financial liabilities
Required to be classified as HFT
Derivatives not designated in hedging relationships
Other(1)
2014
2013
(5)
$
(13)
15
(14)
(101)
(12)
$
$
$
$
(37)
(13)
(20)
37
$
$
$
$
$
(1) Excluding the interest income portion related to cash and cash equivalents of $11 million for the fiscal year 2014 ($14 million for fiscal year
2013).
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 137
Carrying amounts and fair value of financial instruments
The classification of financial instruments and their carrying amounts and fair value of financial instruments were
as follows as at:
December 31, 2014
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Long-term debt(2)
Other financial liabilities
December 31, 2013
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Long-term debt(2)
Other financial liabilities
January 1, 2013
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Long-term debt(2)
Other financial liabilities
FVTP&L
HFT Designated
AFS
(1)
Amortized
cost
DDHR
Total
carrying
value Fair value
$ 2,489
—
43
$ 2,532
$
$
— $
—
578
578
$
— $
—
330
330
—
1,538
422
$ 1,960
$
$
— $
—
73
73
$
18
—
172
190
n/a
n/a
n/a
n/a
$ 4,198
7,683
719
$ 12,600
$ 3,397
—
129
$ 3,526
$
$
— $
—
673
673
$
— $
—
315
315
—
1,492
425
$ 1,917
$
$
— $
—
25
25
$
—
—
142
142
n/a
n/a
n/a
n/a
$ 4,089
7,203
958
$ 12,250
$ 2,557
—
92
$ 2,649
$
$
— $
—
697
697
$
— $
—
217
217
—
1,311
133
$ 1,444
$
$
— $
—
15
15
$
—
—
158
158
n/a
n/a
n/a
n/a
$ 3,310
5,405
712
$ 9,427
$
$
$
$
$
$
$
$
$
$
$
$
— $ 2,489
1,538
—
1,858
485
$ 5,885
485
— $ 4,216
7,683
—
1,556
592
$ 13,455
592
— $ 3,397
1,492
—
2,205
663
$ 7,094
663
— $ 4,089
7,203
—
1,511
386
$ 12,803
386
— $ 2,557
1,311
—
1,782
643
$ 5,650
643
— $ 3,310
5,405
—
1,011
126
$ 9,726
126
$ 2,489
1,538
1,869
$ 5,896
$ 4,216
7,692
1,655
$ 13,563
$ 3,397
1,492
2,203
$ 7,092
$ 4,089
7,346
1,656
$ 13,091
$ 2,557
1,311
1,782
$ 5,650
$ 3,310
5,272
1,146
$ 9,728
(1) Financial assets are classified as L&R and financial liabilities as other than HFT.
(2) Includes the current portion of long-term debt.
n/a: Not applicable
138 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Offsetting financial assets and financial liabilities
The Corporation is subject to enforceable master netting agreements related mainly to its derivative financial
instruments and cash and cash equivalents which contain a right of set-off in case of default, insolvency or
bankruptcy. The amounts that are subject to the enforceable master netting agreements, but which do not meet
some or all of the offsetting criteria, are as follows as at :
Description of recognized financial assets
and liabilities
Amount recognized
in the financial
statements
Amounts subject
to master netting
agreements
Net amount not
subject to master
netting agreements
December 31, 2014
Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents
December 31, 2013
Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents
$
$
$
$
$
$
528
(665)
2,489
792
(411)
3,397
$
$
$
$
$
$
(271)
344
(73)
(304)
316
(12)
$
$
$
$
$
$
257
(321)
2,416
488
(95)
3,385
Derivatives and hedging activities
The carrying amounts of all derivative and non-derivative financial instruments in a hedge relationship were as
follows, as at:
Derivative financial instruments
designated as fair value hedges
Cross-currency interest-rate swaps
Interest-rate swaps
Derivative financial instruments
designated as cash flow hedges(1)
Forward foreign exchange contracts
Derivative financial instruments
classified as HFT(2)
Forward foreign exchange contracts
Interest-rate swaps
Embedded derivative financial
instruments
Foreign exchange
Call options on long-term debt
December 31, 2014
Liabilities
Assets
December 31, 2013
Liabilities
Assets
January 1, 2013
Liabilities
Assets
$
— $
226
226
259
29
—
—
14
43
— $
—
—
592
72
1
—
—
73
36
296
332
331
27
—
1
101
129
$
— $
67
67
319
22
2
1
—
25
$
17
394
411
232
13
—
3
76
92
6
—
6
120
12
2
1
—
15
Total derivative financial
instruments
Non-derivative financial
instruments designated as
hedges of net investment
Long-term debt
$
$
528
$
665
$
792
$
411
$
735
$
141
— $
23
$
— $
517
$
— $
1,042
(1) The maximum length of time of derivative financial instruments hedging the Corporation’s exposure to the variability in future cash flows for
anticipated transactions is 35 months as at December 31, 2014.
(2) Held as economic hedges, except for embedded derivative financial instruments.
The net gains on hedging instruments designated in fair value hedge relationships and net losses on the related
hedged items attributable to the hedged risk recognized in financing expense, amounted to $173 million and $168
million respectively for fiscal year 2014 (net losses of $205 million and net gains of $213 million respectively for
fiscal year 2013).
The methods and assumptions used to measure the fair value of financial instruments are described in Note 33 –
Fair value of financial instruments.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 139
14. CASH AND CASH EQUIVALENTS
Cash and cash equivalents were as follows, as at:
Cash
Cash equivalents
Term deposits
Money market funds
Cash and cash equivalents
$
December 31, 2014
997
$
December 31, 2013
1,475
$
January 1, 2013
916
$
796
696
2,489
$
762
1,160
3,397
$
656
985
2,557
See Note 30 – Credit facilities for details on covenants related to cash and cash equivalents.
15.
TRADE AND OTHER RECEIVABLES
Trade and other receivables were as follows, as at:
December 31, 2014(1)(2)
Trade receivables, gross
Allowance for doubtful accounts
Other
Total
December 31, 2013(1)(2)
Trade receivables, gross
Allowance for doubtful accounts
Other
Total
January 1, 2013(1)(2)
Trade receivables, gross
Allowance for doubtful accounts
Other
Total
Total
1,453
(39)
1,414
124
1,538
1,430
(44)
1,386
106
1,492
1,256
(34)
1,222
89
1,311
$
$
$
$
$
$
$
$
$
$
$
$
Not past
due
Past due but not impaired (3)
less than
90 days
more than
90 days
Impaired (4)
717
—
717
796
—
796
813
—
813
$
$
$
$
$
$
238
—
238
194
—
194
204
—
204
$
$
$
$
$
$
381
—
381
359
—
359
200
—
200
$
$
$
$
$
$
117
(39)
78
81
(44)
37
39
(34)
5
(1) Of which $355 million and $475 million are denominated in euros and other foreign currencies, respectively, as at December 31, 2014
($465 million and $411 million, respectively, as at December 31, 2013 and $396 million and $356 million, respectively, as at
January 1, 2013).
(2) Of which $419 million represents customer retentions relating to long-term contracts as at December 31, 2014 based on normal terms and
conditions ($392 million as at December 31, 2013 and $240 million as at January 1, 2013).
(3) Of which $525 million of trade receivables relates to BT long-term contracts as at December 31, 2014, of which $376 million were more
than 90 days past due ($509 million as at December 31, 2013, of which $353 million were more than 90 days past due and $335 million as
at January 1, 2013, of which $190 million were more than 90 days past due). BT assesses whether these receivables are collectible as part
of its risk management practices applicable to long-term contracts as a whole.
(4) Of which a gross amount of $71 million of trade receivables are individually impaired as at December 31, 2014 ($73 million as at December
31, 2013 and $34 million as at January 1, 2013).
The factors that the Corporation considers to classify trade receivables as impaired are as follows: the customer
is in bankruptcy or under administration, payments are in dispute, or payments are in arrears. Further information
on financial risk is provided in Note 32 – Financial risk management.
140 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Allowance for doubtful accounts – Changes in the allowance for doubtful accounts were as follows, for fiscal
years:
Balance at beginning of year
Provision for doubtful accounts
Amounts written-off
Recoveries
Effect of foreign currency exchange rate changes
Balance at end of year
2014
(44)
(5)
(1)
8
3
(39)
$
$
2013
(34)
(13)
3
3
(3)
(44)
$
$
Off-balance sheet factoring facilities
In the normal course of its business, BT has factoring facilities to which it can sell, without credit recourse,
qualifying trade receivables. Trade receivables of € 974 million ($1,183 million) were outstanding under such
facilities as at December 31, 2014 (€ 1,084 million ($1,495 million) as at December 31, 2013 and € 886 million
($1,169 million) as at January 1, 2013). Trade receivables of € 1,287 million ($1,712 million) were sold to these
facilities during fiscal year 2014 (€ 1,213 million ($1,611 million) during fiscal year 2013).
16.
INVENTORIES
Inventories were as follows, as at:
Aerospace programs
Long-term contracts
Production contracts
Cost incurred and recorded margins
Less: advances and progress billings
Service contracts
Cost incurred and recorded margins
Less: advances and progress billings
Finished products(1)
December 31, 2014
4,600
$
December 31, 2013
4,847
$
January 1, 2013
4,345
$
7,369
(5,558)
1,811
310
(17)
293
1,266
7,970
$
7,064
(5,406)
1,658
420
(19)
401
1,328
8,234
$
5,387
(4,014)
1,373
408
(15)
393
1,429
7,540
$
(1) Finished products include 1 new aircraft not associated with a firm order and 57 pre-owned aircraft, totalling $485 million as at
December 31, 2014 (11 new aircraft and 43 pre-owned aircraft, totalling $535 million as at December 31, 2013 and 3 new aircraft and 74
pre-owned aircraft, totalling $551 million as at January 1, 2013).
Finished products as at December 31, 2014 include $248 million of pre-owned aircraft legally sold to third parties
and leased back under sale and leaseback facilities ($134 million as at December 31, 2013 and $147 million as at
January 1, 2013). The related sales proceeds are accounted for as sale and leaseback obligations.
The amount of inventories recognized as cost of sales totalled $16,426 million for fiscal year 2014
($14,106 million for fiscal year 2013). These amounts include $172 of write-downs for fiscal year 2014 ($147
million for fiscal year 2013). An additional write-down of $21 million is recognized in special items for fiscal year
2014 ($24 million for fiscal year 2013). See Note 8 – Special items for more details.
Under certain contracts, title to inventories is vested to the customer as the work is performed, in accordance with
contractual arrangements and industry practice. In addition, in the normal course of business, the Corporation
provides performance bonds, bank guarantees and other forms of guarantees to customers, mainly in BT, as
security for advances received from customers pending performance under certain contracts. In accordance with
industry practice, the Corporation remains liable to the purchasers for the usual contractor’s obligations relating to
contract completion in accordance with predetermined specifications, timely delivery and product performance.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 141
Advances and progress billings received on long-term contracts in progress were $7,273 million as at
December 31, 2014 ($7,777 million as at December 31, 2013 and $5,792 million as at January 1, 2013).
Revenues include revenues from BT long-term contracts, which amounted to $7,366 million for fiscal year 2014
($6,409 million for fiscal year 2013).
17. OTHER FINANCIAL ASSETS
Other financial assets were as follows, as at:
Derivative financial instruments(1)
Investments in financing structures(2)
Investments in securities(2) (3)
Long-term contract receivables
Aircraft loans and lease receivables(2) (4)
Restricted cash
Other
Of which current
Of which non-current
$
December 31, 2014
528
360
346
321
275
17
11
1,858
530
1,328
1,858
$
$
$
$
December 31, 2013
792
331
335
319
400
19
9
2,205
637
1,568
2,205
$
$
$
January 1, 2013
735
329
243
—
423
25
27
1,782
443
1,339
1,782
$
$
$
$
(1) See Note 13 – Financial instruments.
(2) Carried at fair value, except for $12 million of aircraft loans and lease receivables, $16 million of investments in securities and $45 million of
investment in financing structures carried at amortized cost as at December 31, 2014 ($12 million, $20 million and $46 million, respectively,
as at December 31, 2013 and $11 million, $26 million and $44 million, respectively, as at January 1, 2013).
(3) Includes $70 million of securities to secure contingent capital contributions to be made in relation to guarantees issued in connection with
the sale of aircraft as at December 31, 2014 ($70 million as at December 31, 2013, and nil as at January 1, 2013).
(4) Financing with three airlines represents 64% of the total aircraft loans and lease receivables as at December 31, 2014 (four airlines
represented 59% as at December 31, 2013 and four airlines represented 60% as at January 1, 2013). Aircraft loans and lease receivables
are generally collateralized by the related assets. The value of the collateral is closely related to commercial airline industry performance
and aircraft-specific factors (age, type-variant and seating capacity), as well as other factors.
18. OTHER ASSETS
Other assets were as follows, as at:
Prepaid expenses
Sales tax and other taxes
Retirement benefits(1)
Intangible assets other than aerospace program
tooling and goodwill(2)
Deferred financing charges
Flexjet fractional ownership deferred costs
Other
Of which current
Of which non-current
(1) See Note 21 – Retirement benefits.
(2) See Note 20 – Intangible assets.
$
December 31, 2014
760
302
159
$
December 31, 2013
620
344
174
$
January 1, 2013
366
281
38
156
138
—
33
1,548
592
956
1,548
$
$
$
186
100
—
9
1,433
626
807
1,433
$
$
$
210
103
206
30
1,234
564
670
1,234
$
$
$
142 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
19. PROPERTY, PLANT AND EQUIPMENT
PP&E were as follows, as at:
Cost
Balance as at December 31, 2013
Additions
Disposals
Transfers
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2014
Accumulated amortization and impairment
Balance as at December 31, 2013
Amortization
Disposals
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2014
Net carrying value
Cost
Balance as at January 1, 2013
Additions
Disposals
Transfers
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2013
Accumulated amortization and impairment
Balance as at January 1, 2013
Amortization
Disposals
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2013
Net carrying value
Land Buildings Equipment
Construction
in progress
Other
Total
$
98
—
—
—
$
2,218
41
(5)
279
$
1,287
45
(81)
124
$
356
228
—
(407)
429
2
(12)
4
$ 4,388
316
(98)
—
(7)
91
$
(120)
2,413
$
(28)
1,347
$
(6)
171
$
(1)
422
(162)
$ 4,444
— $
—
—
—
— $
$
91
(1,232) $
(65)
4
81
(1,212) $
$
1,201
(825) $
(107)
66
2
(864) $
$
483
— $
—
—
(265) $ (2,322)
(189)
80
(17)
10
—
— $
$
171
(4)
79
(276) $ (2,352)
$ 2,092
146
Land
Buildings
Equipment
Construction
in progress
Other
Total
99
1
(3)
—
1
98
$
$
— $
—
—
—
— $
$
98
$
2,132
68
(29)
13
$
1,333
41
(149)
68
34
2,218
$
(6)
1,287
$
(1,164) $
(60)
17
(25)
(1,232) $
$
986
(832) $
(104)
101
10
(825) $
$
462
179
254
—
(78)
1
356
$
$
447
27
(42)
(3)
$ 4,190
391
(223)
—
—
429
30
$ 4,388
— $
—
—
(261) $ (2,257)
(182)
130
(18)
12
—
— $
$
356
2
(13)
(265) $ (2,322)
$ 2,066
164
$
$
$
$
$
$
$
$
$
$
Included in the above table are assets under finance lease, where the Corporation is the lessee, presented in
Other, with cost and accumulated amortization amounting to $243 million and $91 million, respectively, as at
December 31, 2014 ($195 million and $83 million as at December 31, 2013 and $225 million and $103 million as
at January 1, 2013).
