Bombardier, Inc. Annual Report 2015

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FY2015 Annual Report · Bombardier, Inc.

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2015
FINANCIAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2015

BOMBARDIER.COM

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Message to shareholders ...............................................................................................

Management’s discussion and analysis ................................................................. 4

Overview ............................................................................................................................ 6

Business Aircraft ............................................................................................................ 45

Commercial Aircraft ..................................................................................................... 63

Aerostructures and Engineering Services ....................................................... 84

Transportation ................................................................................................................. 93

Other .................................................................................................................................... 113

Consolidated ﬁnancial statements ........................................................................... 143

Notes to consolidated ﬁnancial statements ....................................................... 152

Investor information ......................................................................................................... 225

All amounts in this ﬁnancial report are in U.S. dollars unless otherwise indicated.

Forward-looking statements(1) in this section are based on:

• the sufficiency of our pro forma liquidity position to execute

• current ﬁrm order backlog and estimated future order

intake in our Aerospace reportable segments;(2)

• the realization of upcoming tenders and our ability to

capture them in our Transporation reportable segment;
• increased share of higher margin and lower risk contracts
in the order backlog, as well as a balanced distribution of
orders across segments and geographies;

• stability of the global competitive and economic

environment as well as continued favourable trends(2)
impacting our Transportation business;

• our investment in new products and aircraft programs will
drive revenue growth with the C Series aircraft program
being the principal revenue driver for our Commercial
Aircraft reportable segment and the Global 7000 and
Global 8000 aircraft program being the principal revenue
driver for our Business Aircraft reportable segment;

• an increased level of aircraft deliveries and improved pricing;
• a higher proportion of services revenue;
• the continued deployment and execution of key

transformation initiatives, especially those impacting
direct and indirect procurement costs, labor efficiency and
working capital improvement and the effectiveness thereof
on a sustainable basis;

• our ability to meet scheduled EIS dates and planned costs
for the C Series and the Global 7000 and Global 8000
aircraft programs;

• ramp-up of the production of the C Series and Global 7000

and Global 8000 aircraft programs including learning
curve improvements;

• our ability to execute and deliver business model

enhancement initiatives;

• product development spend to decline over the coming

years to reach more stable levels toward the end of our ﬁve-
year plan in line with amortization;

• our ability to recruit and retain highly skilled resources to

deploy our product development strategy;

• the ability of our supply base to support planned

production rates;

• stability of foreign exchange rates;
• the satisfaction of all conditions to complete the

previously announced investment in the C Series aircraft
program by the Government of Québec including the
completion of deﬁnitive agreements, the receipt of
consents from third parties, the completion of an internal
pre-closing reorganization and the receipt of required
regulatory approvals;

our plan over the planned period;

• the ability to identify and enter into further risk sharing

partnerships; and

• the gradual de-leveraging of our balance sheet toward
the end of our ﬁve-year plan, in the context of improved
operating performance and earnings growth, conversion
of our earnings into cash and disciplined capital deployment.

(1) Refer to the Guidance and forward-looking statements
section and the forward-looking statement disclaimer in
Overview as well as the Guidance and forward-looking
statements section in each reportable segment.

(2) Demand forecast is based on the analysis of main market
indicators. For more details, refer to the market indicators
in the Industry and economic environment section for each
reportable segment.

The C Series, and Global 7000 and Global 8000 aircraft
programs are currently 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 October 28, 2015, due to the lack of sales following
the prolonged market weakness, we cancelled the Learjet 85
aircraft program.

ALP, AVENTRA, Bombardier, Challenger, Challenger 300,
Challenger 350, Challenger 605, Challenger 650,
Challenger 850, CRJ, CRJ700, CRJ900, CRJ1000, C Series,
CS100, CS300, EBI, ELECTROSTAR, FlexCare, FLEXITY,
FLEXX, Global, Global 5000, Global 6000, Global 7000,
Global 8000, INNOVIA, INTERFLO, Learjet, Learjet 40,
Learjet 45, Learjet 60, Learjet 70, Learjet 75, Learjet 85,
MITRAC, MOVIA, OMNEO, PRIMOVE, Q400, REGINA,
Smart Parts, Smart Parts Plus, Smart Parts Maintenance Plus,
Smart Parts Preferred, SPACIUM, TALENT, The Evolution of
Mobility, TRAXX, TWINDEXX, XR and ZEFIRO are trademarks
of Bombardier Inc. or its subsidiaries.

The printed version of this annual report uses paper containing 30% post-consumer fibres,
certiﬁed EcoLogo, processed chlorine free. Using this paper, instead of virgin paper, saves:

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contents of
62 garbage cans

27,891 kg
of CO2,
equivalent to
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emissions of 9 cars

248,438 litres
of water, equal
to one person’s
consumption of water
in 710 days

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Printed in Canada
ISBN: 978-2-923797-34-2
Legal deposit, Bibliothèque et
Archives nationales du Québec
All rights reserved.
© 2016 Bombardier Inc. or its subsidiaries

Alain Bellemare
President and
Chief Executive Officer

DRIVING PERFORMANCE

Across Bombardier, 2015 was a year of unprecedented change. We put
the entire organization—our leadership, business models, operating
footprint, product portfolio, procedures and processes—under intense
scrutiny. We’re leaving no stone unturned as we pave the way to
improved performance and sustained success.

The past year was both an exciting and challen-
ging one at Bombardier. Today the path ahead is
crystal-clear. We know what needs to be done to
transform the business and ramp up our efficiency.
We’re engaging all of our employees in a rigorous
process that will enhance customer satisfaction
and return Bombardier to greater proﬁtability.

2015: SETTING THE STAGE

Aided by comprehensive independent reviews
of our operations, senior leaders spent much of
2015 setting the stage for signiﬁcantly improved
performance. We took several decisive steps
to strengthen our foundation and stabilize our
business. This included creating a strong lea-
dership team with deep industry, functional and
turnaround expertise, an action that increased our
credibility with the market and customers alike.

In October, the Québec government announced
a $1-billion equity investment to secure a 49.5%
stake in our game-changing C Series aircraft
program. This will help propel the C Series to
long-term success. One month later, the Caisse
de dépôt et placement du Québec (CDPQ)
announced a $1.5-billion equity investment for
a 30% stake in our rail transportation business.
These strategic investments give us the ﬁnancial

strength to execute our plan and build on our
great product portfolio.

STRATEGIC ROADMAP

In 2015, we established a strategic roadmap to
turn our organization around over the next ﬁve
years. Transforming the way we do business to
better realize our earnings power and improve our
cash ﬂow is a top priority. So is achieving superior
ﬁnancial discipline and performance to reinforce
our competitiveness. Our roadmap entails three
phases: de-risking our business, re-building perfor-
mance and de-leveraging our balance sheet.

De-risking our business

In 2015, we de-risked our major development
programs. This included proactively reducing
the production rates of our Global 5000 and
Global 6000 business jets to align with market
demand. We also cancelled our Learjet 85 pro-
gram due to the lack of sales following the
prolonged weakness in this segment.

The CS100 commercial jet was certiﬁed in late
2015, allowing us to focus on its entry-into-service,
on certifying the CS300 and on developing
the Global 7000 and Global 8000 business air-
craft program.

BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2015 1

Re-building performance

2016 AND BEYOND

As part of our roadmap, we launched a compre-
hensive framework focusing on four levers to
drive performance:

• Grow revenue by leveraging our investments

in major programs

• Drive operational improvements by accelerating
our cost-reduction and working capital initiatives

• Capture better margins by adjusting our

commercial strategies

• Optimize our capital deployment

All of our operational improvements revolve
around rebuilding our earnings and free cash ﬂow.
At its essence, this operational transformation is
about changing mindsets and behaviours to foster
a true high-performance culture. Each business
segment is implementing extensive cost-reduction
and platform right-sizing initiatives. As with the
transformation of any large global organization,
ours will take time, yet yield substantial beneﬁts.

Our transformation activities will drive down our
direct and indirect costs as well as our inventory
level. To reduce these costs, we’ll leverage our
scale as the world’s third largest civil aircraft
manufacturer and a global leader in rail trans-
portation. This means speaking to suppliers with
one Bombardier voice. Combined with other
measures, standardizing our parts and material
requirements across platforms and businesses
will enable us to generate savings without com-
promising our products.

To meet our working capital targets, we’re
rolling out a company-wide initiative to opti-
mize inventory turns and achieve benchmark
performance. We’re now actively sharing best
practices across our organization to push our
manufacturing processes to a completely new
level of performance.

De-leveraging our balance sheet

The roadmap’s third phase will kick in as we start
to see more beneﬁts from our operational transfor-
mation and disciplined capital deployment. During
this phase, we’ll gradually de-leverage our balance
sheet and strengthen our credit metrics as we
move towards an optimized capital structure.

The coming year will be a time of transition from
de-risking to re-building our business and positio-
ning ourselves for margin expansion. Despite the
challenges ahead, having sufficient liquidity and a
clear roadmap to enhanced performance in each
business segment will make all the difference.

Lower revenue due to resetting the Global 5000
and Global 6000 production rates, as well as the
dilutive impact of the C Series ramp-up, will put
pressure on our proﬁtability in the short term.
However, we anticipate better margins in Business
Aircraft and stronger results in rail transportation,
which should improve our cash usage.

C Series

The C Series is the ﬁrst family of aircraft designed
speciﬁcally for the high-potential 100- to 150-seat
category. These jets are also this category’s ﬁrst
completely new aircraft program in more than
30 years.

The C Series commercial jets exceed their original
performance targets for range, fuel burn and
emissions as well as payload. Their operating
economics—lower trip and seat-mile costs—make
them a compelling platform for ﬂeet planners. Both
the airline industry’s recent return to proﬁtability
and more stringent environmental regulations will
accelerate the retirement of older aircraft and
beneﬁt this next-generation aircraft program.

To ensure the program’s success, our efforts are
focused on three areas. The ﬁrst is working closely
with a great launch customer, Deutsche Lufthansa
AG subsidiary Swiss International Air Lines, to deli-
ver an efficient and successful entry-into-service
of the CS100 by mid-year 2016.

The second is building the aircraft’s order backlog.
We made further progress on this front in Februa-
ry 2016, when we signed a Letter of Intent with
Air Canada for the sale of up to 75 CS300 aircraft.
This landmark commitment from a major interna-
tional airline based in North America complements
previous orders in Europe and Asia. Overall, we’ve
now received orders and commitments for a total
of 678 C Series aircraft worldwide.

The third success factor is driving efficiencies in
our ramp-up plan. This includes leveraging our
improved procurement process to lower unit
costs. It also means reducing the costs associated
with early C Series production units as quickly as

2 BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2015

possible to move the program to positive annual
cash ﬂow by 2020.(1)

Global 7000 and Global 8000

In business aircraft, we’re the industry leader in
terms of deliveries and installed base in catego-
ries where we compete. We have the industry’s
strong est backlog and a broad product lineup
with market-leading jets in every segment.

Like the C Series, the Global 7000 is a segment-
deﬁning jet. It will be Business Aircraft’s key
source of growth in the years to come. Accele-
rated component and system level testing are
under way as we drive towards ﬁrst ﬂight. A
state-of-the-art production system, including a
world-class assembly line, is in place to ensure
an efficient ramp-up.

Rail transportation

Given worldwide mega-trends such as population
growth, urbanization and city congestion and
pollution, mass transportation is mission critical
for cities of the future. It provides the greenest
and most sustainable mode of transport. Rail
transportation is also among the ﬁrst industries
to beneﬁt from economic stimulus programs.

Bombardier is a global leader in rail transportation
with world-class solutions and strong customer
relationships across all segments and geogra-
phies. The CDPQ’s investment speaks volumes
about the strength of our rail transportation
strategy and activities.

To reinforce our leadership in this resilient mar-
ket, we’ll focus on three key drivers of our future
success: satisfying customers, securing strategic
orders and efficiently converting our year-end
order backlog of over $30 billion into proﬁtable
revenue. At the same time, our installed base
of more than 100,000 vehicles will continue to
generate after-sales business and repeat orders
for us.

TARGETS

In 2015, we established a series of company-wide
targets. By 2018, we aim to be free cash ﬂow
positive. Our goal for 2020 is to become a
$25-billion business in revenue, supported by a

strong backlog and winning product portfolio.
We’re also targeting a 7% to 8% EBIT margin
and free cash ﬂow greater than 80% of our
net income.(1)

TIME TO DELIVER

At Bombardier, we have everything we need
to succeed.

This includes robust fundamentals and a clear
pathway for improvement. We have global
scale with 2015 revenue of some $18 billion and
four great businesses with outstanding pro-
ducts. We’re present in growing markets with
strong demand that’s driven by infrastructure
spending and global trends. Our people are
highly skilled with deep expertise. We have new
programs and a strong backlog. We’re a market
leader in rail transportation and business air-
craft; we’re growing in commercial aircraft; and
we have industry-leading capabilities in aeros-
tructures manufacturing.

Today success is about more than being a
leader; it involves delighting our customers by
executing, as promised, on our programs and
contracts. It’s about transforming our operations
and creating a high-performance culture with
strong ﬁnancial discipline. It’s also about driving
performance and generating sustainable value for
our shareholders. This is how we intend to ensure
Bombardier’s mid-term ﬁnancial performance and
long-term success.

(1) Please refer to the Guidance and forward-looking statements section
and the forward-looking statement disclaimer in Overview as well as the
Guidance and forward-looking statements section in each reportable
segment for more details. Also refer to the inside back cover of this report for
the assumptions related to these forward-looking statements.

Alain Bellemare
President and Chief Executive Officer

BOMBARDIER INC. FINANCIAL REPORT – FISCAL YEAR ENDED DECEMBER 31, 2015 3

BOMBARDIER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the fiscal year ended December 31, 2015

OVERVIEW

BUSINESS AIRCRAFT

COMMERCIAL AIRCRAFT

AEROSTRUCTURES AND ENGINEERING SERVICES

TRANSPORTATION

OTHER

PAGE
6

113

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” 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 we fulfill our 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: Business Aircraft, Commercial Aircraft, Aerostructures
and Engineering Services and Transportation, which is reflective of our organizational structure effective as of
January 1, 2015. As a result of the new organization structure, financial results for the year ended December 31, 2014 have
been reclassified to conform with the current year presentation. Intersegment transaction policies put in place following the
adoption of the new organizational structure in 2015 were not applied retroactively, which impacted period-over-period
variances.

The results of operations and cash flows for the fourth quarters are not necessarily indicative of the results of operations and
cash flows for the full fiscal year.

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 each reportable segment's Analysis of results section).

Materiality for disclosures
We determine whether information is material based on whether we 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 2015 comprises the message from our President and Chief Executive Officer to
shareholders, this MD&A and our consolidated financial statements.

4 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

The following table shows the abbreviations used in the MD&A and the consolidated financial statements.

Term
AFS
AOCI
BPS
CAGR
CCTD
CGU
CIS
DB
DC
DDHR
DSU
EBIT

Description
Available for sale
Accumulated other comprehensive income
Basis points
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 (loss) before financing expense, financing
income and income taxes

EBITDA Earnings (loss) before financing expense, financing
income, income taxes, amortization and impairment
charges on PP&E and intangible assets

EBT
EIS
EPS

Earnings (loss) before income taxes
Entry-into-service
Earnings (loss) per share attributable to equity
holders of Bombardier Inc.

FTV
FVTP&L Fair value through profit and loss

Flight test vehicle

Term
GAAP
GDP
HFT
IAS
IASB
IFRIC

IFRS
L&R
MD&A
NCI
NMF
OCI
PP&E
PSG
PSU
R&D
RSU
RVG
SG&A
U.K.
U.S.

Description
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
Information not meaningful
Other comprehensive income
Property, plant and equipment
Performance security guarantee
Performance share unit
Research and development
Restricted share unit
Residual value guarantee
Selling, general and administrative
United Kingdom
United States of America

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 5

OVERVIEW

OVERVIEW OF ACTIVITIES

Our new organization structure, our leadership team and an
overview of our operations

HIGHLIGHTS OF THE YEAR

Highlights of our results for the fiscal year

Key events

KEY PERFORMANCE MEASURES AND
METRICS

Key performance measures and associated metrics that we
use to monitor our progress on a consolidated basis

STRATEGIC PRIORITIES

Our roadmap to 2020

Key financial data for the last five years

GUIDANCE AND FORWARD-LOOKING
STATEMENTS

Guidance and disclaimers in connection with our forward-
looking statements

CONSOLIDATED RESULTS OF OPERATIONS Our consolidated results for the fourth quarter and fiscal year

ended December 31, 2015

CONSOLIDATED FINANCIAL POSITION

Explanations of significant variances in our assets, liabilities
and equity

LIQUIDITY AND CAPITAL RESOURCES

Our cash flows, available short-term capital resources,
expected future liquidity requirements and credit ratings

CAPITAL STRUCTURE

Global metrics we use to monitor our capital structure

RETIREMENT BENEFITS

RISK MANAGEMENT

Overview of our retirement benefit plans, associated risks and
related mitigation strategies as well as key financial data

Our key financing and market risks and related mitigation
strategies

NON-GAAP FINANCIAL MEASURES

Definitions of our non-GAAP financial measures and
reconciliations to the most comparable IFRS measures

PAGE
7

6 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

OVERVIEW OF ACTIVITIES

Our new organizational structure

Following the reorganization announced in July 2014, we adopted a new leaner, more nimble organizational
structure. The former Bombardier Aerospace has been divided into three segments: Business Aircraft,
Commercial Aircraft and Aerostructures and Engineering Services. Along with Transportation, these segments
now report directly to the President and Chief Executive Officer in order to enhance agility. Corporate office
expenses, previously allocated to Bombardier Aerospace and Bombardier Transportation, are now presented
separately, along with intersegment eliminations. This new structure was effective as of January 1, 2015. The
2014 comparative results have been restated to reflect the new business segments.

The new organization structure enables us to more readily identify and remove obstacles to operational efficiency
and better positions us to respond quickly to evolving consumer needs, changing market dynamics and world
events. It also provides more transparency across the reportable segments and enables greater investor visibility
into profitability by market.

Our leadership team(1)

(1) Supplemental information regarding our leadership team can be found on our website at bombardier.com.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 7

Overview of our operations

We are the world’s leading manufacturer of both planes and trains, operating under four reportable segments:
Business Aircraft, Commercial Aircraft, Aerostructures and Engineering Services and Transportation. We are
driving the evolution of mobility worldwide by providing more efficient, sustainable and enjoyable transportation.
Our products, services, and most of all, our employees are what makes us a global leader in mobility solutions.

BUSINESS AIRCRAFT

COMMERCIAL AIRCRAFT

A global leader in the design, manufacture and
aftermarket support for three families of business
jets (Learjet, Challenger and Global), spanning
from the light to large aircraft categories.

Designs, manufactures and provides aftermarket
support for a broad portfolio of commercial aircraft
in the 60- to 150-seat categories, including the
Q400 aircraft and the CRJ and C Series families of
aircraft.

Revenues
EBIT
EBIT before special items(1)
Order backlog
Number of employees(2)

$7.0 billion Revenues

$(1.3) billion EBIT
$308 million EBIT before special items(1)
$17.2 billion Order backlog

10,400 Number of employees(2)

$2.4 billion
$(4.0) billion
$(170) million
$11.5 billion
5,050

AEROSTRUCTURES AND ENGINEERING
SERVICES
Designs and manufactures major aircraft structural
components and provides aftermarket component
repair and overhaul as well as other engineering
services for both internal and external clients.

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.

Revenues
EBIT
External order backlog
Number of employees(2)

$1.8 billion Revenues

$105 million EBIT

$80 million Order backlog

12,100 Number of employees(2)

$8.3 billion
$465 million
$30.4 billion
39,400

Every day around the globe, our 70,900(2)(3) dedicated employees work diligently to earn our worldwide leadership
in aerospace and rail transportation. As at the date of this report, we have 75 production and engineering sites in
28 countries and a worldwide network of service centres.

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric and each reportable

segment’s Analysis of results section for reconciliations to the most comparable IFRS measures.

(2) As at December 31, 2015, including contractual and inactive employees. Subsequent to the end of the fiscal year, we decided to take steps
to optimize our workforce with a combination of manpower reduction and strategic hiring. These figures do not reflect the planned changes.

(3) 3,950 product development engineering, Corporate office and other employees are not allocated to a reportable segment.

8 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

HIGHLIGHTS OF THE YEAR

We secured our liquidity, de-risked our major programs, strengthened our team and
developed a transformation roadmap towards superior operating performance

REVENUES

$18.2 billion

ADJUSTED NET
INCOME(1)
$326 million

ADJUSTED EPS(1)

FREE CASH FLOW(1)

ORDER BACKLOG

$0.14

$(1.8) billion

$59.2 billion

RESULTS

For the fiscal years ended December 31
Revenues
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)
Net loss
Diluted EPS (in dollars)
Adjusted net income(1)
Adjusted EPS (in dollars)(1)
Net additions to PP&E and intangible assets
Free cash flow usage(1)
As at December 31
Order backlog (in billions of dollars)
Available short-term capital resources(2)

2015
$ 18,172
$ (4,838)

(26.6)%
554
3.0 %
992
5.5 %

$ (5,340)
(2.58)
$
326
$
0.14
$
$ 1,862
$ (1,842)
2015
59.2
$
$ 4,014

2014
$ 20,111
(566)
$
(2.8)%
923
4.6 %

$ 1,340

6.7 %

$ (1,246)
(0.74)
$
648
$
0.35
$
$ 1,964
$ (1,117)
2014
69.1
$
$ 3,846

Variance

(10)%
nmf
nmf
(40)%
(160) bps
(26)%
(120) bps

nmf
nmf
(50)%
(60)%
(5)%
(65)%

(14)%
4 %

(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 our revolving credit facilities.

* Non-GAAP financial measure. Refer to the Non-GAAP financial measures for a definition of this metric and Consolidated results of

Operations for reconciliations to the most comparable IFRS measures in 2015 and 2014.

** Fiscal year 2011 comprised 11 months of Bombardier Aerospace results and 12 months of Transportation results.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 9

* 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 in 2015 and 2014.

** Fiscal year 2011 comprised 11 months of Bombardier Aerospace results and 12 months of Transportation results.

KEY EVENTS

• We secured a pro forma liquidity of $6.5 billion(1) through various initiatives:

•

In November 2015, we entered into a definitive agreement with the Caisse de dépôt et placement du
Québec (CDPQ) for a $1.5-billion convertible share investment in Transportation’s newly-created
holding company, Bombardier Transportation (Investment) UK Ltd (BT Holdco). The CDPQ’s shares
are convertible into a 30% common equity stake of BT Holdco, subject to annual adjustments related
to performance. BT Holdco will continue to be controlled by Bombardier Inc. and consolidated in our
financial results. The investment was completed on February 11, 2016.
In October 2015, we entered into a memorandum of understanding with the Government of Québec,
who will invest $1.0 billion in the C Series aircraft program in return for a 49.5% equity stake in a
newly created limited partnership to which we would transfer the assets, liabilities and obligations of
the C Series aircraft program. This newly created limited partnership will carry on the operations
related to our C Series aircraft program and will be consolidated in our financial results. The
execution of the definitive agreements and the disbursement of the investment are expected to take
place in the second quarter of 2016, subject to closing conditions. The Government of Québec’s
interest in the partnership will be redeemable at our option, in certain circumstances.
In March 2015, we issued a $2.25-billion aggregate amount of unsecured Senior Notes, due in
September 2018 and March 2025. The net proceeds were used to finance the redemption of
$750 million of existing debt which was due in 2016 and for general corporate purposes.

• During the first quarter of 2015, we closed a $1.1-billion Canadian dollar ($868 million) public offering
of equity. The net proceeds were used to supplement working capital and for general corporate
purposes.

(1) Refer to the Liquidity and capital resources section for a reconciliation of pro forma liquidity.

10 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

• We de-risked our aircraft programs:

• Following the completion of an in-depth review of the C Series aircraft program as well as discussions

with the Government of Québec, which resulted in the above-mentioned memorandum of
understanding, Commercial Aircraft recorded a charge of $3.2 billion in special items in the third
quarter of 2015, mainly related to the impairment of aerospace program tooling. We continue to
believe that the C Series aircraft program meets specific market requirements and that it has long-
term market potential.

• On December 17, 2015, the CS100 aircraft was awarded type certification from Transport Canada,

paving the way for the delivery and EIS of the aircraft with first operator Swiss International Air Lines
(SWISS) expected in the second quarter of 2016.

• On October 28, 2015, due to the lack of sales following the prolonged market weakness, we
cancelled the Learjet 85 aircraft program. As a result, Business Aircraft recorded a charge of
$1.2 billion in special items in the third quarter of 2015, mainly related to the impairment of the
remaining Learjet 85 aircraft program development costs. We remain committed to the Learjet family
of aircraft.

• Following an in-depth review, which was completed in the second quarter of 2015, to validate all

aspects of the Global 7000 and Global 8000 aircraft program, our findings indicated that there would
be a delay in the Global 7000 aircraft’s schedule. The aircraft is now expected to enter into service in
the second half of 2018.

• Following the impact on industry-wide order intake of current economic conditions and geopolitical
issues in some regions, on May 14, 2015, Business Aircraft announced a production rate reduction
for the Global 5000 and Global 6000 aircraft.

• We strengthened our leadership team:

• Several well respected industry veterans joined our senior leadership team, under the direction of our

new President and Chief Executive Officer, Alain Bellemare.

• We implemented our transformation initiatives as part of our roadmap to 2020:

•

In November 2015, we introduced our roadmap to 2020, a clear path for returning the organization to
sustainable, profitable earnings growth and cash flow generation. Four levers were identified to drive
results: revenue growth, operational transformation, business model enhancements, and portfolio
strategy.

• We continue to restructure and enhance Business Aircraft’s business model to improve long-term
profitability. Subsequent to the end of the fiscal year, on January 13, 2016, we announced that we
have completed initiatives to increase the number of direct-to-market channels, including termination
of third-party sales representative and distribution agreements, and to restructure customer
commercial agreements, which resulted in the cancellation in the fourth quarter of fiscal year 2015 of
24 firm orders, valued at approximately $1.75 billion based on 2015 list prices, with an additional
cancellation of 30 optional orders. Mainly as a result of these completed initiatives, in the fourth
quarter of 2015, Business Aircraft recorded $327 million in special items.

• Subsequent to the end of the fiscal year, we decided to take steps to optimize our workforce with a

combination of manpower reduction and strategic hiring. The company plans to reduce its workforce
by an estimated 7,000 production and non-production employees throughout 2016 and 2017, as we
move forward with our transformation plan. During the same period, this workforce reduction will be
partially offset by hiring in certain growth areas, notably to support the ramp-up of strategic programs
and projects worldwide. These adjustments will enable us to resize our organization in line with
current business needs and to increase our competitiveness. The manpower reduction includes
approximately 2,000 contractual workers and 800 product development engineers, the latter of which,
are not allocated to a reportable segment. Restructuring charges consisting mainly of severance of
approximately $250 million to $300 million will be recorded as special items primarily in 2016.
• Subsequent to the end of the fiscal year, we announced a plan to present a proposal to shareholders of the

Corporation for a consolidation (also known as a “reverse stock split”) of the Class A shares (multiple voting) (Class
A Shares), issued and unissued, and Class B shares (subordinate voting) (Class B Subordinate Voting Shares),
issued and unissued, at the annual and special meeting planned for spring 2016 (the Share Consolidation). The
consolidation ratio will be selected by the Board of Directors from within a range of ratios, subject to shareholder
approval, which ratio would be expected, at that time, to result in an initial post-consolidation share price in the
range of $10 to $20 Canadian dollars per Class A Share or Class B Subordinate Voting Share. Assuming receipt of
shareholder and Toronto Stock Exchange approvals, the Share Consolidation, if any, would be completed at such
time as the Board of Directors shall deem appropriate.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 11

KEY PERFORMANCE MEASURES AND METRICS

The table below summarizes key performance measures and associated metrics evaluated only on a
consolidated basis. Our reportable segments use multiple other key performance measures to evaluate various
key metrics. Refer to each reportable segment’s Key performance measures and metrics section for further
details.

KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS

Profitability

• Diluted EPS and adjusted EPS(1), as measures of global performance.

Liquidity

Capital
structure

• 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
Profitability
Revenues
Order backlog (in billions of dollars)
EBIT
EBIT margin
EBIT before special items(1)(4)
EBIT margin before special items(1)(4)
Effective income tax rate
Net income (loss)
Adjusted net income(1)
Diluted EPS (in dollars)
Adjusted EPS (in dollars)(1)

Liquidity

2015

2014

2013

2012

2011(3)

$ 18,172
$
59.2
$ (4,838)

(26.6)%
554
3.0 %
(3.0)%

$ (5,340)
326
$
(2.58)
$
0.14
$

$ 20,111
69.1
$
(566)
$
(2.8)%
923
4.6 %
(68.4)%

$ (1,246)
648
$
(0.74)
$
0.35
$

$ 18,151
69.7
$
923
$
5.1%
893
4.9%
25.8%
572
608
0.31
0.33

$
$
$
$

$ 16,414
64.9
$
666
$
4.1%
806
4.9%
12.3%
470
671
0.25
0.36

$
$
$
$

$ 17,904
53.9
$
1,166
$

6.5%

1,166

6.5%
13.9%
737
887
0.41
0.49

$
$
$
$

Free cash flow usage(1)
Available short-term capital resources(2)

$ (1,842)
$ 4,014

$ (1,117)
$ 3,846

$
$

(907)
4,837

$
$

(636)
3,967

$ (1,046)
3,642
$

Capital structure

Interest coverage ratio(5)
Financial leverage ratio(5)
Weighted-average long-term debt
maturity (in years)

1.5
7.3

6.3

3.1
4.7

6.4

2.8
5.4

6.4

3.2
4.2

7.4

4.5
3.3

8.0

(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 in 2015 and 2014.

(2) Defined as cash and cash equivalents plus the amount available under the revolving credit facilities.
(3) Fiscal year 2011 comprised 11 months of Bombardier Aerospace results and 12 months of Transportation results.
(4) Refer to the Consolidated results of operations section for details of special items recorded in 2015 and 2014. In 2013, the special items

related to a $43-million gain on resolution of a litigation in connection with capital tax, of which $12 million was recorded in financing income,
a $24-million inventory write-down and a $23-million gain on disposal of a business. In 2012, the special items related to $119 million of
restructuring charges in Transportation, a $40-million gain on resolution of a litigation in connection with capital tax, of which $17 million was
recorded in financing income, a $19-million loss related to flooding in New Jersey, U.S. and a $25-million foreign exchange hedging loss.

(5) Refer to the Capital structure and Non-GAAP financial measures sections for computations of these ratios.

12 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

STRATEGIC PRIORITIES

Roadmap to 2020

2015 was a year of significant change for Bombardier. We performed a comprehensive business review of our
business, took decisive action on a number of fronts, and laid out a clear plan for returning the organization to
sustainable, profitable earnings growth and cash flow generation. Our roadmap to 2020 is based on three
interrelated phases: de-risk, re-build, then de-leverage.

De-risk: Paving the way to improved sustainable operating and financial performance

2015 was devoted to de-risking our business.

We secured a level of pro forma liquidity of $6.5 billion(1) that is sufficient to execute our plan. Over the last three
months of 2015, we attracted key strategic investments in core businesses. In October 2015, we announced that
the Government of Québec will make a $1.0-billion equity investment to support bringing the game-changing
C Series aircraft program to market. The investment remains conditional upon the completion of definitive
agreements, the receipt of consents from third parties, the completion of an internal pre-closing reorganization,
the receipt of required regulatory approvals and other customary conditions precedent. We expect to enter into
the definitive agreements in the second quarter of 2016. One month later, we further strengthened our pro forma
liquidity position when we entered into a definitive agreement with the Caisse de dépôt et placement du Québec
(CDPQ) for a $1.5 billion convertible share investment for a 30% stake in our rail transportation business. The
investment was completed on February 11, 2016.

We also made significant progress in de-risking our major programs. In December 2015, Transport Canada
awarded type certification for the CS100 aircraft, setting up its EIS with launch customer Swiss International Air
Lines expected in the second quarter of 2016. We reset the Global 5000 and Global 6000 aircraft production rate,
a proactive measure to better align supply and demand for this important franchise. We revised the schedule of
the Global 7000 and Global 8000 aircraft program in development to ensure no compromise is made in terms of
performance and comfort of this category-defining aircraft program. In October 2015, we canceled the Learjet 85
platform in light of lack of sales following prolonged market weakness.

(1) Refer to the Liquidity and capital resources section for a reconciliation of pro forma liquidity.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 13

With the coming year expected to be a time of transition at Bombardier, significant work remains to be done. We
face revenue and earnings headwinds amidst the reduction in Global 5000 and Global 6000 aircraft production
rates as well as negative EBIT in Commercial Aircraft mainly due to the dilutive impact of the initial years of
production of the C Series aircraft program. Our priorities are clear:

•
•
•

reaching EIS and ramping-up of the C Series aircraft program;
executing the Global 7000 and Global 8000 aircraft development program; and
accelerating the implementation and realizing the benefits of our transformation initiatives.

Re-build: a clear path to profitable earnings expansion and cash generation

Our rebuilding phase is squarely focused on achieving superior financial performance. Leveraging our market
leadership positions, our strengthened leadership team and our performance culture, we are engaging four levers
to drive results: profitable revenue growth, operational transformation, business model enhancements and
portfolio strategy.

Profitable revenue growth
We continue to invest extensively in leading-edge products and solutions that will enhance our competitiveness
across the aerospace and rail transportation industries and in a growing number of geographic markets.

All segments have strong levels of order backlog, representing a leading indicator of future revenues and a vote
of confidence in our product strategy. We had a consolidated order backlog of $59.2 billion as at
December 31, 2015.

Revenue conversion on our strong order backlog, which comes from realizing the benefits of our past and
ongoing investments, is the key driver of our future top-line growth. We have therefore prioritized EIS and
production ramp-up of critical aerospace development programs, namely the C Series and Global 7000 and
Global 8000 aircraft programs, along with Transportation executing on existing contracts and winning new orders
across its strong bid pipeline. This revenue growth is, however, partially offset from the headwinds we face in
2016 from the production rate reduction of our Global 5000 and Global 6000 business aircraft.

Considering our significant and growing installed base of aircraft and rail vehicles and systems, aftermarket
services present a meaningful opportunity in terms of customer satisfaction and engagement, long-term loyalty,
and increased revenue.

14 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Operational transformation
Major changes are being implemented across the organization as we progress along our road to operational
improvement. Our financial objectives are clear: to improve profitability and convert income to cash flow.
Fundamentally, we are cultivating a high-performance culture, with cross-functional teams driving rigorous
processes that are changing mindsets and transforming behaviors.

Transformation process
In 2015 we created the Operations Strategy corporate function, led by the Vice President, Operations Strategy, to
drive our operational transformation. Its mandate is to collaborate with the business segments to identify
opportunities, to set targets, to coordinate cross-functional teams and to monitor and track progress in order to
ensure accountability for each initiative across the organization.

In 2015, a rigorous, independent analysis was conducted to determine the improvement potential of each part of
the business. We quantified specific, achievable improvement opportunities as the basis of our EBIT and working
capital improvement targets, which were cascaded down through each business segment. We then engaged
individual departments and business segment leaders to work together to create bottom-up plans with clear
owners that would reach, and in some cases, exceed those targets. Lastly, we began to prioritize and execute
those plans with a cascading governance model.

Now that each business segment, in collaboration with the dedicated Operational Strategy office, has identified
and quantified specific opportunities, the transformation is in the execution phase. Each business segment is
ultimately responsible for the execution of its respective initiatives. A rigorous process is initially undertaken to
elaborate the project, in which project leads from the business segment are assigned and the workstream is
organized. Where initiatives can be applied across business segments, cross-functional workstreams are
established as a means to promote economies of scale.

Transformation priorities
We are working with our suppliers to reduce product cost and implementing tighter controls on our working capital
through improved synchronization of our supply chain. We are also using our cash more effectively, particularly
when it comes to consumables, discretionary spend and capital investments. We have launched workstreams
dedicated to optimizing our footprint and we are driving performance through labour efficiency initiatives with a
focus on the C Series aircraft program learning curve.

Direct costs
We are leveraging our scale with suppliers. As the world’s third largest civil aircraft manufacturer and one of the
world’s largest rail equipment manufacturers, our direct spend in 2015 was more than $13 billion. We recognize
opportunity in consolidating our spending view and speaking to our suppliers with one Bombardier voice.

Our Transportation business segment is placing a strong emphasis on creating key product platforms, which will
allow us to achieve further scale with our supply base, without compromising our products.

We are leveraging our global footprint to create key centers of excellence with clear cost and performance
mandates to ensure we provide the best value to our customers.

Indirect costs
In 2015 we centralized our procurement function, representing the first time we have brought together our entire
buying community from across all of our business segments. In doing so, we have identified considerable overlap
in our non-product goods and services spend and thus opportunities to fully leverage our purchasing power. We
have also put in place the Global Work Share project, which is to drive efficiency in our general and administrative
tasks by transferring routine tasks to lower-cost shared centers around the globe.

Working capital
A thorough benchmarking exercise has revealed a clear opportunity to improve our inventory management
practices and is the catalyst behind our company-wide initiative to optimize inventory turns. With over $12 billion
in gross inventory at the end of 2015, this workstream represents another high-impact, high-priority opportunity.
We are actively sharing best practices across our organization to drive our manufacturing processes to a whole
new level of performance.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 15

Business model enhancements
We have begun to implement changes to select business models as part of our thrust to improve long-term
profitability. In addition to the select examples listed below, we have identified and will continue to seek
opportunities as we drive our turnaround and respond to changing market conditions.

At Business Aircraft, we are taking action to capitalize on market opportunities around the world. In January 2016,
we announced changes to our strategic sales approach by restructuring certain customer commercial agreements
and increasing the number of direct-to-market channels. Specifically, Business Aircraft reached an agreement to
end its third-party sales representative and distribution agreement with TAG Aeronautics, positioning the Business
Aircraft sales team to handle sales activities and engage directly with customers and prospects in the Middle East
and North Africa. Also, the restructuring of customer commercial agreements resulted in the cancellation of 24
firm orders in the fourth quarter of 2015, positions which we expect to sell at improved margins.

At Transportation, the transformation 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. To better position itself in the future, Transportation is increasing investment in a harmonized I.T.
landscape and in R&D to develop standardized vehicle and sub-systems platforms. 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 to increase margins.

Portfolio strategy
We will employ a disciplined approach to capital deployment, while continuing to assess strategic options.

Over the last several years, we have invested extensively in major development programs, notably the C Series
and Global 7000 and Global 8000 aircraft programs and several rail platforms. We expect our product
development spend to decline over the coming years to reach more stable levels toward the end of our current
five-year plan, upon the conclusion of the Global 7000 and Global 8000 aircraft development program and its
production ramp-up. The Global 7000 and Global 8000 aircraft program is our final major program currently under
development. We will continue to make disciplined investments to ensure the ongoing competitiveness of our
products as we continue to drive The Evolution of Mobility.

De-leverage: Disciplined, gradual approach to improving our capital structure

The third and final phase of our turnaround is to gradually de-leverage our balance sheet toward the end of our
five-year plan, in the context of improved operating performance and earnings growth, conversion of our earnings
into cash and disciplined capital deployment. Moving toward a more optimal capital structure, which includes
reducing debt and improving credit metrics, is in line with our fundamental objective of delivering value to
shareholders.

16 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

GUIDANCE AND FORWARD-LOOKING STATEMENTS

What we said for 2015

What we did in 2015

What’s next for 2016(1)

Growth and
deliveries

Approximately 210
deliveries.

199 deliveries.

Profitability(2) EBIT margin in the range of
5% to 6%.
Approximately 80 deliveries.

Growth and
deliveries

EBIT margin before special
items(2) of 4.4%.
76 deliveries.

Profitability(2) Negative EBIT of

Business
Aircraft

Commercial
Aircraft

approximately $200 million
including the dilutive impact
of the initial years of
production of the C Series
aircraft program.(3)

Revenues of approximately
$1.8 billion, mainly from
intersegment contracts with
Business Aircraft and
Commercial Aircraft
segments.

Growth

Aerostructures
and
Engineering
Services

Profitability(2) EBIT margin of

Growth

Transportation

approximately 6%.
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(4) in excess
of 1.0.

Profitability(2) Slight improvement in EBIT
margin compared to 2014.

Growth

Profitability(2)

Consolidated

Liquidity

Free cash flow usage(5)
between $1.9 billion and
$2.2 billion in 2015.

Net additions to PP&E and
intangible assets for 2015 to
be at a similar level as 2014.

Negative EBIT before special
items(2) of $170 million.

Revenues of $1.8 billion, of
which $1.3 billion was from
intersegment contracts.

EBIT margin before special
items(2) of 5.8%.
Excluding currency impacts,
revenue declined by 1%.
Book-to-bill ratio(4) of 1.1.

EBIT margin before special
items(2) of 5.6% compared to
5.5% in 2014.
Revenues of $18.2 billion.

EBIT before special items(2)
of $554 million.
Free cash flow usage(5) of
$1.8 billion.

Net additions to PP&E and
intangible assets of
$1.9 billion, slightly lower
than $2.0 billion in 2014.

Revenues greater than
$5.0 billion.
Approximately 150
deliveries.

EBIT margin of
approximately 6%.
Revenues of approximately
$3.0 billion.
Approximately 95 deliveries.

Negative EBIT of
approximately $550 million,
mainly due to the dilutive
impact of the initial years of
production of the C Series
aircraft program.(3)
Revenues are expected to
remain at approximately
$1.8 billion, mainly from
intersegment contracts with
Business Aircraft and
Commercial Aircraft.

EBIT margin of
approximately 7.5%.
Revenues of approximately
$8.5 billion, based on the
assumption that foreign
exchange rates will remain
stable in 2016 compared to
2015.

EBIT margin above 6%.

Revenues in the range of
$16.5 billion to $17.5 billion.

EBIT in the range of
$200 million to $400 million.
Free cash flow usage(5) in
the range of $1.0 billion to
$1.3 billion.

(1) See each reportable segment’s Guidance and forward-looking statements section and forward-looking statements disclaimer hereafter for

details regarding the assumptions on which the guidance is based.

(2) Profitability guidance is based on EBIT before special items. Refer to the Non-GAAP financial measures section for a definition of this metric
and the Consolidated results of operations section, as well as each reportable segment’s Analysis of results section for reconciliations to the
most comparable IFRS measures in 2015.

(3) 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.

(4) Ratio of new orders over revenues.
(5) Refer to the Non-GAAP financial measures section for a definition of this metric and the Liquidity and capital resources section for a

reconciliation to the most comparable IFRS measure in 2015.

For further detail on the 2015 guidance by reportable segment, refer to each reportable segment’s Guidance and
forward-looking statements section. For further detail on the 2015 liquidity guidance see the Liquidity and capital
resources section.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 17

This MD&A includes forward-looking statements, which may involve, but are not limited to: statements with respect to our
objectives, guidance, targets, goals, priorities, market and strategies, financial position, beliefs, prospects, plans, expectations,
anticipations, estimates and intentions; general economic and business outlook, prospects and trends of an industry; expected
growth in demand for products and services; product development, including projected design, characteristics, capacity or
performance; expected or scheduled entry-into-service of products and services, orders, deliveries, testing, lead times,
certifications and project execution in general; competitive position; the expected impact of the legislative and regulatory
environment and legal proceedings on our business and operations; available liquidities and ongoing review of strategic and
financial alternatives; the completion of the investment by the Government of Québec in the C Series aircraft program (the
C Series Investment) and the use of proceeds therefrom; the use of proceeds from the private placement of a minority stake in
Transportation to the CDPQ (the CDPQ Investment and, with the C Series Investment, the Investments); the effects of the
Investments on the range of options available to us, including regarding our participation in future industry consolidation; the
capital and governance structure of the Transportation segment following the CDPQ Investment, and of the Commercial
Aircraft segment following the C Series Investment; the impact and expected benefits of the Investments on our operations,
infrastructure, opportunities, financial condition, access to capital and overall strategy; and the impact of the sale of equity on
our balance sheet and liquidity position. The implementation of the Share Consolidation is subject to a number of conditions,
including but not limited to, Toronto Stock Exchange approval and shareholder approval, and subject to the Board of Directors’
authority, notwithstanding approval of the Share Consolidation by shareholders, to determine in its discretion not to proceed
with the Share Consolidation, without further approval or action by, or prior notice to, shareholders. There can be no assurance
that the Share Consolidation will be implemented as proposed or at all, or as to the timing thereof, or that the Share
Consolidation will result in the contemplated initial post-consolidation share price of Class A Shares or Class B Subordinate
Voting Shares.

Forward-looking statements can generally 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 forecast results. While management considers their assumptions to be reasonable and
appropriate based on information currently available, there is risk that they may not be accurate.

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 our business
environment (such as risks associated with the financial condition of the airline industry, of business aircraft customers, and of
the rail industry; trade policy; increased competition; political instability and force majeure), operational risks (such as risks
related to developing new products and services; development of new business; the certification and homologation of products
and services; fixed-price commitments and production and project execution; pressures on cash flows based on project-cycle
fluctuations and seasonality; our ability to successfully implement our strategy and transformation plan; 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; reliance on information systems; reliance on and
protection of intellectual property rights; and adequacy of insurance coverage), financing risks (such as risks related to liquidity
and access to capital markets, retirement benefit plan risk, exposure to credit risk, certain restrictive debt covenants, financing
support provided for the benefit of certain customers and reliance on government support), market risks (such as risks related
to foreign currency fluctuations, changing interest rates, decreases in residual values, increases in commodity prices and
inflation rate fluctuations). For more details, see the Risks and uncertainties section in Other. Certain important assumptions
by management in making forward-looking statements include, but are not limited to: that ongoing due diligence investigations
by the Government of Québec will not identify any materially adverse facts or circumstances; the satisfaction of all conditions
to the completion of the C Series Investment, including the receipt of any required third party, regulatory and other approvals.
For additional information with respect to the assumptions underlying the forward-looking statements made in this MD&A, refer
to the Guidance and forward-looking statements sections in each reportable segment. There can be no assurance that the
C Series Investment will be undertaken or completed in whole or in part, or of the timing, size and proceeds of any such
transaction, which will depend on a number of factors.

Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not
exhaustive and undue reliance should not be placed on forward-looking statements. The forward-looking statements set forth
herein reflect our expectations as at the date of this report and are subject to change after such date. Unless otherwise
required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking
statements contained in this MD&A are expressly qualified by this cautionary statement.

18 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

CONSOLIDATED RESULTS OF OPERATIONS

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
EBIT
Financing expense
Financing income
EBT
Income taxes
Net 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
2014
2015
5,960
5,017
5,314
4,616
646
401
351
356
112
119
(25)
(96)
6
52
156
16
1,357
673
(1,201)
(657)
65
95
(21)
(17)
(1,249)
(731)
341
(54)
(1,590)
(677)

(679)
2

(0.31)

$
$

(1,594)
4

(0.92)

Fourth quarters
ended December 31
2014
2015
181
(238)
272
139
9
83
0.04
—

$
$
$
$

Fiscal years
ended December 31
2014
2015
20,111
18,172
17,534
16,199
2,577
1,973
1,358
1,213
347
355
(89)
(149)
38
—
923
554
1,489
5,392
(566)
(4,838)
249
418
(75)
(70)
(740)
(5,186)
506
154
(1,246)
(5,340)

(5,347)
7

(2.58)

$
$

(1,260)
14

(0.74)

Fiscal years
ended December 31
2014
2015
1,117
(100)
1,340
992
648
326
0.35
0.14

$
$
$
$

$
$

$
$
$
$

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for definitions of these metrics and reconciliations to the

most comparable IFRS measures.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 19

Reconciliation of segment to consolidated results

Revenues
Business Aircraft
Commercial Aircraft
Aerostructures and Engineering Services
Transportation
Corporate and Elimination
Consolidated
EBIT before special items(2)
Business Aircraft
Commercial Aircraft
Aerostructures and Engineering Services
Transportation
Corporate and Elimination

Special Items
Business Aircraft
Commercial Aircraft
Aerostructures and Engineering Services
Transportation
Corporate and Elimination

EBIT
Business Aircraft
Commercial Aircraft
Aerostructures and Engineering Services
Transportation
Corporate and Elimination

Fourth quarters
ended December 31

Fiscal years
ended December 31

2015

2,086
644
443
2,164
(320)
5,017

28
(87)
(9)
123
(39)
16

380
240
—
—
53
673

(352)
(327)
(9)
123
(92)
(657)

2014 (1)

2015

2014 (1)

2,462
720
522
2,636
(380)
5,960

174
(140)
22
111
(11)
156

1,357
—
—
—
—
1,357

(1,183)
(140)
22
111
(11)
(1,201)

6,996
2,395
1,797
8,281
(1,297)
18,172

308
(170)
104
465
(153)
554

1,560
3,800
(1)
—
33
5,392

(1,252)
(3,970)
105
465
(186)
(4,838)

7,200
2,740
1,919
9,619
(1,367)
20,111

499
(107)
97
526
(92)
923

1,402
16
14
57
—
1,489

(903)
(123)
83
469
(92)
(566)

(1) Financial results for the fourth quarter and fiscal year ended December 31, 2014 have been reclassified to conform with the current year

presentation. See Reclassification at the beginning of each reporting segment for more details.

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric.

20 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Detailed analyses of revenues and EBIT are provided in each reportable segment’s Analysis of results section.

Analysis of consolidated results

Special items

Special items comprise items which do not reflect, in our opinion, our 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:

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014

2015

Ref

Impairment and other charges - C Series aircraft
program
Impairment and other charges - Learjet 85 aircraft
program
Changes in estimates and fair value
Impairment charge - CRJ1000 aircraft program
Write-off of deferred costs
Termination of sales representative and distribution
agreements
Impairment charge - Learjet family of aircraft
Tax litigation
Loss on repurchase of long-term debt
Restructuring charges
Gain on resolution of a litigation
Tax impacts of special items

Of which is presented in
Special items in EBIT
Financing expense - loss on financial instruments
Financing expense - loss on

repurchase of long-term debt

Financing income - interests related to

the resolution of a litigation

Income taxes - effect of special items

2
3
4
5

6
7
8
9
10
11
12

11
12

—

3,235

—

—
—
243
194

133
53
50
—
—
—
—
673

673
—

—

—
—
673

1,357
—
—
—

—
—
—
—
—
—
284
1,641

1,357
—

—

—
284
1,641

1,163
353
243
194

133
53
50
22
9
—
106
5,561

5,392
41

—
106
5,561

1,357
—
—
—

—
—
—
43
142
(18)
273
1,797

1,489
—

(8)
273
1,797

1. Represents an impairment charge of $3.1 billion on aerospace program tooling, and inventory write-downs
and other provisions of $165 million, following the completion of an in-depth review of the C Series aircraft
program as well as discussions with the Government of Québec which resulted in the October 2015
memorandum of understanding. The special item includes a credit of $14 million in Corporate and Elimination.

In 2015, represents an impairment charge of $919 million on aerospace program tooling (including a credit of
$6 million in Corporate and eliminations), and inventory write-downs, write-downs of other assets, PP&E and
other intangible assets, other provisions and other financial liabilities of $244 million, as a result of the
cancellation of the Learjet 85 aircraft program due to the lack of sales following the prolonged market
weakness.

In 2014, represents losses related to the pause of the Learjet 85 aircraft program announced in January 2015,
mainly comprised of an impairment charge of $1.3 billion on aerospace program tooling.

3. Related to an increase in provisions for credit guarantees and RVGs as a result of changes in assumptions
concerning residual value curves of regional aircraft due to difficult market conditions for regional pre-owned
aircraft and a higher probability that the guaranteed party will exercise the RVG given the recent experience
with respect to RVG and a loss on certain financial instruments due to changes in estimated fair value.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 21

4. Represents an impairment charge of $243 million on the remaining CRJ1000 aircraft program development
costs. The impairment is due to the lack of recent order intake as well as low firm order backlog for the
CRJ1000 aircraft, mainly stemming from pilot scope clauses in the U.S., which have restricted the use,
number and seating capacity of regional aircraft flying on behalf of network carriers. Over the near term, we
do not anticipate scope clause relaxation in the U.S., during which time, we will not be able to sell the
CRJ1000 aircraft in the U.S. market. The special item includes a charge of $3 million in Corporate and
Elimination.

5. Mainly related to restructuring of customer commercial agreements.

6. Costs incurred in connection with the termination of third-party sales representative and distribution

agreements to increase the number of direct-to-market channels.

7. Represents an impairment charge on the remaining Learjet family aerospace program tooling, following the

prolonged market weakness in the light business aircraft category.

8. Represents a provision related to tax litigation.

In 2015, represents the loss related to the redemption of the $750-million Senior Notes. In 2014, represents
the loss related to the redemption of the €785-million ($1,093-million) Senior Notes.

10. Restructuring charges in 2015 related to:

$13 million related to the workforce reduction announced in January 2015 of approximately 1,000
positions, located mostly in Querétaro, Mexico and Wichita, U.S., as a result of the decision to pause the
Learjet 85 aircraft program,
a reversal of restructuring provisions taken in prior year of $4 million.

•
Restructuring charges in 2014 related to:
•

$120 million related to the workforce reduction connected to the new organizational structure announced
in July 2014, of which $63 million related to the Business Aircraft, Commercial Aircraft and Aerostructures
and Engineering Services and $57 million related to Transportation.
$22 million related to the Business Aircraft, Commercial Aircraft and Aerostructures and Engineering
Services workforce reduction announced in January 2014.

•

11. Represents a gain at Business Aircraft and Commercial Aircraft upon the successful resolution of a litigation in
connection with Part IV of the Québec Income Tax Act, the Tax on Capital, of which $8 million represents the
interest portion of the gain.

12. In 2015, represents net write-downs of deferred income tax assets, mainly due to the reorganization and

consolidation of Transportation under one holding entity necessary to facilitate the planned placement of a
minority stake in Transportation. In 2014, represents net write-downs of deferred tax assets as a result of
changes in estimated future taxable profit following the decision to pause the Learjet 85 aircraft program.
These items have a significant impact on the effective income tax rates.

Net financing expense

Net financing expense amounted to $74 million and $348 million, respectively, for the fourth quarter and fiscal
year ended December 31, 2015, compared to $48 million and $174 million for the corresponding periods last
fiscal year.

The $26-million increase for the fourth quarter is mainly due to:

higher interest on long-term debt, after the effect of hedges ($29 million).

•
Partially offset by:
•

higher financing income from changes in discount rates of provisions ($11 million).

22 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

The $174-million increase for the fiscal year is mainly due to:

•
•

higher interest on long-term debt, after the effect of hedges ($94 million); and
a higher net loss related to certain financial instruments classified as FVTP&L ($61 million), mainly due to
special item losses of $41 million as a result of changes in estimated fair value.

Partially offset by:
•

a lower loss on repurchase of long-term debt(1) ($21 million).

(1) In fiscal year 2015, represents the loss related to the redemption of the $750-million Senior Notes recorded as a special item. In fiscal year

2014, represents the loss related to the redemption of the €785-million ($1,093-million) Senior Notes recorded as a special item.

Income taxes

The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2015 were 7.4% and
(3.0)%, respectively, compared to the statutory income tax rate in Canada of 26.8%.

For the fourth quarter ended December 31, 2015, the lower effective tax rate is mainly due to the net non-
recognition of income tax benefits related to tax losses and temporary differences mainly due to the impairment
charges recorded as a special item in relation to the CRJ1000 aircraft program and Learjet family of aircraft as
well the other special items recorded in the fourth quarter.

The negative effective income tax rate in the fiscal year ended December 31, 2015 is due to:

•

the net non-recognition of income tax benefits related to tax losses and temporary differences mainly due
to the impairment and other charges recorded as special items related to the C Series aircraft program
and Learjet 85 aircraft program; and
the net write-downs of deferred income tax assets, mainly due to the reorganization and consolidation of
Transportation under one holding entity necessary to facilitate the planned placement of a minority stake
in Transportation recorded as a special item.

Partially offset by:
•

the positive impacts of the income tax rate differential of foreign subsidiaries.

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%.

The negative effective income tax rates in the fourth quarter and fiscal year ended December 31, 2014 were
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, mainly due to the charge recorded as a special item in relation to the
pause of the Learjet 85 program.

Partially offset by:

•

the positive impact of the recognition of previously unrecognized tax losses or temporary differences and
permanent differences.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 23

CONSOLIDATED FINANCIAL POSITION

The total assets decreased by $4.7 billion in the
fiscal year, including a decrease of $0.7 billion
related to foreign exchange. The decrease excluding
currency impacts is mainly explained by:

•

a $2.8-billion decrease in aerospace
program tooling mainly related to the
impairment charges of $4.3 billion on some
of our aerospace programs, partly offset by
net additions of $1.6 billion;
a $503-million decrease in other financial
assets mainly in assets related to derivative
financial instruments, aircraft loans and
lease receivables, and investments in
financing structures;
a $422-million decrease in gross inventories
mainly in Business Aircraft’s aerospace
program inventories as well as pre-owned
Business Aircraft inventories partly offset by
an increase in Transportation’s inventories
following ramp-up of production ahead of
deliveries; and
a $396-million increase in advances and
progress billings.

The total liabilities and equity decreased by
$4.7 billion in the fiscal year, including a currency
impact of $0.7 billion. The decrease excluding
currency impacts is mainly explained by:

•

a $4.1-billion decrease in equity, mainly due
to a net loss of $5.3 billion partially offset by
the issuance of share capital of $822 million
and remeasurement of defined benefit plans
of $581 million; and
a $1.4-billion decrease in advances on
aerospace programs mainly resulting from
lower order intake than deliveries.

Partially offset by:

•

a $1.4-billion increase in long-term debt,
mainly related to the issuance of
$2.25 billion of Senior Notes partially offset
by the redemption of the $750-million Senior
Notes.

* Includes a deficit of $4.1 billion as at December 31, 2015 and

equity of $55 million as at December 31, 2014.

24 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

LIQUIDITY AND CAPITAL RESOURCES

Free cash flow

Free cash flow (usage)(1)

Net loss
Non-cash items
Amortization
Impairment charges on PP&E and intangible assets
Deferred income taxes
Share of income of joint ventures and associates
Loss on repurchase of long-term debt
Other

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)
Net interest and income taxes received (paid)
Free cash flow (usage) before net interest
and income taxes received or paid(1)

Fourth quarters
ended December 31
2014
2015
(1,590)
(677)

Fiscal years
ended December 31
2014
2015
(1,246)
(5,340)

123
296
(55)
(96)
—
—
18
1,461
1,070
(543)
527
48

116
1,266
295
(25)
—
4
38
981
1,085
(495)
590
55

438
4,300
63
(149)
22
11
77
598
20
(1,862)
(1,842)
(348)

417
1,266
354
(89)
43
(1)
101
2
847
(1,964)
(1,117)
(161)

479

535

(1,494)

(956)

Our free cash flow usage(1) of $1.8 billion for the year was slightly better than our guidance, mainly due to improved
working capital in Transportation and lower net additions to PP&E and intangible assets.

The $63-million deterioration of free cash flow for the fourth quarter is mainly due to:

•

lower net income before non-cash items and special items excluding impairment charges on PP&E and
intangible assets ($189 million) (see reconciliation table below); and
higher net additions to PP&E and intangible assets ($48 million).

a positive period-over-period variation in net change in non-cash balances before special items excluding
impairment charges on PP&E and intangible assets ($194 million) (see reconciliation and explanation
below).

The $725-million deterioration of free cash flow usage for the fiscal year is mainly due to:

•

lower net income before non-cash items and special items excluding impairment charges on PP&E and
intangible assets ($530 million) (see reconciliation table below); and
a negative period-over-period variation in net change in non-cash balances before special items excluding
impairment charges on PP&E and intangible assets ($273 million) (see reconciliation and explanation
below).
Partially offset by:

•

lower net additions to PP&E and intangible assets ($102 million) mainly in the Learjet 85 aircraft program.

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section for definitions of these metrics.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 25

•
Partially offset by:
•

Reconciliation of net income (loss) before non-cash items and special items excluding impairment
charges on PP&E and intangible assets to net loss

Net loss
Non-cash items
Special items excluding impairment charges on PP&E and
intangible assets(1)
Net income (loss) before non-cash items and special items
excluding impairment charges on PP&E and intangible
assets

Net change in non-cash balances

Fourth quarters
ended December 31
2014
$ (1,590)
1,656

2015
(677)
268

Fiscal years
ended December 31
2014
$ (1,246)
1,990

2015
$ (5,340)
4,685

377

1,092

223

(32)

157

437

967

Reconciliation of net change in non-cash balances before special items excluding impairment charges
on PP&E and intangible assets to net change in non-cash balances

Net change in non-cash balances
Special items excluding impairment charges on PP&E and
intangible assets(1)
Net change in non-cash balances before special items
excluding impairment charges on PP&E and intangible
assets

Fourth quarters
ended December 31
2014
981

2015
1,461

Fiscal years
ended December 31
2014
2

2015
598

377

1,092

223

1,084

890

(494)

(221)

(1) Represents all special items presented in EBIT, except impairment charges on PP&E and intangible assets. Refer to the Consolidated results
of operations for details regarding special items. Also refer to the Reconciliation of EBITDA before special items and EBITDA to EBIT table in
the Non-GAAP financial measures section.

For the fourth quarter ended December 31, 2015, the $1,084 million inflow before special items excluding
impairment charges on PP&E and intangible assets is mainly due to:

•
•
•
•
•

a decrease in Transportation’s inventories following deliveries, partly offset by ramp-up in production;
a decrease in Business Aircraft’s aerospace program inventories;
an increase in other liabilities in Transportation mainly related to sales taxes;
a decrease in other financial asset mainly due to the settlement of an interest rate swap agreement; and
an increase in trade and other payables.

Partially offset by:

•

a decrease in Business Aircraft’s advances on aerospace programs mainly resulting from lower order
intake than deliveries;
a decrease in Transportation’s advances and progress billings following deliveries, partly offset by
advances on existing contracts and new orders; and
an increase in Transportation’s trade and other receivables.

For the fourth quarter ended December 31, 2014, the $890 million inflow before special items excluding
impairment charges on PP&E and intangible assets was mainly due to:

•
•
•

•

a decrease in aerospace program work-in-process inventories, mainly in business aircraft;
an increase in Transportation and Business Aircraft’s trade and other payables;
a decrease in finished product inventories, mainly due to a decrease in medium and light business aircraft
categories and turboprops;
an increase in Transportation’s other liabilities mainly from higher accruals for long-term contract costs;
an increase in Transportation’s advances and progress billings on existing contracts and new orders;
a decrease in Transportation’s inventories following delivery in a few contracts ahead of ramp-up of
production; and
a decrease in Transportation’s trade and other receivables.

Partially offset by:

•

a decrease in Business Aircraft’s advance on aerospace programs.

26 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

For the fiscal year ended December 31, 2015, the $494 million outflow before special items excluding impairment
charges on PP&E and intangible assets is mainly due to:

•

a decrease in advances on aerospace programs mainly resulting from lower order intake than deliveries;
and
an increase in Transportation’s inventories following ramp-up of production ahead of deliveries.

Partially offset by:

•
•
•
•

a decrease in Business Aircraft’s aerospace program inventories;
an increase in Transportation’s advances and progress billings on existing contracts and new orders;
an increase in retirement benefits liability mainly related to Transportation; and
a decrease in Business Aircraft finished product inventories mainly in pre-owned aircraft inventories.

For the fiscal year ended December 31, 2014, the $221 million outflow before special items excluding impairment
charges on PP&E and intangible assets was mainly due to:

an increase in Transportation’s inventories following ramp-up of production ahead of deliveries;
an increase in Transportation’s trade and other receivables; and
a decrease in Transportation’s retirement benefit liabilities.

•
•
•
Partially offset by:
•

an increase in Transportation’s trade and other payables resulting from higher activities in the year partially
offset by a decrease in trade and other payables of all aerospace segments but mainly in Business Aircraft;
a decrease in aerospace program work-in-process inventories, mainly in business aircraft and regional
jets;
an increase in Transportation’s advances and progress billings on existing contracts and new orders;
an increase in Transportation’s other financial liabilities, mainly related to derivative financial instruments;
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.

•

•
•

•

Available short-term capital resources

We continuously monitor our level of liquidity, 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 our liquidity requirements, we take into consideration 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. We
use scenario analyses to stress-test cash flow projections.

Variation in cash and cash equivalents

Balance at the beginning of period/fiscal year

Net proceeds from issuance of long-term debt
Free cash flow (usage)(1)
Repayments of long-term debt
Net proceeds from issuance of shares
Proceeds from investment in financing structure
Effect of exchange rate changes on cash and cash
equivalents
Dividends paid
Net variation in AFS investments in securities
Purchase of Class B Subordinate Voting Shares
held in trust under the RSU plan
Net proceeds from disposal of a business(2)
Other

Balance at the end of period/fiscal year

Fourth quarters
ended December 31
2014
2015
1,935
2,344
—
5
590
527
(16)
(15)
—
—
—
—

(36)
(5)
—

—
—
(95)
2,720

(100)
(45)
53

—
—
67
2,489

Fiscal years
ended December 31
2014
2015
3,397
2,489
1,820
2,218
(1,117)
(1,842)
(1,334)
(831)
—
822
—
150

(104)
(19)
(10)

(9)
—
(144)
2,720

(169)
(182)
—

—
25
49
2,489

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric and the Free cash flow

(usage) table hereinbefore for reconciliations to the most comparable IFRS measure.

(2) Related to the sale of the main assets and related liabilities of our Flexjet activities completed in December 2013. In fiscal year 2014, we

received the balance of the sale price.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 27

Available short-term capital resources

Cash and cash equivalents
Available revolving credit facilities
Available short-term capital resources

Pro forma liquidity

December 31, 2015
2,720
$
1,294
4,014

As at
December 31, 2014
2,489
$
1,357
3,846

Available short-term capital resources as at December 31, 2015
Gross proceeds of the investment from the CDPQ in our rail transportation business
received February 11, 2016
Expected gross proceeds of the investment from the Government of Québec in the C Series aircraft program
Pro forma liquidity

4,014

1,500
1,000
6,514

Our available short-term capital resources include cash
and cash equivalents and the amounts available under
our 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 our letter
of credit facilities. Refer to the Financial covenants
section for details.

In February 2015, we announced a financing plan to
position ourselves with a flexible and strong financial
profile whereby we would access the capital markets,
depending on market conditions, for the issuance of
equity and new long-term debt capital. In keeping with
these objectives, the Board of Directors concluded that
our free cash flow(1) would be more appropriately
applied to bolstering our financial structure and
investing in our core programs and businesses.
Therefore, we suspended the declaration of dividends
on Class A Shares and Class B Subordinate Voting
Shares.

Some totals do not agree due to rounding.

In February 2015, we announced the closing of a public offering, with an over-allotment option having been
exercised in full for an aggregate of 487,840,350 subscription receipts at a price of $2.21 Canadian dollars per
subscription receipt for aggregate gross proceeds of $1.1 billion Canadian dollars, or $868 million. The net
proceeds of the offering were used for general corporate purposes. Following the adoption of a resolution of the
shareholders to increase the number of authorized Class A Shares and Class B Subordinate Voting Shares of the
Corporation effective in March 2015, the subscription receipts were converted into Class B Subordinate Voting
Shares and the proceeds of issuance were released to the Corporation.

In March 2015, we issued an aggregate amount of $2.25 billion in new unsecured Senior Notes, comprised of
$750 million bearing interest at 5.50% due on September 15, 2018 and $1.5 billion bearing interest at 7.50% due
on March 15, 2025. In April 2015, a portion of the proceeds from the Senior Notes was used to finance the
optional early redemption of the $750-million Senior Notes bearing interest at 4.25% due in January 2016. The
remainder of the net proceeds was used for general corporate purposes.

In March 2015, we extended the maturity dates of Transportation’s €500-million ($544-million) and the
$750-million(2) unsecured revolving credit facilities by one year to March 2017 and June 2018, respectively.

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for definition of this metric.
(2) Available for other than Transportation’s usage.

28 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

In October 2015, we entered into a memorandum of understanding with the Government of Québec, who will
invest $1.0 billion in the C Series aircraft program in return for a 49.5% equity stake in a newly created limited
partnership to which we would transfer the assets, liabilities and obligations of the C Series aircraft program. The
investment also includes the issuance of warrants to the Government of Québec, exercisable to acquire up to
200,000,000 Class B Subordinate Voting Shares in the capital of Bombardier Inc. at an exercise price per share
equal to the U.S. dollar equivalent of $2.21 Canadian dollars, using the exchange rate on the date of the
execution of the definitive agreements. The execution of the definitive agreements and the disbursement of the
investment and issuance of the warrants are expected to take place in the second quarter of 2016, subject to
closing conditions. The warrants will have a five-year term from the date of issue. The proceeds of the investment
will be used entirely for the cash flow purposes of the C Series aircraft program. The Government of Québec’s
interest in the partnership will be redeemable at our option, in certain circumstances. Refer to the Strategic
partnership section in Commercial Aircraft for more detail.

In November 2015, we entered into a definitive agreement with the Caisse de dépôt et placement du Québec
(CDPQ) for a $1.5-billion convertible share investment for a 30% stake in our rail transportation business. The
investment was completed on February 11, 2016. The investment comprises the issuance by Bombardier to the
CDPQ of warrants exercisable for a total number of 105,851,872 Class B Subordinate Voting Shares in the capital
of Bombardier Inc. The warrants are exercisable for a period of seven years from the date of their issuance at an
exercise price per Class B Subordinate Voting Share equal to $1.66, the U.S. dollar equivalent of $2.21 in
Canadian dollar. The funds from the investment were distributed to the Corporation in the first quarter 2016 and
will be used for general corporate purposes. The parties have agreed that Bombardier will maintain a consolidated
cash position of at least $1.25 billion. In the event Bombardier’s cash position falls below that level, the Board of
Directors of Bombardier will create a Special Initiatives Committee composed of three independent directors
acceptable to the CDPQ, to develop an action plan to improve cash. The implementation of the plan, once agreed
with the CDPQ, will be overseen by the Special Initiatives Committee. Refer to the Sale of a minority share
section in Transportation for more detail.

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, 2015, we had $5.2 billion committed under the Transportation, the $600-million(1) and the
PSG letter of credit facilities ($5.4 billion as at December 31, 2014). Letters of credit issued under these facilities
amounted to $3.6 billion as at December 31, 2015 ($4.2 billion as at December 31, 2014).

In March 2015, we extended the availability periods of Transportation’s €3.5-billion ($3.8-billion) and the
$600-million(1) letter of credit facilities by one year to May 2018 and June 2018, respectively. In June 2015,
Transportation’s €3.5-billion ($3.8-billion) committed amount increased to €3.64 billion ($4.0 billion). Also, in June
2015, we extended the availability period of the PSG facility to August 2016.

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, 2015 ($1.7 billion as at December 31, 2014).

We also use numerous bilateral bonding facilities with insurance companies to support Transportation’s
operations. An amount of $2.6 billion was outstanding under such facilities as at December 31, 2015 ($2.4 billion
as at December 31, 2014).

See Note 31 – Credit facilities, to the consolidated financial statements, for additional information.

(1) Available for other than Transportation’s usage.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 29

Financial covenants

Under the Transportation and the $600-million(1) letter of credit facilities and our two unsecured revolving credit
facilities available for cash drawings, we must maintain various financial covenants, which must be met on a
quarterly basis.

The $600-million(1) 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 $750 million at the end of each quarter all calculated based on an adjusted consolidated
basis (i.e. excluding Transportation). The minimum liquidity level was increased from $500 million to $750 million
pursuant to the financing plan announced in the first quarter of 2015.

Transportation’s €3.64-billion ($4.0-billion) letter of credit facility and €500 million ($544 million) unsecured
revolving facility financial covenants require a minimum liquidity level of €600 million ($653 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
Transportation stand-alone basis.

These terms and ratios are defined in the respective agreements and do not correspond to our global metrics or
to any specific terms used in the MD&A. Minimum liquidity is not defined as comprising only cash and cash
equivalents as presented in the consolidated statement of financial position. 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
our 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, 2015 and 2014 and as at
January 1, 2014.

(1) Available for other than Transportation’s usage.

On balance sheet sale and leaseback facilities

Business Aircraft 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. We have the right to buy
the aircraft back during the term of the lease for predetermined amounts. As at December 31, 2015, we had sale
and leaseback facilities with third parties under which a total of $133 million was outstanding as at
December 31, 2015 ($260 million as at December 31, 2014).

Future liquidity requirements

Our aerospace segments require capital to develop
industry-leading products and to seize strategic
opportunities to increase competitiveness and execute
growth strategies. We take advantage of favourable
capital market conditions when they materialize to
extend debt maturity, reduce cost of funds and increase
diversity of capital resources.

On an on-going basis, we manage our liabilities by
taking into consideration expected free cash flows(1),
debt repayments and other material cash outlays
expected to occur in the future. The weighted average
long-term debt maturity was 6.3 years as at
December 31, 2015. There is no significant debt
maturing before the year 2018.

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial

measures section for a definition of this metric.

30 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Expected timing of future liquidity requirements

December 31, 2015

Long-term debt(1)
Interest payments
Operating lease obligations
Purchase obligations(2)
Trade and other payables
Other financial liabilities
Derivative financial liabilities

Total
8,697
3,729
838
10,466
4,091
1,314
717
29,852

Less than
1 year
71
561
146
6,485
4,042
310
621
12,236

1 to 3 years
1,449
$
1,094
197
3,475
32
121
96
6,464

3 to 5 years
1,497
$
856
149
450
4
139
—
3,095

Thereafter
5,680
1,218
346
56
13
744
—
8,057

(1) Includes principal repayments only.
(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 2016, contributions to retirement benefit plans are estimated at approximately $390 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.

The investments from the Government of Québec and from the CDPQ along with our available short-term capital
resources of $4.0 billion give us sufficient pro forma liquidity of $6.5 billion to execute our plan. In addition to the
investments, we 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. We consider that
these resources will enable the development of new products to enhance our competitiveness and support our
growth; will allow the payment of dividends, if and when declared by the Board of Directors; and will enable us to
meet all other expected financial requirements in the foreseeable future.

Creditworthiness

We assess and manage creditworthiness using the global metrics as described in the Capital structure section.
We continuously monitor our capital structure to ensure sufficient liquidity to fund product development programs.
Our goal is to strengthen our global metrics and credit ratings. Our objective also includes improving our leverage
metrics by gradually 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.

As at December 31, 2015, our credit ratings were five notches below investment grade.

Credit Ratings

Investment-grade rating

Fitch Ratings Ltd.
Moody’s Investors Service, Inc.
Standard & Poor’s Rating Services

BBB-
Baa3
BBB-

February 16, 2016
B
B2
B

Bombardier Inc.’s rating
December 31, 2014
BB-
Ba3
BB-

Over the long term, we believe that we will be in a good position to improve our credit ratings as we progress
towards profitability targets and return to a more normalized level of investment in product development.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 31

CAPITAL STRUCTURE

We analyze our 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 we do not
consider to be representative of our core performance.

Our 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.

We take advantage of favourable capital market conditions when they materialize to extend debt maturity, reduce
cost of funds and increase diversity of capital resources. The $2.25-billion issuance of unsecured Senior Notes in
March 2015 had a negative impact on our global metrics, but the addition of liquidity in a period of significant
investment warranted the increased leverage.

Interest coverage ratio

Adjusted EBIT(1)
Adjusted interest(1)
Adjusted EBIT to adjusted interest ratio

Fiscal year ended December 31

2015

777

503

1.5

2014

1,262

401

3.1

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for definitions of these metrics and reconciliations to the

most comparable IFRS measures.

The interest coverage ratio deteriorated as a result of:

•

lower adjusted EBIT, mainly due to lower EBIT before special items (see each reporting segment’s
Analysis of results section for details) and lower interest received, mainly as a result of the interest portion
related to the settlement of a cross-currency interest-rate swap recognized in the second quarter of 2014;
and
higher adjusted interest, mainly due to interest paid on unsecured Senior Notes issued in March 2015.

Financial leverage ratio

Adjusted debt(1)
Adjusted EBITDA(1)
Adjusted debt to adjusted EBITDA ratio

Fiscal year ended December 31

2015

9,289

1,278

7.3

2014

8,401

1,775

4.7

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for definitions of these metrics and reconciliations to the

most comparable IFRS measures.

The financial leverage ratio deteriorated as a result of:

•
•

lower adjusted EBITDA, mainly due to lower adjusted EBIT (see variance explanation above); and
higher adjusted debt, mainly due to the issuance of $2.25 billion of unsecured Senior Notes in
March 2015, partially offset by the optional redemption in April 2015 of $750 million of Senior Notes due in
January 2016.

These global metrics do not represent the calculations required for bank covenants. They represent our key
business metrics and as such are used to analyze our capital structure. For compliance purposes, we regularly
monitors our bank covenants to ensure they are all met.

32 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

In addition to the above global metrics, we separately monitor our net retirement benefit liability which amounted
to $1.9 billion as at December 31, 2015 ($2.5 billion as at December 31, 2014). 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. We closely monitor the
impact of the net retirement benefit liability on our future cash flows and we have 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.

RETIREMENT BENEFITS

Decrease in net retirement benefit liability

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 to DB pension plans
decreased by $106 million to $264 million for the fiscal
year ended December 31, 2015, compared to
$370 million the previous year. This reduction in
contributions results mainly from the improvement in
the funding ratio of the funded plans, which has
improved from 74% to 89% since the fiscal year ended
December 31, 2011, and from the strengthening of the
U.S. dollar.

F: Forecast

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 33

Net retirement benefit liability

The discount rate increase in 2015 together with fluctuations in foreign currency exchange rates were the main
reasons for the decrease of $562 million in the net retirement benefit liability from $2.5 billion as at
December 31, 2014 to $1.9 billion as at December 31, 2015.

* Includes liability arising from minimum funding requirement and

impact of asset ceiling test, if any.

34 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Variation in net retirement benefit liability
Balance as at December 31, 2014
Changes in discount rates and other financial assumptions
Other net actuarial gains on defined benefit obligations
Service costs
Changes in foreign exchange rates
Employer contributions
Actuarial losses on pension plan assets
Accretion on net retirement benefit obligation
Other
Balance as at December 31, 2015

2,470 (1)
(340)
(161)
327
(283)
(276)
94
72
5
1,908 (1)

(1) Includes retirement benefit assets of $251 million as at December 31, 2015 ($159 million as at 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 OCI.
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 2015, as the
actual gain on plan assets ($224 million) was below
expected return, this resulted in a $94-million actuarial
loss.

DB plan contributions are estimated at approximately
$300 million for 2016. The future level of contributions
will be impacted by the evolution of market interest
rates and the actual return on plan assets.

* Mainly comprised of changes in discount rates.
** Other is mainly comprised of changes in other actuarial

assumptions and experience adjustments

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 2015, DC pension contributions totaled $78 million. These contributions are estimated
at approximately $90 million for 2016.

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.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 35

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, 2015, 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

Our 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 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 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 fixed income securities and real return asset 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 stems 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 Treasury bills,
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 and mortality improvement tables to set the level of
contributions.

36 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Retirement benefit cost

The retirement benefit cost for fiscal year 2016 for DB plans is estimated at $355 million, of which $289 million
relates to EBIT expense or capitalized cost and $66 million relates to net financing expense, compared to
$400 million for fiscal year 2015. This decrease is mainly due to the expected positive foreign exchange impact
and the increases in discount rate assumptions. The following table provides the components of the retirement
benefit cost, for fiscal years:

Pension
benefits
381
$
78
459

$
$
$

$
$

340
41
78

399
60

Other
benefits
19
$
—
19

n/a
19
n/a

7
12

$
$

2015

Total
400
78
478

340
60
78

406
72

$
$
$

$
$

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

$
$
$

$
$

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 2016
(Forecast)
(33)
8
9

Net retirement benefit liability
as at December 31, 2015

$
$
$

(445)
127
78

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 2016
(Forecast)
8
5
2

$
$
$

Net retirement benefit liability as
at December 31, 2015

$
$
$

101
84
29

Details regarding assumptions used are provided in Note 22 – Retirement benefits, to the consolidated financial
statements.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 37

RISK MANAGEMENT

Active risk management has been one of our priorities
for many years and is a key component of our corporate
strategy framework. To achieve our risk management
objectives, we have embedded risk management
activities in the operational responsibilities of
management and made these activities 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 our 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 assesses our 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 major risks, each reportable
segment, in coordination with CASRA, has implemented an annual review process that results in standardized
heat maps.

We have 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.

38 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Key exposures to financing and market risks
and related mitigation strategies

Our operations are exposed to various financing and market risks. The following is a description of our 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

Our 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

Aerospace
reportable
segments

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.

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.

Use of forward foreign exchange
contracts, mainly to sell U.S. dollars and
buy Canadian dollars and pounds
sterling.

Corporate
office

Transportation Forecast cash inflows and
outflows denominated in a
currency other than the functional
currency of the entity incurring
the cash flows.
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 100% of the identified
exposures at the time of order
intake.

Hedge 85% of the identified
exposures for the first 18
months and up to 75% for the
following six months.

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.

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 euros and Canadian dollars.

Asset/liability management techniques.
Designation of long-term debt as
hedges of our 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. / 2015 FINANCIAL REPORT / OVERVIEW 39

Aerospace reportable segments
The hedged portion of our aerospace reportable segments’ significant foreign currency denominated costs for the
fiscal years ending December 31, 2016 and 2017 was as follows as at December 31, 2015:

Canadian dollars
2017

2016

Pounds sterling
2017

2016

$1,496

$1,636

$854

$292

$895

$249

—

£354

£365

86%

52%

82%

54%

0.8687

0.7807

1.5869

1.5356

For fiscal years
Business Aircraft expected costs denominated in
foreign currency
Commercial Aircraft expected costs denominated
in foreign currency
Aerostructures and Engineering Services 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
Business Aircraft, Commercial Aircraft and
Aerostructures and Engineering Services’ expected
costs for the year ending December 31, 2016 by
approximately $15 million, $8 million and $3 million,
respectively, before giving effect to forward foreign
exchange contracts ($2 million, $1 million and
$1 million impacts, respectively, 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
Aerostructures and Engineering Services’ expected
costs for the fiscal year ending December 31, 2016 by
approximately $4 million, before giving effect to forward
foreign exchange contracts ($1 million impact after
giving effect to such contracts).

Transportation and Corporate office
Transportation’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, Transportation enters into new
hedges in a rollover strategy for periods up to the maturity of the cash flow exposure. As such, Transportation’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.

The identified cash flow exposures at our Corporate office are not significant and mainly arise from expenses
denominated in Canadian dollars. Balance sheet exposure at Corporate office arises mainly from investments in
foreign operations and long-term debt. Despite our risk mitigation strategies, the impact of foreign currency
fluctuations on equity can be significant given the size of our 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, 2015 would have impacted equity, before the effect of income taxes, by
$13 million.

40 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Exposure to credit risk

The effective monitoring and controlling of credit risk is a key component of our 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

All
reportable
segments

Commercial
Aircraft

Through normal treasury
activities, we are 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 we transact strictly with investment-grade financial institutions and
money market funds, based on pre-established consolidated counterparty risk
limits per financial institution and fund.

We are 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
customers in connection
with the sale of commercial
aircraft.

Credit risks arising from normal commercial activities and lending activities are
managed and controlled by each reportable segment, 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 our 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 is 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, we
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, we usually
act 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. We engage 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. We continually monitor any financing opportunities to optimize our capital structure and
maintain appropriate financial flexibility.

Exposure to interest rate risk

Our 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, we 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.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 41

We are 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 2015 by $5 million.

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 (loss) 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

EBIT before special items, amortization and impairment charges on PP&E and intangible assets.

Net income (loss) 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.

Adjusted EPS

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.

Free cash flow

Cash flows from operating activities less net additions to PP&E and intangible assets.

Free cash flow before
net interest and income
taxes paid
Adjusted debt

Adjusted EBIT

Adjusted EBITDA

Adjusted interest

Free cash flow excluding cash paid and received for interest and income taxes, as per the
consolidated statements of cash flows.

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.

We believe that providing certain non-GAAP financial measures in addition to IFRS measures provides users of
our consolidated financial statements with enhanced understanding of results and related trends and increases
the transparency and clarity of the core results of our business. For these reasons, a significant number of users
of the MD&A analyze our 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 our opinion, our
core performance and help users of our MD&A to better analyze results, enabling better comparability of our
results from one period to another and with peers.

42 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, we may exclude
additional items if we believe doing so would result in a more transparent and comparable disclosure. Other
entities in our industry may define the above measures differently than we do. In those cases, it may be difficult to
use similarly-named non-GAAP measures of other entities to compare the performance of those entities to our
performance.

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 tables in the reportable segments and

•

the Consolidated results of operations section; and
free cash flow usage before net interest and income taxes received or paid and free cash flow usage to
cash flows from operating activities – see the Free cash flow usage table in the Liquidity and capital
resources section.

Reconciliation of EBITDA before special items and EBITDA to EBIT

EBIT
Amortization
Impairment charges on PP&E and intangible assets(1)
EBITDA
Special items excluding impairment charges on PP&E and
intangible assets(1)
EBITDA before special items

Reconciliation of adjusted net income to net loss

Net 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(1) and other adjusting items
Adjusted net income

Fourth quarters
ended December 31
2014
$ (1,201)
116
1,266
181

2015
(657)
123
296
(238)

Fiscal years
ended December 31
2014
(566)
417
1,266
1,117

2015
$ (4,838)
438
4,300
(100)

377
139

91
272

1,092
992

223
1,340

Fourth quarters ended December 31
2014
(per share)

2015
(per share)

0.30

$ (1,590)
1,357

0.78

0.01

0.00
0.00

12
285
83

0.01

0.01
0.16

(677)
673

(5)
1
9

Reconciliation of adjusted EPS to diluted EPS (in dollars)

Diluted EPS
Impact of special(1) and other adjusting items
Adjusted EPS

(1) Refer to the Consolidated results of operations section for details regarding special items.

Fourth quarters ended December 31
2014
(0.92)
0.96
0.04

2015
(0.31)
0.31
—

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OVERVIEW 43

Reconciliation of adjusted net income to net loss

Net loss
Adjustments to EBIT related to special items(1)
Adjustments to net financing expense related to:

Fiscal years ended December 31
2014
2015
(per share)
(per share)

$ (5,340)
5,392

2.59

$ (1,246)
1,489

0.86

Net change in provisions arising from changes in interest rates
and net loss (gain) on certain financial instruments(1)
Accretion on net retirement benefit obligations
Loss on repurchase of long-term debt(1)
Interest portion of gains related to special items(1)

Tax impact of special(1) and other adjusting items
Adjusted net income

75
72
22
—
105
326

0.04
0.03
0.01
—
0.05

21
76
43
(8)
273
648

0.01
0.04
0.02
0.00
0.16

Reconciliation of adjusted EPS to diluted EPS (in dollars)

Diluted EPS
Impact of special(1) 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(2)
Adjusted debt

Reconciliation of adjusted EBITDA and adjusted EBIT to EBIT

EBIT
Special items(1)
Interest received
Interest adjustment for operating leases(3)
Adjusted EBIT
Amortization adjustment for operating leases(4)
Amortization
Adjusted EBITDA

Reconciliation of adjusted interest to interest paid

Interest paid
Accretion expense on sale and leaseback obligations
Interest adjustment for operating leases(3)
Adjusted interest

Fiscal years ended December 31
2014
2015
(0.74)
(2.58)
1.09
2.72
0.35
0.14

As at December 31
2014
2015
7,683
8,979

(386)
8,593
133
563
9,289

(407)
7,276
260
865
8,401

Fiscal years ended December 31
2014
2015
(566)
(4,838)
1,489
5,392
298
156
41
67
1,262
777
96
63
417
438
1,775
1,278

Fiscal years ended December 31
2014
2015
354
427
6
9
41
67
401
503

(1) Refer to the Consolidated results of operations section for details regarding special items.
(2) Discounted using the average five-year U.S. Treasury Notes plus the average credit spread, given our credit rating, for the corresponding

period.

(3) 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 our credit rating.

(4) Represents a straight-line amortization of the amount included in adjusted debt for operating leases, based on a nine-year amortization

period.

44 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

BUSINESS AIRCRAFT

Reclassification
As a result of the new organizational structure effective as of January 1, 2015, financial results for the year
ended December 31, 2014 have been reclassified to conform with the current year presentation. Intersegment
transaction policies put in place following the adoption of the new organizational structure in 2015 were not
applied retroactively, which impacted period-over-period variances.

The data presented in 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 section in
Overview for further detail.

HIGHLIGHTS OF THE YEAR

Highlights of the fiscal year with regard to our results and key events

PROFILE

Overview of our operations and products and services

INDUSTRY AND ECONOMIC
ENVIRONMENT

Industry and economic factors affecting our business

KEY PERFORMANCE MEASURES
AND METRICS

Key performance measures and associated metrics that we use to
monitor our progress

ANALYSIS OF RESULTS

Financial performance for the fourth quarter and fiscal year ended
December 31, 2015

GUIDANCE AND FORWARD-
LOOKING STATEMENTS

What we said, what we did and what’s next
Assumptions and risks related to our forward-looking statements

Update on investments in product development

Deliveries, orders, order backlog and workforce

PAGE
46

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 45

HIGHLIGHTS OF THE YEAR

Significant investment in product development

REVENUES

$7.0 billion

EBIT MARGIN BEFORE
SPECIAL ITEMS(1)

NET ADDITIONS TO PP&E
& INTANGIBLE ASSETS

ORDER BACKLOG

4.4%

$722 million

$17.2 billion

RESULTS

For the fiscal years ended December 31
Revenues
Aircraft deliveries (in units)
Net orders (in units)(2)
Book-to-bill ratio(3)
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)
Net additions to PP&E and intangible assets
As at December 31
Order backlog (in billions of dollars)

2015
$ 6,996
199
(24)
nmf
$ (1,252)

(17.9)%
308
4.4 %
492
7.0 %
722
2015
17.2

2014
$ 7,200
204
129
0.6
(903)
(12.5)%
499
6.9 %
648
9.0 %

$ 1,019
2014
24.0

Variance
(3)%
(5)
(153)
nmf
(39)%
(540) bps
(38)%
(250) bps
(24)%
(200) bps
(29)%

(28)%

(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) The net orders for 2015 and 2014 include 143 cancellations and 52 cancellations, respectively.
(3) Ratio of net orders received over aircraft deliveries, in units.

KEY EVENTS

• On October 28, 2015, due to the lack of sales following the prolonged market weakness, we cancelled the
Learjet 85 aircraft program. As a result, we recorded a charge of $1.2 billion in special items in the third
quarter of 2015, mainly related to the impairment of the remaining Learjet 85 aircraft program development
costs.