Also included in the previous table are aircraft under operating leases where the Corporation is the lessor,
presented in Other, with a cost and accumulated amortization amounting to $35 million and $14 million,
respectively, as at December 31, 2014 ($40 million and $12 million as at December 31, 2013 and $51 million and
$12 million as at January 1, 2013). Rental income from operating leases and amortization of assets under
operating leases amounted to $5 million and $2 million, respectively, for fiscal year 2014 ($10 million and
$3 million, respectively, for fiscal year 2013).
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 143
20.
INTANGIBLE ASSETS
Intangible assets were as follows, as at:
Aerospace program tooling
Goodwill
Other (1)(2)
Total
Acquired
Internally
generated
Total (3)
Cost
Balance as at December 31, 2013
$
Additions
Disposals
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2014
$
Accumulated amortization and impairment
$
Balance as at December 31, 2013
Amortization
Impairment
Disposals
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2014
Net carrying value
Cost
Balance as at January 1, 2013
Additions
Disposals
Effect of foreign currency
exchange rate changes
$
$
$
Balance as at December 31, 2013
$
Accumulated amortization and impairment
$
Balance as at January 1, 2013
Amortization
Disposals
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2013
Net carrying value
1,404
235
—
—
1,639
$
$
8,503
1,421
(1)
$ 9,907
1,656
(1)
—
9,923
—
$ 11,562
(620) $
(11)
(69)
—
(2,681) $ (3,301)
(172)
(1,266)
—
(161)
(1,197)
—
—
(700) $
$
939
—
—
(4,039) $ (4,739)
$ 6,823
5,884
$
$
$
$
$
2,381
11
—
(265)
2,127
$
$
— $
—
—
—
—
— $
$
2,127
739
33
(10)
(48)
714
(553)
(56)
—
10
41
(558)
156
$ 13,027
1,700
(11)
(313)
$ 14,403
$ (3,854)
(228)
(1,266)
10
41
$ (5,297)
$ 9,106
Aerospace program tooling
Goodwill
Other (1) (2)
Total
Acquired
Internally
generated
Total (3)
1,254
150
—
—
1,404
$
$
6,670
1,834
(1)
$ 7,924
1,984
(1)
—
8,503
—
$ 9,907
(604) $
(16)
—
(2,550) $ (3,154)
(147)
—
(131)
—
—
(620) $
$
784
—
—
(2,681) $ (3,301)
$ 6,606
5,822
$
$
$
$
$
$
$
2,316
—
—
65
2,381
$
$
— $
—
—
—
— $
$
2,381
737
44
(56)
14
739
(527)
(62)
47
(11)
(553)
186
$ 10,977
2,028
(57)
79
$ 13,027
$ (3,681)
(209)
47
(11)
$ (3,854)
$ 9,173
(1) Presented in Note 18 – Other assets.
(2) Includes internally generated intangible assets with a cost and accumulated amortization of $367 million and $254 million, respectively, as
at December 31, 2014 ($359 million and $243 million as at December 31, 2013 and $325 million and $207 million as at January 1, 2013).
(3) Includes intangible assets under development with a cost of $6,126 million as at December 31, 2014 ($5,923 million as at
December 31, 2013 and $4,059 million as at January 1, 2013).
Aerospace program tooling
The net carrying value of aerospace program tooling comprises $4,359 million for commercial aircraft and $2,464
million for business aircraft as at December 31, 2014 ($3,746 million and $2,860 million, respectively, as at
December 31, 2013 and $2,766 million and $2,004 million, respectively, as at January 1, 2013).
144 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Learjet 85 business aircraft program
On January 15, 2015 the Corporation announced its decision to pause the Learjet 85 business aircraft program.
The pause follows a downward revision of Bombardier’s business aircraft market forecast, primarily due the
continued weakness of the light aircraft category since the economic downturn. As a result, the Corporation
performed an impairment test on the Learjet 85 cash generating unit (the “Learjet 85 program”) which principally
consists of capitalized development costs. The Corporation determined that the Learjet 85 program carrying
amount exceeded its recoverable amount, and accordingly recorded an impairment charge of $1,266 million in
special items related to the Learjet 85 development costs.
The recoverable amount of the Learjet 85 program was based on fair value less costs of disposal. The fair value
measurement of the Learjet 85 program is categorized within level 3 of the fair value hierarchy. The estimate of
the fair value less costs of disposal was determined using forecasted cash flows based on long-range forecasts
prepared by management thereafter, and an after tax discount rate of 8% based on a benchmark sampling of
publicly traded companies in the aerospace sector. The forecasted cash flows for the Learjet 85 recoverable
amount assume a 25 year program life which reflects incremental investments related to improvements and
variants, followed by an additional 10 year period of after-market sales.
Additional information related to the Corporation’s impairment testing methodology for aerospace program tooling
is included in Note 4 - Use of estimates and judgment.
Goodwill
Goodwill is related to the DaimlerChrysler Rail Systems GmbH (Adtranz) acquisition in May 2001. Goodwill is
monitored by management at the BT operating segment level. During the fourth quarter of fiscal year 2014, the
Corporation completed an impairment test. The Corporation did not identify any impairment. See Note 4 – Use of
estimates and judgment for more details.
21. RETIREMENT BENEFITS
The Corporation sponsors several funded and unfunded defined benefit pension plans as well as defined
contribution pension plans in Canada and abroad, covering a majority of its employees. The Corporation also
provides other unfunded defined benefit plans, covering certain groups of employees mainly in Canada and the
U.S.
Pension plans are categorized as defined benefit (“DB”) or defined contribution (“DC”). DB plans specify the
amount of benefits an employee is to receive at retirement, while DC plans specify how contributions are
determined. As a result, there is no deficit or surplus for DC plans. Hybrid plans are a combination of DB and DC
plans.
Funded plans are plans for which segregated plan assets are invested in trust. Unfunded plans are plans for which
there are no segregated plan assets, as the establishment of segregated plan assets is generally not permitted or
not in line with local practice.
FUNDED DB PLANS
The Corporation’s major DB plans reside in Canada, the U.K. and the U.S., therefore very significant portions of
the DB pension plan assets and benefit obligation are located in those countries. The following text focuses mainly
on plans registered in these three countries.
Governance
Under applicable pension legislations, the administrator of each plan is either the Corporation, in the case of U.S.
plans and Canadian plans registered outside of Québec, or a pension committee, board of trustees or corporate
trustee in the case of plans registered in Québec and the U.K.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 145
Plan administrators are responsible for the management of plan assets and the establishment of investment
policies, which define, for each plan, investment objectives, target asset allocation, risk mitigation strategies, and
other elements required by pension legislation.
Plan assets are pooled in three common investment funds (CIFs) for Canadian, U.K. and U.S. plans, respectively,
in order to achieve economies of scale and greater efficiency, diversification and liquidity. The CIFs are broken
down by sub-funds or asset classes in order to allow each plan to have its own asset allocation given its
associated pension obligation liability profile.
The management of the CIFs has been delegated to three (Canadian, U.K. and U.S.) investment committees
(ICs). The ICs are responsible for allocating assets among various sub-funds and asset classes in accordance with
each plan’s investment policy. They are also responsible for hiring, monitoring and terminating investment
managers and have established a multi-manager structure for each sub-fund and asset class. They are supported
by Bombardier Inc. Pension Asset Management Services, who oversee the management of the plans’ assets and
of the CIFs on a daily basis. Daily administration of the plans is delegated to either Bombardier Inc. or to external
pension administration service providers. The administrators, the ICs and Bombardier Inc. also rely on the
expertise of external legal advisors, actuaries, auditors and investment consultants.
Benefit Policy
DB plan benefits are based on salary and years of service. In Canada and the U.S., since September 1, 2013, all
new non-unionized employees join DC plans (i.e. they no longer have the option of joining DB or hybrid plans).
Employees who are members of a DB or hybrid plan closed to new members continue to accrue service in their
original plan.
In the U.K., seven out of nine DB plans are closed to new members. New employees join DC plans. Pension
entitlements are indexed to inflation according to pension legislation and plan rules.
Funding requirements
Actuarial valuations are conducted by independent firms hired by the Corporation or the administrators, as required
by pension legislation. The purpose of the valuations is to determine the plans’ financial position and the annual
contributions to be made by the Corporation to fund both benefits accruing in the year (normal cost) and deficits
accumulated over prior years. Minimum funding requirements are set out by applicable pension legislations.
Pension plans in Canada are governed under the Supplemental Pension Plans Act in Québec, the Pension
Benefits Act in Ontario, the Pension Benefits Standards Act of 1985 for plans under federal authority, and the
Income Tax Act. Actuarial valuations are required at least every three years. Depending on the jurisdiction and the
funded status of the plan, actuarial valuations may be required annually. Contributions are determined by the
appointed actuary and cover the going-concern normal costs and deficits (established under the assumption that
the plan will continue to be in force) or solvency deficits (established under the assumption that the plan stops its
operations and is being liquidated), as prescribed by laws and actuarial practices. Under the laws in effect,
minimum contributions are required to amortize the going-concern deficits over a period of fifteen years and
solvency deficits over a period of five years. Temporary solvency relief measures put in place to mitigate the
adverse effects of the 2008 financial crisis allow for the amortization of solvency deficits over a period of up to ten
years.
Pension plans in the U.S. are mainly governed under the Employee Retirement Income Security Act, the Internal
Revenue Code, the Pension Protection Act of 2006 and the Highway and Transportation Funding Act. Actuarial
valuations are required annually. Contributions are determined by appointed actuaries and cover normal cost and
deficits as prescribed by law. Funding deficits are generally amortized over a period of seven years.
Pension plans in the U.K. are governed under the Pensions Act of 2004. Actuarial valuations are required at least
every three years. The funding deficit amortization period is determined jointly by the administrators and the
Corporation.
146 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Investment Policy
The investment policies are established to achieve a long-term investment return so that, in conjunction with
contributions, the plans have sufficient assets to pay for the promised benefits while maintaining a level of risk that
is acceptable given the tolerance of plan stakeholders. See below for more information about risk management
initiatives.
The target asset allocation is determined based on expected economic and market conditions, the maturity profile
of the plans’ liabilities, the funded status of the respective plans and the plan stakeholders’ tolerance to risk.
The plans’ investment strategy is to invest broadly in fixed income and equity securities and to have a smaller
portion of the funds’ assets invested in real return asset securities (global infrastructure and real estate listed
securities).
As at December 31, 2014, the average target asset allocation was as follows:
- 52%, 50% and 51% in fixed income securities, for Canadian, U.K. and U.S. plans, respectively;
38%, 35% and 44% in equity securities, for Canadian, U.K. and U.S. plans, respectively; and
-
10%, 15% and 5% in real return asset securities, for Canadian, U.K. and U.S. plans, respectively.
-
In addition, to mitigate interest rate risk, interest rate hedging overlay portfolios (comprised of long-term interest
rate swaps and long-term Gilt forwards) were implemented in 2013 for most of the plans. The interest rate hedging
overlay portfolios were liquidated in 2014 to crystallize the gains realized from declining bond yields. These
portfolios will be re-implemented when the market will be favorable.
The plan administrators have also established dynamic de-risking strategies. As a result, asset allocation will likely
become more conservative in the future and interest rate hedging overlay portfolios are likely to be established as
plan funding status and market conditions continue to improve. Bombardier Inc. Pension Asset Management
Services monitors the de-risking triggers on a daily basis to ensure timely and efficient implementation of these
strategies. The Corporation and administrators periodically undertake asset and liability studies to determine the
appropriateness of the investment policies and de-risking strategies.
Risk management initiatives
The Corporation’s pension plans are exposed to various risks, including equity, interest rate, inflation, foreign
exchange, liquidity and longevity risks. Several risk strategies and policies have been put in place to mitigate the
impact these risks could have on the funded status of DB plans and on the future level of contributions by the
Corporation. The following is a description of key risks together with the mitigation measures in place to address
them.
Equity risk
Equity risk is the risk that results from fluctuations in equity prices. This risk is managed by maintaining
diversification of portfolios across geographies, industry sectors and investment strategies.
Interest rate risk
Interest rate risk is the risk that results from fluctuations in the fair value of plan assets and liabilities due to
movements in interest rates. This risk is managed by reducing the mismatch between the duration of plan assets
and the duration of pension obligation. This is accomplished by having a portion of the portfolio invested in long-
term fixed income securities and interest rate hedging overlay portfolios.
Inflation risk
Inflation risk is the risk that benefits indexed to inflation increase significantly as a result of changes in inflation
rates. To manage this risk, the benefit indexation has been capped in certain plans and a portion of plan assets has
been invested in real return asset securities and real return fixed income securities.
Foreign exchange risk
Currency risk exposure arises from fluctuations in the fair value of plan assets denominated in a currency other
than the currency of the plan liabilities. Currency risk is managed with foreign currency hedging strategies as per
plan investment policies.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 147
Liquidity risk
Liquidity risk is the risk stemming from holding assets which cannot be readily converted to cash when needed for
the payment of benefits or to rebalance the portfolios. Liquidity risk is managed through investment in government
bonds and equity futures and by having no investments in private placements or hedge funds.
Longevity risk
Longevity risk is the risk that increasing life expectancy results in longer-than-expected benefit payments. This risk
is mitigated by using the most recent mortality tables to set the level of contributions.
UNFUNDED DB PLANS
Unfunded plans are located in countries where the establishment of funds for segregated plan assets is generally
not permitted or not in line with local practice. The Corporation's main unfunded DB plans are located in Germany.
Nearly half of the German unfunded DB plan liability relates to plans for which benefits no longer accrue. The
Corporation contributes annually to the Pensions Sicherungs Verein, Germany’s pension protection association,
which provides protection for pension benefits up to certain limits in the event that plan sponsors become
insolvent.
DC PLANS
A growing proportion of employees are participating in DC plans and, as a result, contributions to DC plans have
increased over the past several years. The largest DC plans are located in Canada and in the U.S. The plan
administrators and ICs oversee the management of DC plan assets.
OTHER PLANS
The Corporation also provides other unfunded defined benefit plans, consisting essentially of post-retirement
healthcare coverage, life insurance benefits and retirement allocations mainly in Canada for BA. The Corporation
provides post-retirement life insurance and post-retirement health care, with provisions that vary between groups
of employees in Canada. New non-unionized hires are generally no longer offered post-retirement health care and
receive, instead, lump sum retirement allocations.
RETIREMENT BENEFITS PLANS
The following table provides the components of the retirement benefit cost, for fiscal years:
Current service cost
Accretion expense
Past service cost (credit)
Curtailment
Settlement
Other
DB plans
DC plans
Total retirement benefit cost
Related to
Funded DB plans
Unfunded DB plans
DC plans
Recorded as follows
EBIT expense or capitalized cost
Financing expense
n/a: Not applicable
Pension
benefits
273
61
(2)
(22)
(2)
2
310
90
400
264
46
90
339
61
$
$
$
$
$
$
$
Other
benefits
7
15
(3)
1
—
—
20
—
20
n/a
20
n/a
5
15
$
$
$
$
$
$
$
$
$
$
$
$
2014
Total
280
76
(5)
(21)
(2)
2
330
90
420
264
66
90
344
76
Pension
benefits
301
96
—
(15)
(3)
1
380
87
467
335
45
87
371
96
$
$
$
$
$
$
$
Other
benefits
12
17
—
—
—
—
29
—
29
n/a
29
n/a
12
17
$
$
$
$
$
$
$
$
$
$
$
$
2013
Total
313
113
—
(15)
(3)
1
409
87
496
335
74
87
383
113
148 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Changes in the cumulative amount of remeasurements gains (losses) of defined benefit plans recognized in OCI,
and presented as a separate component of deficit, were as follows, for fiscal years:
Gains (losses)
Balance as at January 1, 2013
Impact of asset ceiling
Actuarial gains, net
Effect of exchange rate changes
Income taxes
Balance as at December 31, 2013
Impact of asset ceiling
Actuarial gains, net
Effect of exchange rate changes
Income taxes
Balance as at December 31, 2014
$
$
(2,794)
(30)
865
76
(87)
(1,970)
28
(767)
93
(45)
(2,661)
The following tables present the changes in the defined benefit obligation and fair value of pension plan assets, for
fiscal years:
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Change in benefit obligation
Obligation at beginning of year
Accretion
Current service cost
Plan participants' contributions
Past service cost (credit)
Actuarial losses (gains) - changes in
financial assumptions
Actuarial losses (gains) - changes in
experience adjustments
Actuarial losses (gains) - changes in
demographic assumptions
Benefits paid
Curtailment
Settlement
Other
Effect of exchange rate changes
Obligation at end of year
Obligation is attributable to
Active members
Deferred members
Retirees
Change in plan assets
Fair value at beginning of year
Employer contributions
Plan participants' contributions
Interest income on plan assets
Actuarial gains
Benefits paid
Settlement
Administration costs
Effect of exchange rate changes
Fair value at end of year
$
9,955
444
273
39
(2)
1,470
(98)
58
(333)
(22)
(26)
2
(797)
$ 10,963
$
5,912
1,443
3,608
$ 10,963
$
$
8,332
370
39
383
676
(333)
(24)
(9)
(614)
8,820
$
$
$
$
$
$
2014
Total
$ 10,290
459
280
39
(5)
1,514
(121)
50
(349)
(21)
(26)
2
(822)
$ 11,290
$
6,112
1,443
3,735
$ 11,290
335
15
7
—
(3)
44
(23)
(8)
(16)
1
—
—
(25)
327
200
—
127
327
— $
16
—
—
—
(16)
—
—
—
— $
8,332
386
39
383
676
(349)
(24)
(9)
(614)
8,820
$
$
$
$
$
$
9,979
416
301
41
—
(432)
65
104
(294)
(15)
(3)
(26)
(181)
9,955
5,485
1,298
3,172
9,955
7,434
467
41
320
528
(294)
—
(9)
(155)
8,332
$
$
$
$
$
$
2013
Total
$ 10,395
433
313
41
—
(466)
59
70
(308)
(15)
(3)
(26)
(203)
$ 10,290
$
5,692
1,298
3,300
$ 10,290
416
17
12
—
—
(34)
(6)
(34)
(14)
—
—
—
(22)
335
207
—
128
335
— $
14
—
—
—
(14)
—
—
—
— $
7,434
481
41
320
528
(308)
—
(9)
(155)
8,332
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 149
The following table presents the reconciliation of plan assets and obligations to the amount recognized in the
consolidated statements of financial position, as at:
Present value of defined benefit
obligation
Fair value of plan assets
Impact of asset ceiling test(1)
Net amount recognized
Amounts included in:
Retirement benefit
Liability
Asset(2)
Net liability
December 31, 2014
Other
benefits
Pension
benefits
December 31, 2013
Other
benefits
Pension
benefits
January 1, 2013
Other
benefits
Pension
benefits
$ 10,963
(8,820)
2,143
—
2,143
$
$
$
2,302
(159)
2,143
$
$
$
$
327
—
327
—
327
327
—
327
$
$
$
$
9,955
(8,332)
1,623
29
1,652
1,826
(174)
1,652
$
$
$
$
335
—
335
—
335
335
—
335
$
$
$
$
9,979
(7,434)
2,545
—
2,545
2,583
(38)
2,545
$
$
$
$
416
—
416
—
416
416
—
416
(1) Comprises the effect of exchange rate changes.
(2) Presented in Note 18 – Other assets.
The following table presents the allocation of the net retirement benefit liability by major countries, as at:
Funded pension plans
Canada
U.S.
U.K.
Other
Unfunded pension plans
Germany
Canada
U.S.
Other
Net liability
December 31, 2014
Other
benefits
Pension
benefits
December 31, 2013
Other
benefits
Pension
benefits
January 1, 2013
Other
benefits
Pension
benefits
$
$
826
347
74
103
1,350
560
29
32
172
793
2,143
$
$
— $
—
—
—
—
—
290
26
11
327
327
$
502
186
125
114
927
515
29
26
155
725
1,652
$
$
— $
—
—
—
—
—
301
25
9
335
335
$
1,138
333
170
167
1,808
517
33
27
160
737
2,545
$
$
—
—
—
—
—
—
373
28
15
416
416
The following table presents the allocation of benefit obligation and plan assets by major countries, as at:
Funded pension plans
Canada
U.K.
U.S.
Other
Unfunded pension plans
December 31, 2014
Plan
Benefit
assets
obligation
December 31, 2013
Plan
Benefit
assets
obligation
January 1, 2013
Plan
assets
Benefit
obligation
$
5,015
3,805
946
404
10,170
1,120
$ 11,290
$
$
4,189
3,731
599
301
8,820
—
8,820
$
4,479
3,570
750
431
9,230
1,060
$ 10,290
$
$
4,006
3,445
564
317
8,332
—
8,332
$
4,823
3,121
846
452
9,242
1,153
$ 10,395
$
$
3,685
2,951
513
285
7,434
—
7,434
150 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The fair value of plan assets by level of hierarchy, was as follows, as at:
Cash and cash equivalents
Equity securities
U.S.
U.K.
Canada
Other
Fixed-income securities
Corporate
Government
Other
Real return asset securities
Other
Cash and cash equivalents
Equity securities
U.S.
U.K.
Canada
Other
Fixed-income securities
Corporate
Government
Other
Real return asset securities
Other
Cash and cash equivalents
Equity securities
U.S.
U.K.
Canada
Other
Fixed-income securities
Corporate
Government
Other
Real return asset securities
Other
Total
673
Level 1
548
$
$
$
931
389
359
1,110
2,789
1,201
2,642
27
3,870
911
577
8,820
Total
503
1,022
509
409
1,290
3,230
855
2,483
23
3,361
876
362
8,332
Total
215
1,009
465
446
1,260
3,180
970
2,089
22
3,081
653
305
7,434
927
371
359
1,110
2,767
—
—
—
—
911
—
4,226
Level 1
398
1,018
489
409
1,288
3,204
—
—
—
—
876
—
4,478
Level 1
90
1,006
445
446
1,258
3,155
—
—
—
—
653
—
3,898
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
December 31, 2014
Level 3
—
$
Level 2
125
—
18
—
—
18
1,201
2,642
27
3,870
—
503
4,516
$
4
—
—
—
4
—
—
—
—
—
74
78
December 31, 2013
Level 3
—
$
Level 2
105
—
20
—
—
20
855
2,483
23
3,361
—
289
3,775
$
4
—
—
2
6
—
—
—
—
—
73
79
Level 2
125
January 1, 2013
Level 3
—
$
—
20
—
—
20
970
2,089
22
3,081
—
238
3,464
$
3
—
—
2
5
—
—
—
—
—
67
72
Plan assets did not include any of the Corporation’s shares, nor any property occupied by the Corporation or other
assets used by the Corporation as at December 31, 2014, 2013 and January 1, 2013.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 151
The following table presents the contributions made for fiscal year 2014 and 2013 as well as the estimated
contributions for fiscal year 2015:
Contribution to
Funded pension plans
Unfunded pension plans
Other benefits
Total defined benefits plans
DC pension plans
Total contributions
2015
Estimated
2014
2013
$
$
296
24
17
337
91
428
$
$
342
28
16
386
90
476
$
$
440
27
14
481
87
568
The following table presents information about the maturity profile of the defined benefit obligation expected to be
paid, as at:
Benefits expected to be paid
Within 1 year
Between 1 and 5 years
Between 5 and 10 years
Between 10 and 15 years
Between 15 and 20 years
December 31, 2014
$
$
298
1,405
2,262
2,824
3,161
9,950
The following table provides the weighted average duration of the defined benefit obligations related to pension
plans, as at:
Duration in years as at
Funded pension plans
Canada
U.S.
U.K.
Other
Unfunded pension plans
Germany
Canada
U.S.
Other
December 31, 2014
17.8
15.6
20.7
13.9
17.7
13.7
13.7
16.0
The following table provides the expected payments to be made under the unfunded plans, as at December 31,
2014:
Benefits expected to be paid
Within 1 year
Between 1 and 5 years
Between 5 and 10 years
Between 10 and 15 years
Between 15 and 20 years
Germany
Other
Total
$
$
18
82
123
158
184
565
$
$
22
98
145
164
172
601
$
$
40
180
268
322
356
1,166
152 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The significant actuarial assumptions reflect the economic situation of each country. The weighted-average
assumptions used to determine the benefit cost and obligation were as follows, as at:
(in percentage)
Benefit cost
Discount rate
Rate of compensation increase
Inflation rate
Ultimate health care cost trend rate
Benefit obligation
Discount rate
Rate of compensation increase
Inflation rate
Initial health care cost trend rate
Ultimate health care cost trend rate
n/a: Not applicable
December 31, 2014
Other
benefits
Pension
benefits
December 31, 2013
Other
benefits
Pension
benefits
January 1, 2013
Other
benefits
Pension
benefits
4.59%
3.36%
2.34%
n/a
3.69%
3.26%
2.21%
n/a
n/a
4.97%
3.25%
2.40%
4.98%
4.07%
3.25%
2.05%
6.08%
4.99%
4.25%
3.35%
2.19%
n/a
4.59%
3.36%
2.34%
n/a
n/a
4.38%
3.25%
2.00%
5.00%
4.97%
3.25%
2.40%
6.55%
4.98%
4.44%
3.71%
2.24%
n/a
4.25%
3.35%
2.19%
n/a
n/a
4.25%
3.50%
3.15%
5.00%
4.38%
3.25%
3.00%
7.00%
5.00%
The mortality tables and the average life expectancy in years of a member at age 45 or 65 is as follows, as at
December 31:
(in years)
Country
Canada
Mortality tables
2014 Private Sector Mortality Table ("CPM2014Priv")
Life expectancy over 65 for a male member currently
Aged 45 on December
2013
22.9
Aged 65 on December
2013
21.3
2014
21.6
2014
22.7
projected generationally using the CMP
Improvement Scale B ("CPM-B")(1)
U.K.
U.S.
SNA02M_CMI 2010 and S1P(M/F)A CMI 2012(2)
RP-2014 mortality table projected generationally
using the MP-2014 improvement scale(3)
Germany
Dr. K Heubeck 2005
22.0
21.7
20.1
21.8
19.1
20.0
23.8
23.4
22.8
23.9
19.1
22.6
Country
Canada
Mortality tables
2014 Private Sector Mortality Table ("CPM2014Priv")
projected generationally using the CMP
Improvement Scale B ("CPM-B")(1)
U.K.
U.S.
SNA02M_CMI 2010 and S1P(M/F)A CMI 2012(2)
RP-2014 mortality table projected generationally
using the MP-2014 improvement scale(3)
Germany
Dr. K Heubeck 2005
Life expectancy over 65 for a female member currently
Aged 45 on December
2013
24.5
Aged 65 on December
2013
23.5
2014
25.1
2014
24.1
24.2
23.9
23.9
24.0
21.0
23.7
26.2
25.5
26.4
26.1
21.0
26.2
(1) RPP2014Priv using draft improvement scale A1-2014 (CPM-A1D2014) as at December 31, 2013.
(2) S1NA_L CMI 2010 G as at December 31, 2013.
(3) PPA mandated mortality table per IRC as at December 31, 2013.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 153
A 0.25 percentage point increase in one of the following actuarial assumptions would have the following effects, all
other actuarial assumptions remaining unchanged:
Assumption
Discount rate
Rate of compensation increase
Inflation rate
Retirement benefit cost
for fiscal year
2014
(34)
8
9
$
$
$
Net retirement benefit
liability as at
December 31, 2014
(483)
89
138
$
$
$
A one year additional life expectancy as at December 31, 2014 for all DB plans would increase the net retirement
benefit liability by $272 million and the retirement benefit cost for fiscal year 2014 by $17 million, all other actuarial
assumptions remaining unchanged.
As at December 31, 2014, the health care cost trend rate for retirement benefits other than pension, which is a
weighted-average annual rate of increase in the per capita cost of covered health and dental care benefits, is
assumed to be 6.08% and to decrease progressively to 4.99% by calendar year 2017 and then remain at that level
for all participants. A one percentage point change in assumed health care cost trend rates would have the
following effects, as at December 31, 2014 and for fiscal year 2014:
Effect on the net retirement benefit liability
Effect on the retirement benefit cost
22.