• Following our in-depth review, which was completed in the second quarter of 2015, to validate all aspects of
the Global 7000 and Global 8000 aircraft program, our findings indicated that there would be a delay in the
Global 7000 aircraft’s schedule. The aircraft is now expected to enter into service in the second half of 2018.
• During the year, we announced workforce reductions for a total of approximately 2,400 employees, of which
approximately 1,000 employees related to the pause of the Learjet 85 aircraft program and approximately
1,400 employees related to the production rate decrease of the Global 5000 and Global 6000 aircraft. The
2,400 workforce reductions included employees in the Aerostructures and Engineering Services reportable
segment as well as product development engineers not allocated to a reportable segment.
In the fourth quarter of 2015, following the prolonged market weakness in the light business aircraft category,
an impairment charge of $53 million was recorded as a special item on the remaining Learjet family
aerospace program tooling. We remain committed to the Learjet family of aircraft.
In the fourth quarter of 2015, the Challenger 650 aircraft entered into service.

•
• Effective June 15, 2015, David M. Coleal became President, Bombardier Business Aircraft.
• We continue to restructure and enhance Business Aircraft’s business model to improve long-term profitability.

•

Subsequent to the end of the fiscal year, on January 13, 2016, we announced that we have completed
initiatives to increase the number of direct-to-market channels, including termination of third-party sales
representative and distribution agreements, and to restructure customer commercial agreements, which
resulted in the cancellation in the fourth quarter of fiscal year 2015 of 24 firm orders, valued at approximately
$1.75 billion based on 2015 list prices, with an additional cancellation of 30 optional orders. Mainly as a result
of these completed initiatives, in the fourth quarter of 2015, we recorded $327 million in special items.

46 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

• Subsequent to the end of the fiscal year, we decided to take steps to optimize our workforce with a

combination of manpower reduction and strategic hiring. Business Aircraft plans to reduce its workforce by an
estimated 500 production and non-production employees throughout 2016 and 2017, as we move forward
with our transformation plan. These adjustments will enable us to resize our organization in line with current
business needs and to increase our competitiveness.

PROFILE

World-class products

We design, develop, manufacture, market and provide aftermarket support for three families of business jets -
Learjet, Challenger and Global. Our business jet portfolio spans from the light to the large categories.

With more than 4,400 aircraft in service in North America, Europe, China and other Asia-Pacific, Latin America,
the CIS, the Middle East and Africa, Business Aircraft has developed a service and support network of 59 service
facilities including seven wholly-owned service centres in the U.S., the Netherlands and Singapore, 15 regional
support office (RSO) locations in 12 countries and superior aircraft parts availability sustained by 10 parts facilities
on five continents.

MARKET SEGMENT: BUSINESS AIRCRAFT

LIGHT BUSINESS JETS
Models: Learjet 70, Learjet 75

Market category: Light business jets
Key features(1): The Learjet family of aircraft features
exceptionally fast cruise speeds, high climb rates and
operating ceilings, along with competitive operating costs.

Learjet 75 aircraft

MID-SIZE BUSINESS JETS
Models: Challenger 350 and Challenger 650

Market category: Medium business jets
Key features(1): The Challenger family of aircraft features
productivity-enhancing business tools, with the most
comfortable cabins in its category. Each aircraft offers low
operating costs, high reliability, and can be customized
with leading-edge cabin communication equipment.

(1) Under certain operating conditions, when compared to aircraft currently in service.

Challenger 650 aircraft

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 47

LARGE BUSINESS JETS
Models: Global 5000, Global 6000, Global 7000(1) and
Global 8000(1)
Market category: Large business jets
Key features(2): The Global family of aircraft offers a
balance of performance, comfort and productivity for long-
range missions. The Global 7000 and Global 8000 aircraft
are being developed as an extension to the Global family
of aircraft and are expected to give us broad market
coverage in the upper end of the business aircraft market.
The state-of-the-art Global 7000 aircraft will feature a wing
that optimizes both short-field and high-speed, long-range
performance, a highly efficient engine and the largest
cabin and most advanced cockpit in the large business
aircraft category.(3)

Global 5000 aircraft

SPECIALIZED AIRCRAFT
Models: Various Bombardier business aircraft
Key features: Specialized aircraft provides solutions for governments, agencies and specialized organizations worldwide by
modifying business aircraft to suit customer needs for different mission requirements including: maritime patrol, medical,
government VIP transport, intelligence surveillance, reconnaissance and communication platforms, and military transport.

(1) Currently under development.
(2) Under certain operating conditions, when compared to aircraft currently in service.
(3) See the Global 7000 and Global 8000 aircraft program disclaimer at the end of this MD&A.

MARKET SEGMENT: CUSTOMER SERVICES AND SOLUTIONS

MAINTENANCE
Services portfolio: Extensive capabilities to accommodate maintenance, refurbishment and modification of business aircraft,
component repair and overhaul services as well as dispatching mobile repair teams to customers’ aircraft.
Key features: Offering worldwide service and support through seven wholly-owned Service Centres, 51 Authorized Service
Facilities including line maintenance facilities, one wholly-owned line maintenance station, 15 Bombardier mobile response
vehicles and one aircraft.

PARTS
Services portfolio: Providing new and used parts, initial provisioning services, as well as customer owned repairs.

Key features: Supporting business aircraft customers for all their parts needs with eight parts depots worldwide and two major
hubs. A sophisticated inventory management system ensures 24 hours and seven days distribution and worldwide availability.

SMART SERVICES
Services portfolio: A growing portfolio of innovative cost-per-flight-hour plans available for Global, Challenger and Learjet
aircraft. Options include Smart Parts, Smart Parts Plus, Smart Parts Preferred and Smart Parts Maintenance Plus.

Key features: From coverage on exchanges and repairs of airframe system components to flight deck avionics, Smart
Services provides budget predictability and cost protection.

CUSTOMER SUPPORT
Services portfolio: Comprehensive portfolio of business aircraft customer support including 24-hour customer response
centres, customer services engineering, a network of field service personnel, customer response team (CRT) trucks, regional
support offices, technical publications, and EIS support.

Key features: Providing operators with a single point of contact, 24 hours a day, 365 days a year, for all critical and aircraft-on-
the-ground requests and supporting all customer requirements from EIS throughout ownership of the aircraft by leveraging a
global support network of strategically located teams.

48 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

TRAINING
Services portfolio: Providing a complete range of flight crew and technical training services on business aircraft at two
wholly-owned facilities and through a network of strategic partnerships worldwide.

Key features: One of the only business jet manufacturers which provides training on its own aircraft programs. Training is
provided through custom state-of-the art classroom technology systems, and a suite of high fidelity training devices and
certified Level D Full Flight Simulators.

INDUSTRY AND ECONOMIC ENVIRONMENT

Long-term market drivers remain solid despite a current challenging
environment

Overall, the business aircraft market indicators signal challenges in the short-term.

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 significantly
decreasing in the last four quarters, mainly due to reduced confidence in selling prices, business
conditions and customer interest and reduced willingness to increase inventory. The worldwide
index fell below the threshold of market stability in the second quarter of 2015 and is now at 35,
the lowest level since the second quarter of 2009.

Corporate
profits

U.S. corporate profits are expected to decrease year-over-year by 5.1% to a forecast $2.0 trillion
for 2015.(1)

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 slightly increased over the past year and is at 11.6%. We consider 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
slightly increased.

In the large category, the level of pre-owned business aircraft inventory has been stable in the
current year but remains below what we consider to be the normal range for the overall
market.

Business jet utilization in the U.S. slightly increased by 0.8% in 2015 compared to 2014. Business
jet utilization in Europe remained essentially the same in 2015 compared to 2014.

In the business aircraft market categories in which we compete, business aircraft deliveries and
total billings were stable in 2015 as compared to 2014.(2)

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on the current

environment.
(1) According to the U.S. Bureau of Economic Analysis News Release dated December 22, 2015.
(2) Based on our estimates and the General Aviation Manufacturers Association (GAMA) annual shipment report dated February 10, 2016.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 49

Source: UBS
* The UBS Business Jet Market Index is a measure of market

Sources: JETNET and Ascend online
* As a percentage of total business jet fleet, excluding very light jets.

confidence from industry professionals, gathered through bi-monthly
surveys of brokers, dealers, manufacturers, fractional providers,
financiers and others.

Shaded area indicates what we consider to be the normal range

of total pre-owned business jet inventory available for sale, i.e.
between 11% and 14%.

Source: U.S. Federal Aviation Administration (FAA) website
* Comparative figures have been restated to reflect an updated
population of aircraft models.

Source: Eurocontrol

In 2015, we estimate the level of industry orders in the market categories in which Business Aircraft competes
decreased by approximately 40% compared to last year.(1) Current economic conditions and geopolitical issues in
some regions such as Latin America, China and Russia, have had an impact on industry-wide order intake.
During 2015, the industry deliveries and billings in the market categories in which we compete were essentially in
line with last year.(2) The light business aircraft category remains weak since the economic downturn.
(1) Based on our estimates and public disclosure records of certain competitors.
(2) Based on our estimates and the GAMA annual shipment report dated February 10, 2016.

50 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

The state of the world economy and those of individual countries are key factors in the demand for air travel. 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 2.5% in 2015, which is slightly lower than the 2.7% increase in 2014. The world
economy is predicted to grow at 2.3% and 2.9% in 2016 and 2017, respectively.(1)

The GDP in the U.S., the largest market for business aircraft, is expected to grow at 2.0% in 2016, compared to
2.4% in 2015. In Europe, Business Aircraft’s second largest market in terms of sales, the GDP is expected to grow
by 1.9% in 2016, the same level of growth as in 2015.(1)

For China and India, regions with high growth potential for business aviation, growth in 2016 is expected to be at
6.2% and 7.4% respectively, compared to 6.9% and 7.4%, respectively, in 2015. In the CIS, a decline of 1.2% is
expected in 2016, compared to a decline of 3.1% in 2015.(1)

(1) According to “Oxford Economics Global Data Report” dated February 11, 2016.

Short-term outlook
The current neutral or negative trends in indicators reflect short-term softness for the business aircraft market.
The business aircraft market has been impacted by the current economic conditions and geopolitical issues in
some markets such as China, Latin America and Russia. Slower than expected global economic growth,
geopolitical uncertainty and low oil and gas prices are expected to continue impacting the business aircraft market
in 2016. However, based on our “Business Aircraft Market Forecast” published on May 2015, the business aircraft
market is expected to grow at a CAGR of 5% up to 2020 in the market categories in which we compete.(1)

Long-term outlook
In the long-term, we anticipate continued wealth creation
in mature markets and increased penetration of business
jets in emerging markets. The overall market for
business jets is expected to show strong long-term
growth. We remain confident in the potential of the
business aircraft industry with a strong outlook for long-
term drivers of business aircraft demand.

In May 2015, we released our annual market forecast for
the 10-year period for calendar years 2015 to 2024. The
“Business Aircraft Market Forecast” estimates 9,000
aircraft deliveries in the light to large categories. The 10-
year deliveries are valued at an estimated
$267 billion.(1)(2)

Over the next 10 years, we expect the large business
aircraft category to represent half of overall revenues at
$137 billion, while the medium and light business aircraft
categories will represent $91 billion and $39 billion,
respectively. In addition, 1,825 light to large business
aircraft are expected to be retired over the next 10 years.

(1) Available on Bombardier’s dedicated investor relations website at

ir.bombardier.com.

(2) Unit values are based on Business & Commercial Aviation magazine

2014 list prices.

* As stated in our “Business Aircraft Market Forecast”, published in
May 2015 and available on Bombardier’s dedicated investor
relations website at ir.bombardier.com
**Unit values are based on Business and Commercial Aviation
magazine 2014 list prices.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 51

Despite the current economic conditions and geopolitical issues in some markets such as China, Latin America
and Russia, which had an impact on order intake levels industry-wide, we remain confident in the potential of the
business aircraft industry with a strong outlook for long-term drivers of business jet demand.

Some aircraft manufacturers, like us, have a number of new business jets in development, with the view that the
new models stimulate demand and will contribute to the industry’s recovery over the longer-term.

The worldwide business aircraft fleet is expected to increase from 15,735 aircraft at the end of 2014 to 22,910
aircraft in 2024. North America is expected to receive the greatest number of new business jet deliveries in the
10-year period with 3,900 aircraft, followed by Europe with 1,525 aircraft. Notably, China is expected to become
the third largest market for business jet deliveries, with 875 deliveries between 2015 and 2024. We also expect
other key growth markets in non-traditional economies to receive a significant share of business jet deliveries over
the next 10 years.(1)

(1) As stated in our “Business Aircraft Market Forecast”, published in May 2015 and available on Bombardier’s dedicated investor relations

website at ir.bombardier.com.

BUSINESS AIRCRAFT FLEET EVOLUTION BY
CATEGORY 2015-2024*

BUSINESS AIRCRAFT FLEET EVOLUTION BY
GEOGRAPHIC REGION 2015-2024*

* In units. As stated in our “Business Aircraft Market Forecast”,

published in May 2015 and available on Bombardier’s dedicated
investor relations website at ir.bombardier.com.

** Includes 270, 165, 110 and 5 retirements for Latin America, Rest of

world, Europe and China regions, respectively.

Customer services

Business Aircraft’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 our support locations can be found in the Profile section.

The demand for customer services is driven by the size of the fleet of Bombardier business aircraft, by the
number of hours flown by said fleet and the average age of the fleet. Based on Business Aircraft’s large installed
base, we will continue to focus on these high margin activities.

52 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Customer services market indicators

Indicator

Current situation

Status

Installed
base

Average
annual
flight
hours

Average
age of fleet

The installed base for active in-service Bombardier business aircraft increased by 3.9% in 2015
compared to 2014.(1)
Based on our estimates, Bombardier business aircraft average annual flight hours remained
essentially the same as it slightly decreased by 0.7% in 2015 compared to last year.

Typically, aircraft direct maintenance costs increase as an aircraft ages. Therefore, the average
age of the fleet of Bombardier aircraft will impact the size of the maintenance market. The average
age of the Bombardier business aircraft fleet remained essentially the same in 2015 compared to
2014.(1)

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on the current

environment.
(1) Based on data obtained from Ascend fleet database by Flightglobal.

Short-term outlook
Based on the market indicators above, the demand for spare parts and service programs is expected to grow. We
continue 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 the fleet for business aircraft, however, wealth creation and
economic development in non-traditional markets is driving a shift in the proportion of the business aircraft fleet
outside of the U.S. This trend in demand impacts the geographical layout of our support network. In non-
traditional markets, the strategy is to increase our local customer-support presence and leverage third parties to
deploy the full span of services.

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 should create new opportunities for customer services.

KEY PERFORMANCE MEASURES AND METRICS

The table below summarizes our most relevant key performance measures and related metrics.

KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS

Growth and
competitive
positioning

Profitability

Liquidity

Customer
satisfaction

• 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 our competitive positioning.

•

EBIT, EBIT margin, EBIT before special items(2) and EBIT margin before special items(2), as measures
of performance.

Free cash flow(2), as a measure of liquidity generation.

•
• On-time aircraft deliveries, as a measure of meeting our commitment to customers.
•
• Regional availability of parts and material to support customer requests, as a measure of meeting

Fleet dispatch reliability, as a measure of our products’ reliability.

Execution

•

customer needs for the entire life of the aircraft.
Achievement of program development milestones, as a measure of flawless execution.

(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.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 53

Our incentive-based compensation plan for non-unionized employees across our sites rewards the collective
efforts of our employees in achieving our objectives using performance indicator targets. A total of 6,000
employees worldwide, or 59% of permanent employees, participate in the program. In 2015, 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 and executing according to plan in new product development programs.

ANALYSIS OF RESULTS

Results of operations

Revenues
EBITDA before special items(1)
Amortization(2)
EBIT before special items(1)
Special items
EBIT
EBIT margin before special items(1)
EBIT margin

Fourth quarters
ended December 31
2014
2015
$ 2,462
$ 2,086
225
$
83
$
51
55
174
28
1,357
380
$ (1,183)
(352)

Fiscal years
ended December 31
2014
2015
$ 7,200
$ 6,996
648
$
492
$
149
184
499
308
1,402
1,560
(903)
$ (1,252)

1.3 %
(16.9)%

7.1 %
(48.1)%

4.4 %
(17.9)%

6.9 %
(12.5)%

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics.
(2) Amortization is included in cost of sales, SG&A and R&D expense based on the underlying function of the asset.

Revenues by geographic region(1)

North America
Europe
Asia-Pacific
Rest of world(2)

4,152
1,343
845
656
6,996

Fiscal years ended December 31
2014

2015

59%
19%
12%
10%
100%

3,491
1,359
997
1,353
7,200

48%
19%
14%
19%
100%

(1) Revenues are attributed to countries based on the location of the customer.
(2) The Rest of world region includes the CIS, Africa, South America, the Middle East and Central America.

Revenues
The $376-million decrease for the fourth quarter is
mainly due to lower aircraft deliveries as well as
lower deliveries and mix of pre-owned business
aircraft.

The $204-million decrease for the fiscal year is
mainly due to lower deliveries of large business
aircraft partially offset by higher deliveries of medium
business aircraft.

54 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

* The fiscal year ended December 31, 2011 comprises 11 months
of results.

Special items
Special items comprise items which do not reflect, in our opinion, our 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:

Impairment and other charges - Learjet 85 aircraft
program

Write-off of deferred costs
Termination of sales representative and distribution
agreements
Impairment charge - Learjet family of aircraft
Restructuring charges
Gain on resolution of a litigation

EBIT margin impact

Ref

3
4
5
6

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014
2015

—

194

133
53
—
—
380
(18.2)%

$ 1,357

$ 1,169

$ 1,357

—

194

—

—
—
—
—
$ 1,357

133
53
11
—
$ 1,560

—
—
48
(3)
$ 1,402

(55.2)%

(22.3)%

(19.4)%

In 2015, represents an impairment charge of $925 million on aerospace program tooling and inventory write-
downs, write-downs of other assets and PP&E, other provisions and other financial liabilities of $244 million,
as a result of the cancellation of the Learjet 85 aircraft program due to the lack of sales following the
prolonged market weakness. A credit of $6 million related to this special item is included in Corporate and
eliminations.

In 2014, represents losses related to the pause of the Learjet 85 aircraft program announced in January 2015,
mainly comprised of an impairment charge of $1.3 billion on aerospace program tooling.

2. Mainly related to restructuring of customer commercial agreements.

3. Costs incurred in connection with the termination of third-party sales representative and distribution

agreements to increase the number of direct-to-market channels.

4. Represents an impairment charge on the remaining Learjet family aerospace program tooling, following the

prolonged market weakness in the light business aircraft category.

5. Restructuring charge in 2015 related to:

•

a $13-million restructuring charge related to the workforce reduction of 1,000 employees in Querétaro,
Mexico and Wichita, U.S. related to the Learjet 85 program partially offset by a $2-million adjustment to a
restructuring provision recorded in the prior year.

Restructuring charges in 2014 related to:
•

a $35-million expense in 2014 related to the workforce reduction connected to the new organizational
structure announced in July 2014; and
a $13-million expense due to the workforce reduction announced in January 2014.

•

6. Represents a gain on a resolution of a litigation in connection with Part IV of the Québec Income Tax Act, the

Tax on Capital.

EBIT margin
There was a significant increase in EBIT margin for the fourth quarter ended December 31, 2015 compared to the
same period last fiscal year. The EBIT margin before special items (see explanation of special items above)
decreased by 5.8 percentage points, mainly as a result of:

•
•
•
•

lower aircraft margins;
lower absorption of SG&A expenses;
higher write-downs of pre-owned aircraft; and
higher R&D expense per unit produced, mainly as a result of the amortization of aerospace program
tooling following the EIS of the Challenger 650 aircraft in the fourth quarter of 2015.

Partially offset by:
•

a favourable mix of aircraft deliveries.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 55

There was a significant decrease in EBIT margin for the fiscal year ended December 31, 2015 compared to last
fiscal year. The EBIT margin before special items (see explanation of special items above) for the fiscal year
decreased by 2.5 percentage points, mainly as a result of:

•
•
•

lower aircraft margins;
higher write-downs of pre-owned aircraft; and
higher R&D expense per unit produced, mainly as a result of the amortization of aerospace program
tooling following the EIS of the Challenger 350 aircraft and the Challenger 650 aircraft.

Partially offset by:
•
•

a favourable mix of aircraft deliveries; and
lower SG&A expense.

The Global 7000 aircraft is defining the new standard
in the large business aircraft category

Investment in product development

Program tooling(1)
R&D expense(2)

As a percentage of revenues

Fourth quarters
ended December 31
2014
2015
269
194
1
1
270
195
11.0%
9.3%

Fiscal years
ended December 31
2014
2015
967
674
9
4
976
678
13.6%
9.7%

(1) Net amount capitalized in aerospace program tooling.
(2) Excluding amortization of aerospace program tooling of $39 million and $125 million, respectively, for the fourth quarter and fiscal year

ended December 31, 2015 ($36 million and $96 million, respectively, for the fourth quarter and fiscal year ended December 31, 2014), as
the related investments are already included in aerospace program tooling.

Program tooling additions mainly relate to the development of the Global 7000 and Global 8000 aircraft program
as well as the Challenger 650 aircraft.

* For fiscal years 2011 to 2013, the balances have not been

restated to align with the current segmented presentation.
** The fiscal year ended December 31, 2011 comprises 11

* For fiscal years 2011 to 2012, the balances have not been
restated to align with the current segmented presentation.

months of results.

56 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

The carrying amount of business aircraft program tooling(1) as at December 31, 2015 was $2.0 billion, compared
to $2.5 billion as at December 31, 2014. The decrease includes the impairment charge of $925 million related to
the remaining program tooling balance following the decision to cancel the Learjet 85 aircraft program in October
2015. As well, an impairment charge of $53 million was recorded in the fourth quarter of 2015 related to the
remaining program tooling balance of the Learjet family of aircraft reflecting the current market weakness in the
light business aircraft category.

The carrying amount as at December 31, 2014 is net of an impairment charge of $1.3 billion related to the
January 2015 decision to pause the Learjet 85 aircraft program.

(1) Capitalized borrowing costs included in the business aircraft aerospace program tooling balance amounted to $157 million as at

December 31, 2015 ($208 million as at December 31, 2014).

Reconciliation of the carrying amount of aerospace program tooling
Balance as at December 31, 2014
Investment in product development
Amortization of aerospace program tooling
Impairment of the Learjet 85 program following the cancellation of the

program in October 2015

Learjet family of aircraft impairment charge due to the continued market

weakness in the light business aircraft category

Balance as at December 31, 2015

2,470
674
(125)

(925)

(53)
2,041

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 throughout the product
development cycle. The product development process is constantly refined to integrate the lessons learned from
our 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 our product responsibility strategy. In addition to the Design for Environment approach,
health and safety considerations are also embedded in product design.

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.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 57

The Global 7000 and Global 8000 aircraft program
We continue to focus our efforts on the flight test program in order to bring the category-defining Global 7000
aircraft to market.

The engines have been mounted on the first Global 7000 FTV. All structural components have been joined on
FTV1, including the rear, centre and forward fuselage sections, the wing, the landing gear and vertical and
horizontal stabilizers. FTV2 is in final assembly with major structural components joined, including the rear, centre
and forward fuselage sections and cockpit. Two additional FTVs are in various stages of production and
assembly.

The manufacturing process of the Global 7000 and Global 8000 aircraft program is employing the highest caliber
technology. The final assembly line in Toronto, Canada, features a state-of-the-art automated positioning system
using laser-guided measuring. This system is used to join the wing structure to the fuselage with a very high level
of precision. Laser-guided technology is also a key feature of articulated robot drilling on the final assembly line,
which ensures consistent quality and repeatability. Robot drilling features a tolerance for accuracy and precision
within less than one thousandth of an inch.

The safety-of-flight testing is underway. Engine development by our supplier, as well as ground and flight testing
of the engine, are progressing.

Following an in-depth review of all aspects of the program, which was completed in the second quarter of 2015,
the Global 7000 aircraft is expected to enter into service in the second half of 2018.

The Challenger 650 aircraft program
The Challenger 650 aircraft program, the evolution of the Challenger 605 aircraft, was launched in October 2014.
The Challenger 650 received type certification from Transport Canada and the Federal Aviation Administration in
November 2015 and entered into service in the fourth quarter of 2015.

Similar overall level of business aircraft deliveries

Business aircraft deliveries

(in units)
Light

Learjet 70/75
Learjet 60 XR

Medium

Challenger 300/350
Challenger 605/650
Challenger 850

Large

Global 5000/Global 6000

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014
2015

11
—

18
14
—

21
64

18
—

19
16
—

25
78

32
—

68
25
1

73
199

33
1

54
36
—

80
204

In fiscal year 2015, we captured a 36% market share in the overall market in which we compete, based on
revenue, and 33% of the market share based on units delivered. We were the market leader in terms of units
delivered and second in terms of revenues. This compares with a market share of 37% and 34%, based on
revenues and units delivered respectively, in fiscal year 2014. In 2014, we were also the market leader in terms of
units delivered and second in terms of revenues.(1)
(1) Based on our estimates and the GAMA annual shipment report dated February 10, 2016.

58 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Lower level of order intake reflecting current challenges in the market

Net orders

(in units)
Gross orders
Cancellations
Net orders

The net negative orders for the fourth quarter ended
December 31, 2015 are mainly due to the
cancellation of 24 firm orders, following the
restructuring of certain customer commercial
agreements.

In addition to the cancellation of 24 firm orders in the
fourth quarter of 2015, the net negative orders for
fiscal year 2015 are due to cancellations of 74
Learjet 85 aircraft orders, of which 64 orders were
cancelled in the third quarter of 2015 following our
decision to cancel the aircraft program due to the
lack of sales following the prolonged market
weakness.

In 2014, there were two and ten cancellations of
Learjet 85 aircraft orders, in the quarter and fiscal
year respectively.

In the past years, the high order intake was partly
due to significant multi-aircraft orders signed with
NetJets Inc., Flexjet, LLC, Vistajet and various
undisclosed customers.

Fourth quarters
ended December 31
2014
2015
49
31
(17)
(50)
32
(19)

Fiscal years
ended December 31
2014
2015
181
119
(52)
(143)
129
(24)

* Fiscal year 2011 comprised 11 months of results.

Highest order backlog in the industry despite current market conditions

Order backlog

(in billions of dollars)

As at
December 31, 2015 December 31, 2014
24.0

17.2

The decrease in order backlog as at December 31, 2015 reflects lower order intake than deliveries for business
aircraft. The net negative level of orders for the fiscal year reflects cancellations following the decision to cancel
the Learjet 85 aircraft program as well as impacts related to our decision to restructure certain customer
commercial agreements.

The order backlog and the production horizon for programs are monitored to align production rates to reflect
market demand. On May 14, 2015, we announced a reduction in the production rate for the Global 5000 and
Global 6000 aircraft.

Book-to-bill ratio(1)

Net orders
Deliveries

Fourth quarters
ended December 31
2014
2015
32
(19)
78
64
0.4
nmf

Fiscal years
ended December 31
2014
2015
129
(24)
204
199
0.6
nmf

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

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 59

The negative book-to-bill ratios for the fourth quarter
and fiscal year ended December 31, 2015 for
business aircraft reflect higher cancellations than
gross orders intake, mainly as a result of the
Learjet 85 aircraft program cancellation as well as
the cancellations related to the restructuring of
certain customer commercial agreements,
recognized in the third and fourth quarters of 2015,
respectively.

Fiscal year 2011 comprised 11 months of results.

Workforce

Total number of employees

Permanent(1)
Contractual(2)

December 31, 2015
10,100
300
10,400

As at
December 31, 2014
11,000
600
11,600

Percentage of permanent employees covered by collective agreements

43%

46%

(1) Including inactive employees.
(2) Including non-employees and agency outsourced personnel.

The workforce as at December 31, 2015 decreased by approximately 10% when compared to last year. This is
mainly related to a workforce reduction of approximately 250 employees following the decision to pause the
Learjet 85 program announced in the first quarter of 2015 and a reduction of approximately 750 employees
related to the production rate decrease of the Global 5000 and Global 6000 aircraft announced in the second
quarter of 2015. Reductions of approximately 450 employees related to the production rate decrease are
expected to take place in 2016.

Subsequent to the end of the fiscal year, we decided to take steps to optimize our workforce with a combination of
manpower reduction and strategic hiring. Business Aircraft plans to reduce its workforce by an estimated 500
production and non-production employees throughout 2016 and 2017, as we move forward with our
transformation plan. These adjustments will enable us to resize our organization in line with current business
needs and to increase our competitiveness.

60 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Major collective agreements

Location

Union

Montréal, Canada

International Association of Machinists and
Aerospace Workers (IAMAW) – Local 712

Montréal Global aircraft
completion centre,
Canada

Unifor - Local 62

Toronto, Canada

Unifor - Locals 112 and 673

Wichita, U.S.

International Association of Machinists and
Aerospace Workers (IAMAW) – Local 639

Approximate number of
permanent employees
covered as at
December 31, 2015
1,350

Expiration of current
collective agreement

November 30, 2018

1,250

December 5, 2016

1,250

450

June 22, 2018

October 9, 2017

GUIDANCE AND FORWARD-LOOKING STATEMENTS

What we said for 2015

What we did in 2015

What’s next for 2016(1)

Approximately 210 deliveries.

199 deliveries.

Revenues greater than $5.0 billion.

Growth and
deliveries

Profitability(2) EBIT margin in the range of 5%

to 6%.

EBIT margin before special
items(2) of 4.4%.

Approximately 150 deliveries.

EBIT margin of approximately 6%.

Deliveries were slightly lower than expected as a result of the current economic conditions and geopolitical issues
in some markets such as China, Latin America and Russia. The EBIT margin before special items(2) was lower
than guidance, mainly due to lower aircraft margins and a decrease in fair value of pre-owned aircraft. Slower
than expected global economic growth, geopolitical uncertainty and low oil and gas prices are expected to
continue impacting the business aircraft market in 2016.

To address these market conditions, we have taken actions to strengthen our business and solidify our long-term
profitability across our portfolio of products:

•

In an effort to sustain margins, in May 2015, we took the decision to reduce the production rate of the
Global 5000 and Global 6000 aircraft as a proactive measure to better align supply and demand and to
protect the residual values for this important brand.

• Due to the lack of sales following the prolonged market softness in the light business aircraft, we

•

canceled the Learjet 85 aircraft program in October 2015.
In December 2015, we discontinued marketing the Learjet 60 and Challenger 850 aircraft to focus our
efforts on our category-leading products.

• We expect to realize the benefits from our past and ongoing product investments, which will be a key
driver of our future revenue growth. The Global 7000 aircraft is defining the new standard in the large
business aircraft category as it is the first and only business aircraft to offer four unique living spaces. It
has exceptionally high speed and unique steep approach capabilities. We have therefore prioritized the
EIS of the Global 7000 aircraft, which is expected to EIS in the second half of 2018. We revised the
schedule for the Global 7000 and Global 8000 aircraft program to ensure no compromise is made in
terms of performance and comfort of these category-defining aircraft.
In January 2016, we announced changes to our strategic sales approach by increasing the number of
direct-to-market channels. Specifically, we terminated third-party sales representative and distribution
agreements positioning our sales team to handle sales activities and engage directly with customers and
prospects in the Middle East and North Africa.

•

• We restructured customer commercial agreements, resulting in the cancellation of 24 firm orders in the

fourth quarter of fiscal year 2015, valued at approximately $1.75 billion based on 2015 list prices, with an
additional cancellation of 30 optional orders.

(1) Refer to the Forward-looking statements hereafter.
(2) Profitability guidance is based on EBIT before special items. Refer to the Non-GAAP financial measures section in Overview for a definition

of this metric and to the Analysis of results section for a reconciliation to the most comparable IFRS measure.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / BUSINESS AIRCRAFT 61

Despite the current economic and geopolitical challenges as well as the headwinds we expect to face in 2016
from the production rate reduction of the Global 5000 and Global 6000 aircraft, we are confident in our ability to
contribute to sustainable revenue and profitability growth. We have leading products in the light, medium and
large aircraft categories and the highest order backlog in the business aircraft industry. The Global 7000 and
Global 8000 aircraft program is well positioned to capture a significant share of the large aircraft category. Our
focus is to strengthen our order backlog by taking action to capitalize on growing market opportunities around the
world. Considering our significant and growing installed base of business aircraft, high-margin aftermarket
services present another opportunity in terms of revenue growth and profitability. Our roadmap to 2020 to grow
our revenues and profitability and our operational transformation plan to reduce costs are key in achieving our
objectives.(1)

(1) Refer to the Strategic Priorities section in Overview for more details on our roadmap to 2020.

Forward-looking statements
Forward-looking statements(1) in this section of the MD&A are based on:
• current firm order backlog and estimated future order intake;(2)

• a lower level of aircraft deliveries in fiscal year 2016 compared to fiscal year 2015 due to the production rate reset on the

Global 5000 and Global 6000 aircraft program and growth from customer services;

•

the continued deployment and execution of key transformation initiatives, especially those impacting direct and indirect
procurement costs, labor efficiency and working capital improvement;

• our ability to execute and deliver business model enhancement initiatives;

• our ability to meet scheduled EIS dates and planned costs for the Global 7000 and Global 8000 aircraft program;

• our ability to recruit and retain highly skilled resources to deploy our product development strategy;

•

the ability of our supply base to support planned production rates; and

• stability of foreign exchange rates.

(1) Also refer to the Guidance and forward-looking statements section in Overview.
(2) Demand forecast is based on the analysis of main market indicators, including real GDP growth, industry confidence, corporate
profitability within our customer base, pre-owned business jet inventory levels, aircraft utilization, aircraft shipments and billings,
installed base and average age of the fleet. For more details, refer to the market indicators in the Industry and economic environment
section.

62 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

COMMERCIAL AIRCRAFT

HIGHLIGHTS OF THE YEAR

Highlights of the fiscal year with regard to our results and key events

PROFILE

Overview of our operations and products and services

INDUSTRY AND ECONOMIC
ENVIRONMENT

Industry and economic factors affecting our business

KEY PERFORMANCE MEASURES
AND METRICS

Key performance measures and associated metrics that we use to
monitor our progress

ANALYSIS OF RESULTS

Financial performance for the fourth quarter and fiscal year ended
December 31, 2015

Update on investments in product development

Deliveries, orders, order backlog and workforce

STRATEGIC PARTNERSHIP

Our partnership with the Government of Québec, who will invest $1.0
billion in the C Series aircraft program

GUIDANCE AND FORWARD-
LOOKING STATEMENTS

What we said, what we did and what’s next

Assumptions and risks related to our forward-looking statements

PAGE
64

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 63

HIGHLIGHTS OF THE YEAR

CS100 aircraft received type certification

REVENUES

$2.4 billion

EBIT MARGIN BEFORE
SPECIAL ITEMS(1)

NET ADDITIONS TO PP&E
& INTANGIBLE ASSETS

ORDER BACKLOG

(7.1)%

$963 million

$11.5 billion

RESULTS

For the fiscal years ended December 31
Revenues
Aircraft deliveries (in units)
Net orders (in units)
Book-to-bill ratio(2)
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)
Net additions to PP&E and intangible assets
As at December 31
Order backlog (in billions of dollars)

2015
$ 2,395
76
51
0.7
$ (3,970)
nmf
(170)
(7.1)%
(66)
(2.8)%
963
2015
11.5

2014
$ 2,740
86
153
1.8
(123)
(4.5)%
(107)
(3.9)%
(5)
(0.2)%
801
2014
12.5

Variance
(13)%
(10)
(102)
nmf
nmf
nmf
(59)%
(320) bps
nmf
(260) bps
20 %

(8)%

(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) Ratio of net orders received over aircraft deliveries, in units.

KEY EVENTS

• Subsequent to the end of the fiscal year, we signed a Letter of Intent (LOI) with Air Canada for 45 CS300
aircraft with options for an additional 30 CS300 aircraft, including conversion rights to the CS100 aircraft.
Upon execution of a firm purchase agreement, Air Canada will become the first mainline, international
network carrier based in North America for the C Series family of aircraft. This LOI complements our existing
C Series aircraft orders in both Europe and Asia. The Air Canada deliveries are expected to start in 2019.
Based on list price of the CS300 aircraft, a firm order would be valued at approximately $3.8 billion. This LOI
is not included in the order backlog as at December 31, 2015. As at the date of this report, firm orders and
other agreements(1) for a total of 678 C Series aircraft have been signed with 23 customers in 20 countries,
including 243 firm orders.
In October 2015, Bombardier Inc. entered into a memorandum of understanding with the Government of
Québec, who will invest $1.0 billion in the C Series aircraft program in return for a 49.5% equity stake in a
newly created limited partnership to which we would transfer the assets, liabilities and obligations of the
C Series aircraft program. This newly created limited partnership will carry on the operations related to our
C Series aircraft program and will be consolidated in our financial results. The execution of the definitive
agreements and the disbursement of the investment are expected to take place in the second quarter of
2016, subject to closing conditions. The Government of Québec’s interest in the partnership will be
redeemable at our option, in certain circumstances.

•

• Following the completion of an in-depth review of the C Series aircraft program as well as discussions with
the Government of Québec, which resulted in the memorandum of understanding, we recorded a charge of
$3.2 billion in special items in the third quarter of 2015, mainly related to the impairment of aerospace
program tooling. We continue to believe that the C Series aircraft program meets specific market
requirements and that it has long-term market potential.

(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, 2015

• On December 17, 2015, the CS100 aircraft was awarded type certification from Transport Canada, paving the

way for the delivery and EIS of the aircraft with first operator Swiss International Air Lines (SWISS) expected
in the second quarter of 2016.

• During the fourth quarter of 2015, we recorded a charge of $240 million in special items related to the

impairment of the remaining CRJ1000 aircraft tooling balance due to the lack of recent order intake as well as
low firm order backlog for this program, mainly stemming from pilot scope clauses in the U.S. which have
restricted the use, number and seating capacity of regional aircraft flying on behalf of network carriers. Over
the near term, we do not anticipate scope clause relaxation in the U.S., during which time, we will not be able
to sell the CRJ1000 aircraft in the U.S. market.

• Effective April 9, 2015, Fred Cromer became President, Bombardier Commercial Aircraft.

PROFILE

A leading portfolio of aircraft in the 60- to 150-seat categories

We design and manufacture a broad portfolio of commercial aircraft in the 60- to 150-seat categories, including,
the CRJ700, CRJ900 and CRJ1000 regional jets as well as the clean-sheet C Series mainline jets and the Q400
turboprop. We provide aftermarket services for these aircraft as well as for the 20- to 59-seat range category.

Commercial Aircraft’s customer services network includes Customer Response Centres located in Montréal and
Toronto, Canada, as well as 22 Regional Support Offices (RSO) and Parts Facilities worldwide. Three wholly-
owned and operated Service Centres in the U.S. provide heavy maintenance, drop-in maintenance, as well as
structural repair and overhaul of airframes and components. Some 10 strategically located Authorized Service
Facilities provide valued support worldwide to keep our customers flying competitively. The network is supported
by regionally-based mobile teams.

MARKET SEGMENT: COMMERCIAL AIRCRAFT
REGIONAL JETS
Models: CRJ700, CRJ900 and CRJ1000

Market category: 60- to 100-seat regional jets
Key features(1): Designed for hub expansion and point-to-
point services, the CRJ aircraft family is optimized for
medium to long distance regional routes. The most
successful regional aircraft program, the CRJ family,
features best-in-class: operating costs, fuel burn and
emissions. The CRJ is constantly raising the bar with
vision of a double digit fuel burn reduction by 2020.(2)
Since its launch, the CRJ family of regional jets has
stimulated the regional jet market. In North America alone,
it accounts for 20% of all jet departures. Globally, the
family operates more than 200,000 flights per month.

(1) Under certain operating conditions, when compared to aircraft currently in service for short-haul flights up to 500 NM.
(2) Based on CRJ900 improvements since EIS. Improvements are currently under development, and as such, all specifications and data are

approximate, may change without notice and are subject to certain operating rules, assumptions and other conditions.

CRJ900 aircraft

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 65

COMMERCIAL JETS
Models: CS100(1) and CS300(1)
Market category: 100- to 150-seat commercial jets
Key features(2): Designed for the growing 100- to 150-seat
market, the 100% new C Series aircraft family offers 15%
operating cost advantage over in-production aircraft and
up to 12% operating cost advantage over re-engined
aircraft. The C Series clean-sheet design ensures that the
aircraft will achieve greatly reduced noise and emissions,
as well as superior operational flexibility, exceptional
airfield performance and range. The C Series aircraft's
maximum range has been confirmed to be 3,300 NM
(6,112 km), some 350 NM (648 km) more than originally
targeted. All noise performance testing on the CS100
aircraft has been completed and data confirms it is the
quietest in-production commercial jet in its class. The
aircraft is delivering more than a 20% fuel burn advantage
compared to in-production aircraft, and a greater than 10%
advantage compared to re-engined aircraft. The C Series
aircraft will also emit 50% fewer NOx emissions than the
Committee on Aviation Environmental Protection (CAEP6)
NOx emission standards.

TURBOPROPS
Model: Q400

Market category: 60- to 90-seat turboprops
Key features(3): The Q400 airliner is a fast, fuel-efficient,
low-emission and highly flexible turboprop. It is the only in-
production turboprop that can be configured with capacity
up to 86 passengers while offering jet-like speed and an
extended range, along with best-in-class seat costs. The
cargo-passenger combi Q400 aircraft is available in
various configurations and offers up to 9,000 lbs of cargo
capacity and up to 1,150 cubic feet of cargo volume while
accommodating 50 passengers. The combi Q400 aircraft
provides unique opportunities for airlines operating routes
with medium to low passenger loads, but with high cargo
potential.

CS300 aircraft

Q400 aircraft

SPECIALIZED AIRCRAFT
Models: Various Bombardier commercial aircraft
Key features: Provides solutions for governments, agencies and specialized organizations worldwide by modifying
commercial aircraft to suit customer needs for different mission requirements including: maritime patrol, medical and
government VIP transport, intelligence surveillance, reconnaissance and communication platforms, and military transport.

(1) Currently under development.
(2) All data and specifications are estimates, subject to change in family strategy, branding, capacity and performance during the design,

manufacture and certification process (based on 500 NM trips). Refer to the disclaimer at the end of this MD&A.
(3) Under certain operating conditions, when compared to aircraft currently in service for short-haul flights up to 500 NM.

66 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

MARKET SEGMENT: CUSTOMER SERVICES AND SOLUTIONS

MAINTENANCE SERVICES
Services portfolio: Extensive capabilities to accommodate aircraft maintenance, refurbishment and modification for
commercial aircraft.

Key features: Offering worldwide service and support through wholly-owned Service Centres, Authorized Service Facilities
and the mobile repair teams.

PARTS SERVICES
Services portfolio: Providing new and used parts, initial provisioning services, as well as repair of customer-owned parts.

Key features: Supporting customers for all their parts needs with two parts distribution hubs, eight parts depots, and two
component repair and overhaul facilities worldwide.

SMART SERVICES
Services portfolio: A growing portfolio of innovative cost per-flight-hour plans available for commercial aircraft.

Key features: From coverage on exchanges and repairs of airframe system components to flight deck avionics, the Smart
Parts program is a key component (together with the Smart Maintenance program) of our Smart Services, providing budget
predictability and cost protection for our customers.

SUPPORT SERVICES
Services portfolio: Comprehensive portfolio of customer services including: ten RSOs, 24-hour Customer Response Centres,
engineering and maintenance planning, customer liaison pilots, network of field service personnel, mobile technical repair
teams, modifications, technical publications, EIS support and e-services.

Key features: Providing operators with a single point of contact, 24 hours a day, 365 days a year, for all critical and aircraft-on-
the-ground requests supporting customers through a network of strategically located teams.

CUSTOMER SERVICE NETWORK
In 2015, the expansion in the customer service network across the globe continued with the opening of new support locations
to better serve customers. We added a new authorized service facility location in India while also increasing our parts depot
stocking sets for China, India and the Middle East to support commercial aircraft customers.

TRAINING
Services portfolio: A complete range of flight crew and technical training services on commercial and specialized aircraft at
wholly-owned facilities and through a network of strategic collaborations worldwide. In addition, we have five approved third-
party training providers to provide worldwide training services under our oversight.

Key features: As an original equipment manufacturer (OEM), we quickly modify courseware and training devices to reflect
ongoing aircraft enhancements.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 67

INDUSTRY AND ECONOMIC ENVIRONMENT

Robust market entering into the next era
for the 100-150 seat commercial aircraft category

The commercial aircraft market continues to build momentum as passenger traffic levels and forecast airline
financial performance improve in 2015. 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

Aircraft
shipments

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 6.3%
and 6.5% higher, respectively, for the year-to-date period ended December 2015 compared to the
same period last year.(1)
In 2015, industry load factors reached an all-time high. Airlines achieved both domestic and
international average passenger load factors of 81.5% and 79.7%, respectively, for the year-to-
date period ended December 2015 compared to 80.6% and 79.2%, respectively, for the same
period last year. Continued increases in traffic over recent months resulted in upward movement of
load factors, mostly in domestic markets.(1)
During 2015, regional passenger traffic measured by RPK for the four leading U.S. network
carriers and their affiliates(2), which represent a major portion of the regional airline passenger
traffic in the U.S., our largest market, slightly decreased by 0.9% compared to 2014.

These airlines achieved an average passenger load factor of 81.4% in 2015, up from the 80.6%
experienced in 2014.
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 $99 per barrel
in 2014 to $52 per barrel in 2015. During the first week of February 2016, the price was
approximately $32 per barrel.(3) More recently, lows in crude oil prices reflect expected increases in
supply and expected decrease in demand due to slower anticipated global economic growth.(1)
Although some airlines may delay their decision to renew their fleet in the short term, this should
continue to 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.

Airline financial performance continued to improve in 2015. Airline profits are forecast to total
$33.0 billion in 2015, a record high and a sixth 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, helping to increase load factors, and lower
fuel costs, followed by airlines in Europe and Asia-Pacific. Airline financial performance is expected
to increase to total profits of $36.3 billion in 2016.(4)
Environmental issues and new environmental regulations 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.(5)
In 2015, the industry delivered 303 aircraft in the 60- to 150-seat category, a decrease of 4.1%
compared to 2014.(6)

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on the current

environment.
(1) Per IATA’s December 2015 “Air Passenger Market Analysis and Airlines Financial Monitor” reports.
(2) Delta Air Lines, American Airlines, United Airlines, and Alaska Air.
(3) According to the U.S. Energy Information Administration’s (EIA) website.
(4) Per IATA’s forecast in the “Economic Performance of the Airline Industry” December 2015 year-end report.
(5) According to our “Commercial Aircraft Market Forecast”, published in June 2015 and available on Bombardier’s dedicated investor relations
website at ir.bombardier.com.
(6) Our estimates based on delivery data available from Ascend fleet database by Flightglobal and public disclosure records of certain
competitors.

68 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Indicator
Replace-
ment
demand

Current situation
We estimate that most commercial aircraft have life cycles ranging between 15 to 30 years. As at
December 31, 2015, approximately 2,350 aircraft representing an estimated 38% of the world’s
active fleet in the 60- to 150-seat aircraft category is over 15 years old compared to 37% at the end
of 2014.(1)

Status

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on the current

environment.
(1) Based on data obtained from Ascend fleet database by Flightglobal.

Source: U.S. EIA

Sources: IATA’s forecast in the “Economic Performance of the Airline
Industry” December 2015 year-end report.
F: Forecast

According to IATA, the world’s airlines are set to post a collective record net profit for 2015. Airline financial
performance improved in most regions during the year, particularly in the U.S. where the improvement was driven
by airline mergers and lower fuel costs.(1)

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 2.5% in 2015, which is slightly lower than the 2.7% increase in 2014. The world
economy is predicted to grow at 2.3% and 2.9% in 2016 and 2017, respectively.(2)

The GDP in the U.S., the largest market for commercial aircraft, is expected to grow at 2.0% in 2016, compared to
2.4% in 2015. In Europe, our second largest market in terms of sales, the GDP is expected to grow by 1.9% in
2016, the same growth rate 2015.(2)

In regions with high growth potential for commercial aviation, growth in 2016 is expected to be at 6.2% and 7.4%
for China and India, respectively, compared to 6.9% and 7.4% in 2015, respectively. In the CIS, a decline of 1.2%
is expected in 2016 compared to a decline of 3.1% in 2015.(2)

(1) Per IATA’s forecast in the “Economic Performance of the Airline Industry” December 2015 year-end report.
(2) According to “Oxford Economics Global Data Report” dated February 11, 2016.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 69

Short-term outlook
The current overall positive trend in market indicators as well as the future anticipated growth in GDP rates are
expected to further increase the demand for air travel and the demand for new aircraft is expected to follow.

The world economy is projected to grow by 2.3% in 2016 and 2.9% in 2017 and 3.0% in 2018.(1) Historically, as
the world economy improves, demand for air travel increases and the demand for new aircraft is expected to
follow. We believe that the market for larger regional aircraft and smaller mainline aircraft should grow in North
America as airlines continue to focus on fleet optimization, fuel-efficiency and reducing environmental impacts.

In Europe, GDP is expected to grow at 1.9% in 2016. In this context, we do not expect much growth in demand for
regional aircraft in Europe in 2016. For 2017 and 2018, the expected growth is at 2.1% and 2.0%, respectively.(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 “Oxford Economics Global Data Report” as at February 11, 2016.

Long-term outlook
We remain 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.

In June 2015, we released our annual market forecast
for the 20-year period from 2015 to 2034.(1)

The “Commercial Aircraft Market Forecast” predicts
12,700 aircraft deliveries for 60- to 150-seat commercial
aircraft in the next 20 years compared to our previous
forecast of 13,100 aircraft deliveries for 20- to 149-seat
in 2014 to 2033. The decrease compared to our previous
forecast is mainly due to the 20- to 59-seat segment that
is no longer included in the re-defined scope of the
forecast.

The 20-year deliveries are valued at $650 billion(2),
compared to the $658 billion previously forecast. Over
the next 20 years, 5,000 60- to 150-seat commercial
aircraft are expected to be retired, 4% higher than the
4,800 retirements forecast in 2014.

(1) Available on Bombardier’s dedicated investor relations website at

ir.bombardier.com.

(2) Revenues are based on estimated segment 2014 list prices.

* As stated in our “Commercial Aircraft Market Forecast”,
published in June 2015 and available on Bombardier’s dedicated
investor relations website at ir.bombardier.com
**Unit values based on Business and Commercial Aviation
magazine 2014 list prices.

The forecast deliveries are expected to arise from replacement demand in established markets, such as North
America and Europe, and fleet growth potential in emerging markets. North America is expected to account for
the greatest number of 60- to 150-seat commercial aircraft deliveries, followed by China, Europe and Latin
America.

70 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

COMMERCIAL AIRCRAFT FLEET EVOLUTION BY
CATEGORY 2015-2034*

* In units. As stated in our “Commercial Aircraft Market Forecast”, published in June 2015 and available on Bombardier’s dedicated investor
relations website at ir.bombardier.com.

Most new 60- to 150-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 other Asia-Pacific, 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.

In the long-term, the worldwide 60- to 150- seat fleet is forecast to grow to 15,000 units by 2034. Approximately
55% of the forecast deliveries are in the 100- to 150-seat segment, for a value of approximately $460 billion.(1)(2)
Airlines in this segment, who have been constrained to the currently available technology on these aircraft, are
anticipated to witness a major fleet transformation. The aircraft in service today in this market segment are older
than larger single-aisle aircraft. There had been little activity to renew the fleet in this segment and as of today, the
C Series is the only clean sheet design for this market. While there are other redesigned aircraft expected to enter
the market, the C Series will offer superior economics and passenger comfort. We anticipate to capture 50% of
this market which represents up to 3,500 C Series deliveries over the next 20 years.(1) Environmental regulations
and the requirement to upsize from regional aircraft should provide positive growth for this segment of the market.

The 60- to 100-seat aircraft market should see substantial growth over the forecast period with demand for 5,700
aircraft worth $190 billion.(1)(2) Overall, demand for regional aircraft in the 60- to 100-seat aircraft market is
expected to be approximately equally split between turboprops and jets in terms of units.

(1) According to our “Commercial Aircraft Market Forecast”, published in June 2015 and available on Bombardier’s dedicated investor relations

website at ir.bombardier.com.

(2) Revenues are based on estimated segment 2014 list prices.

Customer services

Our worldwide customer services network includes parts hubs, parts depots, authorized service facilities (ASF),
service centres, regional support offices (RSO), customer response centres (CRC), mobile repair team (MRT), as
well as training centres and authorized training providers (ATP).

Supplemental information regarding our support locations can be found in the Profile section.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 71

The demand for customer services is driven by the size of the fleet of Bombardier commercial aircraft, the number
of hours flown by said fleet and the average age of the fleet.

Customer services market indicators

Indicator

Current situation

Status

Installed
base
Average
daily flight
hours
Average
age of fleet

The installed base for active in-service Bombardier commercial aircraft remained essentially at the
same level in 2015 compared to 2014 with approximately 2,210 aircraft.(1)
Based on our estimates, Bombardier aircraft average daily flight hours, slightly decreased by
approximately 1.4% for commercial aircraft for the 12-month period ended October 31, 2015
compared to the same period last year.
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
2015 compared to 2014.(1)

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on the current

environment.
(1) Based on data obtained from Ascend fleet database by Flightglobal.

Short-term outlook
Historically, the U.S. represented the largest share of deliveries for commercial aircraft, however, wealth creation
and economic development in non-traditional markets is driving a shift in the proportion of commercial aircraft
delivered outside of the U.S. This trend in demand impacts the geographical layout of our support network. In the
non-traditional markets, the strategy is to increase our local customer services presence and leverage third-
parties to deploy the full span of services.

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, commercial aircraft industry deliveries should see the highest growth rates in emerging
economies such as South Asia and China. This growing demand along with our customer services offerings is
expected to drive growth outside of traditional markets.(1)

Airline financial performance has been improving in the past years to achieve record high levels(2) but margins are
still driven by major cost drivers such as labour, maintenance, and fuel. Operators are increasingly relentless in
managing costs, including focusing significant attention on managing maintenance expenses.

The global commercial air transport fleet stands at approximately 23,000 aircraft. Approximately 25% of the fleet
is domiciled in North America, close to 20% is in Europe, and other Asia-Pacific, China, and India together have
slightly more than 25% of the fleet.(3) However, the composition is expected to change over the next ten years.
North America is expected to experience a decline of 7%, while Asian markets anticipate the highest growth rates,
representing opportunities for the maintenance, repair and overhaul (MRO) industry.(4)

The 2014 air transport MRO market was $62.1 billion. It is expected to grow to $90 billion by 2024 at a CAGR of
3.8% per annum with other Asia-Pacific and China driving this growth.(5)

(1) As stated in our “Commercial Aircraft Market Forecast”, published in June 2015 and available on Bombardier’s dedicated investor relations

website at ir.bombardier.com.

(2) Per IATA’s forecast in the “Economic Performance of the Airline Industry” December 2015 year-end report.
(3) Based on data obtained from Ascend fleet database by Flightglobal.
(4) According to the “March 2015 Global Fleet and MRO Market Economic Assessment” report prepared by CAVOK, a division of Oliver

Wyman.

(5) According to the “MRO Market Forecast & Trends” presentation at the Aviation Week MRO Asia-Pacific Conference on November 3, 2015

by ICF International.

72 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

KEY PERFORMANCE MEASURES AND METRICS

The table below summarizes our most relevant key performance measures and associated metrics.

KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS

Growth and
competitive
positioning

Profitability

Liquidity

Customer
satisfaction

•

EBIT, EBIT margin, EBIT before special items(2) and EBIT margin before special items(2), as measures
of performance.

Free cash flow(2), as a measure of liquidity generation.

•
• On-time aircraft deliveries, as a measure of meeting our commitment to customers.
•
• Regional availability of parts and material to support customer requests, as a measure of meeting

Fleet dispatch reliability, as a measure of our products’ reliability.

Execution

•

Achievement of program development milestones, as a measure of flawless execution.

customer needs for the entire life of the aircraft.

Our incentive-based compensation plan for non-unionized employees across Commercial Aircraft sites rewards
the collective efforts of our employees in achieving our objectives using performance indicator targets. A total of
3,000 employees worldwide, or 67% of permanent employees, participate in the program. In 2015, 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 and executing according to plan in new product development programs.

(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.

ANALYSIS OF RESULTS

Results of operations

Revenues
EBITDA before special items(1)
Amortization(2)
EBIT before special items(1)
Special items
EBIT
EBIT margin before special items(1)
EBIT margin

$
$

Fourth quarters
ended December 31
2014
2015
720
644
(113)
(58)
27
29
(140)
(87)
—
240
(140)
(327)
(19.4)%
(13.5)%
(19.4)%
(50.8)%

Fiscal years
ended December 31
2014
2015
$ 2,740
$ 2,395
(5)
(66)
$
$
102
104
(107)
(170)
16
3,800
(123)
$ (3,970)
(3.9)%
(4.5)%

(7.1)%
nmf

Revenues by geographic region(1)

North America
Asia-Pacific
Rest of world(2)
Europe

1,514
466
237
178
2,395

Fiscal years ended December 31
2014

2015

63%
20%
10%
7%
100%

1,655
609
295
181
2,740

60%
22%
11%
7%
100%

(1) Revenues are attributed to countries based on the location of the customer.
(2) The Rest of world region includes the Middle East, Africa, the CIS, South America and Central America.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 73

Revenues
The $76-million and $345-million decreases for the
fourth quarter and fiscal year ended December 31,
2015, respectively, are mainly due to lower deliveries
of regional jets partially offset by higher deliveries of
turboprops.

* The fiscal year ended December 31, 2011 comprises 11 months
of results.

The special items were as follows:

Impairment and other charges - C Series aircraft
program
Changes in estimates and fair value
Impairment charge - CRJ1000 aircraft program tooling
Restructuring charge

Gain on resolution of a litigation

EBIT margin impact

Fourth quarters ended
December 31
2014

2015

Ref

Fiscal years ended
December 31
2014

2015

1
2
3
4

—
—
240
—

—
240
(37.3)%

—
—
—
—

—
—
0.0%

3,249
312
240
(1)

—
3,800
nmf

—
—
—
23

(7)
16
(0.6)%

1. Represents an impairment charge of $3.1 billion on aerospace program tooling, and inventory write-downs
and other provisions of $179 million, following the completion of an in-depth review of the C Series aircraft
program as well as discussions with the Government of Québec which resulted in the October 2015
memorandum of understanding. An offset of $14 million related to this special item is included in Corporate
and Elimination.

2. Related to an increase in provisions for credit guarantees and RVGs as a result of changes in assumptions
concerning residual value curves of regional aircraft due to difficult market conditions for regional pre-owned
aircraft and a higher probability that the guaranteed party will exercise the RVG given the recent experience
with respect to RVG and a loss on certain financial instruments due to changes in estimated fair value.

74 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

3. Represents an impairment charge of $240 million on the remaining CRJ1000 aircraft program development
costs. The impairment is due to the lack of recent order intake as well as low firm order backlog for the
CRJ1000 aircraft, mainly stemming from pilot scope clauses in the U.S., which have restricted the use,
number and seating capacity of regional aircraft flying on behalf of network carriers. Over the near term, we
do not anticipate scope clause relaxation in the U.S., during which time, we will not be able to sell the
CRJ1000 aircraft in the U.S. market. A charge of $3 million related to this special item is included in Corporate
and Elimination.

4. The restructuring charge in 2015 related to:

an adjustment to a restructuring provision recorded in the prior year.

•
Restructuring charges in 2014 mainly related to:
•

a $18-million expense in 2014 related to the workforce reduction connected to the new organizational
structure announced in July 2014; and
a $5-million expense due to the workforce reduction announced in January 2014.

•

5. Represents gain on a resolution of a litigation in connection with Part IV of the Québec Income Tax Act, the

Tax on Capital.

EBIT margin
There was a significant decrease in EBIT margin for the fourth quarter ended December 31, 2015 compared to
the same period last fiscal year. The EBIT margin before special items (see explanation of special items above)
for the fourth quarter increased by 5.9 percentage points mainly as a result of:

•

lower other expenses, mainly due to a net positive variance of provisions for credit and residual value
guarantees.

Partially offset by:
•

higher losses related to early production units of the C Series aircraft program(1).

There was a significant decrease in EBIT margin for the fiscal year compared to the same period last year. The
EBIT margin before special items (see explanation of special items above) for the fiscal year decreased by 3.2
percentage points mainly as a result of:

lower margins related to aircraft deliveries;
a one-time write-down of used spares inventory related to the CRJ200 aircraft program; and
higher losses related to early production units of the C Series aircraft program(1).

•
•
•
Partially offset by:
•

lower other expenses, mainly due to a net positive variance of provisions for credit and residual value
guarantees.

(1) Early production units in a new aircraft program require higher costs than units produced later in the program and the selling prices of early

units are generally lower.

The game-changing C Series aircraft program progressing toward EIS

Investment in product development

Program tooling(1)
R&D expense(2)

As a percentage of revenues

Fourth quarters
ended December 31
2015
220
1
221
34.3%

2014
122
2
124
17.2%

Fiscal years
ended December 31
2015
937
3
940
39.2%

2014
685
8
693
25.3%

(1) Net amount capitalized in aerospace program tooling.
(2) Excluding amortization of aerospace program tooling of $12 million and $60 million, respectively, for the fourth quarter and fiscal year ended

December 31, 2015 ($19 million and $76 million, respectively, for the fourth quarter and fiscal year ended December 31, 2014), as the
related investments are already included in aerospace program tooling.

Program tooling additions mainly relate to the development of the C Series aircraft program.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 75

* For fiscal years 2011 to 2013, the expenditures have not
been restated to align with the current segment presentation.

** The fiscal year ended December 31, 2011 comprises 11

months of results.

* For fiscal years 2011 to 2012, the balances have not been restated

to align with the current segment presentation.

The carrying amount of commercial aircraft program tooling(1) as at December 31, 2015 was $1.9 billion,
compared to $4.3 billion as at December 31, 2014. The decrease in the net carrying value of commercial aircraft
program tooling as at December 31, 2015 is mainly due to the impairment charges related to the C Series aircraft
program and the CRJ1000 aircraft of $3.1 billion and $240 million, respectively, recorded in the third and fourth
quarters of 2015.

(1) Capitalized borrowing costs included in the commercial aircraft aerospace program tooling balance amounted to $294 million as at

December 31, 2015 ($523 million as at December 31, 2014).

Reconciliation of the carrying amount of aerospace program tooling

Balance as at December 31, 2014
Investment in product development
Amortization of aerospace program tooling
C Series aircraft program impairment charge
CRJ1000 aircraft impairment charge
Balance as at December 31, 2015

4,347
937
(60)
(3,070)
(240)
1,914

Recognizing the long-term nature of product development activities, as well as the significant human and financial
resources required, we follow a gated product development process focusing on early identification and mitigation
of potential risks. All programs follow the Bombardier Engineering System throughout the product development
cycle. The product development process is constantly refined to integrate the lessons learned from our 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. 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 our product
responsibility strategy. In addition to the Design for Environment approach, health and safety considerations are
also embedded in product design.

76 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

PRODUCT DEVELOPMENT PROCESS
Stage
Conceptual definition JTAP

JCDP

Launch preparation

Preliminary definition JDP

Detail definition

DDP

Product definition release

Product certification

Program completion

The C Series aircraft program
Following the completion of the CS100 aircraft certification comprehensive and rigorous flight testing program,
including more than 3,000 flight test hours logged, the aircraft was awarded type certification from Transport
Canada on December 17, 2015, paving the way for the aircraft’s delivery and EIS with first operator SWISS
expected in the second quarter of 2016.

During the fourth quarter of 2015, the CS100 aircraft successfully completed the first phase of route proving, with
completion of the initial 150 hour block of function and reliability testing. These tests, also called route-proving
flights, are conducted using typical airline flight routings and operational procedures. Following the completion of
the North American route-proving program, the aircraft will start European route-proving flights in the coming
weeks. Testing supporting the certification of optional features required for specific customers, such as extended
range operation with two-engine airplanes and steep approach landing, continues. All noise performance testing
was completed, confirming the aircraft is the quietest in-production commercial jet in its class.(1)

The focus now shifts towards ensuring a flawless EIS alongside first operator SWISS, with first delivery planned in
the second quarter of 2016.

CS300 aircraft flight testing
The CS300 aircraft’s documentation for certification is over 70% complete. The first CS300 FTV is undergoing
upgrades to the latest software and hardware versions and continues planned tests, such as flutter, handling,
cruise performance, cross-wind takeoff and landing, braking and anti-skid testing.

The second CS300 FTV has joined the flight testing fleet in the first quarter of 2016. The EIS of the CS300 aircraft
is expected in the second half of 2016.

Flight and aircraft structural test performance results have exceeded original targets for fuel burn, payload, range
and airfield performance.(1)

All the flight test aircraft are displaying a high level of reliability and the aircraft performance and test results are in
line with expectations.

(1) Key performance targets under certain operating conditions when compared to aircraft currently in production for flights of 500 nautical

miles. See the C Series family of aircraft program disclaimer at the end of this MD&A.

Full production ramp-up and EIS readiness
C Series program has begun the ramp-up to full production. On the manufacturing front, ramp-up is progressing
to plan in the new assembly facilities in Mirabel, Canada, and more aircraft are moving down the line, including
units for launch operator SWISS, with the airline’s first aircraft structurally completed.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 77

In December 2015, the CS100 aircraft’s full-flight simulator, which will play a significant role in pilot training for the
all-new CS100 aircraft, was awarded Interim Level C qualification from Transport Canada, the U.S. Federal
Aviation Administration (FAA) and the European Aviation Safety Agency (EASA). The regulatory authorities also
qualified the flight training device for CS100 aircraft.

Customer support activities are ramping up in preparation for first delivery.

Aircraft deliveries

(in units)
Regional jets
CRJ700
CRJ900
CRJ1000
Turboprops

Q400

Amphibious

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014
2015

—
6
3

10
1
20

1
13
—

8
1
23

2
38
4

29
3
76

7
48
4

25
2
86

Deliveries of commercial aircraft for the fiscal year ended December 31, 2015 decreased compared to last year,
mainly due to higher deliveries of CRJ900 aircraft in the previous fiscal year to Delta Air Lines, Inc.

For the three-year period ended December 31, 2015, we captured 28% of the market in the 60- to 100-seat
category based on units delivered. This compares to a market share of 27% for the three-year period ended
December 31, 2014.(1)
(1) Our estimates based on delivery data available from Ascend fleet database by Flightglobal.

Aircraft orders

Net orders

(in units)
Regional jets

CRJ700
CRJ900
CRJ1000

Commercial jets

CS300

Turboprops

Q400

Amphibious

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014
2015

—
18
—

—

3
—
21

—
25
—

—

7
3
35

2
25
(2)

—

26
—
51

1
45
—

41
5
153

78 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

There has been an order decrease in all aircraft
categories in the year ended December 31, 2015,
but mainly in the commercial jets category.

During the year ended December 31, 2014,
significant orders were received from Macquarie
AirFinance and Al Qahtani Aviation Company for 40
and 16 CS300 aircraft respectively, and from
American Airlines, Inc. and China Express Airlines
for 24 and 16 CRJ900 aircraft respectively.

The following significant orders were received during the fiscal year ended December 31, 2015:

* The fiscal year ended December 31, 2011 comprised

11 months of results.

Customer

Fourth quarter
China Express Airlines (China)(3)
Undisclosed customer(4)

First quarter
Chorus Aviation Inc. (Canada)
Mesa Airlines (U.S.)

Firm order

Value(1)

Options(2)

10 CRJ900

8 CRJ900

13 Q400
7 CRJ900

$
$

463

369

—

6 CRJ900

424
326

10 Q400
—

(1) Value of firm order based on list prices.
(2) Not included in the order backlog.
(3) With this transaction, China Express Airlines has exercised eight previously acquired options for CRJ900 aircraft.
(4) The aircraft will be operated in Sweden’s Scandinavian Airlines (SAS) network by Dublin-based CityJet.

Subsequent to the end of the fiscal year, we signed a Letter of Intent (LOI) with Air Canada for 45 CS300 aircraft
with options for an additional 30 CS300 aircraft, including conversion rights to the CS100 aircraft. Upon execution
of a firm purchase agreement, Air Canada will become the first mainline, international network carrier based in
North America for the C Series family of aircraft. This LOI complements our existing C Series aircraft orders in
both Europe and Asia. The Air Canada deliveries are expected to start in 2019. Based on list price of the CS300
aircraft, a firm order would be valued at approximately $3.8 billion. This LOI is not included in the order backlog as
at December 31, 2015.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 79

Order backlog and book-to-bill ratio

Order backlog

(in billions of dollars)

2015
11.5

As at December 31
2014
12.5

The order backlog decreased during fiscal year 2015, mainly as a result of lower order backlog in regional jets as
well as the sale of Military Aviation Training activities to CAE Inc. in the third quarter of 2015. The order backlog
and the production horizon for programs are monitored to align production rates to reflect market demand.

Commercial aircraft order backlog and options

(in units)

Regional jets

CRJ700
CRJ900
CRJ1000

Commercial jets

CS100
CS300

Turboprops

Q400

Amphibious

Firm orders

2015
Options

As at December 31
2014
Options

Firm orders

(1) (2)

10
44
25

53
190

39
—
361

—
24
9

49
113

77
—
272

10
57
31

(1)

63
180

42
3
386

—
56
22

49
113

94
—
334

(1) The total of 243 orders includes 86 firm orders with conversion rights to the other C Series aircraft model.
(2) On June 15, 2015, we announced that launch operator SWISS has converted 10 of its 30 firm-ordered CS100 aircraft to the larger CS300

aircraft.

The total C Series firm order backlog comprises 243 aircraft with 14 customers in 14 countries as at
December 31, 2015. As at the date of this report, firm orders and other agreements(1) for a total of 678 C Series
aircraft have been signed with 23 customers in 20 countries, including 243 firm orders.

(1) The other agreements consist of conditional orders, letters of intent, options and purchase rights.

Book-to-bill ratio(1)

Net orders
Deliveries

(1) Ratio of net orders received over aircraft deliveries, in units.

Fourth quarters
ended December 31
2014
2015
35
21
23
20
1.5
1.1

Fiscal years
ended December 31
2014
2015
153
51
86
76
1.8
0.7

80 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

* The fiscal year ended December 31, 2011 comprises 11 months of results.

Workforce

Total number of employees

Permanent(1)
Contractual(2)

Percentage of permanent employees covered by collective agreements

(1) Including inactive employees.
(2) Including non-employees and agency outsourced personnel.

As at December 31
2014
2015
4,900
4,500
200
550
5,100
5,050

38%

39%

The workforce as at December 31, 2015 remains at a similar level compared to previous year. We anticipate a
higher workforce in our Mirabel, Québec assembly site as we continue to ramp up the production rate on the
C Series aircraft program.

Major collective agreements

Location

Union

Toronto, Canada

Unifor - Locals 112 and 673

Montréal, Canada

International Association of Machinists and
Aerospace Workers (IAMAW) – Local 712

Approximate number of
permanent employees
covered as at
December 31, 2015
850

Expiration of current
collective agreement

June 22, 2018

800

November 30, 2018

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 81

STRATEGIC PARTNERSHIP

Government of Québec’s investment in the C Series aircraft program

In October 2015, we entered into a memorandum of understanding which contemplates a $1.0 billion equity
investment by the Ministère de l’Économie, de l’Innovation et des Exportations du Québec (through
Investissement Québec) (the Government of Québec) for a 49.5% equity stake in a newly-created limited
partnership to which we would transfer the assets, liabilities and obligations of the C Series aircraft program. This
newly created limited partnership will be owned 50.5% by Bombardier Inc. and, as a subsidiary of Bombardier
Inc., will carry on the operations related to our C Series aircraft program. After the investment, the newly created
limited partnership will be consolidated in our financial results. The investment remains conditional upon the
completion of definitive agreements, the receipt of consents from third parties, the completion of an internal pre-
closing reorganization, the receipt of required regulatory approvals and other customary conditions precedent.

The proceeds of the investment will be used entirely for cash flow purposes of the C Series aircraft program. We
estimate that the C Series aircraft program will require cash of approximately $2.0 billion over the next five years
at which time the program is expected to be cash flow positive, of which $1.0 billion will be funded by the
Government of Québec’s investment in the program.

The investment also includes the issuance of warrants to the Government of Québec exercisable to acquire up to
200,000,000 Class B Subordinate Voting Shares in the capital of Bombardier Inc., at an exercise price per share
equal to the U.S. dollar equivalent of $2.21 Canadian dollars, using the exchange rate on the date of execution of
definitive agreements. The warrants will have a five-year term from the date of issue and will not be listed on the
Toronto Stock Exchange.

The execution of the definitive agreements and disbursement of the investment and issuance of the warrants are
expected to take place in the second quarter of 2016, subject to the conditions to closing.

The investment contemplates a continuity undertaking providing that we maintain in the Province of Québec, for a
period of 20 years, the newly-created limited partnership’s operational, financial and strategic headquarters,
manufacturing and engineering activities, shared services, policies, practices and investment plans for research
and development, in each case in respect of the design, manufacture and marketing of the CS100 and CS300
aircraft and after-sales services for these aircraft and that we will operate the facilities located in Mirabel, Canada
for these purposes.

The Government of Québec’s interest in the partnership will be redeemable at our option, in certain
circumstances.

GUIDANCE AND FORWARD-LOOKING STATEMENTS

What we said for 2015

What we did in 2015

What’s next for 2016(1)

Approximately 80 deliveries.

76 deliveries.

Revenues of approximately $3.0 billion.

Growth and
deliveries

Profitability(2) Negative EBIT of approximately

$200 million including the dilutive
impact of the initial years of production
of the C Series aircraft program.(3)

Negative EBIT before
special items(2) of
$170 million.

Approximately 95 deliveries.
Negative EBIT of approximately
$550 million, mainly due to the dilutive
impact of the initial years of production
of the C Series aircraft program.(3)

(1) See Forward-looking statements hereafter.
(2) Profitability guidance is based on EBIT before special items. Refer to the Non-GAAP financial measures section in Overview for a definition

of this metric and to the Analysis of results section for a reconciliation to the most comparable IFRS measure.

(3) 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.

82 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Deliveries were slightly lower than expected, while we slightly exceeded our profitability guidance for 2015.

The demand for new commercial aircraft is driven by the demand for air travel. The market is robust with strong
passenger traffic levels and airlines are expected to reach record levels of profitability in 2015 and 2016.(1)

The C Series aircraft program is expected to drive our growth and as such, EIS of the program is a priority. With
the C Series aircraft program, we have the best-in-class products. The C Series aircraft program is the first
completely new aircraft designed specifically for the 100-150 seat category, a category which has not experienced
much product development in the last 30 years. Fuel is one of the largest component of airlines’ profitability and
the price of fuel continues to be volatile. The C Series aircraft program is exceeding performance targets for
range, fuel burn, payload and emissions. Its operating economics, which include lower trip and seat-mile costs,
make it a compelling choice for airlines looking to retire older, less fuel efficient aircraft. Demo flights showcasing
the aircraft to airlines and other interested operators around the world are ongoing.

The dilutive impact of the initial years of production of the C Series aircraft program will put pressure on our
profitability in the short-term; however, a state-of-the art production system is in place to ensure an efficient ramp-
up in order to reduce the costs associated with the initial units of production. We will work on building our order
backlog and leverage our improved procurement process to lower unit costs.

We expect large regional jets and turboprops to continue to play an important role in the regional aircraft market of
up to 100 seats. Due to the economic advantages of our CRJ family of regional jets and Q400 turboprop, a large
installed customer base and commonality benefits across the CRJ family of aircraft, we believe we are well
positioned in the regional jet and turboprop categories.

With our strong product portfolio and our roadmap to 2020 which comprises our operational transformation plan to
reduce our costs(2) ,we believe we have the right plan in place to grow our revenues and profitability.

(1) Per IATA’s forecast in the “Economic Performance of the Airline Industry” December 2015 year-end report.
(2) Refer to the Strategic Priorities section in Overview for more details on our roadmap to 2020.

Forward-looking statements:
Forward-looking statements(1) in this section of the MD&A are based on:
• current firm order backlog and estimated future order intake;(2)

•

ramp-up of the production of the C Series aircraft program including learning curve improvements;

• our ability to strengthen our market position and product value proposition for the CRJ and Q400 aircraft programs;

•

the continued deployment and execution of key transformation initiatives, especially those impacting direct and indirect
procurement costs, labour efficiency and working capital improvement;

• our ability to meet scheduled EIS dates and planned costs for the C Series aircraft program;

• our ability to recruit and retain highly skilled resources to deploy our product development strategy;

•

the ability of our supply base to support planned production rates; and

• stability of foreign exchange rates.
(1) Also see the Guidance and forward-looking statements section in Overview.
(2) Demand forecast is based on the analysis of main market indicators, including real GDP growth, passenger traffic levels, fuel prices,
airline profitability, environmental regulations, aircraft shipments, replacement demand, installed base, aircraft utilization rates and
average age of fleet. For more details, refer to the market indicators in the Industry and economic environment section.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / COMMERCIAL AIRCRAFT 83

AEROSTRUCTURES AND ENGINEERING SERVICES

HIGHLIGHTS OF THE YEAR

Highlights of the fiscal year with regard to our results and key events

PROFILE

Overview of our operations and products and services

INDUSTRY AND ECONOMIC
ENVIRONMENT

Industry and economic factors affecting our business

KEY PERFORMANCE MEASURES
AND METRICS

Key performance measures and associated metrics that we use to
monitor our progress

ANALYSIS OF RESULTS

Financial performance for the fourth quarter and fiscal year ended
December 31, 2015

GUIDANCE AND FORWARD-
LOOKING STATEMENTS

External order intake, external order backlog

Our workforce

What we said, what we did and what’s next

Assumptions and risks related to our forward-looking statements

PAGE
85

84 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

HIGHLIGHTS OF THE YEAR

Contributing to Bombardier’s overall competitiveness

REVENUES

$1.8 billion

EBIT MARGIN BEFORE SPECIAL
ITEMS(1)

NET ADDITIONS TO PP&E &
INTANGIBLE ASSETS

5.8%

RESULTS

$26 million

For the fiscal years ended December 31
Revenues
External order intake
External book-to-bill ratio(2)
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)
Net additions to PP&E and intangible assets
As at December 31
External order backlog

2015
1,797
474
0.9
105
5.8%
104
5.8%
154
8.6%
26
2015
80

2014
1,919
556
1.0
83
4.3%
97
5.1%
146
7.6%
38
2014
113

Variance
(6)%
(15)%
nmf
27 %
150 bps
7 %
70 bps
5 %
100 bps
(32)%

(29)%

(1) 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 hereafter for reconciliations to the most comparable IFRS measures.

(2) Ratio of new external orders over external revenues.

KEY EVENTS

• Subsequent to the end of the fiscal year, we decided to take steps to optimize our workforce with a

combination of manpower reduction and strategic hiring. Aerostructures and Engineering Services plans
to reduce its workforce by an estimated 2,500 production and non-production employees throughout 2016
and 2017, as we move forward with our transformation plan. During the same period, this workforce
reduction will be partially offset by hiring in certain growth areas, notably to support the ramp-up of
strategic programs and projects worldwide. These adjustments will enable us to resize our organization in
line with current business needs and to increase our competitiveness.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / AEROSTRUCTURES AND ENGINEERING SERVICES 85

PROFILE

World class capabilities

Specialized in aerostructures manufacturing and engineering services, Aerostructures and Engineering Services
designs and builds aerostructures for Bombardier and other aircraft and aerostructure manufacturers.
Aerostructures and Engineering Services is the largest aerostructures supplier for Bombardier’s sustaining
programs as well as for the C Series and the Global 7000 and Global 8000 programs, providing structures such
as cockpits, all-composite wings for the C Series aircraft program and the rear fuselage for the Global 7000 and
Global 8000 aircraft program. Our key focus over the short to medium term remains to deliver on cost saving
initiatives for current sustaining programs and programs under development.

Our people, capabilities, and state-of-the-art technologies provide customers with products and services in the
following areas:

• Design, manufacturing and aftermarket support for complex composite and metallic aerostructures, including:

cockpit and fuselage components;
horizontal stabilizers, vertical stabilizers and tailcones;
complete composite wings, including wing sub-assemblies and components; and
engine nacelles.

• Design, manufacturing and aftermarket support for associated aircraft systems including:

electrical harnesses;
tubing components; and
high pressure ducting.

• Engineering solutions including:

aircraft structures design and stress analysis; and
ground test services.

We are present on four continents including manufacturing and engineering sites in Montréal, Canada; Belfast,
Northern Ireland; Querétaro, Mexico; and Casablanca, Morocco. In addition, there are service centers in Dallas,
U.S. and in Belfast, Northern Ireland, which provide maintenance services for structures, including major
modifications and repairs. Certain new product development and sustaining engineering activities are performed
in Bangalore, India.

86 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

INDUSTRY AND ECONOMIC ENVIRONMENT

Aerostructures and Engineering Services’ key market drivers are strongly linked to factors such as economic
growth (GDP per capita), air passenger traffic and aircraft retirement rates. More specifically, the aerostructures
market is mainly driven by the number of new products in development or upgrades to existing platforms as well
as growth in production rates and backlogs in various aircraft sectors.

The following key indicators are used to monitor the health of the aerostructures and engineering services
industry in the short term:

Indicator
Number of new products in
development or upgrades to
existing platforms by original
equipment manufacturers

Original equipment
manufacturer production
rates / units delivered

Current situation
New programs are expected to enter the market from China, Russia and India in
the coming years. Boeing and Airbus do not currently have any new programs
under development but existing programs are expected to remain stable.

Status

Airbus and Boeing increased their production rates on their sustaining programs.
Bombardier is expecting a ramp-up on its C Series aircraft program starting
2016. Despite the fact that Bombardier decreased its production rate on Global
5000 and Global 6000 aircraft, the business aircraft market is expected to grow
at a CAGR of 5% up to 2020, in the market categories in which we compete.(1)

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on the current

environment.

(1) Based on our “Business Aircraft Market Forecast”, published in May 2015 and available on Bombardier’s dedicated investor relations

website at ir.bombardier.com

Given that the industry’s revenues are generated from supplying aerostructures to original equipment
manufacturers in the aerospace market, it is impacted by the same industry and economic environments
described in Business Aircraft and Commercial Aircraft. Refer to the Industry and economic environment sections
of Business Aircraft and Commercial Aircraft for further discussion of the overall aerospace market which may
affect the business.

The current status of some market drivers could potentially have a negative impact over the short-term for the
aerostructures industry. The economic conditions and on-going geopolitical issues in China, Russia and Latin
America have had a negative impact on both business and commercial aircraft orders. Industry confidence in the
business jet market(1) has been significantly decreasing in the last four quarters. On the positive side, the demand
for air travel (measured by RPK) has increased for commercial airlines compared to the same period last year
and remains robust since the beginning of the current year.

The long-term outlook for Aerostructures and Engineering Services remains strong. Aerostructures and related
aftermarket (including components repair and overhaul, spare parts and other engineering services) are currently
estimated to be around a $70-billion market worldwide, with forecast annual growth of 2.8% to 2023.(2) The market
is predominantly composed of the manufacture of wings and fuselages, mostly for large commercial aircraft.

(1) As measured by the UBS Business Jet Market index. See Industry and economic environment section in Business Aircraft for details.
(2) “Counterpoint Market Intelligence Limited (CPMIL) 2015 - The eleventh review of the Aerostructures Market” from Counterpoint and “ICF

International - Aerostructures & Components MRO Market Overview, March 17, 2015”.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / AEROSTRUCTURES AND ENGINEERING SERVICES 87

KEY PERFORMANCE MEASURES AND METRICS

The table below summarizes our most relevant key performance measures and associated metrics.

KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS

Growth and competitive
positioning

• Revenue, as a measure of growth.
• Market share in terms of revenues, as a measure of our competitive positioning.

Profitability

Liquidity

•

EBIT, EBIT margin, EBIT before special items(1) and EBIT margin before special items(1), as
measures of performance.

Free cash flow(1), as a measure of liquidity generation.

Customer satisfaction

• On-time delivery of aerostructures, as a measure of meeting our commitment to customers.

Execution

•

Achievement of program development milestones, as a measure of flawless execution.

Our incentive-based compensation plan for non-unionized employees across our sites rewards the collective
efforts of our employees in achieving our objectives using performance indicator targets. A total of 4,200
employees worldwide, or 40% of permanent employees, participate in the program. In 2015, as part of this
program, incentive-based compensation was linked to the achievement of targeted results, based on EBIT before
special items and free cash flow.

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics.

ANALYSIS OF RESULTS

Focus on cost reduction

Results of operations

Revenues

Intersegment revenues
External revenues

EBITDA before special items(1)
Amortization(2)
EBIT before special items(1)
Special items
EBIT
EBIT margin before special items(1)
EBIT margin

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014
2015

$
$

321
122
443
3
12
(9)
—
(9)
(2.0)%
(2.0)%

377
145
522
32
10
22
—
22
4.2%
4.2%

$
$

1,290
507
1,797
154
50
104
(1)
105
5.8%
5.8%

$
$

1,359
560
1,919
146
49
97
14
83
5.1%
4.3%

Revenues by geographic region(1)

North America
Europe
Rest of world(2)
Asia-Pacific

1,328
395
43
31
1,797

Fiscal years ended December 31
2014

2015

74%
22%
2%
2%
100%

1,393
425
58
43
1,919

73%
22%
3%
2%
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.

88 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Revenues
The $79 million decrease for the three-month period is due to:

•

lower intersegment revenues ($56 million), mainly due to lower volume for business aircraft, partially
offset by an increase in spare parts sales; and
lower external revenues ($23 million), mainly due to lower volume.

The $122 million decrease for the fiscal year is due to:

•

lower intersegment revenues ($69 million), mainly due to lower volume for both business and commercial
aircraft, partially offset by higher pricing for business aircraft, reflecting changes to the intersegment
pricing policy, and an increase in spare parts sales; and
lower external revenues ($53 million), mainly due to lower volume, partially offset by an increase in spare
parts sales.

The special item for fiscal year 2015 relates to an adjustment to a restructuring provision recorded in the prior
year.

The special items for fiscal year 2014 included a $10-million expense related to the workforce reduction
connected to the new organizational structure announced in July 2014, and a $4-million expense related to the
workforce reduction announced in January 2014.

EBIT margin
The EBIT margin for the fourth quarter ended December 31, 2015 decreased by 6.2 percentage points compared
to the same period last fiscal year, mainly as a result of the following items, which include timing elements:

•

•
•

lower margins on intersegment contracts, mainly due to the recognition of expected losses on early units
of the C Series aircraft program, under long-term contract accounting;
higher spend on cost reduction initiatives;
an increase in retirement benefit obligations as a result of changes to a pension plan under a new
collective agreement, of which other provisions taking effect in 2016 and 2017 will result in lower pension
expense in future years; and
lower absorption of higher SG&A expenses.

•
Partially offset by:
•

higher margins on external contracts, mainly due to improved pricing.

The EBIT margin percentage for the fiscal year ended December 31, 2015 increased by 1.5 percentage points
compared to last fiscal year. The EBIT margin before special items (see explanation of special items above) for
the fiscal year increased by 0.7 percentage points, mainly as a result of:

•

higher margins on intersegment contracts, mainly due to higher pricing for business aircraft, reflecting
changes to the intersegment pricing policy; lower cost, including costs incurred in foreign currencies
translated at lower exchange rates after giving effect to hedges, partially offset by the recognition of
expected losses on early units of the C Series aircraft program, under long-term contract accounting; and
higher margins on external contracts, mainly due to improved pricing, costs incurred in foreign currencies
translated at lower exchange rates after giving effect to hedges and a favourable long-term contract
adjustment.

Partially offset by:
•
•

higher spend on cost reduction initiatives;
an increase in retirement benefit obligations as a result of changes to a pension plan under a new
collective agreement, of which other provisions taking effect in 2016 and 2017 will result in lower pension
expense in future years; and
lower absorption of higher SG&A expenses.

•

BOMBARDIER INC. / 2015 FINANCIAL REPORT / AEROSTRUCTURES AND ENGINEERING SERVICES 89

External order backlog

Order backlog and book-to-bill ratio

December 31, 2015
80
$

As at
December 31, 2014
113
$

The external order backlog has decreased over the fiscal year mainly as a result of lower order intake on certain
contracts.

External order intake and book-to-bill ratio

External order intake
External book-to-bill ratio(1)

(1) Ratio of new external orders over external revenues.

Fourth quarters ended
December 31
2014
136
0.9

2015
103
0.8

Fiscal years
ended December 31
2014
2015
556
474
1.0
0.9

Workforce with diverse capabilities to deliver state-of-the-art technologies

Total number of employees

Permanent(1)
Contractual(2)

December 31, 2015
10,400
1,700
12,100

As at
December 31, 2014
11,000
2,000
13,000

Percentage of permanent employees covered by collective agreements

70%

68%

(1) Including inactive employees.
(2) Including non-employees and agency outsourced personnel.

The workforce as at December 31, 2015 decreased by 900 employees, or 7%, when compared to last year. The
decrease is mainly due to the workforce reduction of approximately 400 employees announced in the first quarter
of 2015 following the decision to pause the Learjet 85 aircraft program, as well as the workforce reduction of
approximately 200 employees announced in the second quarter of 2015 related to the production rate decrease of
the Global 5000 and Global 6000 aircraft program.

Subsequent to the end of the fiscal year, we decided to take steps to optimize our workforce with a combination of
manpower reduction and strategic hiring. Aerostructures and Engineering Services plans to reduce its workforce
by an estimated 2,500 production and non-production employees throughout 2016 and 2017, as we move forward
with our transformation plan. During the same period, this workforce reduction will be partially offset by hiring in
certain growth areas, notably to support the ramp-up of strategic programs and projects worldwide. These
adjustments will enable us to resize our organization in line with current business needs and to increase our
competitiveness. The C Series aircraft program continues to ramp up its production rate, generating new jobs at
our our facility in Belfast, Northern Ireland.

90 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Major collective agreements

Location

Union

Belfast, Northern Ireland Unite the Union and the General Machinists

& Boilermakers

Montréal, Canada

International Association of Machinists and
Aerospace Workers (IAMAW) – Local 712

Querétaro. Mexico

Confederación de Trabajadores de México

Casablanca, Morocco

Union Marocaine du Travail (UMT)

Approximate number of
permanent employees
covered as at
December 31, 2015
4,000

Expiration of current
collective agreement

January 24, 2016

2,200

November 30, 2018

850

225

April 30, 2016

March 31, 2016

The agreement with Unite the Union and the General Machinists & Boilermakers in Belfast expired on
January 24, 2016. We are currently in discussions with the union.

GUIDANCE AND FORWARD-LOOKING STATEMENTS

What we said for 2015

What we did in 2015

What’s next for 2016(1)

Growth

Revenues of approximately
$1.8 billion, mainly from
intersegment contracts with
Business Aircraft and Commercial
Aircraft segments.

Revenues of $1.8 billion, of which
$1.3 billion was from intersegment
contracts.

Profitability(2) EBIT margin of approximately 6%. EBIT margin before special items(2)

of 5.8%.

Revenues are expected to remain
at approximately $1.8 billion,
mainly from intersegment contracts
with Business Aircraft and
Commercial Aircraft.

EBIT margin of approximately
7.5%.

Results for 2015 were essentially in line with guidance.

We have a solid plan in place which focuses on the following priorities: reduction of procurement cost and labour
efficiency. We are also implementing tighter controls of our working capital through improved synchronization of
our supply chain.