TRADE AND OTHER PAYABLES
Trade and other payables were as follows, as at:
Trade payables
Accrued liabilities
Interest
Other
One percentage point
increase
30
2
$
$
One percentage point
decrease
(26)
(2)
$
$
$
December 31, 2014
3,037
566
124
489
4,216
$
$
December 31, 2013
2,959
623
116
391
4,089
$
January 1, 2013
2,398
519
66
327
3,310
$
$
154 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
23. PROVISIONS
Changes in provisions were as follows, for fiscal years 2014 and 2013:
Balance as at December 31, 2013
Additions
Utilization
Reversals
Accretion expense
Effect of changes in discount rates
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2014
Of which current
Of which non-current
Balance as at January 1, 2013
Additions
Utilization
Reversals
Accretion expense
Effect of changes in discount rates
Effect of foreign currency
exchange rate changes
Balance as at December 31, 2013
Of which current
Of which non-current
Credit and
residual
value
guarantees
463
$
51
(50)
(15)
6
1
$
Restructuring,
severance
and other
termination
benefits
81
178 (2)
(114)
(15)
—
—
Product
warranties
863
$
354
(321)
(58)
1
(1)
(65)
773
607
166
773
$
$
$
—
456
92
364
456
$
$
$
(13)
117
115
2
117
Credit and
residual
value
guarantees
483
$
77
(64)
(19)
3
(17)
$
Restructuring,
severance
and other
termination
benefits
127
9
(43)
(15)
—
—
Product
warranties
907
369
(356)
(71)
1
(1)
14
863
715
148
863
$
$
$
—
463
65
398
463
$
$
$
3
81
77
4
81
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1)
Other
58
173 (3)
(6)
(15)
1
—
(5)
206
176
30
206
(1)
Other
91
14
(24)
(25)
—
—
2
58
24
34
58
$
$
$
$
$
$
$
$
Total
1,465
756
(491)
(103)
8
—
(83)
1,552
990
562
1,552
Total
1,608
469
(487)
(130)
4
(18)
19
1,465
881
584
1,465
(1) Includes litigations and claims, as well as environmental liabilities.
(2) Includes $155 million of special items. For more details on the addition related to the BA and BT restructuring charges, see Note 8 – Special
items.
(3) Includes $108 million of other provisions related to the pause of the Learjet 85 program, of which $71 million is included in special items
and the balance is in the impairment charge in special items. For more details on the addition related to the pause of the Learjet 85
program, see Note 8 – Special items.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 155
24. OTHER FINANCIAL LIABILITIES
Other financial liabilities were as follows, as at:
Derivative financial instruments(1)
Government refundable advances
Sale and leaseback obligations
Lease subsidies(2)
Current portion of long-term debt(3)
Vendor non-recurring costs
Other
Of which current
Of which non-current
$
December 31, 2014
665
363
260
172
56
36
60
1,612
1,010
602
1,612
$
$
$
$
December 31, 2013
411
481
138
142
215
38
301
1,726
1,009
717
1,726
$
$
$
January 1, 2013
141
398
168
158
45
53
93
1,056
455
601
1,056
$
$
$
$
(1) See Note 13 – Financial instruments.
(2) The amount contractually required to be paid is $206 million as at December 31, 2014 ($172 million as at December 31, 2013 and
$203 million as at January 1, 2013).
(3) See Note 26 – Long-term debt.
Sale and leaseback obligations
The Corporation has set up sale and leaseback facilities, which may be used to sell pre-owned business aircraft.
For accounting purposes, amounts outstanding under certain of these arrangements are considered financial
obligations secured by the pre-owned business aircraft. The arrangements are generally for a term no longer than
24 months. The Corporation may settle the obligation at any time during the arrangement.
25. OTHER LIABILITIES
Other liabilities were as follows, as at:
Employee benefits(1)
Accruals for long-term contract costs
Supplier contributions to aerospace programs
Deferred revenues
Income and other taxes payable
Deferred income taxes(2)
Flexjet fractional ownership deferred revenues
Other
Of which current
Of which non-current
$
December 31, 2014
661
631
601
450
367
—
—
568
3,278
2,182
1,096
3,278
$
$
$
$
December 31, 2013
750
630
529
460
368
—
—
480
3,217
2,227
990
3,217
$
$
$
January 1, 2013
645
677
364
499
252
46
241
445
3,169
2,212
957
3,169
$
$
$
$
(1) Comprises all employee benefits excluding those related to retirement benefits, which are reported in the line items Retirement benefits and
in Other assets (see Note 21 – Retirement benefits).
(2) See Note 11 – Income taxes.
156 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
26.
LONG-TERM DEBT
Long-term debt was as follows, as at:
Amount in
currency of
origin Currency Contractual (1)
Interest rate
After effect
of fair value
hedges
Maturity
Amount
Amount
Amount
December 31
2014
December 31
2013
January 1
2013
Senior notes
Notes
750
650
600
850
780
500
USD
USD
USD
USD
EUR
USD
4.25%
7.50%
4.75%
7.75%
6.13%
5.75%
1,200
USD
6.00%
1,250
USD
6.13%
785(5)
250
162
EUR
USD
USD
7.25%
7.45%
6.30%
Debentures
Other(2)
150
Various(3)
CAD
Various
7.35%
Various(3)
Of which current(4)
Of which non-current
n/a
3-month
Libor + 4.19
Jan. 2016 $
Mar. 2018
n/a
Apr. 2019
3-month
Libor + 4.14
Mar. 2020
746 $
686
593
922
742 $
695
—
915
—
724
—
978
3-month
Euribor + 2.87(6)
May 2021
1,110
1,187
1,183
3-month
Libor + 3.37
3-month
Libor + 3.56
3-month
Libor + 3.50
3-month
Libor + 4.83
Mar. 2022
Oct. 2022
Jan. 2023
n/a
n/a May 2034
3-month
Libor + 1.59
n/a
n/a Dec. 2026
n/a 2015-2026
504
1,219
1,277
—
248
—
129
249
478
—
1,200
492
—
—
1,171
1,162
248
164
140
263
247
171
150
298
$
$
$
7,683 $
7,203 $
5,405
56 $
7,627
7,683 $
215 $
6,988
7,203 $
45
5,360
5,405
(1) Interests on long-term debt as at December 31, 2014 are payable semi-annually, except for the other debts for which the timing of interest
payments is variable.
Includes obligations under finance leases.
(2)
(3) The notional amount of other long-term debt is $249 million as at December 31, 2014 ($263 million as at December 31, 2013 and $298
million as at January 1, 2013). The contractual interest rate, which represents a weighted average rate, is 4.46% as at December 31, 2014
(4.62% as at December 31, 2013 and 4.65% as at January 1, 2013).
(4) See Note 24 – Other financial liabilities.
(5) Repurchased pursuant to an optional redemption exercised in April, 2014.
(6) The interest-rate swap agreement related to the €780 million Senior Notes was settled in the fourth quarter of fiscal year 2014. As this
interest-rate swap was in a fair value hedge relationship, the related deferred gain recorded in the hedged item will be amortized in interest
expense up to the maturity of the debt.
n/a: Not applicable
All Senior notes and Notes rank pari-passu and are unsecured. The Corporation is subject to various financial
covenants under the BA and BT letter of credit facilities and the two unsecured revolving credit facilities, which
must be met on a quarterly basis, see Note 30 - Credit facilities for more details. A breach of any of these
agreements or the inability to comply with these covenants could result in a default under these facilities, which
would permit the Corporation's banks to request immediate defeasance or cash cover of all outstanding letters of
credit, and bond holders and other lenders to declare amounts owed to them to be immediately payable. These
conditions were all met as at December 31, 2014 and 2013 and January 1, 2013.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 157
The carrying value of long-term debt includes principal repayments, transaction costs, unamortized discounts and
the basis adjustments related to derivatives designated in fair value hedge relationships. The following table
presents the contractual principal repayments of the long-term debt, as at:
Within 1 year
Between 1 and 5 years
More than 5 years
27. SHARE CAPITAL
$
December 31, 2014
56
2,127
5,193
7,376
$
$
December 31, 2013
213
2,630
4,130
6,973
$
January 1, 2013
45
1,358
3,522
4,925
$
$
Preferred shares
The preferred shares authorized were as follows, as at December 31, 2014, and 2013 and January 1, 2013:
Series 2 Cumulative Redeemable Preferred Shares
Series 3 Cumulative Redeemable Preferred Shares
Series 4 Cumulative Redeemable Preferred Shares
Authorized for the
specific series
12,000,000
12,000,000
9,400,000
The preferred shares issued and fully paid were as follows, as at:
Series 2 Cumulative Redeemable Preferred Shares
Series 3 Cumulative Redeemable Preferred Shares
Series 4 Cumulative Redeemable Preferred Shares
December 31, 2014
9,692,521
2,307,479
9,400,000
December 31, 2013
9,692,521
2,307,479
9,400,000
January 1, 2013
9,692,521
2,307,479
9,400,000
Series 2 Cumulative Redeemable Preferred Shares
Redemption: Redeemable, at the Corporation’s option, at $25.50 Cdn per share.
Conversion: Convertible on a one-for-one basis, at the option of the holder, on August 1, 2017 and on August 1 of every
fifth year thereafter into Series 3 Cumulative Redeemable Preferred Shares. Fourteen days before the
conversion date, if the Corporation determines, after having taken into account all shares tendered for
conversion by holders, that there would be less than 1,000,000 outstanding Series 2 Cumulative Redeemable
Preferred Shares, such remaining number shall automatically be converted into an equal number of Series 3
Cumulative Redeemable Preferred Shares. Likewise, if the Corporation determines fourteen days before the
conversion date that, at such time, there would be less than 1,000,000 outstanding Series 3 Cumulative
Redeemable Preferred Shares, then no Series 2 Cumulative Redeemable Preferred Shares may be
converted.
Since August 1, 2002, the variable cumulative preferential cash dividends are payable monthly on the
15th day of each month, if declared, with the annual variable dividend rate being set between 50% to 100% of
the Canadian prime rate, and adjusted as follows. The dividend rate will vary in relation to changes in the
prime rate and will be adjusted upwards or downwards on a monthly basis to a monthly maximum of 4% if the
trading price of Series 2 Cumulative Redeemable Preferred Shares is less than $24.90 Cdn per share or more
than $25.10 Cdn per share.
Dividend:
158 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Series 3 Cumulative Redeemable Preferred Shares
Redemption: Redeemable, at the Corporation’s option, at $25.00 Cdn per share on August 1, 2017 and on August 1 of
every fifth year thereafter.
Conversion: Convertible on a one-for-one basis, at the option of the holder, on August 1, 2017 and on August 1 of every
fifth year thereafter into Series 2 Cumulative Redeemable Preferred Shares. Fourteen days before the
conversion date, if the Corporation determines, after having taken into account all shares tendered for
conversion by holders, that there would be less than 1,000,000 outstanding Series 3 Cumulative Redeemable
Preferred Shares, such remaining number shall automatically be converted into an equal number of Series 2
Cumulative Redeemable Preferred Shares. Likewise, if the Corporation determines fourteen days before the
conversion date that, at such time, there would be less than 1,000,000 outstanding Series 2 Cumulative
Redeemable Preferred Shares, then no Series 3 Cumulative Redeemable Preferred Shares may be
converted.
For the five-year period from August 1, 2012 and including July 31, 2017, the Series 3 Cumulative
Redeemable Preferred Shares carry fixed cumulative preferential cash dividends at a rate of 3.134% or
$0.7835 Cdn per share per annum, payable quarterly on the last day of January, April, July and October of
each year at a rate of $0.195875 Cdn, if declared. For each succeeding five-year period, the applicable fixed
annual rate of the cumulative preferential cash dividends calculated by the Corporation shall not be less than
80% of the Government of Canada bond yield, as defined in the Articles of Amalgamation.
Dividend:
Series 4 Cumulative Redeemable Preferred Shares
Redemption: The Corporation may, subject to certain provisions, on not less than 30 nor more than 60 days’ notice, redeem
Conversion:
Dividend:
for cash the Series 4 Cumulative Redeemable Preferred Shares at $25.00 Cdn.
The Corporation may, subject to the approval of the Toronto Stock Exchange and such other stock exchanges
on which the Series 4 Cumulative Redeemable Preferred Shares are then listed, at any time convert all or any
of the outstanding Series 4 Cumulative Redeemable Preferred Shares into fully paid and non-assessable
Class B Shares (Subordinate Voting) of the Corporation. The number of Class B Shares (Subordinate Voting)
into which each Series 4 Cumulative Redeemable Preferred Shares may be so converted will be determined
by dividing the then applicable redemption price together with all accrued and unpaid dividends to, but
excluding the date of conversion, by the greater of $2.00 Cdn and 95% of the weighted-average trading price
of such Class B Shares (Subordinate Voting) on the Toronto Stock Exchange for the period of 20 consecutive
trading days, which ends on the fourth day prior to the date specified for conversion or, if that fourth day is not
a trading day, on the trading day immediately preceding such fourth day. The Corporation may, at its option, at
any time, create one or more further series of Preferred Shares of the Corporation, into which the holders of
Series 4 Cumulative Redeemable Preferred Shares could have the right, but not the obligation, to convert
their shares on a share-for-share basis.
The holders of Series 4 Cumulative Redeemable Preferred Shares are entitled to fixed cumulative preferential
cash dividends, if declared, at a rate of 6.25% or $1.5625 Cdn per share per annum, payable quarterly on the
last day of January, April, July and October of each year at a rate of $0.390625 Cdn per share.
Common shares
All common shares are without nominal or par value.
Class A Shares (Multiple Voting)
Voting rights: Ten votes each.
Conversion: Convertible, at any time, at the option of the holder, into one Class B Share (Subordinate Voting).
Dividend:
After payment of the priority dividend on the Class B Shares (Subordinate Voting) mentioned below, the Class
A Shares (Multiple Voting) shall share equally, share for share, with respect to any additional dividends which
may be declared in respect of the Class A Shares (Multiple Voting) and Class B Shares (Subordinate Voting).
These dividends, if declared, shall be payable quarterly on the last day of March, June, September and
December of each year.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 159
Class B Shares (Subordinate Voting)
Voting rights: One vote each.
Conversion: Convertible, at the option of the holder, into one Class A Share (Multiple Voting): (i) if an offer made to Class A
Dividend:
(Multiple Voting) shareholders is accepted by the present controlling shareholder (the Bombardier family); or
(ii) if such controlling shareholder ceases to hold more than 50% of all outstanding Class A Shares (Multiple
Voting) of the Corporation.
The holders of Class B Shares (Subordinate Voting) are entitled, in priority to the holders of Class A Shares
(Multiple Voting) to non-cumulative dividends of $0.0015625 Cdn per share, payable quarterly on the last day
of March, June, September and December of each year at a rate of $0.000390625 Cdn per share, if declared.
After payment of said priority dividend, the Class B Shares (Subordinate Voting) shall share equally, share for
share, with respect to any additional dividends which may be declared in respect of the Class A Shares
(Multiple Voting) and the Class B Shares (Subordinate Voting). These dividends, if declared, shall be payable
quarterly on the last day of March, June, September and December of each year.