We recognize that there are significant savings opportunities by consolidating our spend with suppliers and
leveraging economies of scale. We have put in place detailed strategies to reduce the cost of commodities such
as those used in composites, fabricated metal parts, hardware and electrical components.

We have also launched initiatives focused on labour costs in order to continue improving efficiency in assembly
and fabrication of parts. We are focused on reducing the learning curve costs as we ramp-up the production of
components for the C Series aircraft program and we are leveraging our global footprint to create key centers of
excellence with clear cost and performance mandates.

We are confident that our roadmap to 2020, which includes our operational transformation plan to reduce
procurement and labour costs as well as to implement tighter controls over our working capital, will enable us to
continue to contribute to Bombardier’s overall competitiveness.(3)

(1) See Forward-looking statements in boxed text below.
(2) Profitability guidance is based on EBIT before special items. Refer to the Non-GAAP financial measures section in Overview for a definition

of this metric and to the Analysis of results section for a reconciliation to the most comparable IFRS measure.

(3) Refer to the Strategic priorities section in Overview for more details on our roadmap to 2020.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / AEROSTRUCTURES AND ENGINEERING SERVICES 91

Forward-looking statements:

Forward-looking statements(1) in this section of the MD&A are based on:

• a similar level of production in fiscal year 2016 compared to fiscal year 2015;(2)

•

the continued deployment and execution of key transformation initiatives, especially those impacting direct and indirect
procurement costs, labor efficiency and working capital improvement;

•

the ability of our global manufacturing footprint to leverage lower cost geographies and emerging economies;

• our ability to meet scheduled EIS dates and planned costs for new aircraft programs;

• our ability to recruit and retain highly skilled resources to deploy our product development strategy;

•

the ability of our supply base to support our planned production rates; and

• stability of foreign exchange rates.
(1) Also see the Guidance and forward-looking statements section in Overview.
(2) Demand forecast is based on the main market indicators including number of new products in development or upgrades to existing
platforms by original equipment manufacturers and production rates. For details refer to the market indicators in the Industry and
economic environment section.

92 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

TRANSPORTATION

HIGHLIGHTS OF THE YEAR

Highlights of the fiscal year with regard to our results and key events

PROFILE

Overview of our operations and products and services

INDUSTRY AND ECONOMIC
ENVIRONMENT

Industry and economic factors affecting our business

KEY PERFORMANCE MEASURES
AND METRICS

Key performance measures and associated metrics that we use to
monitor our progress

ANALYSIS OF RESULTS

Financial performance for the fourth quarter and fiscal year ended
December 31, 2015

Orders, order backlog and workforce

SALE OF A MINORITY SHARE

CDPQ’s $1.5-billion convertible share investment in our rail
transportation business

GUIDANCE AND FORWARD-
LOOKING STATEMENTS

What we said, what we did and what’s next

Assumptions and risks related to our forward-looking statements

PAGE
94

100

104

105

109

111

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 93

HIGHLIGHTS OF THE YEAR

Increased EBIT margin and strong order intake

REVENUES

EBIT MARGIN BEFORE
SPECIAL ITEMS(1)

ORDER INTAKE

ORDER BACKLOG

$8.3 billion

5.6%

$8.8 billion

$30.4 billion

RESULTS

For the fiscal years ended December 31
Revenues
Order intake (in billions of dollars)
Book-to-bill ratio(2)
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)
Net additions to PP&E and intangible assets
As at December 31
Order backlog (in billions of dollars)

2015
8,281
8.8
1.1
465
5.6%
465
5.6%
564
6.8%
155
2015
30.4

$
$

2014
9,619
12.6
1.3
469
4.9%
526
5.5%
641
6.7%
107
2014
32.5

$
$

Variance
(14)%
(30)%
nmf

(1)%
70 bps
(12)%
10 bps
(12)%
10 bps
45 %

(6)%

(1) 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.

(2) Ratio of new orders over revenues.

BACKLOG AND REVENUES
(as at and for the fiscal years ended; in billions of
dollars)

EBIT AND EBIT BEFORE SPECIAL ITEMS*
(for fiscal years; in millions of dollars)

* Non-GAAP financial measure. Refer to the Non-GAAP financial measures section in Overview for a definition of this metric. Refer to the

Analysis of results section for reconciliations to the most comparable IFRS measures in 2015 and 2014.

Restated for Corporate and elimination adjustments as per the new organizational structure.

94 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

KEY EVENTS

•

• Strong order intake of $8.8 billion across all product segments and geographic regions, leading to a book-to-

bill ratio of 1.1 for the fiscal year and bringing the backlog to $30.4 billion at year end.

• On April 14, 2015, the V300ZEFIRO Italy very high-speed train received homologation and successfully

completed its maiden trip from Milan to Rome before entering commercial service in June 2015.

• During the year, we strengthened our position in the Chinese market:

We signed an agreement with the New United Group (NUG) to establish a joint venture for signalling
and rail control in China.
Bombardier-Sifang Transportation, a Chinese entity in which Bombardier holds a 50 percent interest,
was awarded contracts with China Railway Corp. (CRC) to supply 15 CRH380D very high speed
trains valued at approximately $381 million and 80 CRH1E-250 high-speed new generation sleeper
train cars valued at approximately $165 million, and has delivered the first very high speed train to its
customer, Shanghai Railway Bureau.
Our Chinese joint venture, CSR Puzhen Bombardier Transportation Systems Ltd., won its first contract
for an INNOVIA APM 300 automated people mover (APM) to be delivered to its customer Shanghai
Shentong Metro Co. Ltd.

• On December 9, 2015, Laurent Troger became President, Bombardier Transportation.
• Subsequent to the end of the fiscal year, we decided to take steps to optimize our workforce with a

combination of manpower reduction and strategic hiring. Transportation plans to reduce its workforce by an
estimated 3,200 production and non-production employees throughout 2016 and 2017, as we move forward
with our transformation plan. During the same period, this workforce reduction will be partially offset by hiring
in certain growth areas, notably to support the ramp-up of strategic programs and projects worldwide. These
adjustments will enable us to resize our organization in line with current business needs and to increase our
competitiveness.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 95

PROFILE

The broadest and most innovative portfolio in the industry serving
customers worldwide

Transportation offers a portfolio of efficient products and services in the rail industry, covering the full spectrum of
rail solutions, ranging from complete trains to sub-systems, services, system integration and signalling. Based on
this suite of innovative technologies, we have won orders across all product segments and major geographies,
underlining the competitiveness of our products and services worldwide.

We have 61 production and engineering sites and 18 service centres in 28 countries. The global headquarters is
located in Berlin, Germany.

MARKET SEGMENT: ROLLING STOCK

INTERCITY, HIGH SPEED TRAINS, AND VERY
HIGH SPEED TRAINS
Application: Equipment for medium and long-distance
operations.

Major products: REGINA, TWINDEXX Express and
ZEFIRO family

Key features: Solutions offering very high operating
flexibility, high comfort and safety standards for the
passengers in combination with high efficiency covering
the full spectrum of speed requirements: intercity
(160-200 km/h), high speed (200-250 km/h) and very high
speed (250-380 km/h).

COMMUTER AND REGIONAL TRAINS
Application: Suburban and regional rail transit for urban
centres and surrounding regions.

Major products: AVENTRA, OMNEO, SPACIUM,
TALENT 2, TWINDEXX Vario, ELECTROSTAR

Key features: Broad product line featuring electric, diesel
and dual mode multiple unit trains/vehicles, along with
locomotive-hauled coaches in both single and double-deck
configurations. Our modular train platforms offer very high
flexibility to transit authorities and operators, as well as
high levels of comfort and capacity.

ZEFIRO very high speed train

SPACIUM Electric Multiple Unit

96 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

LIGHT RAIL VEHICLES
Application: Efficient surface transit in urban centres.

Major products: FLEXITY family (FLEXITY 2, Outlook,
Freedom, Berlin, Classic, Swift)

Key features: Our broad portfolio of FLEXITY vehicles
features high technical capabilities and low life-cycle
costs.

METROS
Application: High-capacity mobility for urban mass transit.

Major products: MOVIA and INNOVIA platforms

FLEXITY tram

Key features: Flexible modular product platform adaptable to the requirements of customers across diverse markets, with a
track record for rapid, reliable, cost and energy efficient operation, including driverless solutions.

ELECTRIC AND DIESEL LOCOMOTIVES
Application: Locomotives for intercity, regional and freight
rail service.

Major products: TRAXX platform, ALP electric and dual-
power locomotives

Key features: Versatile product platform offering electric,
diesel-electric, dual-power and multi-system propulsion,
last-mile diesel or battery drive features. Innovative
solutions increase power and reliability in combination with
high energy efficiency. Homologated in several countries
in Europe, enabling cross-border service.

TRAXX dual power locomotive

PROPULSION AND CONTROLS
Application: Complete propulsion and control product portfolio for all rail vehicles and e-mobility applications, including
traction and auxiliary converters, traction motors and train control and management systems for onboard solutions.

Major products: Products of the MITRAC platform, including traction and auxiliary converters, drives, train control
management systems (TCMS), high voltage equipment and complete system solutions.

Key features: A leader in reliability, modular design, energy efficiency and ease of maintenance technologies, applicable to
the full spectrum of rolling stock.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 97

BOGIES
Application: Complete solutions for our full product
portfolio and also third-party businesses.

Major products: FLEXX bogies portfolio including latest
technologies: FLEXX Eco, FLEXX Urban, FLEXX Speed,
FLEXX Power and the award-winning WAKO Technology

Key features: Advanced product technology and
complete aftermarket services covering the full spectrum
of rolling stock applications. Our track-friendly bogies are
designed to ensure safe and smooth operation and reduce
wheel and rail wear, minimizing operational costs and
noise.

MARKET SEGMENT: SYSTEM AND SIGNALLING

MASS TRANSIT AND AIRPORT SYSTEMS
Application: Fully Automated People Mover (APM),
metro, monorail and light rail systems.

Major products: INNOVIA APM 300 system, INNOVIA
Monorail 300 system, INNOVIA Metro 300 system,
FLEXITY 2 tram systems

Key features: Broad rolling stock portfolio for urban and
airport applications that can be customized to provide a
complete turnkey system solution. Strong track record for
reliability and availability across 60 complete systems
around the world. In 2015, we won a GOOD DESIGNTM
award for our INNOVIA Monorail 300 system from the
Chicago Athenaeum: Museum of Architecture and Design.

FLEXX metro bogie

INNOVIA Monorail 300 system

MAINLINE SYSTEMS
Application: System solutions for intercity and high speed applications covering medium- to long-distance operations.

Key features: Turnkey system approach to provide reliable rail systems for mainline applications featuring very high
passenger comfort and safety standards. Highly experienced in systems integration and engineering as well as in operations
and maintenance.

OPERATIONS AND MAINTENANCE OF SYSTEMS
Application: Operations and maintenance (O&M) services for fully automated transit and mass transit systems.

Key features: Strong O&M experience in automated, driverless technologies, including APM, metro and monorail systems as
well as fleet management solutions for urban and intercity transportation systems.

98 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

PRIMOVE E-MOBILITY
Application: Our PRIMOVE portfolio offers vehicle
manufacturers and operators a flexible package of zero-
emission e-mobility solutions for several types of electric
rail and road vehicles such as trams, buses, trucks and
cars. The fully integrated system of fast inductive charging,
long-life batteries and efficient propulsion equipment
allows cities and the transportation industry to easily
incorporate electric mobility.

Major products: PRIMOVE charging, PRIMOVE battery,
PRIMOVE propulsion

Key features: PRIMOVE provides a convenient,
automatic and wireless energy supply system that allows
electric vehicles to be charged dynamically and statically
at high power levels without affecting driving habits or
journey times. The PRIMOVE propulsion and controls
system integrates electrical driveline solutions with
interfaces for all major vehicle components to optimize the
overall efficiency and performance of electric buses.

PRIMOVE e-bus

MASS TRANSIT SIGNALLING
Application: Rail control and signalling solutions for mass transit systems such as metros, light rail or APMs.

Major products: CITYFLO

Key features: Complete portfolio of solutions ranging from manual applications to fully automated Communication-Based
Train Control, which helps to increase infrastructure capacity and can be installed without interruption to service.

MAINLINE SIGNALLING
Application: Rail control and signalling solutions for mainline railways ranging from freight traffic to regional and commuter,
intercity and high speed lines.

Major products: INTERFLO and EBI Cab Automatic Train Control onboard equipment

Key features: Complete portfolio of conventional signalling systems which uses the European Rail Traffic Management
System technology and is already functioning in several countries inside and outside of Europe.

INDUSTRIAL SIGNALLING
Application: Rail control and signalling solutions for the industrial sector, major application in the surface and sub-surface
mining industry.

Major products: INTERFLO 150

Key features: Innovative signalling system technologies used to increase transport capacity in a secure and cost effective
manner. Our technology covers the whole process, enhancing not only the underground operation, but also the transfer of ore
from the excavation site to the transportation hub.

MARKET SEGMENT: SERVICES

MATERIAL SOLUTIONS
Application: Supply chain, spare parts inventory management, obsolescence management and technical support services for
rail operators.

Key features: Advanced material supply solutions together with global engineering and purchasing power through global
network of parts and components suppliers. Logistics capability to source and deliver what is needed, when needed, where
needed.

FLEET MANAGEMENT
Application: Comprehensive portfolio of fleet and operations management services.

Key features: Robust and effective ‘back office’ solutions support rail operators in delivering their ‘front line’ service every day.
Engineering expertise, whole life maintenance techniques and tools optimize availability, reliability, punctuality, safety and cost
over the whole life cycle of the fleet.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 99

ASSET LIFE MANAGEMENT, COMPONENT RE-ENGINEERING AND OVERHAUL
Application: Upgrade, life extension and overhaul of rail vehicles and components.

Key features: Broad portfolio of system and component upgrades executed at Transportation specialist facilities and customer
sites. We leverage our engineering and supply chain strength to bring operational performance and whole life cost
advantages. More than 4,000 vehicles have been refurbished. Experience in more than 4,000 different component types.

INDUSTRY AND ECONOMIC ENVIRONMENT

Resilient growth and promising opportunities expected in the rail industry

Further consolidation increased competitiveness in the rail industry in 2015, however the future outlook for the rail
market remains positive supported by favourable long-term trends in the rail industry. Urbanization, population
growth, and government policies aimed at reducing greenhouse gas emissions are expected to 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 is expected to increase from approximately 7.3 to 9.7
billion by 2050, together with the share of people living in urban areas growing
from 54% to 66% in the same time period.(1) Population growth and urbanization
create an increasing demand for high capacity public transport solutions
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 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 backed by the
public sector. Rail infrastructure investments are expected to grow, as
governments and multilateral institutions continue to fund projects in the rail
industry to support and foster economic development. However public
indebtedness and austerity measures may impede public tender processes for
some new rail projects.
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 European Union.

Identifies a favourable, neutral or negative status, respectively, in the market categories in which we compete, based on our view of

the current environment.
(1) According to the United Nations: “World Urbanization Prospects: The 2014 Revision” and “World Population Prospects: The 2015 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 bi-annual World Rail Market Study published in September 2014. The study expects the overall accessible rail
market* 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 and North America to show the highest
annual growth rate. The overall order volume is expected to reach an annual average of approximately $105.9
billion in the period of 2017-2019(1). Rolling stock will remain the largest segment, but systems and signalling and
services will maintain the highest growth rates, with a CAGR of 3.4% and 3.3%, respectively compared with 1.9%
for rolling stock.
* 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. Transportation’s accessible market also excludes the infrastructure, freight wagon and shunter
segments.

(1) Based on data from UNIFE World Rail Market Study “Forecast 2014 to 2019” published in September 2014 for Transportation’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€ = $ 1.25581, the average cumulative exchange rate over the 2013-15 period, was used to convert all figures.
Figures for 2013-15 were extrapolated based on UNIFE data for 2011-13 and 2014-16.

100 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Source: UNIFE World Rail Market Study “Forecast 2014 to 2019” and extrapolated figures(1)

Europe
In 2015, the order volume exceeded the high level
observed in 2014, driven mainly by a high number of
medium-sized orders for commuter and regional trains
in the U.K., Germany, France and Belgium.
Furthermore, several cities in Western Europe awarded
large contracts for Light Rail Vehicles (LRV) especially
in Austria and Germany.

In the upcoming years, a high level of investment is
expected in Western Europe, primarily in the high-
speed, commuter and regional trains segments in
Germany, France and the U.K. Large metro projects will
be tendered in London and Paris.

Furthermore, the upgrade and expansion of high-speed
networks in Turkey and Spain will create opportunities
for rolling stock, services as well as signalling. In
Eastern Europe, aging fleets still denote high potential
demand for services and rolling stock solutions
although budgeting and funding constraints persist.

Source: UNIFE World Rail Market Study “Forecast 2014 to 2019” and
extrapolated figures(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. Transportation’s accessible market also excludes the infrastructure, freight wagon and shunter
segments.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 101

North America
The order volume in North America in 2015 remained
below the levels observed in the preceding year mainly
due to very large metro orders in 2014. In 2015,
investments in the U.S. were focused on urban
solutions such as light rail and Automated People
Mover (APM) for airports. Both in the U.S. and in
Canada, large orders for services and signalling
contracts were awarded.

In North America, strong order volume is expected in
the next years as large metro orders are expected to be
awarded in the U.S. The need for urban solutions and
maintenance will drive investments in Canada. Mexico
is expected to invest in the renewal of its metro fleets
as well as in light rail and other urban applications.

Asia-Pacific
In the Asia-Pacific region, investment increased
compared to 2014 with significant order volume
observed in 2015 mainly driven by China and India.
Large domestic orders in the high-speed train and
metro segments were awarded in China. In India,
several cities invested in additional metro vehicles to
meet the growing demand for urban transportation. The
Indian government undertook significant investments to
renew its locomotives fleet and to upgrade signalling
installations on its freight network. In Australia, several
cities continued to invest in LRV and commuter trains.

The outlook for the region remains positive since further
investments are expected in India and China in the high
speed train, commuter and regional train as well as
metro segments. In Australia further investments are
planned in the commuter and regional train segment
giving rise to new services contracts. Mass transit
opportunities will arise in large urban centers in South-
East Asia in countries such as Taiwan, Thailand and
Malaysia to address the need for higher capacity
solutions.
*

Source: UNIFE World Rail Market Study “Forecast 2014 to 2019” and
extrapolated figures(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. Transportation’s accessible market also excludes the infrastructure, freight wagon and shunter
segments.

102 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Rest of world(1)
Investments in the Rest of world region decreased in
2015 compared to 2014 due to significant orders
awarded in 2014 in South Africa. Despite international
sanctions imposed on Russia, large domestic
investments were made in the locomotive and services
segments. In South and Central America, metro
contracts have been awarded in Colombia and
Panama.

In the Middle East and Northern Africa, demand for
urban solutions remains high, leading to further
expected investments in LRV, automated metros and
commuter trains. Several metro and urban transport
projects are forecast in South American countries to
address rapid urbanization and congestion issues.

Source: UNIFE World Rail Market Study “Forecast 2014 to 2019” and
extrapolated figures(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. Transportation’s accessible market also excludes the infrastructure, freight wagon and shunter
segments.

(1) The Rest of world region includes South America, Central America, Africa, the Middle East and the CIS.
(2) Based on data from the UNIFE World Rail Market Study “Forecast 2014 to 2019” published in September 2014 for Transportation’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€ = $1.25581, the average cumulative exchange rate over the 2012-14 period, was used to convert
all figures. Figures for 2013-15 were extrapolated based on UNIFE data for 2011-13 and 2014-16.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 103

KEY PERFORMANCE MEASURES AND METRICS

The table below summarizes our most relevant key performance measures and associated metrics.

KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS

Growth and
competitive
positioning

• Order backlog, as a measure of future revenues.
•
• Revenues by product segments and the geographic diversification of revenues, as measures of growth

Book-to-bill ratio(1), as an indicator of future revenues.

and sustainability of competitive positioning.

• Market position, as a measure of our competitive positioning.

Profitability

Liquidity

Customer
satisfaction

Execution

•

EBIT, EBIT margin, EBIT before special items(2) and EBIT margin before special items(2), as 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.

In 2015, our employee incentive-based compensation was linked to the achievement of targeted results, based on
EBIT before special items and free cash flow. A total of 2,900 employees worldwide, or 9% of permanent
employees, participate in the program.

Five-year summary

For the fiscal years ended and as at
December 31

Revenues

External revenues
Intersegment revenues

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)(4)
EBIT margin before special items(2)(4)
Number of employees(5)

2015

8,275
6
8,281

8.8
1.1
30.4
465
5.6%
465
5.6%

$
$

2014
restated(3)

2013
restated(3)

2012
restated(3)

2011
restated(3)

$
$

9,612
7
9,619

12.6
1.3
32.5
469
4.9%
526
5.5%

$
$

8,766
7
8,773

8.8
1.0
32.4
545
6.2%
545
6.2%

$ 7,786
6
$ 7,792

$
$

9.2
1.2
32.0
338
4.3%
482
6.2%

$
$

9,310
6
9,316

9.5
1.0
30.1
718
7.7%
718
7.7%

39,400

39,700

38,500

36,000

36,200

(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 in 2015 and 2014.

(3) Restated for Corporate and elimination adjustments as per the new organizational structure.
(4) Refer to the Analysis of results section for details of special items recorded in 2015 and 2014. The special items for 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 employee and a foreign exchange hedging loss of $25 million.

(5) Including contractual and inactive employees.

104 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

ANALYSIS OF RESULTS

Results of operations

Revenues

External revenues
Intersegment revenues

EBITDA before special items(1)
Amortization
EBIT before special items(1)
Special items
EBIT
EBIT margin before special items(1)
EBIT margin

Fourth quarters
ended December 31
2014
2015

Fiscal years
ended December 31
2014
2015

$
$

2,162
2
2,164
150
27
123
—
123
5.7%
5.7%

$
$

2,634
2
2,636
139
28
111
—
111
4.2%
4.2%

$
$

8,275
6
8,281
564
99
465
—
465
5.6%
5.6%

$
$

9,612
7
9,619
641
115
526
57
469
5.5%
4.9%

(1) Non-GAAP financial measures. Refer to Non-GAAP financial measures sections in Overview for definitions of these metrics.

External revenues by geographic region

Europe(1)
North America
Asia-Pacific(1)
Rest of world(1)(2)

Fourth quarters ended December 31
2014
66% $ 5,345
1,297
15%
1,047
14%
586
5%
100% $ 8,275

2015
68% $ 1,728
393
14%
366
13%
147
5%
100% $ 2,634

$ 1,476
294
285
107
$ 2,162

Fiscal years ended December 31
2014
67%
16%
11%
6%
100%

2015
64% $ 6,471
1,527
16%
1,041
13%
573
7%
100% $ 9,612

(1) The decreases in Europe reflect negative currency impacts of $182 million for the fourth quarter and $960 million for the fiscal year ended
December 31, 2015, while the variances in Asia-Pacific reflect negative currency impacts of $23 million and $105 million, respectively, and
the variances in the Rest of world region reflect negative currency impacts of $28 million and $136 million, respectively.

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

Revenues
Revenues for the fourth quarter and fiscal year ended December 31, 2015, have decreased by $472 million, or
18%, and $1.3 billion, or 14%, respectively, compared to the same periods last fiscal year. Excluding negative
currency impacts of $233 million and $1.2 billion, respectively, revenues have decreased by $239 million, or 9%,
and $136 million, or 1%, compared to the same periods last fiscal year.

The $239 million decrease excluding currency impact for the fourth quarter is mainly explained by:

•

lower activities in rolling stock in North America, Asia-Pacific and Europe following completion of some
commuter and regional train contracts in the three regions, some high speed train contracts in Europe
and Asia-Pacific, and some metro contracts in Europe as well as lower activities in some very high-speed
train contracts in Asia-Pacific, partly compensated by ramp-up in production related to some intercity and
very high speed train contracts in Europe ($183 million); and
lower activities in systems mainly in the Rest of world region, and in signalling in Europe and Asia-Pacific
($139 million).
Partially offset by:
•

higher activities in rolling stock in the Rest of world region, mainly related to ramp-up in production related
to some locomotives and propulsion contracts ($52 million); and
higher activities in systems in Asia-Pacific and in signalling in the Rest of world region ($34 million).

•

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 105

The $136 million decrease excluding currency impact for the fiscal year is mainly explained by:

•

lower activities in rolling stock in North America and Europe following completion of some commuter and
regional train contracts in both regions, some metro and LRV contracts in Europe, partly offset by ramp-
up in production related to some very high speed train and locomotive contracts in Europe ($464 million);
and
lower activities in systems in the Rest of world region and in Europe ($123 million).

•
Partially offset by:
•
•
•

higher activities in signalling in all regions ($203 million);
higher activities in services mainly in Europe, Asia-Pacific and the Rest of world region ($140 million); and
higher activities in rolling stock in the Rest of world region and Asia-Pacific, mainly due to ramp-up in
production related to some propulsion contracts in both regions, some locomotive contracts in the Rest of
world region and some commuter and regional train contracts in Asia-Pacific, partly compensated by
completion of some commuter and regional train contracts in the Rest of world region ($100 million).

The special item for the fiscal year ended December 31, 2014 related to a restructuring charge of $57 million in
connection with measures to further improve competitiveness and cost structure of indirect functions and align
capacity, mainly the reduction of worldwide direct and indirect positions by approximately 900 employees.

EBIT margin
The EBIT margin for the fourth quarter increased by 1.5 percentage points mainly as a result of:

•

a higher gross margin in rolling stock due to a favourable contract mix and a lower negative impact
resulting from revised escalation assumptions for some contracts; and
a higher share of income of joint ventures and associates.

•
Partially offset by:
•
•
•

a lower gross margin in system and signalling;
higher R&D expenses; and
lower absorption of SG&A expenses.

The EBIT margin for the fiscal year increased by 0.7 percentage point. The EBIT margin before special items (see
explanations of special items above) increased by 0.1 percentage points mainly as a result of:

a higher share of income of joint ventures and associates;
a higher gross margin in rolling stock due to a favourable contract mix; and
lower SG&A expenses.

•
•
•
Partially offset by:
•
•

a lower gross margin in system and signalling; and
higher R&D expenses.

106 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

We have secured key strategic orders worldwide

Order backlog

(in billions of dollars)

December 31, 2015
30.4
$

As at
December 31, 2014
32.5
$

The $2.1-billion decrease in order backlog is due to the weakening of some foreign currencies versus the
U.S. dollar as at December 31, 2015, compared to December 31, 2014 ($2.7 billion), mainly the euro, the South
African Rand, the Australian dollar and the pound sterling, partially offset by order intake being higher than
revenues recorded ($0.6 billion).

Order intake and book-to-bill ratio

Order intake (in billions of dollars)
Book-to-bill ratio(1)

(1) Ratio of new orders over revenues.

Fourth quarters
ended December 31
2014
2015
1.8
3.4
0.7
1.6

Fiscal years
ended December 31
2014
2015
12.6
8.8
1.3
1.1

ORDER INTAKE BY REGION
(for fiscal years; in billions of dollars)

ORDER INTAKE AND BOOK-TO-BILL RATIO
(for fiscal years)

The order intake for the fourth quarter and fiscal year ended December 31, 2015 reflect negative currency
impacts of $438 million and $1.3 billion, respectively. Excluding the net negative currency impacts, the order
intake for the fourth quarter increased by $2.0 billion while the order intake for the fiscal year decreased by
$2.5 billion compared to the same periods last fiscal year. The decrease for the fiscal year ended
December 31, 2015 is mainly explained by the significant orders signed with the State of Queensland, Australia,
with Transport for London, U.K., and with Transnet Freight Rail, South Africa, in the first quarter of 2014, for
$6.0 billion.

In 2015, we won several small and medium 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 $30.2 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. Our accessible market also excludes the infrastructure, freight wagon and shunter segments.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 107

The significant orders obtained during the fiscal year ended December 31, 2015 were as follows:

Customer
Fourth quarter

Country

Product or service

Number
of cars

Market
segment

Belgian National Railways

Belgium

M7 double deck cars

355

Rolling stock

(SNCB-NMBS)

Berlin Transport Authority

Germany

FLEXITY trams

Rolling stock

Value

(1)

853

190

(BVG)

Third quarter
Transport for London (TfL)

Crosslinx Transit Solutions
Maintenance General
Partnership

U.K.

Electric multiple units (EMUs)

180

Rolling stock and

558

and fleet maintenance

Services

Canada

Fleet maintenance

n/a

Services

308

(2)

262

Israel Railways (ISR)

Israel

TRAXX locomotives

Rolling stock

Second quarter
Vienna Transport Authority

Wiener Linien

Austria

FLEXITY trams and
FlexCare fleet maintenance

119

Rolling stock and

480

Services

Delhi Metro Rail Corporation Ltd

India

MOVIA metro cars

162

Rolling stock

(DMRC)

Chicago Department of Aviation

U.S.

INNOVIA APM 256 automated

System

(CDA)

people mover

Syndicat des Transports d’Île-de-

France

EMUs

133

Rolling stock

228

180

141

France (STIF) and Société
Nationale des Chemins de fer
Français (SNCF)

De Lijn (VVM)

Belgium

FLEXITY 2 trams

Rolling stock

107

First quarter
National Express Group

Rheinbahn AG and Cologne
transport authority (KVB)

U.K.

Fleet maintenance and spare

n/a

Services

parts

Germany

FLEXITY trams

Rolling stock

213

203

(1) Contract signed as part of a consortium. Only our share of the value is stated.
(2) Based on 2015 list price.
n/a: Not applicable

Workforce

Total number of employees

Permanent(1)

Contractual

Percentage of permanent employees covered by collective agreements

(1) Including inactive employees.

December 31, 2015

December 31, 2014

As at

34,650

4,750

39,400

65%

34,750

4,950

39,700

69%

Headcount in Europe and North America has decreased mainly as a result of a reduction in permanent workforce
due to timing of work on orders received. Contractual workforce also reduced mainly due to lower workload in
connection with the development of new products.

108 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Headcount in Asia-Pacific 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.

Subsequent to the end of the fiscal year, we decided
to take steps to optimize our workforce with a
combination of manpower reduction and strategic
hiring. Transportation plans to reduce its workforce
by an estimated 3,200 production and non-
production employees throughout 2016 and 2017,
as we move forward with our transformation plan.
During the same period, this workforce reduction will
be partially offset by hiring in certain growth areas,
notably to support the ramp-up of strategic programs
and projects worldwide. These adjustments will
enable us to resize our organization in line with
current business needs and to increase our
competitiveness. Transportation has received large
orders, which will mobilize additional employees in
regions where it has limited presence.

Major collective agreements

Location

Union / Contractual partner

Hennigsdorf and other
sites, Germany

IG Metall (German Industrial Union of
Metalworkers)

Vaesteras and,
Stockholm, Sweden

Swedish Union of Salaried Employees and
Swedish Union of Industrial Supervisors

Crespin,
France

U.K.

Poland

Labor Code (Code du travail),
negotiated at industry level

Various local unions
(Unite; RMT; GMB; TSSA)

Local trade unions

WORKFORCE BY GEOGRAPHIC REGION
(as at)

Approximate number of
permanent employees
covered as at
December 31, 2015
6,600

Expiration of current
collective agreement

March 31, 2016(1)

2,150

March 31, 2016

1,600

1,500

1,300

No expiry date(2)

No expiry date(3)

(1) The date by which the tariff pay-related renegotiations are scheduled to commence.
(2) Per the France Labour Code, collective agreements within the metal industry must be applied without expiration and could evolve when new

laws are issued.

(3) Per the U.K. and Poland Labour Code, there are no expiry dates for the collective agreements. Either party can request that the collective

agreements be reviewed or terminated.

SALE OF A MINORITY SHARE

Sale of a 30% stake in Bombardier Transportation to the CDPQ for
$1.5 billion

In November 2015, we entered into a definitive agreement with the Caisse de dépôt et placement du Québec
(CDPQ) for a $1.5 billion convertible share investment in Bombardier Transportation’s newly-created holding
company, Bombardier Transportation (Investment) UK Ltd (BT Holdco). The investment was completed on
February 11, 2016. Under the terms of the investment, Bombardier Inc. sold voting shares convertible into a 30%
common equity stake of BT Holdco to the CDPQ, subject to annual adjustments related to performance.

Following the completion of the previously-announced corporate reorganization, BT Holdco owns essentially all of
the assets of Bombardier’s Transportation business segment, its operational headquarters remains in Germany
and it will continue to be consolidated in Bombardier’s financial results.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 109

Key terms of the investment
The CDPQ will be entitled to its pro-rata portion (on an as-converted basis, initially equal to 30% of BT Holdco
common shares) of any future dividends declared.

Dividends will be payable in cash or, subject to certain conditions, in additional convertible shares at the option of
BT Holdco (any such issuance to increase the CDPQ’s participation).

Performance incentives
The terms of the transaction provide strong performance incentives for Bombardier Transportation. For each of
the first five years following the closing date, the CDPQ’s ownership (on conversion) and return may be subject to
upward or downward annual adjustments, based on a performance target jointly agreed to as part of Bombardier
Transportation’s business plan.

If Bombardier Transportation outperforms its business plan, the CDPQ’s percentage of ownership on conversion
of its shares decreases by 2.5% annually, down to a minimum threshold of 25%. In this circumstance, the
convertible shares’ minimum return also decreases from 9.5% to a floor of 7.5%.

Conversely, should Bombardier Transportation underperform relative to its plan, the CDPQ’s percentage of
ownership on conversion of its shares will increase by 2.5% annually, up to a maximum of 42.5% over a five-year
period. In this case, the convertible shares’ minimum return also increases from 9.5% up to 12%.

Shareholders rights and exit
Under the terms of the investment, the CDPQ has standard minority protection rights, including: pre-emptive
rights, a right of first offer, and tag-along rights, and Bombardier has a right of first offer and customary drag-along
rights, in each case subject to certain conditions.

Bombardier has the ability to buy back the CDPQ’s investment upon specified terms at any time on or after the
third anniversary of the closing of the investment, at the higher of the fair market value (on an as-converted basis)
or a minimum of 15% compounded annual return to the CDPQ.

At any time on or after the fifth anniversary of the closing of the investment, and provided that Bombardier has not
exercised its right to buy back CDPQ’s investment before then, the CDPQ will have the right to cause BT Holdco
to proceed with a secondary initial public offering (IPO) or a sale of 100% of its shares, and to receive the higher
of the value of its shares on an as-converted basis, or based on the implied value of the IPO or sale to a third
party, as the case may be.

Upon a change of control of Bombardier Inc. or, in certain circumstances, of BT Holdco, the CDPQ will have the
right to require an IPO or a sale of 100% of the BT Holdco shares and to receive the higher of the value of the
common shares held by the CDPQ on an as-converted basis, based on the implied value of the IPO or sale to a
third party, as the case may be, or a minimum three-year 15% compounded annual return (or at any time after
three years, a 15% compounded annual return).

Other details of the transaction
The parties have agreed to a consolidated Bombardier cash position of at least $1.25 billion. In the event
Bombardier’s cash position falls below that level, the Board of directors of Bombardier will create a Special
Initiatives Committee composed of three independent directors acceptable to the CDPQ, who would be
responsible to develop an action plan to improve cash. The implementation of the plan, once agreed with the
CDPQ, would be overseen by the Special Initiatives Committee.

110 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Warrants
The investment comprises the issuance by Bombardier to the CDPQ of warrants exercisable for a total number of
105,851,872 Class B shares (subordinate voting) in the capital of Bombardier Inc. (Class B Subordinate Voting
Shares), equivalent to a 4.5% ownership of all outstanding Class A shares (multiple voting) in the capital of
Bombardier Inc. (Class A Shares) and Class B Subordinate Voting Shares (after giving effect to the exercise of
such warrants) (and approximately 4.7% of the aggregate outstanding Class A Shares and Class B Subordinate
Voting Shares on a non-diluted basis). The warrants are exercisable for a period of seven years from the date of
their issuance at an exercise price per Class B Subordinate Voting Share equal to $1.66, the U.S. dollar
equivalent of $2.21 CDN at the date of execution of the subscription agreement, which represents a premium to
the 5-day VWAP of the Class B Subordinate Voting Shares on the Toronto Stock Exchange (TSX) as of
October 16, 2015.

The TSX has determined to accept notice of the private placement of warrants and has conditionally approved the
listing of the Class B Subordinate Voting Shares issuable pursuant to the terms of the warrants on the TSX.
Listing will be subject to Bombardier fulfilling all of the listing requirements of the TSX. The warrants are not and
will not be listed on the TSX, and contain market standard adjustment provisions, including in the event of
corporate changes, stock splits, non-cash dividends, distributions of rights, options or warrants to all or
substantially all shareholders or consolidations.

Security holder approval was required under TSX rules due to the fact that the warrants were issued later than 45
days from the date upon which the exercise price was established, as set out in Section 607(f)(i) of the TSX
Company Manual. Such approval was obtained, as agreed with the TSX, by way of written consent of
shareholders holding more than 50% of the voting rights attached to all of Bombardier’s issued and outstanding
shares.

GUIDANCE AND FORWARD-LOOKING STATEMENTS

What we said for 2015

What we did in 2015

What’s next for 2016(1)

Growth

Excluding currency impacts,
revenues in 2015 are expected
to be higher than in 2014, with
percentage growth in the low-
single digits.
Profitability(2) Slight improvement in EBIT
margin compared to 2014.

Excluding currency impacts,
revenue declined by 1%.

Revenues of approximately $8.5 billion,
based on the assumption that foreign
exchange rates will remain stable in
2016 compared to 2015.

EBIT margin before special
items(2) of 5.6% compared to
5.5% in 2014.

EBIT margin above 6%.

Revenues for 2015 were expected to be higher than in 2014, with percentage growth in the low-single digits.
Excluding currency impacts, revenues in 2015 declined by 1%, mainly explained by the optimization of our supply
chain, which delayed recognition of certain costs and therefore delayed recognition of revenue under long-term
contract accounting.

Our book-to-bill(3) guidance for 2015 was a ratio in excess of 1.0. The book-to-bill ratio was 1.1 in 2015, in line with
our guidance.

We also achieved a slight increase in EBIT margin before special items(2) in 2015, in line with our guidance.
Revised escalation assumptions that negatively impacted remaining estimated contract revenues continued to
impact contract margins in 2015 due to cumulative catch-up adjustments. However, rolling stock contracts with
execution issues in the past were stabilized in 2015.

(1) See forward-looking statements below.
(2) Profitability guidance is based on EBIT before special items. Refer to the Non-GAAP financial measures section in Overview for a definition

of this metric and to the Analysis of results section for a reconciliation to the most comparable IFRS measure.

(3) Ratio of new orders over revenues.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / TRANSPORTATION 111

We are transforming for profitable growth in a resilient rail market
We maintained a strong level of order intake across all segments and geographies in 2015, confirming customers’
continued confidence in our innovative products and services.

We ended the year with a strong order intake of $8.8 billion and an order backlog of $30.4 billion. We anticipate
that an increased share of higher margin and lower risk contracts in the order backlog, as well as the balanced
distribution of orders across segments and geographies, should reduce pressure on critical resources and enable
us to grow our profitability.

Our future profitability growth is based on three key pillars: revenue growth and conversion, a better revenue mix
and continuation of operational transformation. The transformation program OneBT, which was introduced in
2014, has been integrated with the overall Bombardier operational transformation initiative and is in place to
streamline project execution and increase profitability.

Revenue growth is driven by our strong backlog as well as a growing future bid pipeline across all segments and
geographies. As already demonstrated in the past, we aim to outgrow the rail market based on our differentiation
factors and value proposition allowing us to secure contracts with superior technical solutions and value-based
pricing. Increasing the share of revenues related to services, systems and signalling contracts remains a priority.

Several measures implemented under the operational transformation plan are expected to improve margins and
focus on cash generation. We are focused on improving the revenue mix by implementing a selective bidding
approach and increasing the revenue contribution of higher margin and lower risk projects. The new bid process
has been designed to properly assess bid requirements and risks while ensuring bid competitiveness and
profitability in execution. Enhanced product standardization and a platform-based approach will reduce
complexity and lead times. The new structure further empowers project management and implements leaner
processes and a customer centric organization.

We are confident that the measures implemented under the operational transformation plan as part of our
roadmap to 2020,(1) which focuses on a growing and diversifying revenue mix, will reduce execution risk and
contribute to sustainable profitability and growth.

(1) Refer to the Strategic Priorities section in Overview for more details on our roadmap to 2020.

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 our ability to capture them;

normal contract execution and the continued deployment and execution of key transformation initiatives, especially those
impacting direct and indirect procurement costs, labor efficiency and working capital improvement;

our ability to transfer best practices and technology across production;

our ability to execute and deliver business model enhancement initiatives;

our ability to recruit and retain highly skilled resources to deploy our product development strategy;

revenue conversion and phase out of our legacy contracts;

a sustained level of public sector spending;

the ability of our supply base to support the execution of projects; and

• stability of foreign exchange rates.
(1) Also see the Guidance and forward-looking statements section in Overview.

112 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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)

HISTORICAL FINANCIAL SUMMARY

PAGE

114

115

129

130

131

136

137

138

139

140

141

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 113

OFF-BALANCE SHEET ARRANGEMENTS

Factoring facilities

In the normal course of its business, Transportation has set up factoring facilities under which it can sell, without
credit recourse, qualifying trade receivables. For more details, refer to Note 16 - Trade and other receivables, to
the consolidated financial statements.

Credit and residual value guarantees

In connection with the sale of certain of our products, mainly commercial aircraft, we have 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 11 years. In the event of default, we usually act as an agent for the guaranteed parties for the
repossession, refurbishment and re-marketing of the underlying assets. We typically receive 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 38 – Commitments and contingencies, to the consolidated financial statements.

Financing commitments

We sometimes provide financing support to facilitate our 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, 2015, we 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, we have 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. Commercial Aircraft 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 37 – Unconsolidated structured entities, to the consolidated financial statements.

114 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

RISKS AND UNCERTAINTIES

We operate in industry segments which present a variety of risk factors and uncertainties. The risks and
uncertainties described below are those that we currently believe could materially affect our business activities,
financial condition, cash flows and results of operations, but are not necessarily the only risks and uncertainties
that we face. If any of these risks, or any additional risks and uncertainties presently unknown to us or that we
currently consider as being not material, actually occur or become material risks, our business activities, financial
condition, cash flows and results of operations could be materially adversely affected.

General economic
risk

General economic risk is the risk of potential loss due to unfavourable economic conditions. These
factors include government budget compression, reduced levels of public and private capital
expenditures, declining business confidence, political and economic pressures, including those arising
from increasing government deficits and sovereign debt overruns, and crises in the credit markets.

Business
environment risk

Operational risk

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 (including scope clauses in pilot union agreements
restricting the operation of smaller jetliners by major airlines or by their regional affiliates) and business
aircraft customers, the financial condition of the rail industry, trade policy, as well as increased
competition from other businesses including new entrants in market segments in which we compete. In
addition, political instability and force majeure events such as acts of terrorism, natural disasters,
global health risks, 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 our products.

Operational risk is the risk of potential loss due to the nature of our operations. Sources of operational
risk include development of new products and services, development of new business and the
complexity of obtaining certification and homologation of products and services. In addition, the large
and complex projects that are characteristic of our businesses are often structured as fixed-price
contracts and thus exposed to production and project execution risks. Furthermore, our cash flows are
subject to pressures based on project-cycle fluctuations and seasonality and our businesses are
capital intensive, which require that we regularly incur significant capital expenditures and investment
over multi-year periods prior to realizing cash flows under a project. Other sources of operational risk
include our ability to successfully implement our strategy and transformation plan, actions of business
partners, product performance warranty and casualty claim losses, the use of estimates and judgments
in accounting, regulatory and legal conditions, environmental, health and safety issues, as well as
dependence on customers, suppliers (including supply chain management) and human resources. We
are also subject to risks related to problems with reliance on information systems, reliance on and
protection of intellectual property rights and adequacy of insurance coverage.

Financing risk

Market risk

Financing risk is the risk of potential loss due to the liquidity of our 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.

General economic risk

The markets in which we operate may from time to time be affected by a number of local, regional and global
factors that have an impact on economic development and, in consequence, the pace of economic growth and
sustainability. These factors include government budget compression, reduced levels of public and private capital
expenditures, declining business confidence, political and economic pressures, including those arising from
increasing government deficits and sovereign debt overruns and crises in the credit markets.

Since our sales and operations are undertaken around the world, including through manufacturing and production
capacity in Europe and in North America, and partnerships and joint ventures in regions such as Asia, Latin
America and Africa, we may be directly or indirectly affected by an unfavourable political or economic slowdown
occurring within these geographic zones and our business may be exposed to a number of related risks, such as
fluctuations in exchange rates and restrictions on the transfer of capital.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 115

Should the current uncertain global economic situation persist over time or deteriorate, should the economic
headwinds in certain countries, regions or key markets intensify or spread to other countries, or should the global
economic environment deteriorate, this could, in particular, result in potential buyers postponing the purchase of
our products or services, lower order intake, order cancellations or deferral of deliveries, lower availability of
customer financing, increase in our 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

Financial condition of the airline industry and business aircraft customers

The airline industry’s financial condition and viability, including airlines’ ability to secure financing, can influence
the demand for our 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 our aerospace 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.

The purchase of aerospace 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 our aerospace 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. We 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 our financial results.

Financial condition of the rail industry

The rail industry has historically been resilient during economic downturns. Challenging economic and financial
conditions in specific areas, however, may have a negative impact on some rail operators. As customers deal with
budget pressures and discipline and even austerity measures, it may result in projects being reduced in size,
postponed or even cancelled. Such actions by public or private rail operators may negatively impact our order
intake and revenues and put significant pressure on our cost structure and prices. These conditions may be
exacerbated in times of declining investment activity.

A significant proportion of our rail business in any given period relies on government agencies and other public
institutions, which have historically represented the vast majority of the value of the orders that we book annually.
The amount public institutions are able to invest and spend depends on complex political and economic factors
and could vary from one fiscal year to the next. Economic slowdown and public budgetary restrictions can cause
a decrease in infrastructure investments, delays in placing orders and delays in executing contracts or payments,
as well as a decrease in fiscal and other incentive-based measures to promote research and development. In
periods of over-indebtedness (or of a sovereign debt crisis), the implementation of austerity or public spending
reduction programs can lead to a negative impact on the volume of orders placed for transportation infrastructure
projects.

116 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

In addition, intense competition in the rail industry and demands by customers in the current economic
environment have resulted in certain adverse impacts, including the lower level and later receipt of advance
payments. This evolution of contract terms may adversely impact our cash flows and may require us to obtain and
deploy increased amounts of capital from other sources, including factoring facilities, which may adversely affect
our return on equity, financial condition and results of operations. In addition, there can be no assurance that if
such customer payment and advances terms continue to evolve in a manner adverse to the manufacturers we will
be able to access sufficient replacement working capital to finance the execution of projects on acceptable terms
or at all.

Trade policy

As a globally operating organization, our businesses are subject to government policies related to import and
export restrictions and business acquisitions, support for export sales, and world trade policies including specific
regional trade practices. As a result, we are exposed to risks associated with changing priorities by government
and supranational agencies.

In addition, protectionist trade policies and changes in the political and regulatory environment in the markets in
which we operate, such as foreign exchange import and export controls, tariffs and other trade barriers and price
or exchange controls, could affect our business in several national markets, impact our sales and profitability and
make the repatriation of profits difficult, and may expose us to penalties, sanctions and reputational damage.

Increased competition from other businesses including new entrants in market segments in
which we compete

In the aerospace market segments in which we compete, competitors are developing numerous aircraft programs,
with entries-into-service expected throughout the next decade. We face the risk that market share may be eroded
if potential customers opt for competitors’ products. We may also be negatively impacted if we are not able to
meet product support expectations or provide an international presence for our diverse customer base.

In the rail market, we face intense competition in the markets and geographies in which we operate. We face
competition from strong competitors, some of which are larger and may have greater resources in a given
business or region, as well as competitors from emerging markets and new entrants, which may have a better
cost structure. Some rail transportation market segments in which we operate, and some of the significant market
participants in our businesses, are undergoing consolidation. Such consolidation may increase pressure on prices
and profit margins, as well as on payment terms and conditions, manufacturing timeframes and the technologies
proposed and services provided to clients, which could weaken our position in certain markets. Furthermore,
certain competitors might be more effective and faster in capturing available market opportunities, which in turn
may negatively impact our results, revenues and market share.

Political instability

Political instability, which may result from various factors, including social or economic factors, in certain regions
of the world may be prolonged and unpredictable. Any prolonged political instability in markets in which we
participate could lead to delays or cancellation of orders, deliveries or projects in which we have invested
significant resources, particularly when the customers are state-owned or state-controlled entities.

Geopolitical and economic risks, international sanctions and the recent decreases in the price of oil affecting
many energy-exporting nations have raised new concerns in international economies. Beyond any immediate
impact, these developments may also negatively affect the evolution of the global economy.

In addition, geopolitical events in the geographic areas in which we operate can increase difficulties relative to the
conditions under which the contracts we have signed are executed, extend execution periods or trigger
unexpected legislative or regulatory changes that could significantly increase the costs of execution initially
projected for these contracts and which could have a material adverse effect on our business, financial condition,
cash flows and results of operations.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 117

Force majeure events or natural disasters

Force majeure events and 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
our suppliers; delays in projects; or legal liability.

Developing new products and services

Operational risk

Changes resulting from global trends such as climate change, volatile fuel prices, the growth of developing
markets, urbanization, population growth and demographic factors influence customer demands in our main
aerospace and rail transportation markets. To remain competitive and meet customers’ needs, we are required to
anticipate these changes and 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, our investments in new products or technologies may or may not be successful.

Our results may be impacted if we invest in products that are not accepted in the marketplace, if customer
demand or preferences change, if new products are not approved by regulatory authorities (or if we fail to design
or obtain homologation or accreditation for new products or technologies), are not brought to market in a timely
manner, in particular, compared to our competitors, or if our products become obsolete. We may incur cost
overruns in developing new products and there is the risk that our products will not meet performance
specifications to which we have committed to customers.

Our results could also be negatively impacted if we fail to design or obtain accreditation for new technologies and
platforms on budget and in a timely manner. Further, our long-term growth, competitiveness and continued
profitability are dependent on our ability to anticipate and adapt to changes in markets and to reduce the costs of
producing high-quality, new and existing products, to continue to develop our product mix and to align our global
presence with worldwide market opportunities.

In a highly competitive environment, we are and will remain exposed to the risk that more innovative or more
competitive products, services or technologies are developed by competitors or introduced on the market more
quickly or that the products we develop are not accepted by the market.

Business development

Our businesses are dependent on obtaining new orders and customers, thus continuously replenishing our order
backlog. Our results may be negatively impacted if we are unable to effectively execute strategies to gain access
to new markets, capture growth or successfully establish roots in new markets. Our book-to-bill ratio, which we
define as new orders over revenues or units delivered, is an indicator that we use to track potential future
revenues. However, the realization of revenues from new orders is based on certain assumptions, including the
assumption that our relevant contracts will be performed in full in accordance with their terms. The termination or
modification of any one or more major contracts may have a material and adverse effect on future revenues. We
cannot guarantee that we will realize all of the revenues initially anticipated in our new orders, and any such
shortfall may be significant.

Although we have developed and continue to develop our presence in many geographic markets, access to
certain markets can prove to be difficult to secure, particularly if there is a local competitor benefiting from a
stronghold in its home market. These types of situations could put us in an unfavourable position relative to some
of our competitors and present challenges to our strategy and competitive strength in those zones.

118 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Certification and homologation process

We are 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 our
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. or other regulatory authorities could result in service interruption of our products, fewer sales
or slower deliveries, an unplanned build-up of inventories, reduction in inventory values or impairment of assets.

The marketing and entry into service of our rail products require compliance with rail transportation security
standards that differ widely at the global level and are governed by various relevant regulatory authorities. This
creates a complex process for securing the homologation of trains. The process for securing the homologation of
trains is highly involved and may take longer and be more costly than initially anticipated due to the extent of
testing and other supporting technical elements required by the relevant authorities, which elements may change
over time. Our contracts increasingly include language that requires us to bear the risks and obligations
associated with the homologation process, including risks relating to changes in law or regulation or the
interpretation or application of regulations in respect of homologation.

Delays caused by the homologation process, or increased engineering or production costs relating to
homologation, may lead to delays in our ability to deliver our products and complete our contracts, as well as
contract cost overruns relative to our estimates and models and the payment of significant penalties or damages,
service interruptions affecting the products, or even the risk of cancellation of all or a portion of the contract in
extreme cases of prolonged delays. There can be no assurance regarding the time frame required for obtaining
certification or homologation.

Fixed-price and fixed-term commitments and production and project execution

We have historically offered, and expect to continue to offer, a significant portion of our products through
pre-agreed fixed-price contracts with a stipulated delivery schedule, rather than contracts under which payment is
determined solely on a time-and-material basis. Generally, we cannot terminate contracts unilaterally.

We are exposed to risks 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. We may also incur late
delivery penalties if we are unable to increase production rates sufficiently quickly to meet our commitments. In
addition, due to the nature of the bidding process, long-term contract revenues are based, in part, on cost
estimates. Our estimates of the costs for completing a project are subject to a number of assumptions, including
future economic conditions, cost and availability of labour and raw materials, labour productivity, employment
levels and salaries, facility utilization rates, inflation rates, foreign exchange rates and construction and technical
standards to be applied to the project, and are influenced by the nature and complexity of the work to be
performed. Due to the complexity and the length of many of the projects in which we participate, the actual
investment, costs and productivity may differ materially from what we had initially modelled or anticipated. In
addition, many of our contracts contain requirements to comply with mandatory performance levels for the
equipment we deliver or a fixed delivery schedule. If we are unable to comply with these obligations, our clients
could request the payment of contractual penalties, or terminate the contract in question, or even claim
compensation.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 119

The revenue, cash flow and profitability of large, complex, long-term projects vary significantly in accordance with
the progress of the project and depend on a variety of factors, some of which are beyond our control, such as
specification modifications and change orders demanded by the customer, increasing regulatory requirements in
relation to homologation, unexpected technological problems, logistical difficulties and other execution issues that
could lead to engineering cost and time overruns, production cost overruns, late delivery penalties and liquidated
damages payments and postponement or delays in contract execution. In the context of large, complex, long-term
contracts, such overruns and issues can be material in terms of cost and time, may lead to withholding of
payment by customers or risk of cancellation of all or a portion of contract by the customer, and may have a
material adverse impact on our business, results, cash flows, financial position and reputation. In addition, we
may incur late delivery penalties in the event of an inability to increase production rates quickly enough to meet
commitments under such large contracts. The profit margins generated by some of these contracts can, as a
result, prove to be lower than those initially projected, or even be zero-margin or loss contracts.

In addition, many of our long-term contracts are signed with customers that are governmental or quasi-public
entities. These types of customers require that we comply with project bidding and open market specifications,
which may limit our ability to negotiate certain contractual terms and conditions and can force us to accept less
favourable conditions. For example, customers may require manufacturers to bear an increasing proportion of the
homologation regulatory risk, may insist on payment schedules that reduce or eliminate advance payments or that
lead to negative cash-flow during the execution of a project, and may require mandatory technical performance
levels and requirements associated with the issuance of parent company guarantees. For the most part, our rail
transportation business is subject to public procurement protocols, which often take the form of adherence
contracts that cannot be amended in any meaningful sense, causing bidders to risk disqualification if they attempt
to reflect contingencies or special considerations in their offers. Moreover, public procurement protocols often
feature specifications that are subject to numerous change orders, which may result in disputes regarding
allocation of costs in respect of such change orders or specification modifications. These particularities could
potentially expose our business to significant additional risks or costs that could adversely affect the profitability of
our projects.

Additionally, for certain projects, contracts in our rail transportation business impose manufacturing or purchasing
requirements in the countries in which the project is being executed. Such contracts may require us to build local
production capacities, partner with local entities, and/or secure third-party purchases from local suppliers. Such
terms and conditions can lead to pressures on costs, target volumes and execution.

Cash flows and capital expenditures

Our businesses are cyclical and highly capital intensive due to their nature. In the ordinary course of our business,
the structure and duration of many of our complex, long-term projects and product development programs require
us to invest significantly in engineering, development and production for many years before deliveries are made
and the product begins to generate cash flow. In addition, we are regularly required to incur capital expenditures
in order to, among other matters, maintain equipment, increase operating efficiency, 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. Our ability to negotiate and collect customer advances and progress
payments is therefore an important element of our cash flow and working capital management. However, intense
competition in the markets in which we operate and demands by customers in the current economic environment
have resulted in fewer and lower advance payments, which could place significant financial pressures on our
operations. Discrepancies between our disbursements and amounts received on orders placed, or even any
reduction in the overall volume of orders placed or a deterioration of the payment terms on these orders has an
automatic adverse impact on the evolution in working capital requirements and results of operations.

120 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Seasonality

In addition, our cash flows are, to a certain degree, subject to seasonal fluctuations and we expect a
disproportionate amount of our cash flows from operations to occur during our fourth quarter. We expect this trend
to continue. While the payment terms with certain of our vendors extend beyond the amount of time necessary to
collect proceeds from our customers, no assurance can be given that we will be able to maintain such terms. As a
result of fourth quarter cash receipts, at December 31 of each year, our cash and cash equivalents balances
typically reach their highest level (other than as a result of cash flows provided by or used in investing and
financing activities). Our interim results can be affected by these seasonal fluctuations.

Deployment and execution of strategic initiatives related to cost reductions and working capital
improvement

In 2015, we launched the Bombardier transformation plan focusing on three priorities: improve cash generation,
reduce costs and drive performance. As with any large, company-wide transformation there are inherent risks in
the expected timing of results and in the planned value to be achieved. More specifically, the timing and
magnitude of benefits from strategic initiatives could be affected by any number of external and internal factors
including, but not limited to: the outcome of negotiations with suppliers and unions, changing legislation, changes
in socio-economic conditions in the countries in which we operate, variations in planned production volumes,
evolutions in the labor market for key talent, and changes in the priorities of the business. There can be no
assurance that these initiatives, or other initiatives, will enable us to reach our objectives, or that any such
measures will be implemented successfully or within the set time frame. A failure to successfully implement our
strategy and transformation initiatives, or if such measures prove insufficient, could have an adverse impact on
our business activities, financial condition, profitability and outlook.

Business partners

In some of the projects carried out through consortia or other partnership vehicles in which we participate,
partners are jointly and severally liable to the customer. The success of these partnerships is dependent on
satisfactory performance by us and our 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 a potential order.

In order to penetrate new markets and strengthen our partnerships, we have implemented a number of joint
ventures and partnerships in various countries and regions, such as Africa, the Middle East, Latin America and
Asia (in particular, China). These operations involve certain risks, in particular in relation to potential political or
economic instability depending on the countries, in the difficulties that may arise in evaluating assets and liabilities
relating to these operations, in integrating people, activities, technologies and products, as well as in
implementing governance and compliance systems and procedures.

Product performance warranty and casualty claim losses

The products that we manufacture 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, we may incur significant
additional costs to modify and/or retrofit our products and we may not be able to correct defects in a timely
manner or at all. The occurrence of defects and failures in our products could give rise to non-conformity costs,
including warranty and damage claims, negatively affect our reputation and profitability and result in the loss of
customers. Correcting such defects could require significant investment.

In addition, due to the nature of our business, liability claims may arise from accidents, incidents or disasters
involving products and services that we have provided, including claims for serious personal injuries or death.
These accidents may be caused by climatic factors or human error.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 121

If any of our products is proven to have quality issues, fails to meet the national or industrial standards or has
potential risks to the safety of human and properties, we may have to recall such products, be subject to
penalties, have our operating licences or permits revoked, suspend production and sale of our products, or be
ordered to take corrective measures. A product recall may also affect our reputation and brand name, result in a
decreased demand for our products and lead to stricter scrutiny by regulatory agencies over our operations.

We cannot be certain that current insurance coverage will be sufficient to cover one or more substantial claims.
Furthermore, there can be no assurance that we will be able to obtain insurance coverage at acceptable levels
and costs in the future.

Regulatory and legal risks

We are subject to numerous risks relating to current and future regulations, as well as legal proceedings, both
present or that may arise in the future. For example, the harmonization of the European railway market through
the new European standards will require investment to upgrade our existing products to comply with regulatory
requirements, without which regulatory authorities and thus our customer may not accept our products.
Unavailability of compliant products may lead to a loss of market share.

We may become 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 related 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 our reputation, reduce revenues and profitability,
and subject us to criminal and civil enforcement actions. Moreover, legal proceedings resulting in judgments or
findings against us may harm our reputation and place us at a disadvantage for future orders or contract awards.

Also refer to Note 38 – Commitments and contingencies, to our consolidated financial statements, for information
regarding current litigation proceedings related to the investigation in Brazil.

Environmental, health and safety risks

Our products, as well as our manufacturing and service activities, are subject to environmental laws and
regulations in each of the jurisdictions in which we operate, 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
our properties (whether or not caused by us), or on or under other properties and caused by our current or past
operations.

Environmental regulatory requirements, or enforcements thereof, may become more stringent in the future and
we may incur additional costs to be compliant with such future requirements or enforcements. In addition, we may
have contractual or other liabilities for environmental matters relating to businesses, products or properties that
we have in the past closed, sold or otherwise disposed of, or will close, sell or dispose of in the future.

Dependence on customers

While we have a varied customer base, in any given period a limited number of contracts or customers may
account for a significant portion of our revenues for some of our products. Although we constantly seek to expand
our customer base, we believe that in any given period revenues and results may continue to be significantly
affected by a limited number of customers due to the nature of some of our products. Consequently, the loss of
such a customer or changes to their orders could result in fewer sales and/or a lower market share. Since the
majority of our rail transportation customers are governments or public-sector companies or operate under public
contracts, our order intake is also dependent to a significant degree on public-sector budgets and spending
policies.

122 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Dependence on suppliers

Our 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) for our aerospace products, 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) for our rail transportation products.

Disruptions in our supply chain can impact our ability to deliver on schedule. Moreover, failure by one or more
suppliers to meet performance specifications, quality standards or delivery schedules could adversely affect our
ability to meet our commitments to customers, in particular if we are unable to purchase the key components and
parts from those suppliers upon agreed terms or in a cost-effective manner and if we cannot find alternative
suppliers on commercially acceptable terms in a timely manner. Some of our suppliers participate in the
development of products such as aircraft or rolling stock platforms. The advancement of many of our 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. Our
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)

Employment market competition is fierce when it comes to hiring the highly qualified managers and specialists
needed to complete the work we require, particularly in certain emerging countries. In many of our business areas
we intend to expand our business activities, for which we will need highly skilled employees. The success of our
development plans depends, in part, on our ability to develop skills, to retain employees, and to recruit and
integrate additional managers and skilled employees. 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 our success. There is no guarantee that we will be successful in
recruiting, integrating and retaining such employees as needed to accompany our business development, in
particular in emerging countries. Conversely, the measures to adapt headcount to evolution in demand may result
in pressures from our workforce and social risks, which may have an adverse impact on our expected costs
reductions and production capacities

In addition, we are 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 our ability to deliver products and
services in a timely manner and on budget.

Additionally, as a result of our continuing review of our businesses and processes to reduce cost, improve our
manufacturing platform, and better position ourselves in the marketplace, it may be necessary to curtail
production or permanently shut down facilities, leading to the transfer of employees to new production facilities
and processes or to the reduction of our workforce. This could materially adversely impact our relationship with
our employees, as well as result in asset write-downs at the affected facilities.

Reliance on information systems

Unauthorized access to our or our customers’ information and systems could negatively impact our business. We
face certain security threats, including threats to the confidentiality, availability and integrity of our data and
systems. While management supervises and maintains what it considers to be appropriate control, enforcement
and monitoring systems designed to prevent, detect and respond to unauthorized activity in our systems, no
system is failsafe and certain types of attacks or system failures could result in significant financial or information
losses and/or reputational harm.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 123

Reliance on and protection of intellectual property

We regularly apply for new patents and actively manage our intellectual property portfolio to secure our
technological position. However, our patents and other intellectual property may not prevent competitors from
independently developing, or obtaining through licensing, alternative technologies that are substantially equivalent
or superior to ours, and we cannot provide assurance that the measures we have taken will be sufficient to
prevent any misappropriation of our intellectual property. Furthermore, we cannot assure that all our registration
applications will be successful, or our registered intellectual property rights will not be subject to any objection. If
the steps we have taken and the protection afforded by law do not adequately safeguard our intellectual property
rights, or we are not able to register or defend our intellectual property rights, and our competitors exploit our
intellectual property in the manufacture and sale of competing products in the markets we operate, such events
could materially and adversely affect our business.

We could also face claims by others that we are improperly using intellectual property owned by them or
otherwise infringing their rights in intellectual property. Irrespective of the validity or the successful assertion of
such claims, we could incur costs in either defending or settling any intellectual property disputes alleging
infringement. Adverse rulings in any litigation or proceeding could result in the loss of our proprietary rights and
subject us to significant liabilities or even business disruption. Any potential intellectual property litigation against
us could also force us to, among other things, cease selling the challenged products, develop non-infringing
alternatives or obtain licences from owner of the infringed intellectual property. We may not be successful in
developing such alternatives or in obtaining such licences on reasonable terms or at all, which could damage our
reputation and affect our financial condition and profitability.

Adequacy of insurance coverage for our business, products and properties

We maintain insurance policies in accordance with the needs of our business. However, we cannot guarantee that
our insurance policies will provide adequate coverage should we face extraordinary occurrences that result in
losses. We may not obtain certain insurance coverage or may experience difficulties in obtaining the insurance
coverage we need, which could materially and adversely affect our business, financial condition and results of
operations. We do not carry any insurance for business interruption or loss of profit arising from accidents at any
of our manufacturing facilities or other disruptions of our operations.

Accidents or natural disasters may also result in significant property damage, disruption of our operations and
personal injuries or fatalities, and our insurance coverage may be inadequate to cover such losses. In the event of
an uninsured loss or a loss in excess of our insured limits, we could suffer damage to our reputation and/or lose
all or a portion of our production capacity as well as future revenues expected to be generated by the relevant
facilities. Any material loss not covered by our insurance could adversely affect our business, financial condition
and results of operations.

Liquidity and access to capital markets

Financing risk

Our businesses are cyclical and highly capital intensive. In the ordinary course of our business, we rely 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 and receivables factoring facilities to satisfy our
financing needs. There can be no assurance that such working capital cash sources will be available to us in the
future on acceptable terms or at all.

Our ability to achieve our 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.

124 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

From time to time, we undertake various financing initiatives to solidify our liquidity position. Notably, in 2015, we
completed a public offering of subscription receipts and the issuance and refinancing of unsecured senior notes.
We also entered into transactions with the Government of Québec, in relation to the ongoing financing of the
C Series aircraft program, and with the Caisse de dépôt et placement du Québec (CDPQ), relating to a minority
participation in the Transportation business. The investment by the CDPQ was completed on February 11, 2016.
There are no assurances that we will satisfy all the conditions to complete the previously announced investment
in the C Series aircraft program, or that we will receive the required third party, regulatory and other approvals in
order to consummate this transaction.

While we believe that our expected cash flows from operating activities, combined with available short-term
capital resources as well as the investments from the Government of Québec and from the CDPQ will enable the
development of new products to enhance competitiveness and support growth and will enable us to meet all other
expected financial requirements in the foreseeable future, there can be no assurance that this will be the case.

Furthermore, we plan to continue to explore other initiatives such as certain business activities’ potential
participation in industry consolidation. There are no assurances that we will be able to implement these or any
other strategic options on favourable terms and timing or at all, and, if implemented, that such actions would have
the planned results.

If our cash flows and other capital resources are insufficient to fund the required work on our ongoing contracts,
programs and projects, as well as our capital expenditures and debt service obligations, we could be forced to
reduce or delay deliveries, investments and capital expenditures or to seek additional debt or equity capital. We
may not be able to obtain alternative capital resources, if necessary, on favourable terms or at all.

A decline in credit ratings, a significant reduction in the surety or financing market global capacity, widening credit
spreads, significant changes in market interest rates or general economic conditions or an adverse perception in
bank and capital markets of our financial condition or prospects could all significantly increase our cost of
financing or impede our ability to access financial markets. Our credit ratings may be impacted by many factors,
including factors outside of our control relating to the industries or countries and regions in which we operate, and,
accordingly, no assurance can be given that our credit ratings may not be downgraded in the future. Actual or
anticipated changes or downgrades in our credit ratings may increase our cost of financing.

Our right to convert into cash certain deposits or investments, held in financing structures to guarantee our
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

We are 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, actuarial assumptions or other
factors may reduce the amount of funds available for operating purposes, thus limiting our financial flexibility and
weakening our financial condition.

There is no assurance that retirement benefit plan assets will earn the expected rates of return. The ability of our
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 our net retirement benefit
liabilities and could also impact our retirement benefit costs, cash funding requirements and liquidity position.

The net retirement benefit liability is highly sensitive to variations to the underlying discount rate, which represents
the market rate for high-quality corporate fixed-income investments at the end of each reporting period consistent
with the currency and estimated term of the benefit obligations. As a result, the discount rates change is based on
market conditions.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 125

Credit risk

We are exposed to credit risk through our derivative financial instruments and other investing activities carried out
as part of our normal treasury activities, as well as through our trade receivables arising from normal commercial
activities and through financing activities provided to our aerospace customers primarily in the form of aircraft
loans and lease receivables. Reduced liquidity may result if our customers or other counterparties are unable to
make payment of amounts owed to us, or delay these payments, and we may incur impairment losses on these
assets. Furthermore, if our customers experience deteriorating credit quality, we may need to provide additional
direct or indirect financing support to maintain sales, increasing our exposure to credit risk, or reduce our
customers’ credit limits, which could negatively affect our revenues.

We also have exposure to banks in the form of periodically placed deposits and credit commitments. In the event
the banks with which we transact are unable to withstand regulatory or liquidity pressures, credit facilities,
including letter of credit facilities, may become unavailable or we may not be able to extend such facilities upon
their maturity.

Substantial debt and significant interest payment requirements

We currently have, and expect to continue to have, a substantial amount of debt and significant interest payment
requirements. Our level of indebtedness could have significant consequences, including the following:
•
•
• we may be required to dedicate a substantial portion of our cash flows from operations to interest and

it may be more difficult to satisfy our obligations with respect to our indebtedness;
our vulnerability to general adverse economic and industry conditions may be increased;

principal repayments on our indebtedness, reducing the availability of cash flows to fund capital expenditures,
working capital, acquisitions, new business initiatives and other general corporate purposes;
our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate
may be limited;

•

• we may be placed at a disadvantage compared to our competitors that have less debt or greater financial

•

resources;
it may limit, along with the financial and other restrictive covenants to which we are subject, among other
things, our ability to borrow additional funds on commercially reasonable terms, or at all;

• we may be required to monetize assets on terms that are unfavourable to us; and
• we may be required to offer debt or equity securities on terms that are not favourable to us or our

shareholders.

For more information regarding our long-term debt, see Note 27 - Long-term debt, to our consolidated financial
statements.

Restrictive debt covenants

The indentures governing certain of our indebtedness, revolving credit facilities and letter of credit facilities
contain covenants that, among other things, restrict our ability, and in some cases the ability of our 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 our 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 our ability to finance future operations or capital needs, or engage in other
business activities that may be beneficial.

126 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

We are subject to various financial covenants under our letter of credit facilities and unsecured revolving credit
facilities which must be met on a quarterly basis. The $600-million letter of credit facility(1) and the $750-million
unsecured revolving facility(1) include financial covenants requiring a minimum EBITDA to fixed charges ratio, a
maximum net debt to EBITDA ratio and a minimum liquidity level of $750 million, all calculated based on an
adjusted consolidated basis (i.e. excluding Transportation). Transportation’s €3.64-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 Transportation stand-alone basis. These
terms and ratios are defined in their respective agreements and do not correspond to our global metrics or to
specific terms used in the MD&A. Minimum liquidity is not defined as comprising only cash and cash equivalents
as presented in the consolidated statement of financial position.

Our ability to comply with these covenants may also be affected by events beyond our control. A breach of any of
these agreements or our inability to comply with these covenants could result in a default under these facilities,
which would permit our banks to request immediate defeasance or cash cover of all outstanding letters of credit,
and our bond holders and other lenders to declare amounts owed to them to be immediately payable. If any of
these facilities is accelerated, or we are subject to significant cash cover calls, we may not have access to
sufficient liquidity or credit to refinance such facilities on terms acceptable to us or at all. Furthermore, if we incur
additional debt in the future, we may be subject to additional covenants, which may be more restrictive than those
to which we are subject now. In addition, failure to comply with the obligations contained in our existing or future
indentures or loan agreements could require us to immediately cash cover, or repay debt under other agreements
that may contain cross-acceleration or cross-default provisions. There can be no assurance that we would be able
to obtain waivers or amendments of any such defaults, or be able to cash cover or refinance such facilities, on
terms acceptable to us or at all.
(1) Available for other than Transportation’s usage.

Financing support provided for the benefit of certain customers

From time to time, we provide aircraft financing support to customers. We may provide, 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
our 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 our commercial aircraft. Under these arrangements, we are
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, we receive 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. We 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 our liquidity assumptions
related to the development of aircraft or rail products and services. In addition, any future government support
received by our competitors could have a negative impact on our competitiveness, sales and market share.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 127

Foreign exchange risk

Market risk

Our financial results are reported in U.S. dollars and a significant portion of our 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. In situations where we are not fully hedged, our results of operations are 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 our future profitability. Additionally, the settlement timing of
foreign currency derivatives could significantly impact our liquidity.

Interest rate risk

Changes in interest rates may result in fluctuations in our 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 our 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, we are exposed to gains and losses arising from
changes in interest rates, including marketability risk, through our financial instruments carried at fair value such
as certain aircraft loans and lease receivables, investments in securities and certain derivatives.

Residual value risk

We are 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. We are 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
our payment is capped at the floor of the strip if the resale value of the aircraft is below that level.

Commodity price risk

We are exposed to commodity price risk relating principally to fluctuations in the cost of materials used in our
supply chain, such as aluminum, advanced aluminum alloy, titanium, steel and other materials that we use to
manufacture our products, and which represent a significant portion of our cost of sales. We do not maintain
significant inventories of raw materials and components and parts. The prices and availabilities of raw materials
and components and parts may vary significantly from period to period due to factors such as consumer demand,
supply, market conditions and costs of raw materials. In particular, raw materials required for our operations, may
be subject to pricing cyclicality and periodic shortages from time to time. We cannot guarantee that corresponding
variations in cost will be fully reflected in contract prices, and we may be unable to recoup these raw material
price increases, which could affect the profitability of such contracts.

Inflation risk

Our aerospace businesses are 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 Transportation, 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 nevertheless have a
significant impact on our future profitability if the inflation rate assumption used varies from the actual inflation
rate, and this is a particularly acute risk in respect of large long-term contracts which may have an impact on our
results for several years.

128 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

ACCOUNTING AND REPORTING DEVELOPMENTS

Changes in accounting policies

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
was adopted effective January 1, 2015. The adoption of this amendment had no significant impact on our
consolidated financial statements.

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 our fiscal year beginning on January 1, 2018, with earlier application permitted. We are
assessing the impact of the adoption of this standard on our consolidated financial statements.

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 our fiscal year beginning on January 1, 2018, with earlier application permitted. We
are assessing the impact of the adoption of this standard on our consolidated financial statements.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 129

Leases

In January 2016, the IASB released IFRS 16, Leases, to replace the previous leases Standard, IAS 17, Leases,
and related Interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract, the customer (lessee) and the supplier (lessor). IFRS 16
eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee
accounting model. IFRS 16 also substantially carries forward the lessor accounting requirements. Accordingly, a
lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of
leases differently.

IFRS 16 will be effective for our fiscal year beginning on January 1, 2019, with earlier application permitted only if
we apply IFRS 15, Revenue from contracts with customers. We have not yet assessed the impact of the adoption
of this standard on our consolidated financial statements.

FINANCIAL INSTRUMENTS

An important portion of the consolidated balance sheets is composed of financial instruments. Our financial
assets 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. Our financial liabilities 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 us primarily to credit, liquidity and market risks, including foreign
exchange and interest rate risks. A description on how we manage these risks is included in the Risk
management section of Overview and in Note 33 – 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 14 – Financial instruments, to the consolidated
financial statements.

Note 34 - 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 we have immediate access. However, there is no active market for most of our financial instruments. In the
absence of an active market, we determine 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, we use 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

130 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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 34 – 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.

We consider gains and losses arising from certain changes in fair value of financial instruments incidental to our
core performance, such as those arising from changes in market yields, as our 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 our
business and enable better comparability of results from one period to another and with peers.

In connection with the sale of commercial aircraft, we hold financial assets and have 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
Our 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 33 – Financial risk
management and Note 34 – 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 our joint ventures, associates and key management personnel. A
description of our transactions with these related parties is included in Note 36 – Transactions with related parties,
to the consolidated financial statements.

CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

Our significant accounting policies and use of estimates and judgment are described in Note 2 – Summary of
significant accounting policies and Note 5 – 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 us to make assumptions about matters that are highly uncertain at the time the
estimate is made; and

• we 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 our financial
condition, our changes in financial condition or our results of operations.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 131

Our best estimates regarding the future are based on the facts and circumstances available at the time estimates
are made. We use 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.

Our budget and strategic plan cover a five-year period and are fundamental information used as a basis for many
estimates necessary to prepare financial information. We prepare a budget and a strategic plan covering a five-
year period, on an annual basis, using a process whereby a detailed one-year budget and four-year strategic plan
are prepared by each reportable segment and then consolidated. 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. We use
the budget and strategic plan, as well as additional projections or assumptions, to derive the expected results for
periods thereafter. We then track 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

Transportation conducts most of its business under long-term manufacturing and service contracts and the
aerospace segments have 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 and the amount can be measured reliably, 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 usage and costs, including
escalation clauses, labour hours 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. We apply
judgment to determine the probability that we 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. We
conduct quarterly reviews of estimated costs and revenues to completion on a contract-by-contract basis,
including a review of escalation assumptions. 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.

Sensitivity analysis
A 1% increase in the estimated future costs to complete all ongoing long-term contracts would have decreased
Transportation’s gross margin for 2015 by approximately $82 million.

132 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Aerospace program tooling

Our aerospace segments capitalize 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. The recoverable
amount of each aerospace CGU was based on fair value less costs of disposal, generally determined using a
discounted cash flow model.

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 our 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, we exercise judgment to identify independent cash inflows to identify CGUs by family of
aircraft. 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.
The expected future cash flows also include 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 five years are based on the budget and strategic plan. After the initial
five 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 schedules, revenues from related services, procurement costs
based on existing contracts with suppliers, labour costs, general market conditions, foreign exchange rates and
applicable income tax rates. The recoverable amounts were established during the fourth quarter of 2015, using a
post-tax discount rate of 8.75%.

In October 2015, we entered into a memorandum of understanding for the C Series aircraft program with the
Government of Québec. Following the completion of an in-depth review of the C Series aircraft program as well
as discussions with the Government of Québec which resulted in the memorandum of understanding, we
performed an impairment test on the C Series aircraft program CGU (the “C Series aircraft program”), which
principally consisted of capitalized development costs. We determined that the C Series aircraft program carrying
amount exceeded its recoverable amount, and accordingly recorded an impairment charge of $3.1 billion related
to the C Series aircraft program aerospace program tooling in the third quarter of 2015.

In October 2015, due to the lack of sales following the prolonged market weakness, we cancelled the Learjet 85
aircraft program. As a result, we recorded an impairment charge of $919 million related to the remaining
Learjet 85 aircraft program development costs in the third quarter of 2015.

In the fourth quarter of 2015, due to the lack of recent order intake as well as low firm order backlog, mainly
stemming from pilot scope clauses in the U.S. which have restricted the use, number and seating capacity of
regional aircraft flying on behalf of network carriers, we performed an impairment test on the CRJ1000 aircraft
program development costs. We determined that the CRJ1000 aircraft program development costs recoverable
amount was negligible and therefore we recorded an impairment charge of $243 million related to the remaining
balance. Over the near term, we do not anticipate scope clause relaxation in the U.S., during which time, we will
not be able to sell the CRJ1000 aircraft in the U.S. market.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 133

In the fourth quarter of 2015, mainly due to the lack of sales following the prolonged market weakness in the light
business aircraft category, we performed an impairment test on the Learjet family CGU (the “Learjet family”) which
principally consists of capitalized development costs. We determined that the Learjet family aircraft program
carrying amount exceeded its recoverable amount and therefore we recorded an impairment charge of $53 million
related to the remaining Learjet family development costs.

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 the C Series aircraft program evenly distributed over
future periods, would have resulted in an additional impairment charge of approximately $370 million in 2015. A
10% decrease in the expected future net cash inflows for all other aerospace programs evenly distributed over
future periods, would have resulted in no additional impairment charges in 2015.

An increase of 100-basis points in the discount rate used to perform the impairment tests would have resulted in
an additional impairment charge of approximately $170 million in 2015 for the C Series aircraft program and no
additional impairment charges for other aerospace programs.

Goodwill

Goodwill is related to the DaimlerChrysler Rail Systems GmbH (Adtranz) acquisition in May 2001. This goodwill is
monitored by management at the Transportation 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. We selected the fourth quarter
to perform an annual impairment assessment of goodwill.

During the fourth quarter of 2015, an impairment test was completed. The recoverable amount of the
Transportation operating segment was calculated based on fair value less costs to sell inferred by the definitive
agreement with the CDPQ. We did not identify any impairment.

Valuation of deferred income tax assets

To determine the extent to which deferred income tax assets can be recognized, we estimate 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. We exercise 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 prudent tax planning strategies. See Note 12
- 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 our international business relationships and
the long-term nature and complexity of existing contractual agreements, differences arising between our actual
results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments
to tax expense or recovery already recorded. We establish tax provisions for possible consequences of audits by
the tax authorities of each country in which we operate. The amount of such provisions is based on various
factors, such as experience from previous tax audits and differing interpretations of tax regulations by the taxable
entity and the relevant tax authority. Such differences in interpretation may arise for a wide variety of issues
depending on the conditions prevailing in the domicile of each legal entity.

134 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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.

The amounts expected to be paid under the guarantees may 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 RVG 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, as well as on the likelihood that credit or residual value guarantees will be
called upon at the expiry of the financing arrangements. 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 the underlying aircraft 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. 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 commercial aircraft as at December 31, 2015,
Commercial Aircraft’s EBIT for 2015 would have been negatively impacted by $15 million.

Assuming an increase of 5% in the likelihood that residual value guarantees will be called upon at the expiry of
the financing arrangements as at December 31, 2015, Commercial Aircraft’s EBIT for 2015 would have been
negatively impacted by $33 million.

Assuming a 100-basis point decrease in interest rates as at December 31, 2015, Commercial Aircraft’s EBT for
2015 would have been negatively impacted by $18 million. Assuming a 100-basis point increase in interest rates
as at December 31, 2015, Commercial Aircraft’s EBT for 2015 would have been positively impacted by
$17 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.

As the Canadian high-quality corporate bond market, as defined under IFRS, includes relatively few medium- and
long-term maturity bonds, we establish the discount rate for our Canadian pension and other post-employment
plans by constructing a yield curve using four maturity ranges. The first maturity range of the curve is 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 are 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.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 135

We determine the expected rates of compensation increases considering the current salary structure, as well as
historical and anticipated wage increases, in the context of current economic conditions.

See Note 22 – Retirement benefits, to the consolidated financial statements, for further details regarding
assumptions used and sensitivity analysis to changes in critical actuarial assumptions.

Consolidation

We consolidate entities when, based on an evaluation of the substance of our relationship, we establish that we
control the investee. We control an investee when we are exposed to, or have rights to, variable returns from our
involvement with the investee and the ability to use power over the investee to affect the amount of our returns.
We 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, we participate in structured entities where voting rights are not the dominant factor in
determining control. In these situations, we may use a variety of complex estimation processes involving both
qualitative and quantitative factors to determine whether we are exposed to, or have 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 we are 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 we have
power to affect the investee’s returns, including an assessment of the impact of potential voting rights, contractual
agreements and de facto control.

CONTROLS AND PROCEDURES

In compliance with the Canadian Securities Administrators’ Regulation
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.

we have filed certificates signed

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
our 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
our 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).

136 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Changes in internal controls over financial reporting

No changes were made to our internal controls over financial reporting that occurred during the quarter and fiscal
year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.

FOREIGN EXCHANGE RATES

We are 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, 2015
1.0887
0.7202
1.4833

December 31, 2014
1.2141
0.8633
1.5587

Decrease
(10%)
(17%)
(5%)

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, 2015
1.0954
0.7501
1.5176

December 31, 2014
1.2496
0.8809
1.5639

Decrease
(12%)
(15%)
(3%)

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, 2015
1.1092
0.7838
1.5280

December 31, 2014
1.3297
0.9061
1.6483

Decrease
(17%)
(13%)
(7%)

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 137

SHAREHOLDER INFORMATION

Subsequent to the end of the fiscal year, we announced a plan to present a proposal to shareholders of the
Corporation for a consolidation (also known as a “reverse stock split”) of the Class A shares (multiple voting)
(Class A Shares), issued and unissued, and Class B shares (subordinate voting) (Class B Subordinate Voting
Shares), issued and unissued, at the annual and special meeting planned for spring 2016 (the Share
Consolidation). The consolidation ratio will be selected by the Board of Directors from within a range of ratios,
subject to shareholder approval, which ratio would be expected, at that time, to result in an initial post-
consolidation share price in the range of $10 to $20 Canadian dollars per Class A Share or Class B Subordinate
Voting Share. Assuming receipt of shareholder and Toronto Stock Exchange approvals, the Share Consolidation,
if any, would be completed at such time as the Board of Directors shall deem appropriate..

Authorized, issued and outstanding share data, as at February 15, 2016

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

Authorized
2,742,000,000
2,742,000,000
12,000,000
12,000,000
9,400,000

Issued and
outstanding
313,900,550
1,906,316,489
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 Subordinate Voting Share.
(2) Convertible at the option of the holder into one Class A Share under certain conditions.
(3) Net of 26,194,908 Class B Subordinate Voting Shares purchased and held in trust in connection with the PSU and RSU plans.

Share option, PSU, DSU and RSU data as at December 31, 2015

Options issued and outstanding under the share option plans
PSUs, DSUs and RSUs issued and outstanding under the PSU, DSU and RSU plans
Class B Subordinate Voting Shares held in trust to satisfy PSU and RSU obligations

74,347,206
42,843,728
26,194,908

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 Bombardier’s dedicated investor relations website at ir.bombardier.com.

The C Series and Global 7000 and Global 8000 aircraft programs are currently 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 October 28, 2015, due to the lack of sales following the prolonged market weakness, we
cancelled the Learjet 85 aircraft program.

ALP, AVENTRA, Bombardier, Challenger, Challenger 300, Challenger 350, Challenger 605, Challenger 650, Challenger 850, CRJ, CRJ700,
CRJ900, CRJ1000, CSeries, CS100, CS300, EBI, ELECTROSTAR, FlexCare, FLEXITY, FLEXX, Global, Global 5000, Global 6000,
Global 7000, Global 8000, INNOVIA, INTERFLO, Learjet, Learjet 40, Learjet 45, Learjet 60, Learjet 70, Learjet 75, Learjet 85, MITRAC,
MOVIA, OMNEO, PRIMOVE, Q400, REGINA, Smart Parts, Smart Parts Plus, Smart Parts Maintenance Plus, Smart Parts Preferred,
SPACIUM, TALENT, The Evolution of Mobility, TRAXX, TWINDEXX, XR and ZEFIRO are trademarks of Bombardier Inc. or its subsidiaries.

The printed version of this financial report uses Rolland Opaque paper, containing 30% post-consumer fibres, certified Eco-Logo, processed
chlorine free. Using this paper, instead of virgin paper, saves the equivalent of 68 mature trees, 3,046 kg of waste, 27,891 kg of CO2 emissions
(equivalent to the annual emissions of 9 cars) and 248,438 litres of water.

Bombardier Inc., 800 René-Lévesque Blvd. West, Montréal, Québec, Canada H3B 1Y8
Telephone: +1 514 861 9481; fax: +1 514 861 2420; website: bombardier.com

Un exemplaire en français est disponible sur demande adressée auprès du service des Relations avec les investisseurs ou sur le site Internet
de la Société dédié aux relations avec les investisseurs, à l’adresse ri.bombardier.com.

138 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, 2015, 2014 and 2013.

The following table provides selected financial information for the last three fiscal years.

Fiscal years ended December 31

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 December 31

Total assets

Non-current financial liabilities

The quarterly data table is shown hereafter.

February 16, 2016

2015

18,172

(5,347)

(2.58)

—

0.70

0.78

1.56

2014

20,111

(1,260)

2013

18,151

564

(0.74)

0.31

0.10

0.75

0.78

1.56

0.10

0.75

0.78

1.56

2015

$ 22,903

$ 9,527

2014

$ 27,614

$ 8,229

2013

$ 29,363

$ 7,705

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 139

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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 December 31
Revenues
EBIT before special items(1)
Special items
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to

Equity holders of Bombardier Inc.
NCI

Adjusted net income(1)
EPS (in dollars)

Basic and diluted
Adjusted(1)

2015
$ 18,172
554
$
5,392
(4,838)
418
(70)
(5,186)
154
(5,340)

$
$
$

$
$

(5,347)
7
326

(2.58)
0.14

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 Subordinate Voting

$
$

Dividend per preferred share (in Canadian dollars)

Series 2
Series 3
Series 4

Market price ranges (in Canadian dollars)
Class A Shares

High
Low
Close

Class B Subordinate Voting Shares

High
Low
Close

As at December 31
Number of common shares (in millions)
Book value per common share (in dollars)
Shareholders of record

$
$
$

7,335
1,862
438

4,300

0.00
0.00

0.70
0.78
1.56

4.24
1.18
1.49

4.24
1.03
1.34

2,220
(1.99)
14,491

2014
$ 20,111
923
$
1,489
(566)
249
(75)
(740)
506
(1,246)

2013
$ 18,151
893
$
(30)
923
271
(119)
771
199
572

2012
$ 16,414
806
$
140
666
295
(165)
536
66
470

2011 (2)

$ 17,904
1,166
$
—
1,166
380
(70)
856
119
737

$
$
$

$
$

$
$
$

$
$

$
$
$

(1,260)
14
648

(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

$
$
$

$
$

$
$
$

$
$

$
$
$

564
8
608

0.31
0.33

6,767
2,287
391

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0.10

0.75
0.78
1.56

5.42
3.81
4.60

5.43
3.80
4.61

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$
$

$
$

$
$
$

$
$

$
$
$

460
10
671

0.25
0.36

6,129
2,074
364

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0.10

0.75
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1.56

5.00
3.08
3.83

4.93
2.97
3.76

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$

$
$

$
$
$

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$

$
$
$

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0.49

5,866
1,447
325

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0.10

0.69
1.32
1.56

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3.41
4.06

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3.30
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1,740
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14,166

1,739
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13,503

1,730
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13,544

1,724
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13,427

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures for definitions of these metrics and reconciliations to the most

comparable IFRS measures in 2015 and 2014.