The change in the number of common shares issued and fully paid and in the number of common shares
authorized was as follows as at:
Class A Shares (multiple voting)
Issued and fully paid
Balance at beginning of year
Converted to Class B
Balance at end of year
Authorized
Class B Shares (subordinate voting)
Issued and fully paid
Balance at beginning of year
Issuance of shares
Converted from Class A
Held in trust under the PSU plan
Balance at beginning of year
Distributed
Balance at end of year
Authorized
Dividends
Dividends declared were as follows:
Class A common shares
Class B common shares
Series 2 Preferred Shares
Series 3 Preferred Shares
Series 4 Preferred Shares
December 31, 2014 December 31, 2013
314,530,462
(257,207)
314,273,255
1,892,000,000
314,537,162
(6,700)
314,530,462
1,892,000,000
December 31, 2014 December 31, 2013
1,443,496,418
378,501
257,207
1,444,132,126
(18,736,908)
—
(18,736,908)
1,425,395,218
1,892,000,000
1,440,364,381
3,125,337
6,700
1,443,496,418
(24,542,027)
5,805,119
(18,736,908)
1,424,759,510
1,892,000,000
Per share
(Cdn$)
0.10 $
0.10
Per share
(Cdn$)
December 31, 2014
Total
(in millions
of U.S.$)
29
131
160
7
2
13
22
182
Dividend declared for fiscal years
December 31, 2013
Total
(in millions
of U.S.$)
31
142
173
7
2
14
23
196
0.10 $
0.10
0.75
0.78
1.56
0.75
0.78
1.56
$
$
— $
—
Per share
(Cdn$)
Dividend declared after
December 31, 2014
Total
(in millions
of U.S.$)
—
—
—
1
—
4
5
5
0.13
0.20
0.39
$
160 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
28. SHARE-BASED PLANS
PSU and DSU plans
The Board of Directors of the Corporation approved a PSU plan under which PSUs may be granted to executives
and other designated employees. The PSUs give recipients the right, upon vesting, to receive a certain number of
the Corporation’s Class B Shares (Subordinate Voting). The Board of Directors of the Corporation has also
approved a DSU plan under which DSUs may be granted to senior officers. The DSU plan is similar to the PSU
plan, except that their exercise can only occur upon retirement or termination of employment. During fiscal year
2014, a combined value of $53 million of DSUs and PSUs were authorized for issuance ($52 million during fiscal
year 2013).
The number of PSUs and DSUs has varied as follows, for fiscal years:
Balance at beginning of year
Granted
Performance adjustment
Exercised
Cancelled
Balance at end of year
PSU
23,596,681
9,971,382
—
—
(7,522,127)
26,045,936
2014
DSU
8,169,850
2,377,003
—
(500,771)
(2,379,618)
7,666,464 (1)
PSU
24,179,840
7,884,242
(1,543,133)
(5,805,119)
(1,119,149)
23,596,681
2013
DSU
6,673,447
2,229,555
(333,900)
(109,240)
(290,012)
8,169,850 (1)
(1) Of which 2,008,128 DSUs are vested as at December 31, 2014 (2,448,572 as at December 31, 2013).
PSUs and DSUs granted will vest if a financial performance threshold is met. The conversion ratio for vested
PSUs and DSUs ranges from 70% to 150%. PSUs and DSUs generally vest three years following the grant date if
the financial performance thresholds are met. For grants issued between January 1, 2012 and December 31,
2014, the vesting dates range from August 14, 2015 to August 7, 2017.
The weighted-average grant date fair value of PSUs and DSUs granted during fiscal year 2014 was $3.38 ($4.63
during fiscal year 2013). The fair value of each PSUs and DSUs granted was measured based on the closing
price of a Class B Share (Subordinate Voting) of the Corporation on the Toronto Stock Exchange.
From time to time, the Corporation provides instructions to a trustee under the terms of a Trust Agreement to
purchase Class B Shares (Subordinate Voting) of the Corporation in the open market (see Note 27 – Share
capital) in connection with the PSU plan. These shares are held in trust for the benefit of the beneficiaries until the
PSUs become vested or are cancelled. The cost of these purchases has been deducted from share capital.
A compensation revenue of $3 million was recorded during fiscal year 2014 with respect to the PSU and DSU
plans (a compensation expense of $4 million during fiscal year 2013). The compensation revenue is due to the
revision, in the third quarter of fiscal year 2014, of assumptions related to future performance.
Share option plans
Under share option plans, options are granted to key employees to purchase Class B Shares (Subordinate
Voting). Of the 135,782,688 Class B Shares (Subordinate Voting) reserved for issuance, 61,068,883 were
available for issuance under these share option plans, as at December 31, 2014.
Current share option plan - Effective June 1, 2009, the Corporation amended the share option plan for key
employees for options granted after this date. The most significant terms and conditions of the amended plan are
as follows:
• The exercise price is equal to the weighted-average trading prices on the stock exchange during the five
trading days preceding the date on which the options were granted.
• The options vest at the expiration of the third year following the grant date.
• The options terminate no later than seven years after the grant date.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 161
The summarized information on the current share option plan is as follows as at December 31, 2014:
Exercise price range (Cdn$)
2 to 4
4 to 6
6 to 8
Issued and outstanding
Weighted-
average
exercise
price (Cdn$)
3.68
4.79
7.01
Weighted-
average
remaining
life (years)
5.40
4.33
3.62
Exercisable
Weighted-
average
exercise
price (Cdn$)
3.45
4.72
7.01
Number of
options
2,065,000
3,476,528
3,127,022
8,668,550
Number of
options
16,398,065
8,286,637
3,127,022
27,811,724
The weighted-average share price of options exercised during fiscal year 2014 was $3.71 ($4.68 during fiscal
year 2013).
The number of options issued and outstanding under the current share option plan has varied as follows, for fiscal
years:
Balance at beginning of year
Granted
Exercised
Cancelled
Expired
Balance at end of year
Options exercisable at end of year
2014
Weighted-
average
exercise
price (Cdn$)
4.66
3.77
3.45
4.62
3.45
4.39
Number of
options
15,891,601
5,478,566
(174,414)
(541,334)
—
20,654,419
2013
Weighted-
average
exercise
price (Cdn$)
4.57
4.86
3.45
4.65
—
4.66
5.24
5,783,097
4.24
Number of
options
20,654,419
8,630,184
(110,000)
(1,351,310)
(11,569)
27,811,724
8,668,550
Performance share option plan - For options issued to key employees after May 27, 2003, and before
June 1, 2009, the exercise price is equal to the weighted-average trading prices on the stock exchange during the
five trading days preceding the date on which the options were granted. These options vest at 25% per year
during a period beginning one year following the grant date. However, predetermined target market price
thresholds must be achieved in order for the options to be exercised. Such options may be exercised if within the
12-month period preceding the date on which such options vest, the weighted-average trading price on the stock
exchange (during a period of 21 consecutive trading days) is greater than or equal to the target price threshold
established at the time the options were granted. If within such 12-month period, the weighted-average trading
price has not been reached, the target price threshold applicable to the next vesting tranche becomes effective.
The options terminate no later than seven years after the grant date. As at December 31, 2014, target prices
ranged between $6 Cdn and $8 Cdn.
The summarized information on the performance share option plan is as follows, as at December 31, 2014:
Exercise price range
(Cdn$)
4 to 6
8 to 10
Number of
options
105,000
3,529,400
3,634,400
Issued and outstanding
Weighted-
average
target price
(Cdn$)
7.52
8.00
Weighted-
average
remaining
life (years)
0.74
0.63
Weighted-
average
exercise
price (Cdn$)
5.75
8.53
Exercisable
Weighted-
average
exercise
price (Cdn$)
5.89
—
Number of
options
25,000
—
25,000
The weighted-average share price of options exercised during fiscal year 2014 was nil ($4.45 during fiscal year
2013).
162 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The number of options has varied as follows, for fiscal years:
Balance at beginning of year
Exercised
Cancelled
Expired
Balance at end of year
Options exercisable at end of year
2014
Weighted-
average
exercise
price (Cdn$)
7.08
—
8.15
5.48
8.44
Number of
options
12,598,488
(2,898,350)
(474,050)
(524,750)
8,701,338
2013
Weighted-
average
exercise
price (Cdn$)
6.05
3.22
7.00
3.55
7.08
5.89
4,027,938
5.48
Number of
options
8,701,338
—
(1,198,000)
(3,868,938)
3,634,400
25,000
Share-based compensation expense for options
The weighted-average grant date fair value of stock options granted during fiscal year 2014 was $0.78 per option
($1.51 per option for fiscal year 2013). The fair value of each option granted was determined using a Black-
Scholes option pricing model, which incorporates the share price at the grant date, and the following weighted-
average assumptions, for fiscal years:
Risk-free interest rate
Expected life
Expected volatility in market price of shares
Expected dividend yield
2014
1.52%
5 years
32.32%
2.51%
2013
1.73%
5 years
43.18%
2.50%
A compensation expense of $5 million was recorded during fiscal year 2014 with respect to share option plans
($7 million during fiscal year 2013).
Employee share purchase plan
Under the employee share purchase plan, employees of the Corporation are eligible to purchase Class B Shares
(Subordinate Voting) of the Corporation up to a maximum of 20% of their base salary to a yearly maximum of
$30,000 Cdn per employee. The Corporation contributes to the plan an amount equal to 20% of the employees’
contributions. The contributions are used to purchase the Corporation’s Class B Shares (Subordinate Voting) in
the open market on monthly investment dates or as otherwise determined by the Corporation, but not less
frequently than monthly. The Corporation’s contribution to the plan amounted to $8 million for fiscal year 2014
($8 million for fiscal year 2013). Shares purchased by the Corporation are subject to a mandatory 12-month
holding period that must be completed at the anniversary date of January 1.
29. NET CHANGE IN NON-CASH BALANCES
Net change in non-cash balances was as follows, for fiscal years:
Trade and other receivables
Inventories
Other financial assets and liabilities, net
Other assets
Trade and other payables
Provisions
Advances and progress billings in excess of long-term contract inventories
Advances on aerospace programs
Retirement benefits liability
Other liabilities
2014
(184)
87
184
(175)
327
169
(529)
31
(104)
196
2
$
$
2013
(134)
(631)
(15)
(437)
749
(161)
301
334
(8)
361
359
$
$
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 163
30. CREDIT FACILITIES
Letter of credit facilities
The letter of credit facilities and their maturities were as follows, as at:
December 31, 2014
BT facility
BA facility
PSG facility
December 31, 2013
BT facility
BA facility
PSG facility
January 1, 2013
BT facility
BA facility
PSG facility
Amount
committed
Letters of
credit issued
Amount
available
Maturity
$
$
$
$
$
$
4,249 (1) $
600
600
5,449
4,827
600
600
6,027
4,486
600
900
5,986
(1)
(1)
$
$
$
$
$
3,573 $
261
327
4,161 $
4,132 $
403
393
4,928 $
3,291 $
430
339
4,060 $
676
339
273
1,288
695
197
207
1,099
1,195
170
561
1,926
2018 (2)
2017 (3)
2015 (4)
2018
2016
2014 (4)
2017
2015
2013 (4)
(1) € 3,500 million as at December 31, 2014 (€ 3,500 million as at December 31, 2013 and € 3,400 million as at January 1, 2013).
(2) The facility has an initial three year availability period, when new letters of credit can be issued up to the maximum commitment amount of
the facility, plus a one year amortization period during which new letters of credit cannot be issued. The final maturity date of the facility is
2018.
(3) The facility has an initial three year availability period, when new letters of credit can be issued up to the maximum commitment of the
facility. The facility can be extended annually on the anniversary date for an additional year subject to approval by a majority of the bank
syndicate members.
(4) The PSG facility is renewed and extended annually if mutually agreed. In June 2014, the facility was extended until June 2015 and is
intended to be renewed in annual increments thereafter. If the facility is not extended, the letters of credit issued under this facility will
amortize over their maturity.
In addition to the outstanding letters of credit shown in the above table, letters of credit of $1,731 million were
outstanding under various bilateral agreements as at December 31, 2014 ($1,018 million as at December 31,
2013 and $875 million as at January 1, 2013).
The Corporation also uses numerous bilateral bonding facilities with insurance companies to support BT’s
operations. An amount of $2.4 billion was outstanding under such facilities as at December 31, 2014 ($2.3
billion as at December 31, 2013 and $2.3 billion as at January 1, 2013).
Revolving credit facilities
The Corporation has a $750-million unsecured revolving credit facility (“revolving credit facility”) that matures in
June 2017 and bears interest at the applicable base rate (Libor, in the case of a U.S. dollar cash drawing) plus a
margin based on the Corporation’s credit ratings. This facility is available for cash drawings for the general
working capital needs of the Corporation. In addition, the Corporation has an unsecured revolving credit facility
(“BT revolving credit facility”) amounting to €500 million ($ 607 million), available to BT for cash drawings. The
facility matures in March 2016 and bears interest at EURIBOR plus a margin.
Financial covenants
The Corporation is subject to various financial covenants under the BA and BT letter of credit facilities and the two
unsecured revolving credit facilities, which must be met on a quarterly basis. The BA letter of credit and revolving
credit facility include financial covenants requiring a minimum EBITDA to fixed charges ratio, as well as a
maximum net debt to EBITDA ratio, all calculated based on an adjusted consolidated basis i.e. excluding BT. The
BT letter of credit and BT revolving credit facility include financial covenants requiring minimum equity as well as a
maximum debt to EBITDA ratio, all calculated based on BT stand-alone financial data. These terms and ratios are
defined in the respective agreements and do not correspond to the Corporation’s global metrics as described in
Note 31 – Capital management or to the specific terms used in the MD&A. In addition, the Corporation must
164 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
maintain a minimum BT liquidity of €600 million ($ 728 million) and a minimum BA liquidity of $500 million at the
end of each quarter. These conditions were all met as at December 31, 2014 and 2013 and January 1, 2013.
The Corporation regularly monitors these ratios to ensure it meets all financial covenants, and has controls in
place to ensure that contractual covenants are met.
31. CAPITAL MANAGEMENT
The Corporation’s capital management strategy is designed to maintain strong liquidity and to optimize its capital
structure in order to reduce costs and improve its ability to seize strategic opportunities. The Corporation analyzes
its capital structure using global metrics, which are based on a broad economic view of the Corporation. The
Corporation manages and monitors its global metrics such that it can achieve an investment-grade profile.
The Corporation’s objectives with regard to its global metrics are as follows:
adjusted EBIT to adjusted interest ratio greater than 5.0; and
adjusted debt to adjusted EBITDA ratio lower than 2.5.
•
•
Global metrics – The following global metrics do not represent the ratios required for bank covenants. A
reconciliation of the global metrics to the most comparable IFRS financial measures are provided in the Non-
GAAP financial measures section of the MD&A for fiscal year 2014.