(2) Fiscal year 2011 comprised 11 months of Bombardier Aerospace results and 12 months of Transportation results.

BOMBARDIER INC. / 2015 FINANCIAL REPORT / OTHER 141

BOMBARDIER INC.
HISTORICAL FINANCIAL SUMMARY (CONTINUED)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at December 31
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

Provisions
Advances on aerospace programs
Long-term debt
Retirement benefits
Other financial liabilities
Other liabilities
Non-current liabilities

Equity (deficit)
Attributable to equity holders
of Bombardier Inc.
Attributable to NCI

2015

2014

2013

2012

2011

2,720
1,473
6,978
450
484
12,105

2,061
3,975
1,978
761

356
870
797
10,798
22,903

4,040
1,108

1,408
2,002
991
2,274
11,823

918
1,534
8,908
2,159
619
996
15,134
26,957

(4,067)
13
(4,054)
22,903

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

142 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

BOMBARDIER INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the fiscal years ended
December 31, 2015 and 2014

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - FINANCIAL STATEMENTS 143

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 2015. 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 2015. 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 on behalf of the shareholders. The independent
auditors have full and free access to the Audit Committee to discuss their audit and related matters.

Alain Bellemare
President and Chief Executive Officer

John Di Bert, CPA, CA
Senior Vice President and Chief Financial Officer

February 16, 2016

144 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, 2015, 2014 and January 1, 2014, and the
consolidated statements of income, comprehensive income, changes in equity and cash flows for fiscal years
ended December 31, 2015 and 2014, 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. 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, 2015, 2014 and January 1, 2014, and its financial performance and its cash
flows for fiscal years ended December 31, 2015 and 2014 in accordance with International Financial Reporting
Standards, as issued by the International Accounting Standards Board.

(1)

Ernst & Young LLP
Montréal, Canada

February 16, 2016

(1) CPA auditor, CA, public accountancy permit no. A112431

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - AUDITORS’ REPORT 145

CONSOLIDATED FINANCIAL STATEMENTS

For fiscal years 2015 and 2014
(Tabular figures are in millions of U.S. dollars, unless otherwise indicated)

Consolidated financial statements
Notes to the consolidated financial statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.

BASIS OF PREPARATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGES IN ACCOUNTING POLICIES
FUTURE CHANGES IN ACCOUNTING POLICIES
USE OF ESTIMATES AND JUDGMENT
SEGMENT DISCLOSURE
RESEARCH AND DEVELOPMENT
OTHER EXPENSE
SPECIAL ITEMS
FINANCING EXPENSE AND FINANCING INCOME
EMPLOYEE BENEFITS COSTS
INCOME TAXES
EARNINGS PER SHARE
FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS
TRADE AND OTHER RECEIVABLES
INVENTORIES
OTHER FINANCIAL ASSETS
OTHER ASSETS
PROPERTY, PLANT AND EQUIPMENT
INTANGIBLE ASSETS
RETIREMENT BENEFITS
TRADE AND OTHER PAYABLES
PROVISIONS
OTHER FINANCIAL LIABILITIES
OTHER LIABILITIES
LONG-TERM DEBT
SHARE CAPITAL
SHARE-BASED PLANS
NET CHANGE IN NON-CASH BALANCES
CREDIT FACILITIES
CAPITAL MANAGEMENT
FINANCIAL RISK MANAGEMENT
FAIR VALUE OF FINANCIAL INSTRUMENTS
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
TRANSACTIONS WITH RELATED PARTIES
UNCONSOLIDATED STRUCTURED ENTITIES
COMMITMENTS AND CONTINGENCIES
SIGNIFICANT TRANSACTION
EVENTS AFTER THE REPORTING DATE

See MD&A for the abbreviations used in the consolidated financial statements.

146 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

147
152
152
152
162
163
164
168
171
172
172
174
174
175
177
177
180
180
181
182
183
184
185
187
196
197
198
198
199
200
203
206
206
208
209
213
216
217
218
218
222
222

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 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

7
35
8
9

10
10

2015
18,172
16,199
1,973
1,213
355
(149)
—
5,392
(4,838)
418
(70)
(5,186)
154
(5,340)

(5,347)
7
(5,340)

(2.58)

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)

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - FINANCIAL STATEMENTS 147

BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the fiscal years ended December 31
(in millions of U.S. dollars)

Net loss
OCI

Items that may be reclassified to net income

Net change in cash flow hedges
Foreign exchange re-evaluation
Net 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 on related hedging items

Items that are never reclassified to net income

Retirement benefits

Remeasurement of defined benefit plans(3)
Income taxes

Total OCI
Total comprehensive loss
Attributable to

Equity holders of Bombardier Inc.
NCI

Notes

2015
(5,340)

2014
(1,246)

12
(508)
449
(6)
(53)

(5)

(94)
2
(92)

17
(389)
216
37
(119)

(146)
4
(142)

592
(11)
581
431
(4,909)

(4,914)
5
(4,909)

(646)
(45)
(691)
(945)
(2,191)

(2,198)
7
(2,191)

(1) Includes $327 million of loss reclassified to the related non-financial asset for fiscal year 2015 ($97 million of loss for fiscal year 2014).
(2) $300 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 2016.
(3) Includes net actuarial gains (losses).

The notes are an integral part of these consolidated financial statements.

148 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at
(in millions of U.S. dollars)

Notes

December 31
2015

December 31
2014

January 1
2014

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

15
16
17
18
19

20
21
21
12

18
19

23
24

25
26

27
22
25
26

2,720
1,473
6,978
450
484
12,105
2,061
3,975
1,978
761
356
870
797
10,798
22,903

4,040
1,108

1,408
2,002
991
2,274
11,823
918
1,534
8,908
2,159
619
996
15,134
26,957

Equity (deficit)
Attributable to equity holders of Bombardier Inc.
Attributable to NCI

Commitments and contingencies

The notes are an integral part of these consolidated financial statements.

On behalf of the Board of Directors,

(4,067)
13
(4,054)
22,903

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

Pierre Beaudoin
Director

Sheila Fraser, FCPA, FCA
Director

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - FINANCIAL STATEMENTS 149

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BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended December 31
(in millions of U.S. dollars)

Operating activities
Net loss
Non-cash items
Amortization
Impairment charges on PP&E and intangible assets
Deferred income taxes
Gains on disposals of PP&E and intangible assets
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
Proceeds from investment in financing structure
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)
Purchase of Class B shares held in trust under the RSU plan
Net proceeds from issuance of shares
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

2015

2014

(5,340)

(1,246)

20, 21
9, 20, 21
12
8
35
29
9

27
27

438
4,300
63
(3)
(149)
14
22
77
598
20

(1,879)
17
150
(64)
54
—
(12)
(1,734)

2,218
(831)
(19)
(9)
822
(132)
2,049
(104)
231
2,489
2,720

427
92

156
15

$
$

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

$
$

(1) Represents the balance of sale price related to the sale of the main assets and related liabilities of the Corporation’s Flexjet activities.
(2) $19 million of dividends paid relate to preferred shares for fiscal year 2015 ($22 million for fiscal year 2014).
(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 receivables 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 Québec Income Tax Act, the Tax on Capital 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, 2015 - FINANCIAL STATEMENTS 151

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the fiscal years ended December 31, 2015 and 2014
(Tabular figures are in millions of U.S. dollars, unless otherwise indicated)

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” or “our” or “we”). The Corporation is a
manufacturer of transportation equipment, including business and commercial aircraft, as well as major aircraft
structural components, and rail transportation equipment and systems, and is a provider of related services. The
Corporation carries out its operations in four distinct segments, effective January 1, 2015: Business Aircraft,
Commercial Aircraft, Aerostructures and Engineering Services and Transportation. The main activities of the
Corporation are described in Note 6 - Segment disclosure.

The Corporation restated Note 6 - Segment disclosure for the comparative year to reflect its four reportable
segments.

The Corporation’s consolidated financial statements for fiscal years 2015 and 2014 were authorized for issuance
by the Board of Directors on February 16, 2016.

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 Transport France S.A.S.
Learjet Inc.

Location
Germany
U.K.
France
U.S.

Revenues of these subsidiaries combined with those of Bombardier Inc. totalled 70% of consolidated revenues for
fiscal year 2015 (71% for fiscal year 2014).

152 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, the Euro, Pound sterling, various other
European currencies and the U.S. dollar in Transportation, and mainly the U.S. dollar in the aerospace segments.

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
2015
1.0887
0.7202
1.4833

December 31
2014
1.2141
0.8633
1.5587

Exchange rates
as at
January 1
2014
1.3791
0.9400
1.6542

Average exchange rates
for fiscal years

2015
1.1092
0.7838
1.5280

2014
1.3297
0.9061
1.6483

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, and the amount can be
measured reliably, 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, 2015 - NOTES 153

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.

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.

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.

154 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 155

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 call options on long-term debt and foreign exchange
instruments included in sale or purchase agreements. 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, trade-in commitments 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
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.

156 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 157

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
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

158 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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 as incurred 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.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 159

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, patents and trademarks
Other

Straight-line
Straight-line

3 to 20 years
3 to 5 years

(1) As at December 31, 2015, 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 six 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 discounted
cash flow models.

• The value in use is calculated using estimated net cash flows, with detailed projections generally over a

five-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

160 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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.

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.

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. 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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 161

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, DSUs and RSUs, 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, DSUs and RSUs 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,
DSUs and RSUs 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.

Cash-settled share-based payments – Cash-settled share-based payments are measured at fair value at the
grant date with a corresponding liability. Until the liability is settled, the fair value of the liability is remeasured at
the end of each reporting period and at the date of settlement, with any changes in fair value recognised in
income. Limited DSUs and RSUs are cash-settled share-based payments, for which 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 DSUs and RSUs that are expected to vest.

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.

CHANGES IN ACCOUNTING POLICIES

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
was adopted effective January 1, 2015. The adoption of this amendment had no significant impact on the
consolidated financial statements of the Corporation.

162 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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 will be effective for the Corporation’s fiscal year beginning on January 1, 2018, with earlier application
permitted. The Corporation is assessing the impact of the adoption of this standard on its consolidated financial
statements.

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, 2018, with earlier application
permitted. The Corporation is assessing the impact of the adoption of this standard on its consolidated financial
statements.

Leases
In January 2016, the IASB released IFRS 16, Leases, to replace the previous leases Standard, IAS 17, Leases,
and related Interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract, the customer (lessee) and the supplier (lessor). IFRS 16
eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee
accounting model. IFRS 16 also substantially carries forward the lessor accounting requirements. Accordingly, a
lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of
leases differently.

IFRS 16 will be effective for the Corporation’s fiscal year beginning on January 1, 2019, with earlier application
permitted only if the Corporation applies IFRS 15, Revenue from contracts with customers. 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, 2015 - NOTES 163

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 five-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 five-year period, on an annual basis, using a process whereby a detailed one-year
budget and four-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.

Long-term contracts – Transportation conducts most of its business under long-term manufacturing and service
contracts and the aerospace segments have 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, and the amount can be measured reliably, they are included in estimated revenues at
completion.

Estimated contract costs at completion incorporate forecasts for material usage and costs, including escalation
clauses, and labour hours 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, including a review of escalation assumptions. In addition, a detailed annual review is performed on a

164 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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.

Sensitivity analysis
A 1% increase in the estimated future costs to complete all ongoing long-term contracts would have decreased
Transportation’s gross margin for fiscal year 2015 by approximately $82 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. 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, if any. The estimated cost of potential upgrades and
derivatives is based on past experience with previous programs. The expected future cash flows 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 estimated future cash flows for the first five years are based on the strategic plan. After the initial five 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 2015, using a post-tax
discount rate of 8.75%.

C Series aircraft program
In October 2015, the Corporation entered into a memorandum of understanding for the C Series aircraft program
with the Government of Québec. Following the completion of an in-depth review of the C Series aircraft program
as well as discussions with the Government of Québec which resulted in the memorandum of understanding, the
Corporation performed an impairment test on the C Series aircraft program cash generating unit (the “C Series
aircraft program”) which principally consists of capitalized development costs. The Corporation determined that
the C Series aircraft program carrying amount exceeded its recoverable amount, and accordingly recorded an
impairment charge of $3,070 million related to the C Series aircraft program aerospace program tooling in the
third quarter of 2015. See Note 21 - 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 the C Series program evenly distributed over future
periods, would have resulted in an additional impairment charge of approximately $370 million.

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 $170 million.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 165

impairment charge of $919 million related to the remaining Learjet 85 aircraft development costs. See Note 21 -
Intangible assets for more details.

CRJ1000 aircraft program
The Corporation performed an impairment test on the CRJ1000 aircraft program development costs since there
were indicators of impairment due to the lack of recent order intake as well as low firm order backlog, mainly
stemming from pilot scope clauses in the U.S. which have restricted the use, number and seating capacity of
regional aircraft flying on behalf of network carriers. The Corporation determined that the CRJ1000 aircraft
program development costs recoverable amount was negligible and therefore recorded an impairment charge of
$243 million related to the remaining balance. Over the near term, we do not anticipate scope clause relaxation in
the U.S., during which time, we will not be able to sell the CRJ1000 aircraft in the U.S. market. See Note 21 -
Intangible assets for more details.

Learjet family of aircraft
The Corporation performed an impairment test on the Learjet family cash generating unit (the “Learjet family”)
which principally consists of capitalized development costs. The Corporation determined that the Learjet family
aircraft program carrying amount exceeded its recoverable amount, and accordingly recorded an impairment
charge of $53 million related to the remaining Learjet family development costs for fiscal year 2015. See Note 21 -
Intangible assets for more details.

Global 7000 and Global 8000 aircraft program
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 the Global 7000 and Global 8000 aircraft program
evenly distributed over future periods, would not have resulted in an impairment charge.

An increase of 100-basis points in the discount rate used to perform the impairment test would not have resulted
in an impairment charge.

Goodwill – The recoverable amount of the Transportation 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 the fourth quarter of 2015, the Corporation completed an impairment test. The recoverable amount was
calculated based on fair value less costs to sell inferred by the definitive agreement with the CDPQ. The fair value
measurement is categorized within Level 3 of the fair value hierarchy. The Corporation did not identify any
impairment. See Note 40 - Events after the reporting date for more details.

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 prudent tax planning strategies. See Note 12 - 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 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 from previous tax audits and differing interpretations of tax
regulations by the taxable entity and the relevant tax authority. Such differences in interpretation may arise for a
wide variety of issues depending on the conditions prevailing in the domicile of each legal entity.

166 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Credit and residual value guarantees – The Corporation uses an internal valuation model based on stochastic
simulations. The amounts expected to be paid under the guarantees may 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, as well as on the likelihood that
credit or residual value guarantees will be called upon at the expiry of the financing arrangements. 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 the underlying aircraft 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. 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 commercial aircraft as at December 31, 2015,
Commercial Aircraft’s EBIT for 2015 would have been negatively 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 is 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 22 – Retirement benefits for further details regarding assumptions used and sensitivity analysis to
changes in critical actuarial assumptions.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 167

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.

SEGMENT DISCLOSURE

Following the reorganization announced in July 2014, the Corporation has adopted a new organizational structure
with four reportable segments, effective January 1, 2015: Business Aircraft, Commercial Aircraft, Aerostructures
and Engineering Services and Transportation. The Corporation restated the comparative period to reflect its four
reportable segments as described below. Each reportable segment offers different products and services and
mostly requires different technology and marketing strategies.

Business Aircraft

A global leader in the design, manufacture and aftermarket support for three families of business jets (Learjet,
Challenger and Global), spanning from the light to large categories.

Commercial Aircraft

Commercial Aircraft designs and manufactures a broad portfolio of commercial aircraft in the 60- to 150-seat
categories, including the Q400 turboprops, the CRJ700, 900 and 1000 regional jets as well as the clean-sheet
CS100 and CS300 mainline jets. Commercial Aircraft provides aftermarket support for these aircraft as well as for
the 20- to 59-seat range category.

Aerostructures and Engineering Services

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.

Transportation
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.

The segmented information is prepared using the accounting policies described in Note 2 – Summary of
significant accounting policies.

The revenue recognition policies of Aerostructures and Engineering Services follow the Corporation’s policies for
either long-term contracts or aerospace programs depending on the nature of the contracts. Profit on
intercompany transactions is eliminated in the consolidated financial statements and corporate charges that were
previously allocated to segments are now part of Corporate and Elimination. Intersegment transaction policies put
in place following the adoption of the new organizational structure in 2015 were not applied retroactively, which
has not significantly impacted period-over-period variances.

168 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Management assesses segment performance based on EBIT and EBIT before special items. The segmented
results of operations and other information are as follows, for fiscal years:

Transportation

Business
Aircraft

Commercial
Aircraft

Aerostructures
and
Engineering
Services

Corporate
and
Elimination

2015

Total

8,275

507

— $

18,172

6,996

—
6,996

308
1,560

2,394

1
2,395
(170)
3,800

(1,252)

(3,970)

8,281

465

—

465

Results of operations

External revenues

Intersegment revenues

Total revenues

EBIT before special items
Special items(1)
EBIT

Financing expense

Financing income

EBT

Income taxes

Net loss

Other information
R&D(2)
Net additions to PP&E and
intangible assets(3)
Amortization
Impairment charges on
intangible assets(4)
Impairment charges
on PP&E(5)

Results of operations
External revenues
Intersegment revenues
Total revenues
EBIT before special items
Special items(1)
EBIT
Financing expense
Financing income
EBT
Income taxes
Net loss
Other information
R&D(2)
Net additions to PP&E and
intangible assets(3)
Amortization

Impairment charges on
intangible assets(4)

1,290

1,797

104

(1)
105

— $

(1,297)
(1,297)
(153)
33
(186)

—
18,172

554

5,392
(4,838)
418
(70)
(5,186)
154
(5,340)

— $

355

(4)

(3)

1,862

438

4,290

2014

Total

20,111
—
20,111
923
1,489
(566)
249
(75)
(740)
506
(1,246)

560
1,359
1,919
97
14

— $

(1,367)
(1,367)
(92)
—
(92)

150

155

— $

129

722

184

983

963

104

3,310

— $

Transportation

Business
Aircraft

Commercial
Aircraft

Aerostructures
and
Engineering
Services

Corporate
and
Elimination

9,612
7
9,619
526
57

469

7,200
—
7,200
499
1,402
(903)

148

107

115

105

1,019

149

— $

1,266

2,739
1
2,740
(107)
16
(123)

801

102

— $

347

(1)

1,964

417

— $

1,266

(1) See Note 9 – Special items for more details.
(2) Includes tooling amortization. See Note 7 – Research and development for more details.
(3) As per the consolidated statements of cash flows.
(4) See Note 21 – Intangible assets for more details.
(5) See Note 20 – Property, plant and equipment for more details.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 169

The reconciliation of total assets and total liabilities to segmented assets and liabilities is as follows, as at:

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)
Segmented liabilities
Net segmented assets

Transportation
Business Aircraft
Commercial Aircraft
Aerostructures and Engineering Services
Corporate and Elimination

December 31, 2015

December 31, 2014

January 1, 2014

22,903

27,614

29,363

2,720
56
761
19,366

26,957

154
224
8,979
17,600

354
395
467
434
116

$
$
$
$
$

2,489
64
875
24,186

27,559

124
248
7,683
19,504

226
440
3,693
204
119

$
$
$
$
$

3,397
27
1,231
24,708

26,914

116
198
7,203
19,397

296
1,306
3,241
221
247

$
$
$
$
$

(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.

170 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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)

2015

2014

December 31 December 31
2014

2015

January 1
2014

5,599
1,312
108
7,019

1,901
1,354
1,118
384
2,487
7,244

709
605
259
815
2,388

5,417
1,096
229
6,742

2,318
1,691
1,412
450
2,559
8,430

815
748
171
927
2,661

300
4,009
36
4,345

983
1,667
36
368
645
3,699

6
24
21
4
55

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

268
1,253
1,521
$ 18,172

505
1,773
2,278
$ 20,111

1
28
29
8,128

1
39
40
11,198

1
29
30
11,239

(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.

7. 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

2015
1,794
(1,624)
170
185
355

2014
1,831
(1,656)
175
172
347

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 171

OTHER EXPENSE

Other expense was as follows, for fiscal years:

Severance and other involuntary termination costs (including changes in estimates)(1)
Changes in estimates and fair value(1)(2)
Gains on disposals of PP&E and intangible assets
Other

2015
20
(4)
(3)
(13)
—

2014
4
42
(3)
(5)
38

(1) Excludes those presented in special items.
(2) 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.

SPECIAL ITEMS

Special items were as follows, for fiscal years:

Impairment and other charges - C Series aircraft program(1)
Impairment and other charges - Learjet 85 aircraft program(2)
Changes in estimates and fair value(3)
Impairment charge - CRJ1000 aircraft program(4)
Write-off of deferred costs(5)
Termination of sales representative and distribution agreements(6)
Impairment charge - Learjet family of aircraft(7)
Tax litigation(8)
Loss on repurchase of long-term debt(9)
Restructuring charges(10)
Gain on resolution of a litigation(11)
Tax impacts of special items(12)

Of which is presented in
Special items in EBIT
Financing expense - loss on financial instruments(3)
Financing expense - loss on repurchase of long-term debt(9)
Financing income - interests related to the resolution of a litigation(11)
Income taxes - effect of special items(12)

2015
3,235
1,163
353
243
194
133
53
50
22
9
—
106
5,561

5,392
41
22
—
106
5,561

2014
—
1,357
—
—
—
—
—
—
43
142
(18)
273
1,797

1,489
—
43
(8)
273
1,797

1. Represents an impairment charge of $3,070 million on aerospace program tooling, and inventory write-downs
and other provisions of $165 million, following the completion of an in-depth review of the C Series aircraft
program as well as discussions with the Government of Québec which resulted in the October 2015
memorandum of understanding. See Note 17 - Inventories, Note 21 - Intangible assets and Note 24 -
Provisions.

2. Represents an impairment charge of $919 million on aerospace program tooling, and inventory write-downs,
write-downs of other assets, PP&E and other intangible assets, other provisions and other financial liabilities
of $244 million, as a result of the cancellation of the Learjet 85 aircraft program due to the lack of sales
following the prolonged market weakness, for fiscal year 2015 (an impairment charge of $1,266 million, an
inventory write-down and other provisions of $92 million were recorded as a result of the decision to pause
the Learjet 85 aircraft program, for fiscal year 2014). See Note 17 - Inventories, Note 21 - Intangible assets
and Note 24 - Provisions.

172 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

3. Related to an increase in provisions for credit guarantees and RVGs as a result of changes in assumptions

concerning residual value curves of regional aircraft due to difficult market conditions for regional pre-owned
aircraft and a higher probability that the guaranteed party will exercise the RVG given the recent experience
with respect to RVG and a loss on certain financial instruments due to changes in estimated fair value.
4. Represents an impairment charge of $243 million on the remaining CRJ1000 aircraft program development
costs. The impairment is due to the lack of recent order intake as well as low firm order backlog for the
CRJ1000 aircraft, mainly stemming from pilot scope clauses in the U.S., which have restricted the use,
number and seating capacity of regional aircraft flying on behalf of network carriers. Over the near term, we
do not anticipate scope clause relaxation in the U.S., during which time, we will not be able to sell the
CRJ1000 aircraft in the U.S. market. See Note 21 - Intangible assets.

5. Mainly related to restructuring of customer commercial agreements.
6. Costs incurred in connection with the termination of third-party sales representative and distribution

agreements to increase the number of direct-to-market channels.

7. Represents an impairment charge of $53 million on the remaining Learjet family aircraft program tooling

following the prolonged market weakness in the light business aircraft category. See Note 21 - Intangible
assets.

8. Represents a provision related to tax litigation.
9. Represents the loss related to the redemption of the $750-million Senior Notes for fiscal year 2015

($43 million represents the loss related to the redemption of the €785-million ($1,093-million) Senior Notes for
fiscal year 2014). See Note 27 - Long-term debt for more details.

10. Represents restructuring charges of $13 million related to the workforce reduction announced in January

2015 of approximately 1,000 positions, located mostly in Querétaro, Mexico and Wichita, U.S., as a result of
the decision to pause the Learjet 85 aircraft program, and a reversal of restructuring provisions taken in prior
year of $4 million, for fiscal year 2015 (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
Business Aircraft, Commercial Aircraft and Aerostructures and Engineering Services and $57 million to
Transportation, for fiscal year 2014).

11. Represents a gain at Business Aircraft and Commercial Aircraft upon the successful resolution of a litigation
in connection with Part IV of the Québec Income Tax Act, the Tax on Capital, of which $8 million represents
the interest portion of the gain for fiscal year 2014.

12. Represents net write-downs of deferred income tax assets, mainly due to the reorganization and

consolidation of Transportation under one holding entity necessary to facilitate the planned placement of a
minority stake in Transportation, for fiscal year 2015. For fiscal year 2014, represents net write-downs of
deferred tax assets as a result of changes in estimated future taxable profit following the decision to pause
the Learjet 85 aircraft program. These items have a significant impact on the effective income tax rates.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 173

10.

FINANCING EXPENSE AND FINANCING INCOME

Financing expense and financing income were as follows, for fiscal years:

Financing expense

Net loss on certain financial instruments(1)(2)
Accretion on net retirement benefit obligations
Accretion on other financial liabilities
Loss on repurchase of long-term debt(3)
Amortization of letter of credit facility costs
Accretion on provisions
Other

Interest on long-term debt, after effect of hedges

Financing income

Changes in discount rates of provisions
Interest related to the resolution of a litigation(5)
Other

Interest on loans and lease receivables, after effect of hedges
Income from investment in securities
Interest on cash and cash equivalents

2015

2014

82
72
28
22
20
7
30
261
157
418 (4) $

(7)
—
(20)
(27)
(21)
(15)
(7)
(43)
(70) (6) $

21
76
19
43
16
8
29
212
37
249 (4)

—
(8)
(17)
(25)
(27)
(12)
(11)
(50)
(75) (6)

(1) Net losses (gains) on certain financial instruments classified as FVTP&L, including losses (gains) arising from changes in interest rates.
(2) Includes $41 million of special items for fiscal year 2015. See Note 9 – Special items for more details.
(3) Represents the loss related to the redemption of the $750-million Senior Notes, which was recorded as a special item for fiscal year 2015
($43 million represents the loss related to the redemption of the €785-million ($1,093-million) Senior Notes, which was recorded as a
special item for fiscal year 2014).

(4) Of which $192 million represents the interest expense calculated using the effective interest rate method for financial liabilities classified as

other than HFT for fiscal year 2015 ($70 million for fiscal year 2014).

(5) 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 Québec Income Tax Act, the Tax on Capital. The remaining $10 million of the gain was recorded in EBIT as special items for
fiscal year 2014.

(6) Of which $14 million represents the interest income calculated using the effective interest rate method for financial assets classified as L&R

for fiscal year 2015 ($9 million for fiscal year 2014).

Borrowing costs capitalized to PP&E and intangible assets totalled $305 million for fiscal year 2015, using an
average capitalization rate of 5.31% ($293 million and 4.88% for fiscal year 2014). 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).

11.

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

22
29
8, 9

2015
5,411
478
14
25
5,928

2014
5,893
420
2
142
6,457

(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.

174 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

12.

INCOME TAXES

Analysis of income tax expense
Details of income tax expense were as follows, for fiscal years:

Current income taxes
Deferred income taxes

2015
91
63
154

2014
152
354
506

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
Other

Income tax expense
Effective tax rate

2015
(5,186)

26.8%

(1,390)

2014

(740)
26.8 %
(198)

1,618
311
(130)
(284)

(49)
(9)
87
154
(3.0)%

(1) $

488
409
(139)
(57)

(36)
—
39
506
(68.4)%

(1)

(1) An income tax expense of $106 million was recorded for fiscal year 2015 as a result of the special item in relation to the reorganization and
consolidation of Transportation under one holding entity necessary to facilitate the planned placement of a minority stake in Transportation.
For fiscal year 2014, an income tax expense of $273 million was recorded as a result of the special item in relation to the decision to pause
the Learjet 85 aircraft 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

2015
1,618
(1,573)
311
(284)
(9)
63

2014
488
(486)
409
(57)
—
354

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 175

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, 2015
Asset
Liability
1,928
459

— $
—

December 31, 2014
Asset
Liability
1,919
609

— $
—

817
469
596
(95)
(30)

253
(48)
173
4,522
(3,761)
761

—
—
—
—
—

—
—
—
—
—
— $

1,007
120
428
(161)
(55)

231
(436)
175
3,837
(2,962)
875

—
—
—
—
—

—
—
—
—
—
— $

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

Other(1)
Balance at end of year, net

(1) Mainly comprises foreign exchange rate effects.

January 1, 2014
Liability
—
—

Asset
1,985
444

927
240
370
(172)
(63)

155
(821)
167
3,232
(2,001)
1,231

2015
875
(63)

(11)
(6)
(34)
761

—
—
—
—
—

—
—
—
—
—
—

2014
1,231
(354)

(45)
37
6
875

The net operating losses carried forward and deductible temporary differences for which deferred tax assets have
not been recognized amounted to $12,548 million as at December 31, 2015, of which $1,170 million relates to
retirement benefits that will reverse through OCI ($9,688 million as at December 31, 2014 of which $1,718 million
relates to retirement benefits that will reverse through OCI and $7,121 million as at January 1, 2014 of which
$954 million relates to retirement benefits that will reverse through OCI). Of these amounts, approximately
$9,832 million as at December 31, 2015 has no expiration date ($7,383 million as at December 31, 2014 and
$6,506 million as at January 1, 2014) and approximately $1,846 million relates to the Corporation’s operations in
Germany where a minimum income tax is payable on 40% of taxable income ($2,214 million as at December 31,
2014 and $2,066 million as at January 1, 2014) and $476 million relate to the Corporation’s operations in France
where a minimum income tax is payable on 50% of taxable income ($444 million as at December 31, 2014 and
$338 million as at January 1, 2014).

In addition, the Corporation has $1,467 million of unused investment tax credits, most of which can be carried
forward for 20 years and $75 million of net capital losses carried forward for which deferred tax assets have not
been recognized ($694 million and $80 million as at December 31, 2014 and $517 million and $57 million as at
January 1, 2014). Net capital losses can be carried forward indefinitely and can only be used against future taxable
capital gains.

Net deferred tax assets of $663 million were recognized as at December 31, 2015 ($242 million as at
December 31, 2014 and $639 million as at January 1, 2014) 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. See Note 5 – Use of estimates and
judgment for more information on how the Corporation determines the extent to which deferred income tax assets
are recognized.

176 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, as the Corporation has
control or joint control over the dividend policy, 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 $369 million as at December 31, 2015 ($343 million as at December 31, 2014
and $364 million as at January 1, 2014).

13. EARNINGS PER SHARE

Basic and diluted EPS were computed as follows, for fiscal years:

(Number of shares, stock options, PSUs, DSUs and RSUs, in thousands)
Net loss attributable to equity holders of Bombardier Inc.
Preferred share dividends, including taxes
Net loss attributable to common equity holders of Bombardier Inc.
Weighted-average number of common shares outstanding
EPS (in dollars)

Basic and diluted

2015

2014

(5,347)
(23)
$
(5,370)
2,082,683

(1,260)
(27)
$
(1,287)
1,741,733

(2.58)

(0.74)

The effect of the exercise of stock options, PSUs, DSUs and RSUs was included in the calculation of diluted EPS
in the above table, except for 76,722,282 stock options, PSUs, DSUs and RSUs for fiscal year 2015 (50,983,909
stock options, PSUs and DSUs for fiscal year 2014) 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, or the
effect of the exercise would be antidilutive.

14.

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)

2015

2014

(7)

(5)

(101)
22

(70)
(26)

$
$

15
(14)

(101)
(12)

$
$

(1) Excluding the interest income portion related to cash and cash equivalents of $7 million for the fiscal year 2015 ($11 million for fiscal year

2014).

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 177

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, 2015
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, 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

January 1, 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

FVTP&L

HFT Designated

AFS

(1)

Amortized
cost

DDHR

Total
carrying

value Fair value

$ 2,720
—
13
$ 2,733

— $
—
230
230

— $
—
348
348

—
1,473
380
$ 1,853

— $
—
41
41

1
—
135
136

n/a
n/a
n/a
n/a

$ 4,039
8,979
702
$ 13,720

$ 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

— $ 2,720
1,473
—
1,320
349
$ 5,513
349

— $ 4,040
8,979
—
1,539
661
$ 14,558
661

— $ 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

$ 2,720
1,473
1,326
$ 5,519

$ 4,040
6,767
1,426
$ 12,233

$ 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

(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

178 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, 2015

Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents

December 31, 2014

Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents

$
$
$

362
(702)
2,720

528
(665)
2,489

$
$
$

(216)
455
(239)

(271)
344
(73)

$
$
$

146
(247)
2,481

257
(321)
2,416

Derivatives and hedging activities
The carrying amounts of all derivative and non-derivative financial instruments in a hedge relationship were as
follows, as at:

December 31, 2015
Liabilities

Assets

December 31, 2014
Liabilities

Assets

January 1, 2014
Liabilities

Assets

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

Total derivative financial
instruments
Non-derivative financial
instruments designated as
hedges of net investment

Long-term debt

— $
93
93

— $
—
—

256

661

13
—

—
—
13

41
—

—
—
41

— $

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

362

702

528

665

792

411

— $

517

(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 23 months as at December 31, 2015.

(2) Held as economic hedges, except for embedded derivative financial instruments.

The net losses on hedging instruments designated in fair value hedge relationships and net gains on the related
hedged items attributable to the hedged risk recognized in financing expense, amounted to $46 million and $50
million respectively for fiscal year 2015 (net gains of $173 million and net losses of $168 million respectively for
fiscal year 2014).

The methods and assumptions used to measure the fair value of financial instruments are described in Note 34 –
Fair value of financial instruments.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 179

15. 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, 2015
1,235

December 31, 2014
997

January 1, 2014
1,475

746
739
2,720

796
696
2,489

762
1,160
3,397

See Note 31 – Credit facilities for details on covenants related to cash and cash equivalents.

16.

TRADE AND OTHER RECEIVABLES

Trade and other receivables were as follows, as at:

December 31, 2015(1)(2)

Trade receivables, gross
Allowance for doubtful accounts

Other
Total

December 31, 2014(1)(2)

Trade receivables, gross
Allowance for doubtful accounts

Other
Total

January 1, 2014(1)(2)

Trade receivables, gross
Allowance for doubtful accounts

Other
Total

Total

1,372
(36)
1,336
137
1,473

1,453
(39)
1,414
124
1,538

1,430
(44)
1,386
106
1,492

Not past
due

Past due but not impaired (3)
less than
90 days

more than
90 days

Impaired (4)

908
—
908

717
—
717

796
—
796

263
—
263

238
—
238

194
—
194

72
—
72

381
—
381

359
—
359

129
(36)
93

117
(39)
78

81
(44)
37

(1) Of which $390 million and $452 million are denominated in euros and other foreign currencies, respectively, as at December 31, 2015

($355 million and $475 million, respectively, as at December 31, 2014 and $465 million and $411 million, respectively, as at
January 1, 2014).

(2) Of which $233 million represents customer retentions relating to long-term contracts as at December 31, 2015 based on normal terms and

conditions ($419 million as at December 31, 2014 and $392 million as at January 1, 2014).

(3) Of which $243 million of trade receivables relates to Transportation long-term contracts as at December 31, 2015, of which $69 million were

more than 90 days past due ($525 million as at December 31, 2014, of which $376 million were more than 90 days past due and
$509 million as at January 1, 2014, of which $353 million were more than 90 days past due). Transportation 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 $66 million of trade receivables are individually impaired as at December 31, 2015 ($71 million as at

December 31, 2014 and $73 million as at January 1, 2014).

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 33 – Financial risk management.

180 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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

2015
(39)
(7)
6
1
3
(36)

2014
(44)
(5)
(1)
8
3
(39)

Off-balance sheet factoring facilities
In the normal course of its business, Transportation has factoring facilities in Europe to which it can sell, without
credit recourse, qualifying trade receivables. Trade receivables of €871 million ($948 million) were outstanding
under such facilities as at December 31, 2015 (€974 million ($1,183 million) as at December 31, 2014 and
€1,084 million ($1,495 million) as at January 1, 2014). Trade receivables of €1,293 million ($1,435 million) were
sold to these facilities during fiscal year 2015 (€1,287 million ($1,712 million) during fiscal year 2014).

17.

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, 2015
4,215

December 31, 2014
4,600

January 1, 2014
4,847

7,064
(5,490)
1,574

223
(17)
206
983
6,978

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

(1) Finished products include 4 new aircraft not associated with a firm order and 54 pre-owned aircraft, totalling $279 million as at

December 31, 2015 (1 new aircraft and 57 pre-owned aircraft, totaling $485 million as at December 31, 2014 and 11 new aircraft and 43
pre-owned aircraft, totalling $535 million as at January 1, 2014).

Finished products as at December 31, 2015 include $81 million of pre-owned aircraft legally sold to third parties
and leased back under sale and leaseback facilities ($248 million as at December 31, 2014 and $134 million as at
January 1, 2014). The related sales proceeds are accounted for as sale and leaseback obligations.

The amount of inventories recognized as cost of sales totalled $15,232 million for fiscal year 2015
($16,616 million for fiscal year 2014). These amounts include $372 million of write-downs for fiscal year 2015
($193 million for fiscal year 2014). An additional write-down of $57 million is recognized in special items for fiscal
year 2015. See Note 9 – 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
Transportation, 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, 2015 - NOTES 181

Advances and progress billings received on long-term contracts in progress were $6,916 million as at
December 31, 2015 ($7,273 million as at December 31, 2014 and $7,777 million as at January 1, 2014).
Revenues include revenues from Transportation long-term contracts, which amounted to $6,208 million for fiscal
year 2015 ($7,366 million for fiscal year 2014).

In connection with certain long-term contracts, Transportation enters into arrangements whereby amounts are
received from third-party advance providers in exchange for the rights to customer payments. There is no
recourse to Transportation if the customer defaults on its payment obligations assigned to the third-party advance
provider. Amounts received under these arrangements are included as advances and progress billings in
reduction of long-term contracts (production contracts) inventories and amounted to €334 million ($364 million) as
at December 31, 2015. The third-party advance providers could request repayment of these amounts if
Transportation fails to perform its contractual obligations under the related long-term contract.

18. OTHER FINANCIAL ASSETS

Other financial assets were as follows, as at:

Derivative financial instruments(1)
Investments in securities(2)(3)
Long-term contract receivables
Investments in financing structures(2)
Aircraft loans and lease receivables(2)(4)
Restricted cash
Other

Of which current
Of which non-current

December 31, 2015
362
359
298
197
81
11
12
1,320
450
870
1,320

$
$

December 31, 2014
528
346
321
360
275
17
11
1,858
530
1,328
1,858

$
$

January 1, 2014
792
335
319
331
400
19
9
2,205
637
1,568
2,205

$
$

(1) See Note 14 – Financial instruments.
(2) Carried at fair value, except for $2 million of aircraft loans and lease receivables, $11 million of investments in securities and $46 million of
investment in financing structures carried at amortized cost as at December 31, 2015 ($12 million, $16 million and $45 million, respectively,
as at December 31, 2014 and $12 million, $20 million and $46 million, respectively, as at January 1, 2014).

(3) Includes $80 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, 2015 ($70 million as at December 31, 2014 and January 1, 2014).

(4) Financing with three airlines represents 64% of the total aircraft loans and lease receivables as at December 31, 2015 (three airlines

represented 64% as at December 31, 2014 and four airlines represented 59% as at January 1, 2014). 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.

182 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

19. OTHER ASSETS

Other assets were as follows, as at:

Prepaid expenses and deferred costs(1)
Sales tax and other taxes
Retirement benefits(2)
Deferred financing charges
Intangible assets other than aerospace program
tooling and goodwill(3)
Other

Of which current
Of which non-current

(1) See Note 9 – Special items.
(2) See Note 22 – Retirement benefits.
(3) See Note 21 – Intangible assets.

December 31, 2015
414
300
251
173

December 31, 2014
760
302
159
138

114
29
1,281
484
797
1,281

$
$

156
33
1,548
592
956
1,548

$
$

January 1, 2014
620
344
174
100

186
9
1,433
626
807
1,433

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 183

20. PROPERTY, PLANT AND EQUIPMENT

PP&E were as follows, as at:

Cost

Balance as at December 31, 2014

Additions
Disposals
Transfers
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2015

Accumulated amortization and impairment

Balance as at December 31, 2014

Amortization
Impairment
Disposals
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2015
Net carrying value

Cost

Balance as at January 1, 2014

Additions
Disposals
Transfers
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2014

Accumulated amortization and impairment

Balance as at January 1, 2014

Amortization
Disposals
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2014
Net carrying value

$
$

Land Buildings Equipment

Construction
in progress

Other

Total

91
3
(2)
—

(5)
87

— $
—
—
—

—
— $
$
87

2,413
25
(11)
70

1,347
61
(52)
77

171
139
—
(148)

422
45
(59)
1

$ 4,444
273
(124)
—

(88)
2,409

(15)
1,418

(7)
155

(3)
406

(118)
$ 4,475

(1,212) $
(75)
—
11

60
(1,216) $
$
1,193

(864) $
(108)
(10)
49

(2)
(935) $
$
483

— $
—
—
—

(276) $ (2,352)
(208)
(10)
101

(25)
—
41

—
— $
$

155

(3)

55
(263) $ (2,414)
$ 2,061
143

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

Included in the table are assets under finance lease where the Corporation is the lessee, presented in Other, with
cost and accumulated amortization amounting to $245 million and $105 million, respectively, as at December 31,
2015 ($243 million and $91 million, respectively, as at December 31, 2014 and $195 million and $83 million,
respectively, as at January 1, 2014).

Also included in the table are aircraft under operating leases where the Corporation is the lessor, presented in
Other, with a cost and accumulated amortization amounting to $46 million and $11 million, respectively, as at
December 31, 2015 ($35 million and $14 million, respectively, as at December 31, 2014 and $40 million and
$12 million, respectively, as at January 1, 2014). Rental income from operating leases and amortization of assets
under operating leases amounted to $6 million and $16 million, respectively, for fiscal year 2015 ($5 million and
$2 million, respectively, for fiscal year 2014).

184 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

21.

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, 2014

Additions
Disposals
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2015

$
Accumulated amortization and impairment
$

Balance as at December 31, 2014

Amortization
Impairment
Disposals
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2015
Net carrying value

Cost

Balance as at January 1, 2014

Additions
Disposals
Effect of foreign currency
exchange rate changes

$
$

Balance as at December 31, 2014

$
Accumulated amortization and impairment
$

Balance as at January 1, 2014

Amortization
Impairment
Disposals
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2014
Net carrying value

1,639
225
—

—
1,864

9,923
1,399
(2)

$ 11,562
1,624
(2)

—
$ 11,320

—
$ 13,184

(700) $

(25)
(835)
—

(4,039) $ (4,739)
(185)
(4,285)
—

(160)
(3,450)
—

—
(1,560) $
$
304

—

—
(7,649) $ (9,209)
$ 3,975
3,671

$
$

2,127
—
—

(149)
1,978

— $
—
—
—

—
— $
$

1,978

714
20
(14)

(37)
683

(558)
(45)
(5)
8

31
(569)
114

$ 14,403
1,644
(16)

(186)
$ 15,845

$ (5,297)
(230)
(4,290)
8

31
$ (9,778)
$ 6,067

Aerospace program tooling

Goodwill

Other (1)(2)

Total

Acquired

Internally
generated

Total (3)

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

(1) Presented in Note 19 – Other assets.
(2) Includes internally generated intangible assets with a cost and accumulated amortization of $365 million and $278 million, respectively, as

at December 31, 2015 ($367 million and $254 million, respectively, as at December 31, 2014 and $359 million and $243 million,
respectively, as at January 1, 2014).

(3) Includes intangible assets under development with a cost of $3,622 million as at December 31, 2015 ($6,126 million as at

December 31, 2014 and $5,923 million as at January 1, 2014).

Aerospace program tooling
The net carrying value of aerospace program tooling comprises $1,914 million for commercial aircraft, $2,041 million
for business aircraft and $20 million for aerostructure and engineering services, respectively, as at December 31,
2015 ($4,347 million, $2,470 million and $9 million, respectively, as at December 31, 2014 and $3,738 million,
$2,865 million and $5 million, respectively, as at January 1, 2014).

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 185

C Series aircraft program
In October 2015, the Corporation entered into a memorandum of understanding for the C Series aircraft program
with the Government of Québec. Following the completion of an in-depth review of the C Series aircraft program
as well as discussions with the Government of Québec which resulted in the memorandum of understanding, the
Corporation performed an impairment test on the C Series aircraft program cash generating unit (the “C Series
aircraft program”) which principally consists of capitalized development costs. The Corporation determined that
the C Series aircraft program carrying amount exceeded its recoverable amount, and accordingly recorded an
impairment charge of $3,070 million, in special items, related to the C Series aircraft program development costs
in fiscal year 2015. After the impairment charge, the remaining balance of the C Series aerospace program tooling
is $1,850 million as at December 31, 2015.

Learjet 85 aircraft program
On October 28, 2015, due to the lack of sales following the prolonged market weakness, the Corporation
announced the cancellation of the Learjet 85 aircraft program. As a result, the Corporation recorded an
impairment charge on the remaining $919 million of aerospace program tooling related to the Learjet 85 aircraft
program development costs and $5 million on other intangibles, in special items, in fiscal year 2015.

On January 15, 2015 the Corporation announced its decision to pause the Learjet 85 aircraft program. The pause
followed 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 aircraft program”) which principally
consisted of capitalized development costs. The Corporation determined that the Learjet 85 aircraft 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 aircraft development costs in fiscal year 2014.