Adjusted EBIT(1)
Adjusted interest(2)
Adjusted EBIT to adjusted interest ratio
Adjusted debt(3)
Adjusted EBITDA(4)
Adjusted debt to adjusted EBITDA ratio
$
$
$
$
2014
1,262
401
3.1
8,401
1,775
4.7
$
$
$
$
2013
967
346
2.8
7,912
1,454
5.4
(1) Represents EBIT before special items plus interest adjustment for operating leases, and interest received as per the supplemental
information provided in the consolidated statements of cash flows, adjusted, if needed, for the settlement of fair value hedge derivatives
before their contractual maturity dates.
(2) Represents interest paid as per the supplemental information provided in the consolidated statements of cash flows, plus accretion
expense on sale and leaseback obligations and interest adjustment for operating leases.
(3) Represents long-term debt adjusted for the fair value of derivatives (or settled derivatives) designated in related hedge relationships plus
sale and leaseback obligations and the net present value of operating lease obligations.
(4) Represents adjusted EBIT plus amortization and impairment charges of PP&E and intangible assets and amortization adjustment for
operating leases.
In addition to the above global level metrics, the Corporation separately monitors its net retirement benefit liability
which amounted to $2.5 billion as at December 31, 2014 ($2.0 billion as at December 31, 2013). The
measurement of this liability is dependent on numerous key long-term assumptions such as current discount
rates, future compensation increases, inflation rates and mortality rates. In recent years, this liability has been
particularly volatile due to changes in discount rates. Such volatility is exacerbated by the long-term nature of the
obligation. The Corporation closely monitors the impact of the net retirement benefit liability on its future cash
flows and has introduced significant risk mitigation initiatives in recent years in this respect.
In order to adjust its capital structure, the Corporation may issue or reduce long-term debt, make discretionary
contributions to pension funds, repurchase or issue share capital, or vary the amount of dividends paid to shareholders.
See Note 30 – Credit facilities for a description of bank covenants.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 165
32.
FINANCIAL RISK MANAGEMENT
The Corporation is primarily exposed to credit risk, liquidity risk and market risk as a result of holding financial
instruments.
Credit risk
Liquidity risk
Market risk
Risk that one party to a financial instrument will cause a financial loss for the other party by failing to
discharge an obligation.
Risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities.
Risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices, whether those changes are caused by factors specific to the individual financial instrument
or its issuer, or factors affecting all similar financial instruments traded in the market. The Corporation is
primarily exposed to foreign exchange risk and interest rate risk.
Credit risk
The Corporation is exposed to credit risk through its normal treasury activities on its derivative financial
instruments and other investing activities. The Corporation is also exposed to credit risk through its trade
receivables arising from its normal commercial activities. Credit exposures arising from lending activities relate
primarily to aircraft loans and lease receivables provided to BA customers in connection with the sale of
commercial aircraft.
The effective monitoring and controlling of credit risks is a key component of the Corporation’s risk management
activities. Credit risks arising from the treasury activities are managed by a central treasury function in accordance
with the Corporate Foreign Exchange Risk Management Policy and Corporate Investment Management Policy
(the “Policy”). The objective of the policy is to minimize the Corporation’s exposure to credit risk from its treasury
activities by ensuring that the Corporation transacts strictly with investment-grade financial institutions and money
market funds based on pre-established consolidated counterparty risk limits per financial institution and fund.
Credit risks arising from the Corporation’s normal commercial activities, lending activities and under indirect
financing support are managed and controlled by the two reportable segments, BA and BT. The main credit
exposure managed by the segments arises from customer credit risk. Customer credit ratings and credit limits are
analyzed and established by internal credit specialists, based on inputs from external rating agencies, recognized
rating methods and the Corporation’s experience with the customers. The credit risks and credit limits are
dynamically reviewed based on fluctuations in the customer’s financial results and payment behaviour.
These customer credit risk assessments and credit limits are critical inputs in determining the conditions under
which credit or financing will be offered to customers, including obtaining collateral to reduce the Corporation’s
exposure to losses. Specific governance is in place to ensure that financial risks arising from large transactions
are analyzed and approved by the appropriate management level before financing or credit support is offered to
the customer.
Credit risk is monitored on an ongoing basis using different systems and methodologies depending on the
underlying exposure. Various accounting and reporting systems are used to monitor trade receivables, lease
receivables and other direct financings.
Maximum exposure to credit risk – The maximum exposures to credit risk for financial instruments is usually
equivalent to their carrying value, as presented in Note 13 – Financial instruments, except for the financial
instruments in the table below, for which the maximum exposures were as follows, as at:
Aircraft loans and lease receivables
Derivative financial instruments
Investments in securities
Investments in financing structures
December 31, 2014
243
514
295
331
$
$
$
$
December 31, 2013
371
690
287
305
$
$
$
$
January 1, 2013
392
656
197
304
$
$
$
$
Credit quality – The credit quality, using external and internal credit rating system, of financial assets that are
neither past due nor impaired is usually investment grade, except for BA receivables, aircraft loans and lease
receivables and certain investments in financing structures. BA receivables are usually not externally or internally
quoted, however the credit quality of customers are dynamically reviewed and is based on the Corporation’s
166 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
experience with the customers and payment behaviour. The Corporation usually holds underlying assets or
security deposits as collateral or letters of credit for the receivables. The Corporation’s customers for aircraft loans
and lease receivables are mainly regional airlines with a credit rating below investment grade. The credit quality of
the Corporation’s aircraft loans and lease receivables portfolio is strongly correlated to the credit quality of the
regional airline industry. The financed aircraft is used as collateral to reduce the Corporation’s exposure to credit
risk.
Refer to Note 37 – Commitment and Contingencies for the Corporation’s off-balance sheet credit risk, including
credit risk related to support provided for sale of aircraft.
Liquidity risk
The Corporation manages liquidity risk by maintaining detailed cash forecasts, as well as long-term operating and
strategic plans. The management of consolidated liquidity requires a constant monitoring of expected cash inflows
and outflows, which is achieved through a detailed forecast of the Corporation’s liquidity position, as well as long-
term operating and strategic plans, to ensure adequacy and efficient use of cash resources. Liquidity adequacy is
continually monitored, taking into consideration historical volatility and seasonal needs, the maturity profile of
indebtedness, access to capital markets, the level of customer advances, working capital requirements, the
funding of product developments and other financial commitments. The Corporation also monitors any financing
opportunities to optimize its capital structure and maintain appropriate financial flexibility. In addition, the
Corporation engages in certain working capital financing initiatives such as the sale of receivables, aircraft sale
and leaseback transactions and the negotiation of extended payment terms with certain suppliers.
Maturity analysis –The maturity analysis of financial assets and financial liabilities, excluding derivative financial
instruments, was as follows, as at December 31, 2014:
Carrying
amount
Undiscounted cash flows
(before giving effect to the related hedging instruments)
Cash and cash equivalents
Trade and other receivables
Other financial assets(1)
Assets
Trade and other payables
Other financial liabilities(1)
Long-term debt
Principal
Interest
Liabilities
Net amount
$
$
$
$
$
$
2,489 $
1,538
1,330
4,216
891
7,683
Less
than 1
year
2,489 $
1,356
143
3,988
4,179
357
1 to 3
years
3 to 5
years
5 to 10
years
Over 10
years
With no
specific
maturity
— $
54
173
227
2
134
— $
15
98
113
—
77
— $
41
891
932
7
362
— $
4
399
403
—
561
— $
72
60
132
28
—
Total
2,489
1,542
1,764
5,795
4,216
1,491
56
449
5,041
854
844
1,834
1,273
735
2,085
4,796
829
5,994
$ (1,053) $ (1,607) $ (1,972) $ (5,062) $
397
196
1,154
(751) $
—
—
28
7,376
3,053
16,136
104 $ (10,341)
(1) The carrying amount of other financial assets excludes the carrying amount of derivative financial instruments and the carrying amount of
other financial liabilities excludes the carrying amount of derivative financial instruments and the current portion of long-term debt.
Other financial assets include long-term contract receivables. Under the respective agreements, the Corporation
will receive incentive payments related to the reliability of manufactured trains. Due to future variations in the
relevant index and reassessment of the achievement of the reliability targets, the amounts shown in the table
above may vary. Also, termination of a related service contract in case of our non-performance would extinguish
our right to future payments.
The Corporation, mainly in BT, negotiated extended payment terms of 240 days after delivery with certain of its
suppliers. Trade payables with these extended terms totaled $372 million and bore interest at a weighted average
rate of 2% as at December 31, 2014.
Other financial liabilities include government refundable advances. Under the respective agreements, the
Corporation is required to pay amounts to governments at the time of the delivery of aircraft. Due to uncertainty
about the number of aircraft to be delivered and the timing of delivery of aircraft, the amounts shown in the table
above may vary.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 167
The maturity analysis of derivative financial instruments, excluding embedded derivatives, was as follows, as at
December 31, 2014:
Nominal
value (USD
equivalent)
Undiscounted cash flows (1)
Less
than 1
year
1 year
2 to
3 years
3 to
5 years
Over
5 years
Derivative financial assets
Forward foreign exchange contracts
Interest-rate derivatives
Derivative financial liabilities
Forward foreign exchange contracts
Interest-rate derivatives
Net amount
$
$
$
$
8,669 $
4,445
13,114 $
14,156 $
16
14,172 $
$
278 $
114
392 $
(619) $
(1)
(620) $
(228) $
47 $
79
126 $
(83) $
—
(83) $
43 $
— $
39
39 $
— $
—
— $
39 $
— $
18
18 $
— $
—
— $
18 $
— $
(24)
(24) $
— $
—
— $
(24) $
(1) Amounts denominated in foreign currency are translated at the period end exchange rate.
Total
325
226
551
(702)
(1)
(703)
(152)
Market risk
Foreign exchange risk
The Corporation is exposed to significant foreign exchange risks in the ordinary course of business through its
international operations, in particular to the canadian dollar, pound sterling, swiss franc and euro. The Corporation
employs various strategies, including the use of derivative financial instruments and by matching asset and
liability positions, to mitigate these exposures.
The Corporation’s main exposures to foreign currencies are managed by the segments and covered by a central
treasury function. Foreign currency exposures are managed in accordance with the Corporation’s Foreign
Exchange Risk Management Policy (the “FX Policy”). The objective of the FX Policy is to mitigate the impact of
foreign exchange movements on the Corporation’s consolidated financial statements. Under the FX Policy,
potential losses from adverse movements in foreign exchange rates should not exceed pre-set limits. Potential
loss is defined as the maximum expected loss that could occur if an unhedged foreign currency exposure was
exposed to an adverse change of foreign exchange rates over a one-quarter period. The FX Policy also strictly
prohibits any speculative foreign exchange transactions that would result in the creation of an exposure in excess
of the maximum potential loss approved by the Board of Directors of the Corporation.
Under the FX Policy, it is the responsibility of the segments’ management to identify all actual and potential
foreign exchange exposures arising from their operations. This information is communicated to the central
treasury group, which has the responsibility to execute the hedge transactions in accordance with the FX Policy.
In order to properly manage their exposures, each segment maintains long-term cash flow forecasts in each
currency. BA has adopted a progressive hedging strategy while BT hedges all its identified foreign currency
exposures to limit the effect of currency movements on their results. The segments also mitigate foreign currency
risks by maximizing transactions in their functional currency for their operations such as material procurement,
sale contracts and financing activities.
In addition, the central treasury function manages balance sheet exposures to foreign currency movements by
matching asset and liability positions. This program consists mainly in matching the long-term debt in foreign
currency with long-term assets denominated in the same currency.
The Corporation mainly uses forward foreign exchange contracts to manage the Corporation’s exposure from
transactions in foreign currencies and to synthetically modify the currency of exposure of certain balance sheet
items. The Corporation applies hedge accounting for a significant portion of anticipated transactions and firm
commitments denominated in foreign currencies, designated as cash flow hedges. Notably, the Corporation
enters into forward foreign exchange contracts to reduce the risk of variability of future cash flows resulting from
forecasted sales and purchases and firm commitments.
168 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The Corporation’s foreign currency hedging programs are typically unaffected by changes in market conditions, as
related derivative financial instruments are generally held to maturity, consistent with the objective to lock in
currency rates on the hedged item.
Sensitivity analysis
Foreign exchange risk arises on financial instruments that are denominated in foreign currencies. The foreign
exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure of the
Corporation’s financial instruments recorded in its statement of financial position. The following impact on EBT for
fiscal year 2014 is before giving effect to cash flow hedge relationships.
Gain (loss)
Variation
CAD/USD GBP/USD
EUR/USD
+10% $
20 $
13 $
5 $
EUR/CHF
Effect on EBT
Other
(67)
1 $
The following impact on OCI for fiscal year 2014 is for derivatives designated in a cash flow hedge relationship.
For these derivatives, any change in fair value is mostly offset by the re-measurement of the underlying exposure.
Gain (loss)
+10% $
235 $
77 $
35 $
88 $
Variation
CAD/USD GBP/USD
EUR/USD
EUR/CHF
Other
24
Effect on OCI before income taxes
Interest rate risk
The Corporation is exposed to fluctuations in its future cash flows arising from changes in interest rates through
its variable-rate financial assets and liabilities including long-term debt synthetically converted to variable interest
rate (see Note 26 – Long-term debt). The Corporation is exposed from time to time to changes in interest rates for
certain financing commitments, when a financing rate has been guaranteed to a customer in the future. For these
items, cash flows could be impacted by a change in benchmark rates such as Libor, Euribor or Banker’s
Acceptance. These exposures are predominantly managed by a central treasury function as part of an overall risk
management policy, including the use of financial instruments, such as interest-rate swap agreements. Derivative
financial instruments used to synthetically convert interest-rate exposures consist mainly of interest-rate swap
agreements and cross-currency interest-rate swap agreements.
In addition, the Corporation is exposed to gains and losses arising from changes in interest rates, which includes
marketability risk, through its financial instruments carried at fair value. These financial instruments include certain
aircraft loans and lease receivables, certain investments in financing structures, investments in securities, lease
subsidies and certain derivative financial instruments.
The Corporation’s interest rate hedging programs are typically unaffected by changes in market conditions, as
related derivative financial instruments are generally held to maturity to ensure proper assets/liabilities
management matching, consistent with the objective to reduce risks arising from interest rates movements.
Sensitivity analysis
The interest rate risk primarily relates to financial instruments carried at fair value. Assuming a 100-basis point
increase in interest rates impacting the measurement of these financial instruments, excluding derivative financial
instruments in a hedge relationship, as of December 31, 2014 and 2013, the impact on EBT would have been a
negative adjustment of $37 million as at December 31, 2014 ($68 million as at December 31, 2013).