CRJ1000 aircraft program
The Corporation performed an impairment test on the CRJ1000 aircraft program development costs since there
were indicators of impairment due to the lack of recent order intake as well as low firm order backlog. The
Corporation determined that the CRJ1000 aircraft program development costs recoverable amount was negligible
and therefore recorded an impairment charge of $243 million, in special items, related to the remaining balance.

Learjet family of aircraft
The Corporation performed an impairment test on the Learjet family cash generating unit (the “Learjet family”)
which principally consists of capitalized development costs. The Corporation determined that the Learjet family
carrying amount exceeded its recoverable amount, and accordingly recorded an impairment charge of $53 million,
in special items, related to the Learjet family development costs in fiscal year 2015. The impairment is following
the prolonged market weakness in the light business aircraft category. After the impairment charge, the remaining
balance of the Learjet family aerospace program tooling is nil.

Recoverable amount
The recoverable amounts of all aerospace assets or CGUs were based on fair value less costs of disposal. The
fair value measurements are 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 using probability-based long-range forecasts
prepared by management and a post-tax discount rate of 8.75% based on a benchmark sampling of publicly
traded companies in the aerospace sector.

Additional information related to the Corporation’s impairment testing methodology for aerospace program tooling
is included in Note 5 - 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 Transportation operating segment level. During the fourth quarter of fiscal year
2015, the Corporation completed an impairment test. The Corporation did not identify any impairment. See
Note 5 – Use of estimates and judgment for more details.

186 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

22. 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.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 187

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.

Investment Policy

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, 2015, 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.

188 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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 management 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 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 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 fixed income securities and real return asset securities.

Liquidity risk
Liquidity risk stems 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 investments in treasury bills,
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 and mortality improvement 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 allowances. 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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 189

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
302
60
25
(4)
(3)
1
381
78
459

340
41
78

399
60

$
$
$

$
$

Other
benefits
7
12
—
—
—
—
19
—
19

n/a
19
n/a

7
12

$
$

$
$
$

$
$

2015

Total
309
72
25
(4)
(3)
1
400
78
478

340
60
78

406
72

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

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, 2014

Impact of asset ceiling
Actuarial losses, net
Effect of exchange rate changes
Income taxes

Balance as at December 31, 2014

Actuarial gains, net
Effect of exchange rate changes
Income taxes

Balance as at December 31, 2015

(1,970)
28
(767)
93
(45)
(2,661)
407
185
(11)
(2,080)

190 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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

2015

Total

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 (losses) gains
Benefits paid
Settlement
Administration costs
Other
Effect of exchange rate changes
Fair value at end of year

$ 10,963
378
302
34
25

(336)

(125)

(21)
(334)
(4)
(10)
(24)
(1,126)
9,722

5,035
1,368
3,319
9,722

8,820
264
34
318
(94)
(334)
(7)
(10)
(20)
(891)
8,080

$ 11,290
390
309
34
25

327
12
7
—
—

(4)

(14)

(1)
(12)
—
—
(1)
(48)
266

163
—
103
266

— $
12
—
—
—
(12)
—
—
—
—
— $

(340)

(139)

(22)
(346)
(4)
(10)
(25)
(1,174)
9,988

5,198
1,368
3,422
9,988

8,820
276
34
318
(94)
(346)
(7)
(10)
(20)
(891)
8,080

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)

(23)

(8)
(16)
1
—
—
(25)
327

200
—
127
327

— $
16
—
—
—
(16)
—
—
—
—
— $

8,332
386
39
383
676
(349)
(24)
(9)
—
(614)
8,820

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 191

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, 2015
Other
benefits

Pension
benefits

December 31, 2014
Other
benefits

Pension
benefits

January 1, 2014
Other
benefits

Pension
benefits

9,722
(8,080)
1,642
—
1,642

1,893
(251)
1,642

266
—
266
—
266

266
—
266

$ 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

(1) Comprises the effect of exchange rate changes.
(2) Presented in Note 19 – 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, 2015
Other
benefits

Pension
benefits

December 31, 2014
Other
benefits

Pension
benefits

January 1, 2014
Other
benefits

Pension
benefits

589
327
(52)
95
959

492
24
33
134
683
1,642

— $
—
—
—
—

—
233
22
11
266
266

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

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, 2015
Plan
Benefit
assets
obligation

December 31, 2014
Plan
Benefit
assets
obligation

January 1, 2014
Plan
assets

Benefit
obligation

4,214
3,527
914
384
9,039
949
9,988

3,625
3,579
587
289
8,080
—
8,080

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

192 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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
804

Level 1
655

959
282
343
1,101
2,685

1,288
2,199
26
3,513
983
95
8,080

Total
673

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

938
282
343
1,098
2,661

—
—
—
—
927
—
4,243

Level 1
548

927
371
359
1,110
2,767

—
—
—
—
911
—
4,226

Level 1
398

1,018
489
409
1,288
3,204

—
—
—
—
876
—
4,478

December 31, 2015
Level 3
—

Level 2
149

15
—
—
—
15

1,288
2,199
26
3,513
—
93
3,770

6
—
—
3
9

—
—
—
—
56
2
67

December 31, 2014
Level 3
—

Level 2
125

—
18
—
—
18

1,201
2,642
27
3,870
—
503
4,516

4
—
—
—
4

—
—
—
—
—
74
78

Level 2
105

January 1, 2014
Level 3
—

—
20
—
—
20

855
2,483
23
3,361
—
289
3,775

4
—
—
2
6

—
—
—
—
—
73
79

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, 2015, 2014 and January 1, 2014.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 193

The following table presents the contributions made for fiscal year 2015 and 2014 as well as the estimated
contributions for fiscal year 2016:

Contribution to

Funded pension plans
Unfunded pension plans
Other benefits
Total defined benefits plans
DC pension plans
Total contributions

2016
Estimated

2015

2014

266
23
13
302
87
389

239
25
12
276
78
354

342
28
16
386
90
476

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, 2015

295
1,381
2,258
2,880
3,341
10,155

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, 2015

17.3
15.8
19.7
14.0

18.5
13.3
14.2
15.5

The following table provides the expected payments to be made under the unfunded plans, as at
December 31, 2015:

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

16
71
100
120
132
439

19
85
127
138
141
510

35
156
227
258
273
949

194 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, 2015
Other
benefits

Pension
benefits

December 31, 2014
Other
benefits

Pension
benefits

January 1, 2014
Other
benefits

Pension
benefits

3.69%
3.26%
2.21%
n/a

3.80%
3.02%
2.21%
n/a
n/a

4.07%
3.25%
2.05%
4.99%

4.19%
3.00%
2.05%
5.29%
5.12%

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%

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
2014

Aged 65 on December
2014

2015

projected generationally using the CMP
Improvement Scale B (“CPM-B”)

U.K.
U.S.

SNA07M_CMI 2013 and S1P(M/F)A CMI 2012(1)
RP-2014 mortality table projected generationally

using the MP-2015 improvement scale(2)

Germany

Dr. K Heubeck 2005

21.6
22.1

21.3
18.9

21.6
22.0

21.7
20.1

22.7
23.8

22.9
21.5

22.7
23.8

23.4
22.8

Mortality tables
2014 Private Sector Mortality Table (“CPM2014Priv”)

Life expectancy over 65 for a female member currently
Aged 45 on December
2014

Aged 65 on December
2014

2015

Country

Canada

projected generationally using the CMP
Improvement Scale B (“CPM-B”)

U.K.
U.S.

SNA07M_CMI 2013 and S1P(M/F)A CMI 2012(1)
RP-2014 mortality table projected generationally

using the MP-2015 improvement scale(2)

Germany

Dr. K Heubeck 2005

24.0
24.2

23.3
22.9

24.1
24.2

23.9
23.9

25.0
26.1

24.9
25.5

25.1
26.2

25.5
26.4

(1) SNA02M_CMI 2010 and S1P(M/F)A CMI 2012 as at December 31, 2014.
(2) RP-2014 mortality table projected generationally using the MP-2014 improvement scale as at December 31, 2014.

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
2015
(33)
9
8

$
$
$

Net retirement benefit
liability as at
December 31, 2015
(445)
78
127

$
$
$

A one year additional life expectancy as at December 31, 2015 for all DB plans would increase the net retirement
benefit liability by $254 million and the retirement benefit cost for fiscal year 2015 by $17 million, all other actuarial
assumptions remaining unchanged.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 195

As at December 31, 2015, 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 5.29% and to decrease progressively to 5.12% by calendar year 2024 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, 2015 and for fiscal year 2015:

Effect on the net retirement benefit liability
Effect on the retirement benefit cost

23.

TRADE AND OTHER PAYABLES

Trade and other payables were as follows, as at:

Trade payables
Accrued liabilities
Interest
Other

One percentage point
increase
27
2

$
$

One percentage point
decrease
(22)
(2)

$
$

December 31, 2015
2,812
613
154
461
4,040

December 31, 2014
3,037
566
124
489
4,216

January 1, 2014
2,959
623
116
391
4,089

196 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

24. PROVISIONS

Changes in provisions were as follows, for fiscal years 2015 and 2014:

Balance as at December 31, 2014

Additions
Utilization
Reversals
Accretion expense
Effect of changes in discount rates
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2015

Of which current
Of which non-current

Balance as at January 1, 2014

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

Credit and
residual
value
guarantees
456
$
265 (2)
(36)
(15)
6
(6)

Restructuring,
severance
and other
termination
benefits
117
47 (3)
(67)
(25)
—
—

(3)

Product
warranties
773
$
360
(244)
(118)
1
(1)

(46)
725
562
163
725

$
$

—
670
77
593
670

$
$

(6)
66
65
1
66

(1)

Other
206
394 (4)
(8)
(22)
—
—

(5)
565
404
161
565

$
$

Credit and
residual
value
guarantees
463
$
51
(50)
(15)
6
1

Restructuring,
severance
and other
termination
benefits
81
178
(114)
(15)
—
—

(3)

Product
warranties
863
354
(321)
(58)
1
(1)

(65)
773
607
166
773

$
$

—
456
92
364
456

$
$

(13)
117
115
2
117

$
$

Other
58
173
(6)
(15)
1
—

(5)
206
176
30
206

(1)

(4)

$
$

Total
1,552
1,066
(355)
(180)
7
(7)

(57)
2,026
1,108
918
2,026

Total
1,465
756
(491)
(103)
8
—

(83)
1,552
990
562
1,552

(1) Mainly comprised of claims, onerous contract provisions and litigations.
(2) See Note 9 – Special items for more details on changes in estimates and fair value related to Credit and residual value guarantees.
(3) See Note 9 – Special items for more details on the addition and the reversal related to restructuring charges.
(4) Includes other provisions related to the C Series aircraft program and to the cancellation of the Learjet 85 aircraft program, which are

included in special items, for fiscal year 2015 (includes other provisions related to the pause of the Learjet 85 aircraft program, which is
included in special items for fiscal year 2014). See Note 9 – Special items for more details.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 197

25. OTHER FINANCIAL LIABILITIES

Other financial liabilities were as follows, as at:

Derivative financial instruments(1)
Government refundable advances
Lease subsidies(2)
Sale and leaseback obligations
Current portion of long-term debt(3)
Vendor non-recurring costs
Other

Of which current
Of which non-current

December 31, 2015
702
411
135
133
71
20
138
1,610
991
619
1,610

$
$

December 31, 2014
665
363
172
260
56
36
60
1,612
1,010
602
1,612

$
$

January 1, 2014
411
481
142
138
215
38
301
1,726
1,009
717
1,726

$
$

(1) See Note 14 – Financial instruments.
(2) The amount contractually required to be paid is $182 million as at December 31, 2015 ($206 million as at December 31, 2014 and

$172 million as at January 1, 2014).

(3) See Note 27 – 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.

26. OTHER LIABILITIES

Other liabilities were as follows, as at:

Employee benefits(1)
Accruals for long-term contract costs
Supplier contributions to aerospace programs
Income and other taxes payable
Deferred revenues
Other

Of which current
Of which non-current

December 31, 2015
647
606
606
436
397
578
3,270
2,274
996
3,270

$
$

December 31, 2014
661
631
601
367
450
568
3,278
2,182
1,096
3,278

$
$

January 1, 2014
750
630
529
368
460
480
3,217
2,227
990
3,217

$
$

(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 22 – Retirement benefits).

198 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

27.

LONG-TERM DEBT

Long-term debt was as follows, as at:

Senior notes

Amount in
currency of

origin Currency Contractual (1)

650

750

600

850

780

500

USD

EUR

USD

7.50%

5.50%

4.75%

7.75%

6.13%

5.75%

1,200

USD

6.00%

1,250

USD

6.13%

December 31
2015

December 31
2014

January 1
2014

Maturity

Amount

Mar. 2018 $

677 $

686 $

695

Interest rate

After effect
of fair value
hedges

3-month
Libor + 4.18(2)

n/a Sept. 2018

n/a

Apr. 2019

3-month
Libor + 4.14(2)

Mar. 2020

3-month
Euribor + 2.87(3)

May 2021

3-month
Libor + 3.36(2)

3-month
Libor + 3.57(2)

3-month
Libor + 3.48(2)

Mar. 2022

Oct. 2022

Jan. 2023

740

594

916

985

510

1,234

1,290

1,487

—

248

—

107

191

—

593

922

—

915

1,110

1,187

504

1,219

478

—

1,277

1,200

—

746

248

—

129

249

—

1,171

742

248

164

140

263

8,979 $

7,683 $

7,203

71 $

8,908
8,979 $

56 $

7,627
7,683 $

215

6,988
7,203

1,500

USD

7.50%

n/a Mar. 2025

Notes

785

EUR

7.25%

750(4)

250

162

USD

4.25%

7.45%
6.30%

Debentures
Other(5)

150
Various(6)

CAD

Various

7.35%
Various(6)

3-month
Libor + 4.83

n/a

n/a May 2034

3-month
Libor + 1.59

n/a

n/a Dec. 2026

n/a 2016-2026

Of which current(7)
Of which non-current

(1) Interest on long-term debt as at December 31, 2015 is payable semi-annually, except for the other debts for which the timing of interest

payments is variable.

(2) The interest-rate swap agreement related to these Senior Notes were partially settled in the fourth quarter of fiscal year 2015. As these
interest-rate swap were in a fair value hedge relationship, the related deferred gains recorded in the hedged item will be amortized in
interest expense up to the maturity of these debts.

(3) 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.

(4) Repurchased pursuant to an optional redemption exercised in April, 2015.
(5)

Includes obligations under finance leases.

(6) The notional amount of other long-term debt is $191 million as at December 31, 2015 ($249 million as at December 31, 2014 and $263

million as at January 1, 2014). The contractual interest rate, which represents a weighted average rate, is 4.78% as at December 31, 2015
(4.46% as at December 31, 2014 and 4.62% as at January 1, 2014).

(7) See Note 25 – Other financial liabilities.
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 letter of credit facilities, excluding the PSG facility, and the two unsecured revolving credit
facilities, which must be met on a quarterly basis, see Note 31 - 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

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 199

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, 2015 and 2014 and January 1, 2014.

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

28. SHARE CAPITAL

December 31, 2015
71
2,946
5,680
8,697

December 31, 2014
56
2,127
5,193
7,376

January 1, 2014
213
2,630
4,130
6,973

Preferred shares
The preferred shares authorized were as follows, as at December 31, 2015, and 2014 and January 1, 2014:

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, 2015
9,692,521
2,307,479
9,400,000

December 31, 2014
9,692,521
2,307,479
9,400,000

January 1, 2014
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:

200 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, 2015 - NOTES 201

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 and RSU plans

Balance at beginning of year

Purchased

Balance at end of year
Authorized

December 31, 2015 December 31, 2014

314,273,255
(372,705)
313,900,550
2,742,000,000

314,530,462
(257,207)
314,273,255
1,892,000,000

December 31, 2015 December 31, 2014

1,444,132,126
488,006,566
372,705
1,932,511,397

(18,736,908)
(7,458,000)
(26,194,908)
1,906,316,489
2,742,000,000

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

In February 2015, the Corporation announced the closing of a public offering, with an over-allotment option having
been exercised in full for an aggregate of 487,840,350 subscription receipts at a price of $2.21 Canadian dollars
per subscription receipt for aggregate net proceeds of CDN $1,035 million ($822 million).

Following a resolution approved on March 27, 2015, the number of Class A shares and Class B shares
(Subordinate voting) authorized has increased from 1,892,000,000 to 2,742,000,000.

202 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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

Per share
(Cdn$)

0.00 $
0.00

Per share
(Cdn$)

December 31, 2015
Total
(in millions
of U.S.$)
—
—
—
5
2
12
19
19

Dividend declared for fiscal years
December 31, 2014
Total
(in millions
of U.S.$)
29
131
160
7
2
13
22
182

0.10 $
0.10

0.70
0.78
1.56

0.75
0.78
1.56

0.00 $
0.00

Per share
(Cdn$)

Dividend declared after
December 31, 2015
Total
(in millions
of U.S.$)
—
—
—
1
—
3
4
4

0.11
0.20
0.39

29. SHARE-BASED PLANS

PSU, DSU and RSU plans
The Board of Directors of the Corporation approved a PSU and a RSU plan under which PSUs and RSUs may be
granted to executives and other designated employees. The PSUs and the RSUs give recipients the right, upon
vesting, to receive a certain number of the Corporation’s Class B Shares (Subordinate Voting). The RSUs also
give certain recipients the right to receive a cash payment equal to the value of the RSUs. 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 2015, a combined value of $43 million of DSUs, PSUs and RSUs were authorized
for issuance ($48 million during fiscal year 2014).

The number of PSUs, DSUs and RSUs has varied as follows, for fiscal years:

PSU

DSU

2015
RSU

PSU

DSU

Balance at beginning
of year
Granted
Exercised
Forfeited

Balance at end of year

26,045,936
248,757
—
(10,667,476)
15,627,217

7,666,464
—
(340,432)
(2,442,203)
4,883,829 (1)

— 23,596,681
9,971,382
—
(7,522,127)
26,045,936

22,765,354
—
(432,672)
22,332,682

8,169,850
2,377,003
(500,771)
(2,379,618)
7,666,464 (1)

(1) Of which 1,611,700 DSUs are vested as at December 31, 2015 (2,008,128 as at December 31, 2014).

2014
RSU

—
—
—
—
—

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, 2013 and December 31,
2015, the vesting dates range from August 2016 to August 2017. RSUs granted will vest regardless of the
performance. RSUs generally vest three years following the grant date. For grants issued in August 2015, the
vesting date will be in August 2018.

The weighted-average grant date fair value of PSUs and RSUs granted during fiscal year 2015 was $1.18 ($3.38
during fiscal year 2014). The fair value of each PSUs and RSUs 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 28 – Share
capital) in connection with the PSU and/or RSU plan. These shares are held in trust for the benefit of the

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 203

beneficiaries until the PSUs and RSUs become vested or are cancelled. The cost of these purchases has been
deducted from share capital.

A compensation expense of $7 million was recorded during fiscal year 2015 with respect to the PSU, DSU and
RSU plans (a compensation revenue of $3 million during fiscal year 2014).

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, 18,167,801 were
available for issuance under these share option plans, as at December 31, 2015.

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; and
the options terminate no later than seven years after the grant date.

•
•

The summarized information on the current share option plan is as follows as at December 31, 2015:

Exercise price range (Cdn$)

1 to 4
4 to 6
6 to 8

Issued and outstanding
Weighted-
average
exercise
price (Cdn$)
2.15
4.79
7.01

Weighted-
average
remaining
life (years)
6.06
3.32
2.62

Exercisable
Weighted-
average
exercise
price (Cdn$)
3.58
4.70
7.01

Number of
options
7,425,702
3,330,000
2,917,177
13,672,879

Number of
options
63,774,174
7,655,855
2,917,177
74,347,206

The weighted-average share price of options exercised during fiscal year 2014 was $3.71. No options were
exercised during fiscal year 2015.

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
Forfeited
Expired

Balance at end of year

Options exercisable at end of year

2015
Weighted-
average
exercise
price (Cdn$)
4.39
1.69
—
3.54
5.17
2.61

Number of
options
20,654,419
8,630,184
(110,000)
(1,351,310)
(11,569)
27,811,724

2014
Weighted-
average
exercise
price (Cdn$)
4.66
3.77
3.45
4.62
3.45
4.39

4.58

8,668,550

5.24

Number of
options
27,811,724
49,704,570
—
(2,808,698)
(360,390)
74,347,206

13,672,879

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

204 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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.

The number of options has varied as follows, for fiscal years:

Balance at beginning of year

Forfeited
Expired

Balance at end of year

Options exercisable at end of year

2015
Weighted-
average
exercise
price (Cdn$)
8.44
8.37
8.46
—

2014
Weighted-
average
exercise
price (Cdn$)
7.08
8.15
5.48
8.44

Number of
options
8,701,338
(1,198,000)
(3,868,938)
3,634,400

—

25,000

5.89

Number of
options
3,634,400
(270,000)
(3,364,400)
—

—

Share-based compensation expense for options
The weighted-average grant date fair value of stock options granted during fiscal year 2015 was $0.40 per option
($0.78 per option for fiscal year 2014). 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

2015
0.79%
5 years
36.17%
0%

2014
1.52%
5 years
32.32%
2.51%

A compensation expense of $7 million was recorded during fiscal year 2015 with respect to share option plans
($5 million during fiscal year 2014).

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 $6 million for fiscal year 2015
($8 million for fiscal year 2014). 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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 205

30. 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

31. CREDIT FACILITIES

Letter of credit facilities
The letter of credit facilities and their maturities were as follows, as at:

2015
(39)
786
385
196
(7)
531
(199)
(1,411)
196
160
598

2014
(184)
87
184
(175)
327
169
(529)
31
(104)
196
2

December 31, 2015

Transportation facility
Corporation excluding Transportation facility
PSG facility

December 31, 2014

Transportation facility
Corporation excluding Transportation facility
PSG facility

January 1, 2014

Transportation facility
Corporation excluding Transportation facility
PSG facility

Amount
committed

Letters of
credit issued

Amount
available

Maturity

3,963 (1) $

600
600
5,163

4,249
600
600
5,449

4,827
600
600
6,027

(1)

3,195 $
221
173
3,589 $

3,573 $
261
327
4,161 $

4,132 $
403
393
4,928 $

768
379
427
1,574

676
339
273
1,288

695
197
207
1,099

2019 (2)
2018 (3)
2016 (4)

2018
2017
2015 (4)

2018
2016
2014 (4)

(1) €3,640 million as at December 31, 2015 (€3,500 million as at December 31, 2014, and January 1, 2014).
(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
2019.

(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 2015, the facility was extended until August 2016 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 $1,721 million were
outstanding under various bilateral agreements as at December 31, 2015 ($1,731 million as at December 31,
2014 and $1,018 million as at January 1, 2014).

206 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

The Corporation also uses numerous bilateral bonding facilities with insurance companies to support
Transportation’s operations. An amount of $2.6 billion was outstanding under such facilities as at December 31,
2015 ($2.4 billion as at December 31, 2014 and $2.3 billion as at January 1, 2014).

Revolving credit facilities
The Corporation has a $750-million unsecured revolving credit facility (“revolving credit facility”) that matures in
June 2018 and bears interest at the applicable base rate (Libor, in the case of a U.S. dollar cash drawing) plus a
margin. This facility is available for cash drawings for the general working capital needs of the Corporation
excluding Transportation. In addition, the Corporation has an unsecured revolving credit facility (“Transportation
revolving credit facility”) amounting to €500 million ($544 million), available to Transportation for cash drawings.
The facility matures in March 2017 and bears interest at EURIBOR plus a margin.

Financial covenants
The Corporation is subject to various financial covenants under the letter of credit facilities, excluding the PSG
facility, and the two unsecured revolving credit facilities, which must be met on a quarterly basis. The $600-million
letter of credit and $750-million unsecured revolving credit facility, which are available for the Corporation
excluding Transportation, 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
Transportation. The Transportation letter of credit and revolving credit facilities include financial covenants
requiring minimum equity as well as a maximum debt to EBITDA ratio, all calculated based on Transportation
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 32 – Capital management or to the specific
terms used in the MD&A. In addition, the Corporation must maintain a minimum Transportation liquidity of
€600 million ($653 million). The $600-million letter of credit and $750-million unsecured revolving facilities, which
are available for the Corporation excluding Transportation, require minimum liquidity of $750 million at the end of
each quarter of fiscal year 2015 (minimum liquidity of $500 million for fiscal year 2014 and 2013). Minimum
liquidity required is not defined as comprising only cash and cash equivalents as presented in the consolidated
statement of financial position. These conditions were all met as at December 31, 2015 and 2014 and January 1,
2014.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 207

32. CAPITAL MANAGEMENT

The Corporation analyzes its 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. 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 2015.

Adjusted EBIT(1)
Adjusted interest(2)
Adjusted EBIT to adjusted interest ratio
Adjusted debt(3)
Adjusted EBITDA(4)
Adjusted debt to adjusted EBITDA ratio

$
$

2015
777
503
1.5
9,289
1,278
7.3

$
$

2014
1,262
401
3.1
8,401
1,775
4.7

(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 $1.9 billion as at December 31, 2015 ($2.5 billion as at December 31, 2014). 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 31 – Credit facilities for a description of bank covenants.

208 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

33.

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 aerospace 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 four reportable segments, Business Aircraft, Commercial
Aircraft, Aerostructures and Engineering Services and Transportation. 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 14 – 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, 2015
59
362
304
169

$
$
$
$

December 31, 2014
243
514
295
331

$
$
$
$

January 1, 2014
371
690
287
305

$
$
$
$

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 aerospace segments’ receivables, aircraft
loans and lease receivables and certain investments in financing structures. Aerospace segments’ receivables are
BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 209

usually not externally or internally quoted, however the credit quality of customers are dynamically reviewed and
is based on the Corporation’s 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 38 – 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. The Corporation uses
scenario analyses to stress-test cash flow projections. Liquidity adequacy is continually monitored, taking into
consideration historical volatility and seasonal needs, stress-test results, 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.

Several steps were undertaken in 2015 in order to de-risk our business and liquidity. Over the last three months
of 2015, the Corporation attracted key strategic investments in core businesses. In October 2015, the Corporation
announced that the Government of Québec will make a $1.0-billion equity investment to support bringing the
C Series aircraft program to market. The Corporation expects to enter into the definitive agreements in the second
quarter of 2016. One month later, the Corporation further strengthened its liquidity position when we entered into
a definitive agreement with the Caisse de dépôt et placement du Québec (CDPQ) for a $1.5 billion convertible
share investment for a 30% stake in our rail transportation business. The investment was completed on February
11, 2016. See Note 39 – Significant transaction and Note 40 – Events after the reporting date for more details on
those transactions.

Maturity analysis –The maturity analysis of financial assets and financial liabilities, excluding derivative financial
instruments, was as follows, as at December 31, 2015:

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

$
$
$

$
$

2,720 $
1,473
958

4,040
837

8,979

1 to 3
years

3 to 5
years

5 to 10
years

Over 10
years

With no
specific
maturity

Less
than 1
year
2,720 $
1,309
143
4,172
4,042
310

— $
72
174
246
32
121

— $
39
109
148
4
139

— $
5
569
574
—
414

— $
2
145
147
—
330

376
168
874
(727) $

Total

2,720
1,473
1,203
5,396
4,091
1,314

— $
46
63
109
13
—

8,697
—
3,729
—
13
17,831
96 $ (12,435)

71
561
4,984
(812) $ (2,450) $ (2,348) $ (6,194) $

1,497
856
2,496

5,304
1,050
6,768

1,449
1,094
2,696

(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

210 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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 Transportation, negotiated extended payment terms of 240 days after delivery with
certain of its suppliers. Trade payables with these extended terms totaled $386 million and bore interest at a
weighted average rate of 1.95% as at December 31, 2015.

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.

The maturity analysis of derivative financial instruments, excluding embedded derivatives, was as follows, as at
December 31, 2015:

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

Total

Derivative financial assets

Forward foreign exchange contracts
Interest-rate derivatives

Derivative financial liabilities

Forward foreign exchange contracts

Net amount

7,398 $
1,750
9,148 $

249 $
38
287 $

25 $
26
51 $

11,792 $
$

(621) $
(334) $

(96) $
(45) $

— $
16
16 $

— $
16 $

— $
11
11 $

— $
11 $

— $
4
4 $

274
95
369

— $
4 $

(717)
(348)

(1) Amounts denominated in foreign currency are translated at the period end exchange rate.

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, swedish krona 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. The aerospace segments have adopted a progressive hedging strategy while Transportation 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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 211

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.

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 2015 is before giving effect to cash flow hedge relationships.

Gain (loss)

Variation CAD/USD GBP/USD EUR/USD EUR/GBP EUR/CHF
(3) $

+10% $

163 $

40 $

3 $

Effect on EBT
Other
(66)

(36) $

The following impact on OCI for fiscal year 2015 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% $

170 $

68 $

32 $

54 $

82 $

Variation CAD/USD GBP/USD EUR/USD EUR/GBP EUR/CHF

Other

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 27 – 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.

212 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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, 2015 and 2014, the impact on EBT would have been a
negative adjustment of $22 million as at December 31, 2015 ($37 million as at December 31, 2014).

34.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 213

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.

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, 2015:

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

79
362
335 (2)
151
927

(1)
(135)
(702)
(838)

—
—
42
—
42

—
—
—
—

—
362
293
—
655

—
—
(702)
(702)

79
—
—
151
230

(1)
(135)
—
(136)

(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.

214 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Changes in the fair value of Level 3 financial instruments were as follows, for fiscal years 2015 and 2014:

Balance as at January 1, 2014

Net gains (losses) and interest included in net income(1)
Issuances
Settlements

Balance as at December 31, 2014

Net gains (losses) and interest included in net income(1)
Issuances
Settlements

Balance as at December 31, 2015

Aircraft loans
and lease
receivables
388
$
20
3
(148)
263
(54)
10
(140)
79

Investments
in financing
structures
135
$
32
—
(2)
165
(12)
—
(2)
151

Trade and
other
payables

Lease
subsidies
(142)
(19)
(38)
27
(172)
12
—
25
(135)

— $
—
(18)
—
(18)
—
(23)
40
(1)

(1) Of which an amount of $11 million represents realized gains for fiscal year 2015, which is recorded in financing income ($2 million

represents realized losses for fiscal year 2014, which is recorded in financing income and other expense).

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, 2015:

Main assumptions
(weighted average)

Aircraft loans and
lease receivables

Investments in financing
structures

Lease subsidies

Internally assigned credit rating

Between BB to CCC (B) Between BB- to CCC+ (B+) Between BB- to CCC (B+)

Discount rate adjustments

for marketability

Between 7.81%
and 10.36% (9.84%)

Between 1.91%
and 8.90% (6.83%)

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, 2015:

Impact on EBT

Gain (loss)

Aircraft loans and
lease receivables

Investment in financing
structures
Lease subsidies

n/a: Not applicable

Change in fair value
recognized in EBT for
fiscal year 2015

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

(76)

(25)

(2)

(3)

n/a

(2)

(10)

(3)

(10)

n/a

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 215

Fair value hierarchy for items recorded at amortized cost
The following table presents financial assets and financial liabilities measured at amortized cost on a non-
recurring basis categorized using the fair value hierarchy as follows:
•
•

•

The fair value of financial assets and liabilities by level of hierarchy was as follows, as at December 31, 2015:

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

1,473

46
340
1,859

$ (4,039)
(6,767)

(300)
(289)
$ (11,395)

—

—
—
—

—
—

—
—
—

1,473

—

—
—
1,473

$ (4,039)
(6,767)

—
—
$ (10,806)

46
340
386

—
—

(300)
(289)
(589)

35.

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 Transportation.

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

2015
30
119
149

2014
72
17
89

The Corporation has pledged shares in associates, with a carrying value of $18 million as at December 31, 2015
($18 million as at December 31, 2014 and $12 million as at January 1, 2014).

216 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

36.

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

2015
Joint ventures Associates
46
100 $
$
—
129 $
$

2014
Joint ventures Associates
—
128 $
$
6
109 $
$

The following table presents the Corporation’s outstanding balances with joint ventures and associates, as at:

Receivables
Payables

December 31, 2015
Joint ventures Associates
8
31 $
$
2
3 $
$

December 31, 2014
Joint ventures Associates
5
39 $
$
6
6 $
$

January 1, 2014
Joint ventures Associates
1
62 $
$
10
14 $
$

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 aerospace segments and Transportation, 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
Termination and other long-term benefits

2015
19
12
4
11
46

2014
11
11
4
1
27

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 217

37. 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

6,612 $

4,102

7,380 $

4,796

7,965 $

5,452

December 31, 2015

December 31, 2014

January 1, 2014

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 $1.7 billion, of which $354 million was recorded as provisions
and related liabilities as at December 31, 2015 ($1.8 billion and $295 million, respectively, as at December 31,
2014 and $1.8 billion and $291 million, respectively, as at January 1, 2014). The Corporation’s maximum
exposure under these guarantees is included in Note 38 – Commitments and contingencies.

The Corporation concluded that it did not control these structured entities.

38. 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 37 –
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, 2015

December 31, 2014

January 1, 2014

$
$
$

$
$

1,669
1,248
(598)
2,319
1,818
192

48
—

$
$
$

$
$

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) 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).

218 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

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 $670 million as at December 31, 2015 ($456 million as
at December 31, 2014 and $463 million as at January 1, 2014) 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 $135 million as at December 31, 2015 ($172 million as at December 31, 2014 and $142
million as at January 1, 2014). 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 2027.
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,
2015 (71% as at December 31, 2014 and 70% as at January 1, 2014).

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.

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, 2015
90
991
580
8
1,669

December 31, 2014
56
777
880
36
1,749

January 1, 2014
64
860
872
32
1,828

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, 2015
271
204
1,343
1,818

December 31, 2014
687
627
1,382
2,696

January 1, 2014
1,452
355
1,609
3,416

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

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 219

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

Other guarantees

December 31, 2015
173
19
192

December 31, 2014
195
9
204

January 1, 2014
378
94
472

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, 2015 ($48 million as at December 2014, and January 1, 2014). This guarantee matures in 2025.

e) Performance guarantees - In certain projects carried out through consortia or other partnership vehicles in
Transportation, 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 nil as at December 31, 2015 ($38 million as at December 31, 2014 and $43 million as at January 1,
2014), 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.

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, 2015
146
346
346
838

December 31, 2014
165
438
512
1,115

January 1, 2014
161
413
504
1,078

Rent expense was $181 million for fiscal year 2015 ($175 million for fiscal year 2014).

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, 2015
6,485
3,925
56
10,466

December 31, 2014
7,061
4,141
233
11,435

January 1, 2014
8,026
3,667
207
11,900

220 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

The purchase obligations of the Corporation include capital commitments for the purchase of PP&E and intangible
assets amounting to $176 million and $489 million, respectively, as at December 31, 2015 ($196 million and
$432 million as at December 31, 2014 and $331 million and $435 million as at January 1, 2014).

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, 2015,
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 20, 2015, Deutsche Bahn and Transportation announced that they had agreed on an out-of-court
Settlement regarding various claims. The out-of-court Settlement terminated the claim filed on March 4, 2013 by
S-Bahn Berlin GmbH (“SB”) 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. Under the out-of-court Settlement, Bombardier Transportation GmbH made no
admission of liability.

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. Since the service of process in 2014 on BT Brazil, the competition authority has decided to detach the
proceedings against 43 individuals whom it claims to have been difficult to serve process and has also issued
additional technical notes dealing with various procedural objections raised by the defendant corporations and
individuals. BT Brazil is currently contesting before the courts both the decision to detach the proceedings against
43 individuals and decisions by CADE restricting physical access to some of the forensic evidence.

BT Brazil as a result of the administrative proceedings initiated by CADE in 2014 became a party as defendant to
legal proceedings brought by the Sao Paulo State prosecution service against it and other companies for alleged
‘administrative improbity’ in relation to refurbishment contracts awarded in 2009 by the Sao Paulo metro operator
CMSP and for ‘cartel’ in relation to a five year-maintenance contract with the Sao Paulo urban transit operator
CPTM signed in 2002. In September 2015, the prosecution service of Sao Paulo announced a second public civil
action for ‘cartel’ in relation to the follow-on five year maintenance contract covering the period 2007 to 2012. In
addition, BT Brazil was served notice and joined in December 2014 to a civil suit as co-defendant first
commenced by the Sao Paulo state government against Siemens AG in the fall of 2013 and with which the State
government seeks to recover loss for alleged cartel activities.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 221

39. SIGNIFICANT TRANSACTION

Ministère de l’Économie, de l’Innovation et des Exportations du Québec
In October 2015, the Corporation entered into a memorandum of understanding which contemplates a $1.0 billion
equity investment by the Ministère de l’Économie, de l’Innovation et des Exportations du Québec (through
Investissement Québec) (the Government of Québec) for a 49.5% equity stake in a newly-created limited
partnership to which we would transfer the assets, liabilities and obligations of the C Series aircraft program. This
newly created limited partnership will be owned 50.5% by Bombardier Inc. and, as a subsidiary of Bombardier
Inc., will carry on the operations related to our C Series aircraft program. After the investment, the newly created
limited partnership will be consolidated in our financial results. The investment remains conditional upon the
completion of definitive agreements, the receipt of consents from third parties, the completion of an internal pre-
closing reorganization, the receipt of required regulatory approvals and other customary conditions precedent.

The proceeds of the investment will be used entirely for cash flow purposes of the C Series aircraft program.

The Government of Québec’s interest in the partnership will be redeemable in certain circumstances, at the option
of the Corporation.

40. EVENTS AFTER THE REPORTING DATE

Caisse de dépôt et placement du Québec
In November 2015, the Corporation entered into a definitive agreement with the Caisse de dépôt et placement du
Québec (CDPQ) for a $1.5 billion convertible share investment in Bombardier Transportation’s newly-created
holding company, Bombardier Transportation (Investment) UK Ltd (BT Holdco). The investment was completed on
February 11, 2016. Under the terms of the investment, Bombardier Inc. sold voting shares convertible into a 30%
common equity stake of BT Holdco to the CDPQ, subject to annual adjustments related to performance.

Key terms of the investment
The CDPQ will be entitled to its pro-rata portion (on an as-converted basis, initially equal to 30% of BT Holdco
common shares) of any future dividends declared.

Dividends will be payable in cash or, subject to certain conditions, in additional convertible shares at the option of
BT Holdco (any such issuance to increase the CDPQ’s participation).

222 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015 - NOTES 223

will not be listed on the TSX, and contain market standard adjustment provisions, including in the event of
corporate changes, stock splits, non-cash dividends, distributions of rights, options or warrants to all or
substantially all shareholders or consolidations.

Reverse stock split
Subsequent to the end of the fiscal year, we announced a plan to present a proposal to shareholders of the
Corporation for a consolidation (also known as a “reverse stock split”) of the Class A shares (multiple voting)
(Class A Shares), issued and unissued, and Class B shares (subordinate voting) (Class B Subordinate Voting
Shares), issued and unissued, at the annual and special meeting planned for spring 2016 (the Share
Consolidation). The consolidation ratio will be selected by the Board of Directors from within a range of ratios,
subject to shareholder approval, which ratio would be expected, at that time, to result in an initial post-
consolidation share price in the range of $10 to $20 Canadian dollars per Class A Share or Class B Subordinate
Voting Share. Assuming receipt of shareholder and Toronto Stock Exchange approvals, the Share Consolidation,
if any, would be completed at such time as the Board of Directors shall deem appropriate.

Restructuring
Subsequent to the end of the fiscal year, the Corporation decided to take steps to optimize its workforce with a
combination of manpower reduction and strategic hiring. The Corporation plans to reduce its workforce by an
estimated 7,000 production and non-production employees throughout 2016 and 2017, as we move forward with
our transformation plan. During the same period, this workforce reduction will be partially offset by hiring in certain
growth areas, notably to support the ramp-up of strategic programs and projects worldwide. These adjustments
will enable us to resize our organization in line with current business needs and to increase our competitiveness.
The manpower reduction includes approximately 2,000 contractual workers and 800 product development
engineers. Restructuring charges consisting mainly of severance of approximately $250 million to $300 million will
be recorded as special items primarily in 2016.

224 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

INVESTOR INFORMATION

Our performance at a glance

REVENUES(1) AND EBIT MARGIN BEFORE SPECIAL ITEMS(1)
(for fiscal years ended; in billions of dollars)

ORDER BACKLOG
(as at; in billions of dollars)

Revenues

(1) Fiscal year ended December 31, 2011 comprises 11 months and
12 months of Bombardier Aerospace and Transportation results,
respectively.

* Non-GAAP financial measure. Refer to the Non-GAAP financial
measures section in the MD&A for a definition of this metric and
reconciliation to the most comparable IFRS measure.

GEOGRAPHIC SEGMENTATION OF REVENUES
(for fiscal year 2015)

GEOGRAPHIC SEGMENTATION OF EMPLOYEES
(as at December 31, 2015, including contractual and
inactive employees)

BOMBARDIER INC / 2015 FINANCIAL REPORT / INVESTOR INFORMATION 225

STOCK EXCHANGE LISTINGS
Class A Shares and Class B
Subordinate Voting Shares
Preferred Shares, Series 2,
Series 3 and Series 4

Stock listing ticker

FISCAL YEAR 2016 FINANCIAL RESULTS

Toronto (Canada)

BBD (Toronto)

First quarterly report

Second quarterly report

April 28, 2016

August 5, 2016

Third quarterly report

November 10, 2016

2016 Annual Financial Report

February 9, 2017

PREFERRED DIVIDEND PAYMENT DATES

Payment subject to approval by the Board of Directors

Series 2

Record date

Payment date

Record date

Payment date

2015-12-31

2016-01-29

2016-02-29

2016-03-31

2016-04-29

2016-05-31

Series 3

2016-01-15

2016-02-15

2016-03-15

2016-04-15

2016-05-15

2016-06-15

2016-06-30

2016-07-29

2016-08-31

2016-09-30

2016-10-31

2016-11-30

Series 4

2016-07-15

2016-08-15

2016-09-15

2016-10-15

2016-11-15

2016-12-15

Record date

Payment date

Record date

Payment date

2016-01-15

2016-04-15

2016-07-15

2016-10-14

2016-01-31

2016-04-30

2016-07-31

2016-10-31

2016-01-15

2016-04-15

2016-07-15

2016-10-14

2016-01-31

2016-04-30

2016-07-31

2016-10-31

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.

226 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015

Our Board of Directors

BOARD MEMBERS(1)

Pierre Beaudoin

Executive Chairman of the Board of Directors of Bombardier

Laurent Beaudoin

Chairman Emeritus

Alain Bellemare

President and Chief Executive Officer of Bombardier

Joanne Bissonnette

Corporate Director

J. R. André Bombardier

Vice Chairman of the Board of Bombardier

Martha Finn Brooks

Corporate Director

L. Denis Desautels

Corporate Director

Jean-Louis Fontaine

Vice Chairman of the Board of Bombardier

Sheila Fraser

Daniel Johnson

Jean C. Monty

Vikram Pandit

Patrick Pichette

Corporate Director

Counsel, McCarthy Tétrault LLP (barristers and solicitors)

Corporate Director

Chairman of TGG Group (a holding company for advisory and other businesses)

Advisor to Google Inc. (an Internet related services and products company)

Carlos E. Represas

Corporate Director

BOARD COMMITTEES

Board
committees

Board
representation(1)
Audit Committee Sheila Fraser (Chair)

L. Denis Desautels
Daniel Johnson
Jean C. Monty
Patrick Pichette

L. Denis Desautels
(Chairman)
Martha Finn Brooks
Daniel Johnson
Vikram Pandit
Carlos E. Represas

Finance and
Risk
Management
Committee

Corporate
Governance and
Nomination
Committee

Human
Resources and
Compensation
Committee

Carlos E. Represas
(Chairman)
Daniel Johnson
Vikram Pandit
Patrick Pichette(2)

Jean C. Monty
(Chairman)
Martha Finn Brooks
Patrick Pichette
Carlos E. Represas

Responsibilities

• Help the directors meet their responsibilities with respect to accountability
• Assist in maintaining good communication between the directors and
Ernst & Young, Bombardier’s independent auditors
• Assist in maintaining the independance of Ernst & Young
• Maintain the credibility and objectivity of our financial reports
• Investigate and assess any material risk

• Review Bombardier’s material financial risks and its monitoring, control and risk
management
• Review adequacy of policies, procedures and controls in place for risk
management
• Review and monitor significant or unusual transactions and/or projects related to
ongoing activities, business opportunities, mergers, acquisitions, divestitures,
significant asset sales or purchases and equity investments
• Monitor matters or activities related to or involving Bombardier’s financial
standing

• Monitor selection criteria and credentials for Board candidates
• Monitor Board and Committees’ composition and performance
• Monitor Board remuneration

• Oversee succession planning of the President and CEO and other selected
senior positions
• Assess performance of the President and CEO
• Review and approve total executive compensation policy accounting for base
salary, short-term and long-term incentives as well as pension, benefits and
perquisites

(1) Supplemental information regarding our Board of Directors can be found on our website at bombardier.com.
(2) Patrick Pichette was appointed to the Corporate Governance and Nomination Committee on May 7, 2015, following Heinrich Weiss'

retirement.

BOMBARDIER INC / 2015 FINANCIAL REPORT / INVESTOR INFORMATION 227

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 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 Robert-Bourrassa Blvd., 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, April 28, 2016, at 10:00 a.m. at the following
address:

Montreal Science Centre
Perspective 235o Room
2, de la Commune Street West
Montréal, Québec, Canada H2Y 4B2

The annual meeting will also be broadcast live on our
website at bombardier.com.

228 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2015