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 169
33.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value amounts disclosed in these consolidated financial statements represent the Corporation’s estimate of
the price at which a financial instrument could be exchanged in a market in an arm's length transaction between
knowledgeable, willing parties who are under no compulsion to act. They are point-in-time estimates that may
change in subsequent reporting periods due to market conditions or other factors. Fair value is determined by
reference to quoted prices in the principal market for that instrument to which the Corporation has immediate
access. However, there is no active market for most of the Corporation’s financial instruments. In the absence of
an active market, the Corporation determines fair value based on internal or external valuation models, such as
stochastic models, option-pricing models and discounted cash flow models. Fair value determined using valuation
models requires the use of assumptions concerning the amount and timing of estimated future cash flows,
discount rates, the creditworthiness of the borrower, the aircraft’s expected future value, default probability,
generic industrial bond spreads and marketability risk. In determining these assumptions, the Corporation uses
primarily external, readily observable market inputs, including factors such as interest rates, credit ratings, credit
spreads, default probabilities, currency rates, and price and rate volatilities, as applicable. Assumptions or inputs
that are not based on observable market data are used when external data are unavailable. These calculations
represent management’s best estimates. Since they are based on estimates, the fair values may not be realized
in an actual sale or immediate settlement of the instruments.
Methods and assumptions
The methods and assumptions used to measure fair value for items recorded at FVTP&L and AFS are as follows:
Aircraft loans and lease receivables and investments in financing structures – The Corporation uses an
internal valuation model based on stochastic simulations and discounted cash flow analysis to estimate fair value.
Fair value is calculated using market data for interest rates, published credit ratings when available, yield curves
and default probabilities. The Corporation uses market data to determine the marketability adjustments and also
uses internal assumptions to take into account factors that market participants would consider when pricing these
financial assets. The Corporation also uses internal assumptions to determine the credit risk of customers without
published credit rating. In addition, the Corporation uses aircraft residual value curves reflecting specific factors of
the current aircraft market and a balanced market in the medium and long term.
Investments in securities – The Corporation uses discounted cash flow models to estimate the fair value of
unquoted investments in fixed-income securities, using market data such as interest-rate.
Lease subsidies – The Corporation uses an internal valuation model based on stochastic simulations to estimate
fair value of lease subsidies incurred in connection with the sale of commercial aircraft. Fair value is calculated
using market data for interest rates, published credit ratings when available, default probabilities from rating
agencies and the Corporation’s credit spread. The Corporation also uses internal assumptions to determine the
credit risk of customers without published credit rating.
Derivative financial instruments – Fair value of derivative financial instruments generally reflects the estimated
amounts that the Corporation would receive to sell favourable contracts i.e. taking into consideration the
counterparty credit risk, or pays to transfer unfavourable contracts i.e. taking into consideration the Corporation’s
credit risk, at the reporting dates. The Corporation uses discounted cash flow analyses and market data such as
interest rates, credit spreads and foreign exchange spot rate to estimate the fair value of forward agreements and
interest-rate derivatives.
The Corporation uses an option-adjusted spread model and a discounted cash flow model to estimate the fair
value of call features on long-term debt, using market data such as interest-rate swap curves and external
quotations.
170 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The methods and assumptions used to measure fair value for items recorded at amortized cost are as follows:
Financial instruments whose carrying value approximates fair value – The fair values of trade and other
receivables, certain aircraft loans and lease receivables, certain investments in securities, certain investments in
financing structures, restricted cash, trade and other payables, and sales and leaseback obligations measured at
amortized cost, approximate their carrying value due to the short-term maturities of these instruments, because
they bear variable interest-rate or because the terms and conditions are comparable to current market terms and
conditions for similar items.
Long-term contract receivables – The Corporation uses discounted cash flow analyses to estimate the fair
value using market data for interest rates.
Long-term debt – The fair value of long-term debt is estimated using public quotations, when available, or
discounted cash flow analyses, based on the current corresponding borrowing rate for similar types of borrowing
arrangements.
Government refundable advances and vendor non-recurring costs – The Corporation uses discounted cash
flow analyses to estimate the fair value using market data for interest rates and credit spreads.
Fair value hierarchy
The following tables present financial assets and financial liabilities measured at fair value on a recurring basis
categorized using the fair value hierarchy as follows:
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
inputs from observable markets other than quoted prices included in Level 1, including indirectly observable
data (Level 2); and
inputs for the asset or liability that are not based on observable market data (Level 3).
•
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment.
The fair value of financial assets and liabilities by level of hierarchy was as follows, as at December 31, 2014:
Financial assets
Aircraft loans and lease receivables
Derivative financial instruments(1)
Investments in securities
Investments in financing structures
Financial liabilities
Trade and other payables
Lease subsidies
Derivative financial instruments(1)
Total
Level 1
Level 2
Level 3
$
$
$
$
263
528
317 (2)
315
1,423
(18)
(172)
(665)
(855)
$
$
$
$
—
—
38
—
38
—
—
—
—
$
$
$
$
—
528
279
150
957
—
—
(665)
(665)
$
$
$
$
263
—
—
165
428
(18)
(172)
—
(190)
(1) Derivative financial instruments consist of forward foreign exchange contracts, interest-rate swap agreements and embedded derivatives.
(2) Excludes $13 million of AFS investments carried at cost.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 171
Changes in the fair value of Level 3 financial instruments were as follows, for fiscal years 2014 and 2013:
Balance as at January 1, 2013
Net gains (losses) and interest included in net income(1)
Issuances
Settlements
Balance as at December 31, 2013
Net gains (losses) and interest included in net income(1)
Issuances
Settlements
Balance as at December 31, 2014
Aircraft loans
and lease
receivables
412
$
3
8
(35)
388
20
3
(148)
263
$
Investments
in financing
structures
135
$
2
—
(2)
135
32
—
(2)
165
$
$
$
Trade and
other
payables
Lease
subsidies
(158)
(18)
1
33
(142)
(19)
(38)
27
(172)
— $
—
—
—
—
—
(18)
—
(18)
$
(1) Of which an amount of $2 million represents realized losses for fiscal year 2014 ($5 million represents realized gains for fiscal year 2013).
Main assumptions developed internally for Level 3 hierarchy
When measuring Level 3 financial instruments at fair value, some assumptions are not derived from an
observable market. The main assumptions developed internally relate to credit risks of customers without
published credit rating and marketability adjustments to discount rates specific to our financial assets.
These main assumptions are as follows as at December 31, 2014:
Main assumptions
(weighted average)
Aircraft loans and
lease receivables
Investments in financing
structures
Lease subsidies
Internally assigned credit rating
Between BB to C (B) Between BB- to CCC+ (B+) Between BB- to CCC (B+)
Discount rate adjustments
for marketability
Between 3.17%
and 5.29% (5.07%)
Between 1.59%
and 7.40% (5.78%)
n/a
Also, aircraft residual value curves are important inputs in assessing the fair value of certain financial instruments.
These curves are prepared by management based on information obtained from external appraisals and reflect
specific factors of the current aircraft market and a balanced market in the medium and long term.
Sensitivity to selected changes of assumptions for Level 3 hierarchy
These assumptions, not derived from an observable market, are established by management using estimates and
judgments that can have a significant effect on revenues, expenses, assets and liabilities. Changing one or more
of these assumptions to other reasonably possible alternative assumptions, for which the impact on their fair
value would be significant, would change their fair value as follows as at December 31, 2014:
Impact on EBT
Gain (loss)
Change in fair value
recognized in EBT for
fiscal year 2014
Decrease in aircraft
residual value
curves by 5%
Change of assumptions
Downgrade the
internally assigned
credit rating of
unrated customers
by 1 notch
Increase the
marketability
adjustments by
100 bps
Aircraft loans and
lease receivables
Investment in financing
structures
Lease subsidies
$
$
$
n/a: Not applicable
$
$
(6)
21
(14)
(4)
(4)
n/a
$
$
$
$
$
(11)
(11)
3
(15)
(11)
n/a
172 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Fair value hierarchy for items recorded at amortized cost
The following tables present financial assets and financial liabilities measured at amortized cost on a non-
recurring basis categorized using the fair value hierarchy as follows:
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
inputs from observable markets other than quoted prices included in Level 1, including indirectly observable
data (Level 2); and
inputs for the asset or liability that are not based on observable market data (Level 3).
•
The fair value of financial assets and liabilities by level of hierarchy was as follows, as at December 31, 2014:
Financial assets
Trade and other receivables
Other financial assets
Investments in financing structures
Other
Financial liabilities
Trade and other payables
Long-term debt
Other financial liabilities
Government refundable advances
Other
Total
Level 1
Level 2
Level 3
$
1,538
$
45
388
1,971
$
$ (4,198)
(7,692)
(456)
(362)
$ (12,708)
$
$
$
—
—
—
—
—
—
—
—
—
$
$
$
—
—
—
—
$
1,538
45
388
1,971
$
—
(7,692)
$ (4,198)
—
—
—
$ (7,692)
(456)
(362)
$ (5,016)
34.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
In the normal course of business, the Corporation carries out a portion of its businesses through joint ventures
and associates, mainly in BT, none of which are individually material.
The Corporation’s aggregate pro rata shares of net income of joint ventures and associates, were as follows, for
fiscal years:
Joint ventures
Associates
Net income
2014
72
17
89
$
$
$
$
2013
91
28
119
The Corporation has pledged shares in associates, with a carrying value of $18 million as at December 31, 2014
($12 million as at December 31, 2013 and $60 million as at January 1, 2013).
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 173
35.
TRANSACTIONS WITH RELATED PARTIES
The Corporation’s related parties are its joint ventures, associates and key management personnel.
Joint ventures and associates
The Corporation buys and sells products and services on arm’s length terms with some of its joint ventures and
associates in the ordinary course of business. The following table presents the portion of these transactions that is
attributable to the interests of the other venturers, and transaction with associates, for fiscal years:
Sales of products and services, and other income
Purchase of products and services, and other expenses
2014
Joint ventures Associates
—
128 $
$
6
109 $
$
2013
Joint ventures Associates
33
161 $
$
49
41 $
$
The following table presents the Corporation’s outstanding balances with joint ventures and associates, as at:
Receivables
Payables
December 31, 2014
Joint ventures Associates
5
39 $
$
6
6 $
$
December 31, 2013
Joint ventures Associates
1
62 $
$
10
14 $
$
January 1, 2013
Joint ventures Associates
26
147 $
$
28
8 $
$
Compensation paid to key management personnel
The annual remuneration and related compensation costs of the executive and non-executive board members
and key Corporate management, defined as the President and Chief Executive Officer of Bombardier Inc., the
Presidents and Chief Operating Officers of BA and BT, and the Senior Vice Presidents of Bombardier Inc., were
as follows, for fiscal years:
Share-based benefits
Salaries, bonuses and other short-term benefits
Retirement benefits
Other long-term benefits
2014
11
11
4
1
27
$
$
2013
13
13
5
2
33
$
$
174 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
36. UNCONSOLIDATED STRUCTURED ENTITIES
The following table presents the assets and liabilities of unconsolidated structured entities in which the
Corporation had a significant exposure, as at:
Financing structures related to
the sale of commercial aircraft
$
7,380 $
4,796
$
7,965 $
5,452
$
8,881 $
6,294
December 31, 2014
December 31, 2013
January 1, 2013
Assets Liabilities
Assets
Liabilities
Assets
Liabilities
The Corporation has provided credit and/or residual value guarantees to certain structured entities created solely
to provide financing related to the sale of commercial aircraft.
Typically, these structured entities are financed by third-party long-term debt and by third-party equity investors
who benefit from tax incentives. The aircraft serve as collateral for the structured entities long-term debt. The
Corporation retains certain interests in the form of credit and residual value guarantees, subordinated debt and
residual interests. Residual value guarantees typically cover a percentage of the first loss from a guaranteed
value upon the sale of the underlying aircraft at an agreed upon date. The Corporation also provides
administrative services to certain of these structured entities in return for a market fee.
The Corporation’s maximum potential exposure was $1.8 billion, of which $295 million was recorded as provisions
and related liabilities as at December 31, 2014 ($1.8 billion and $291 million, respectively, as at December 31,
2013 and $1.9 billion and $352 million, respectively, as at January 1, 2013). The Corporation’s maximum
exposure under these guarantees is included in Note 37 – Commitments and contingencies.
The Corporation concluded that it did not control these structured entities.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 175
37. COMMITMENTS AND CONTINGENCIES
The Corporation enters into various sale support arrangements, including credit and residual value guarantees
and financing rate commitments, mostly provided in connection with sales of commercial aircraft and related
financing commitments. The Corporation is also subject to other off-balance sheet risks described in the following
table. These off-balance sheet risks are in addition to the commitments and contingencies described elsewhere in
these consolidated financial statements. Some of these off-balance sheet risks are also included in Note 36 –
Unconsolidated special purposes entities. The maximum potential exposure does not reflect payments expected
to be made by the Corporation.
The table below presents the maximum potential exposure for each major group of exposure, as at:
Aircraft sales
Residual value (a)
Credit (a)
Mutually exclusive exposure(1)
Total credit and residual value exposure
Trade-in commitments (b)
Conditional repurchase obligations (c)
Other(2)
Credit (d)
Performance guarantees (e)
December 31, 2014
December 31, 2013
January 1, 2013
$
$
$
$
$
$
1,749
1,275
(628)
2,396
2,696
204
48
38
$
$
$
$
$
$
1,828
1,297
(639)
2,486
3,416
472
48
43
$
$
$
$
$
$
1,812
1,218
(594)
2,436
3,098
489
47
41
(1) Some of the residual value guarantees can only be exercised once the credit guarantees have expired without exercise. Therefore, the
guarantees must not be added together to calculate the combined maximum exposure for the Corporation.
(2) The Corporation has also provided other guarantees (see section f) below).
The Corporation’s maximum exposure in connection with credit and residual value guarantees related to the sale
of aircraft represents the face value of the guarantees before giving effect to the net benefit expected from the
estimated value of the aircraft and other assets available to mitigate the Corporation’s exposure under these
guarantees. Provisions for anticipated losses amounting to $456 million as at December 31, 2014 ($463 million as
at December 31, 2013 and $483 million as at January 1, 2013) have been established to cover the risks from
these guarantees after considering the effect of the estimated resale value of the aircraft, which is based on
information obtained from external appraisals and reflect specific factors of the current aircraft market and a
balance market in the medium and long-term, and the anticipated proceeds from other assets covering such
exposures. In addition, lease subsidies, which would be extinguished in the event of credit default by certain
customers, amounted to $172 million as at December 31, 2014 ($142 million as at December 31, 2013 and $158
million as at January 1, 2013). The provisions for anticipated losses are expected to cover the Corporation’s total
credit and residual value exposure, after taking into account the anticipated proceeds from the sale of underlying
aircraft and the extinguishment of certain lease subsidies obligations.
Aircraft sales
a) Credit and residual value guarantees - The Corporation has provided credit guarantees in the form of lease
and loan payment guarantees, as well as services related to the remarketing of aircraft. These guarantees, which
are mainly issued for the benefit of providers of financing to customers, mature in different periods up to 2025.
Substantially all financial support involving potential credit risk lies with regional airline customers. The credit risk
relating to three regional airline customers accounted for 71% of the total maximum credit risk as at December 31,
2014 (70% as at December 31, 2013 and 67% as at January 1, 2013).
In addition, the Corporation may provide a guarantee for the residual value of aircraft at an agreed-upon date,
generally at the expiry date of related financing and lease arrangements. The arrangements generally include
operating restrictions such as maximum usage and minimum maintenance requirements. The guarantee provides
for a contractually limited payment to the guaranteed party, which is typically a percentage of the first loss from a
guaranteed value. In most circumstances, a claim under such guarantees may be made only upon resale of the
underlying aircraft to a third party.
176 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The following table summarizes the outstanding residual value guarantees, at the earliest exercisable date, and
the period in which they can be exercised, as at:
Less than 1 year
From 1 to 5 years
From 5 to 10 years
From 10 to 15 years
$
December 31, 2014
56
777
880
36
1,749
$
$
December 31, 2013
64
860
872
32
1,828
$
January 1, 2013
41
850
855
66
1,812
$
$
b) Trade-in commitments - In connection with the signing of firm orders for the sale of new aircraft, the
Corporation enters into specified-price trade-in commitments with certain customers. These commitments give
customers the right to trade-in their pre-owned aircraft as partial payment for the new aircraft purchased.
The Corporation’s trade-in commitments were as follows, as at:
Less than 1 year
From 1 to 3 years
Thereafter
$
December 31, 2014
687
627
1,382
2,696
$
$
December 31, 2013
1,452
355
1,609
3,416
$
January 1, 2013
865
869
1,364
3,098
$
$
c) Conditional repurchase obligations - In connection with the sale of new aircraft, the Corporation enters into
conditional repurchase obligations with certain customers. Under these obligations, the Corporation agrees to
repurchase the initial aircraft at predetermined prices, during predetermined periods or at predetermined dates,
conditional upon mutually acceptable agreement for the sale of a new aircraft. At the time the Corporation enters
into an agreement for the sale of a subsequent aircraft and the customer exercises its right to partially pay for the
subsequent aircraft by trading-in the initial aircraft to the Corporation, a conditional repurchase obligation is
accounted for as a trade-in commitment.
The Corporation’s conditional repurchase obligations, as at the earliest exercise date, were as follows, as at:
Less than 1 year
From 1 to 3 years
Thereafter
Other guarantees
$
December 31, 2014
195
9
—
204
$
$
December 31, 2013
378
94
—
472
$
January 1, 2013
248
232
9
489
$
$
d) Credit and residual value guarantees - In connection with the sale of certain transportation rail equipment,
the Corporation has provided a credit guarantee of lease payments amounting to $48 million as at
December 31, 2014 ($48 million as at December 2013 and $47 million as at January 1, 2013). This guarantee
matures in 2025.
e) Performance guarantees - In certain projects carried out through consortia or other partnership vehicles in BT,
partners may be jointly and severally liable to the customer for a default by the other partners. In such cases
partners would normally provide counter indemnities to each other. These obligations and guarantees typically
extend until final product acceptance by the customer and in some cases to the warranty period.
The Corporation’s maximum net exposure to projects for which the exposure of the Corporation is capped,
amounted to $38 million as at December 31, 2014 ($43 million as at December 31, 2013 and $41 million as at
January 1, 2013), assuming all counter indemnities are fully honoured. For projects where the Corporation’s
exposure is not capped, such exposure has been determined in relation to the Corporation’s partners’ share of the
total contract value. Under this methodology, the Corporation’s net exposure is not significant, assuming all
counter indemnities are fully honoured. Such joint and several obligations and guarantees have been rarely called
upon in the past.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 177
f) Other - In the normal course of its business, the Corporation has entered into agreements that include
indemnities in favour of third parties, mostly tax indemnities. These agreements generally do not contain specified
limits on the Corporation’s liability and therefore, it is not possible to estimate the Corporation’s maximum liability
under these indemnities.
Operating leases
The Corporation leases buildings and equipment and assumes aircraft operating lease obligations in connection
with the sale of new aircraft. Future minimum lease payments, mostly related to buildings and equipment, under
non-cancellable operating leases are due as follows, as at:
Within 1 year
Between 1 to 5 years
More than 5 years
$
December 31, 2014
165
438
512
1,115
$
$
December 31, 2013
161
413
504
1,078
$
January 1, 2013
130
247
266
643
$
$
Rent expense was $175 million for fiscal year 2014 ($174 million for fiscal year 2013).
Other commitments
The Corporation also has purchase obligations, under various agreements, made in the normal course of
business. The purchase obligations are as follows, as at:
Within 1 year
Between 1 to 5 years
More than 5 years
$
December 31, 2014
7,061
4,141
233
11,435
$
$
December 31, 2013
8,026
3,667
207
11,900
$
January 1, 2013
7,062
3,943
361
11,366
$
$
The purchase obligations of the Corporation include capital commitments for the purchase of PP&E and intangible
assets amounting to $196 million and $432 million, respectively, as at December 31, 2014 ($331 million and
$435 million as at December 31, 2013 and $292 million and $356 million as at January 1, 2013).
Litigation
In the normal course of operations, the Corporation is a defendant in certain legal proceedings currently pending
before various courts in relation to product liability and contract disputes with customers and other third parties.
The Corporation intends to vigorously defend its position in these matters.
While the Corporation cannot predict the final outcome of all legal proceedings pending as at December 31, 2014,
based on information currently available, management believes that the resolution of these legal proceedings will
not have a material adverse effect on its financial position.
S-Bahn claim
On March 4, 2013, S-Bahn Berlin GMBH (“SB”) filed a claim against Bombardier Transportation GmbH, a wholly
owned subsidiary of the Corporation, in the Berlin District Court (“Landgericht Berlin”), concerning the trains of the
481 Series delivered to SB between 1996 and 2004.
This lawsuit alleges damages of an aggregate value of €348 million ( $423 million) related to allegedly defective
wheels and braking systems. The claim is for payment of €241 million ( $293 million) and also for a declaratory
judgment obliging the Corporation to compensate SB for further damages. SB currently alleges such further
damages to be €107 million ( $130 million).
It is the Corporation’s position that this claim i) is filed in absence of any defect, ii) is not founded on any
enforceable warranty, iii) is filed after the expiry of any statute of limitations and iv) is based on inapplicable
standards. The lawsuit contains allegations against the Corporation which the Corporation rejects as unfounded
and defamatory.
178 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
The Corporation intends to vigorously defend its position and will undertake all actions necessary to protect its
reputation.
Investigation in Brazil
On March 20, 2014, Bombardier Transportation Brasil Ltda (“BT Brazil”), a wholly owned subsidiary of the
Corporation, received notice that it was among the 18 companies and over 100 individuals named in
administrative proceedings initiated by governmental authorities in Brazil, including the Administrative Council for
Economic Protection (“CADE”), and the Sao Paulo Public Prosecutor’s office, following previously disclosed
investigations carried on by such governmental authorities with respect to allegations of cartel activity in the public
procurement of railway equipment and the construction and maintenance of railway lines in Sao Paulo and other
areas.
Companies found to have engaged in unlawful cartel conduct are subject to administrative fines, state actions for
repayment of overcharges and potentially disqualification for a certain period. The Corporation and BT Brazil
continue to cooperate with investigations relating to the administrative proceedings and intend to defend
themselves vigorously.
38. RECLASSIFICATION
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period,
mainly a reclassification from current other assets to non-current other assets.
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - NOTES 179
INVESTOR INFORMATION
Our performance at a glance
STOCK EXCHANGE LISTINGS
Class A and Class B shares
Preferred shares, Series 2,
Series 3 and Series 4
Stock listing ticker
Toronto (Canada)
Toronto (Canada)
BBD (Toronto)
FISCAL YEAR 2015 FINANCIAL RESULTS
First quarterly report
Second quarterly report
Third quarterly report
May 7, 2015
July 30, 2015
October 29, 2015
Financial report, 2015 year-end
February 11, 2016
(1) The fiscal year ended December 31, 2011 comprises 11 months of BA’s results and 12 months of BT’s results.
(2) Some totals do not agree due to rounding.
(3) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section in the MD&A for a definition of this measure.
180 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
DIVIDENDS PER SHARE DECLARED IN 2014 ON AN ANNUAL BASIS
Class A(1)
Class B(1)
Series 2
Series 3
Series 4
Preferred Shares
Dividends declared in 2014
(in Canadian dollars)
Yields(2)
$0.10
2.4%
$0.10
2.4%
$0.75
6.3%
$0.78
6.6%
$1.56
7.1%
(1) Dividends on Common shares (Class A and Class B) have been suspended until further notice.
(2) Based on dividends declared in 2014 and share prices as at December 31, 2014.
PREFERRED DIVIDEND PAYMENT DATES
Payment subject to approval by the Board of Directors
Series 2
Record date
2014-12-31
2015-01-30
2015-02-27
2015-03-31
2015-04-30
2015-05-29
Payment date
2015-01-15
2015-02-15
2015-03-15
2015-04-15
2015-05-15
2015-06-15
Record date
2015-06-30
Payment date
2015-07-15
2015-07-31
2015-08-31
2015-09-30
2015-10-30
2015-11-30
2015-08-15
2015-09-15
2015-10-15
2015-11-15
2015-12-15
PREFERRED DIVIDEND PAYMENT DATES
Payment subject to approval by the Board of Directors
Series 3
Record date
2015-01-16
2015-04-17
2015-07-17
2015-10-16
Payment date
2015-01-31
2015-04-30
2015-07-31
2015-10-31
Series 4
Record date
2015-01-16
2015-04-17
2015-07-17
2015-10-16
Payment date
2015-01-31
2015-04-30
2015-07-31
2015-10-31
Please note that unless stated otherwise, all dividends paid by Bombardier since January 2006 on all of its
common and preferred shares are considered “eligible dividends” as per the Canadian Income Tax Act and any
corresponding provincial or territorial legislation. The same designation applies under the Quebec Taxation Act for
dividends declared after March 23, 2006.
BOMBARDIER INC FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014 - INVESTOR INFORMATION 181
SHAREHOLDERS
If you wish to obtain a copy of this Financial Report, or
other corporate documents, we encourage you to
download them from our website at
www.bombardier.com, which provides practical, timely
and environmentally friendly access. You can,
however, order paper copies from our website or by
contacting:
Bombardier Inc. Public Affairs
800 René-Lévesque Blvd. West
Montréal, Québec
Canada H3B 1Y8
Tel.: +1 514 861 9481, extension 13390
Fax: +1 514 861 2420
INVESTORS
Bombardier Inc., Investor Relations
800 René-Lévesque Blvd. West
Montréal, Québec
Canada H3B 1Y8
Tel.: +1 514 861 9481, extension 13273
Fax: +1 514 861 2420
Email: investors@bombardier.com
DUPLICATION
Although Bombardier strives to ensure that registered
shareholders receive only one copy of corporate
documents, duplication is unavoidable if securities are
registered under different names and addresses. If this
is the case, please call Computershare Investor
Services at one of the following numbers:
+1 514 982 7555 or +1 800 564 6253 (toll-free, North
America only) or send an email to
service@computershare.com.
ONLINE INFORMATION
For additional information, we invite you to visit our
websites at:
bombardier.com
and
ir.bombardier.com
TRANSFER AGENT AND REGISTRAR
Shareholders with inquiries
concerning their shares should
contact:
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, Ontario
Canada M5J 2Y1
or
1500 University Street, Suite 700
Montréal, Québec
Canada H3A 3S8
Tel.: +1 514 982 7555 or +1 800 564 6253
(toll-free, North America only)
Fax: +1 416 263 9394 or +1 888 453 0330
(toll-free, North America only)
Email: service@computershare.com
AUDITORS
Ernst & Young LLP
800 René-Lévesque Blvd. West
Montréal, Québec
Canada H3B 1X9
ANNUAL MEETING
The annual meeting of shareholders will be held on
Thursday, May 7, 2015, at 9:30 a.m. at the following
address:
La Plaza
Ambassadeur Room
420, Sherbrooke Street West
Montréal, Québec, Canada H3A 1B4
The annual meeting will also be broadcast live on our
website at bombardier.com.
182 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2014
Message to shareholders ........................................................................................................................ 1
Management’s discussion and analysis ............................................................................................. 4
Overview................................................................................................................................................... 6
Aerospace ................................................................................................................................................ 39
Transportation ........................................................................................................................................ 66
Other .......................................................................................................................................................... 81
Consolidated financial statements ...................................................................................................... 105
Notes to consolidated financial statements ............................................................................... 114
Investor information .................................................................................................................................. 180
The CSeries family of aircraft, Global 7000 and Global 8000 aircraft, and Challenger 650 aircraft programs are currently
All amounts in this financial report are in U.S. dollars unless otherwise indicated.
in 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 document does not constitute an offer, commitment, representation, guarantee or
warranty of any kind. On January 15, 2015, the Corporation announced the pause of the Learjet 85 aircraft program.
AVENTRA, Bombardier, Challenger, Challenger 300, Challenger 350, Challenger 605, Challenger 650, Challenger 800, CRJ,
CRJ700, CRJ900, CRJ1000, CSeries, CS100, CS300, Dash 8, ELECTROSTAR, Global, Global 5000, Global 6000, Global 7000,
Global 8000, INNOVIA, Learjet, Learjet 40, Learjet 45, Learjet 60, Learjet 70, Learjet 75, Learjet 85, NextGen, Q400, TALENT,
The Evolution of Mobility, TRAXX, XR and ZEFIRO are trademarks of Bombardier Inc. or its subsidiaries.
DETERMINED AND FOCUSED
ON DELIVERING
The printed version of this annual report uses paper containing 30% post-consumer fibres, certified EcoLogo, processed chlorine
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In 2014, Bombardier continued to drive The Evolution of Mobility with new products,
orders, deliveries and geographic markets. It was a year of change coupled with
a sharper focus on customers and profitable execution. This led to a restructuring
of both our aerospace and rail transportation businesses. Today as our new products
approach entry-into-service, momentum is building. So is our determination and
our focus on delivering as promised.
Pierre Beaudoin answers questions about the year gone by and the one to come.
61
mature trees,
equivalent to the area
of 4 tennis courts
2,713 kg
of waste, or the
contents of
55 garbage cans
24,847 kg
of CO2, equivalent to
221,322 litres
of water, equal to one
the annual emissions
person’s consumption
of 8 cars
of water in 632 days
Data issued by the paper manufacturer.
FSC® is not responsible for calculating
resources saved when using this paper.
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ISBN: 978-2-923797-30-4
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© 2015 Bombardier Inc. or its subsidiaries
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ENGLISH – C1 C4 – ENGLISHFINANCIAL REPORT FISCAL YEAR ENDED DECEMBER 31, 2014FISCAL YEAR ENDED DECEMBER 31, 2014FINANCIAL REPORT2014BOMBARDIER.COM